Bangalore Elecrticty Supply Company Truing up for Fy-15

BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

CHAPTER – 3

TRUING UP FOR FY15

Karnataka Electricity Regulatory Commission (KERC) approved the Annual Revenue Requirement (ARR) of BESCOM for FY15 in its Tariff Order dated 12thMay 2014.

Annual Accounts for FY-15 is finalized, audited by the Statutory Auditors and certified by Accountant General of India. BESCOM is submitting Truing up of FY-15 before the Commission based on this audited accounts.

1. Approved V/s Actuals:

The comparison of approved Annual Revenue Requirement to the actuals of FY15are deliberated in the below paras:

Energy Requirement:

Table Number: 3.1

PARTICULARS Approved Actuals Variation Estimated sales in MU 25395.08 24436.05 -959.03 Percentage distribution losses in % 13.6 13.53 -0.07 Energy at interface point in MU 29392.45 28261.00 -1131.45 Percentage transmission losses in % 3.81 3.95 0.14 Total energy requirement in MU 30556.66 29423.03 -1133.63

From the above table, it can be seen that BESCOM has purchased 29,423 MU, which is less by 1134 MU compared to the approved quantum of power purchase i.e., 30, 556.66 MU as per the annual accounts. BESCOM attained the targeted distribution loss for FY-15. Details regarding Power purchase for FY-15 are available in D1 statement.

Power Purchase Cost:

Comparison of actual Power purchase with respect to Commission approved in the Tariff Order dated 12.05.2014 is shown below:

MYT 4TH CONTROL PERIOD FOR FY-17 TO FY-19 Page 1 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

Table Number: 3.2

Particulars Approved Actuals Variation Unit Unit Unit Name of the Cost of Cost of Cost of Cost of Energy in Cost of Energy in Cost of Energy in Generating Energy Energy Energy Energy MU Energy MU Energy MU Station RsCrs RsCrs RsCrs Rs/Kw Rs/Kwh Rs/Kwh h KPCL HYDEL 3646.01 207.72 0.57 3682.15 210.79 0.57 36.14 3.07 0.00 JURALA HYDEL 103.66 33.01 3.18 64.35 26.30 4.09 -39.31 -6.71 0.91 KPCL THERMAL 8091.69 3081.57 3.81 7787.52 3037.29 3.90 -304.17 -44.28 0.09 CGS SUPPLY 7945.5 2590.73 3.26 7606.53 2360.13 3.10 -338.97 -230.60 -0.16 IPPS 5503.08 2512.46 4.57 4550.28 2117.90 4.65 -952.80 -394.56 0.08 NCE 3323.87 1226.61 3.69 3041.09 1133.26 3.73 -282.78 -93.35 0.04 Short Term/ 1942.85 1013.41 5.22 3466.40 1753.01 5.06 1523.55 739.60 -0.16 KPTCL Transmission 1022.49 1032.54 10.05 Charges SLDC charges 11.89 17.16 5.27 PGCIL charges 220.67 234.56 13.89 POSOCO charges 1.53 1.67 0.14 Energy Balance -775.28 -235.05 -775.28 -235.05 TOTAL 30556.66 11922.09 3.90 29423.03 11689.55 3.97 -1133.63 -232.54 0.07

Approved source wise energy and cost (in percentage) is compared with the actual power purchase:

Table Number: 3.3

Name of the Generating Energy Cost Station Approved Actuals Variance Approved Actuals Variance KPCL HYDEL 11.93% 12.19% 0.26% 1.95% 1.98% 0.03% JURALA HYDEL 0.34% 0.21% -0.13% 0.31% 0.25% -0.06% KPCL THERMAL 26.48% 25.79% -0.69% 28.89% 28.55% -0.34% CGS SUPPLY 26.00% 25.19% -0.81% 24.29% 22.18% -2.11% IPPS 18.01% 15.07% -2.94% 23.56% 19.91% -3.65% NCE 10.88% 10.07% -0.81% 11.50% 10.65% -0.85% Short Term/Medium Term 6.36% 11.48% 5.12% 9.50% 16.48% 6.98% TOTAL 100.00% 100.00% 100.00% 100.00%

From the above table it can be seen that there is an energy shortage of -0.13%, -0.69%, -0.81%, -2.94% and -0.81% in Juralahydel, KPCL thermal, CGS supply, IPPs and NCE respectively. This energy shortage is made good by 5.12% through short term. Likewise, the power purchase cost has reduced by -0.06%, -0.34%, -2.11%, -3.65%, and -0.85% in Juralahydel, KPCL thermal, CGS supply, IPPs and NCE respectively. Power purchase increased by 6.98% in short term.

2 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

The Commission approved the power procurement of 30,556.66 MU which includes 3,323.87 MU of energy from NCE sources for FY 15 to BESCOM. The actual percentage of NCE to the total purchase is 11.45 % and solar energy is 362.33 MU which works out to 1.23% of the actual l power purchase. Details are as under. Table Number: 3.4

Particulars UoM Reference Quantum Energy Sales from Apr-14 to Mar-15 MU A 29423.03 Solar RPO as per RPO Regulations % B 0.25 Energy to be purchased through solar during FY 15 MU C=AXB 73.56 RE RPO as per RPO Regulations % D 10 Total RE to be purchased during FY 15 MU E=AXD 2942.3 Purchased through Solar MU F 362.33 Actual total RE purchase MU G 3369.60 Shortfall/Excess – Solar MU H=C-F -288.77 Shortfall/Excess – RE MU I=E-G -427.3

Power purchase cost has increased by7paise above the approved cost. Commission is requested to true up actual power purchase cost of Rs.11, 689.55Cr.

Transmission Charge:

As shown in table 1.2, State Transmission charges was increased by Rs.10.05 Cr., SLDC charges by Rs. 5.27 Crs and Central transmission charges was increase by Rs. 14.03 Cr. Thus total transmission charges increased by Rs.29.35Cr. Commission is requested to true up the net increase in transmission charge of Rs. 29.35Crs. above the approved cost.

Capital Expenditure for FY-15:

The capital expenditure for FY15 is depicted in the table below:

Table Number: 3.5

FY 2014-15 (Rs. In Lakhs) Sl. Nomenclature of work Sanctioned Expenditure No. Budget Incurred 1 E & I Works(11kV link lines) 5000 5458.033 2 E & I Works(Additional DTC's) 4000 5412.64 Expenditure incurred under E& I Works(HT and LT reconductoring, 3 15300 19575.31 Providing AB cable, Spill over, Urgent works, Emergency and T&P etc.,) 4 Local Planning 2000 3130.06 5 Ganga Kalyana 3475.97 4500 6 Service Connection & Drinking water supply 8534.77 7 Meter Programming 9500 19316.06

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8 Replacement of Faulty transformers by new Transformers 1500 10154.48 9 Providing infrastructure to Unauthorized IP sets 6000 16677.58 10 RGGVY 12th plan 0 14.993 11 Niranthara Jyothi Yojane 0 22105.67 12 R-APDRP Part-A(IT implementation) -2700.47 13 DAS 14000 5052.55 14 R-APDRP Part-B 3418.25 15 HVDS 12000 24896.09 16 Civil Eng works and DSM 2500 2936.20 Total 76300 147458 Operation and Maintenance Expenses:

Operation and Maintenance Expenses (O&M Expenses) includes, Repair and Maintenance expenses, Employee cost and Administrative and General Expenditure. Commission is approving O&M Expenses through formula on normative basis. Factors contributing for increase in O&M expenses are Inflation index and consumer growth rate. Increases in cost by these indices are reduced to an extent of predetermined BESCOM’s efficiency factor of 1%.

For-15, to arrive at normative O&M expenses, Commission considered previous 12 years Consumer Price Index (CPI-IW) and Whole sale Price Index (WPI) (i.e., 2002 to 2013) at the ratio of 80:20 and weighted inflation index was arrived through statistical formula. Computed weighted inflation index was6.89%. Consumer growth rate at 5.37% was considered by taking 3 years CAGR upto FY-13. Approved O&M expenses is compared with the actual as under.

Approved O&M expenses for FY-15 is per Tariff Order dated 12.05.2014 is shown below:

Table Number: 3.6

Particulars FY15 No. of Installations 9260781 Weighted Inflation Index (WII) 6.89% Consumer Growth Index (CGI) based on 3 Year CAGR 5.37% Actual O & M expenses for FY13 in Rs. Crs 901.15 O&M expenses in Rs. Crs 1110.95

As per accounts of FY-15, O&M expenses are as follows:

Table Number: 3.7

Particulars Actual

4 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

Other operating (Repair & Maintenance) expenses 54.94 Employee Benefits Expense 802.35 Other expenses 397.07 Total 1254.36

It is noticed that due to adoption of amendments for reporting accounts as per Company’s Act, some expenses which are separately approved as per regulatory formats such as finance charges and other Debts are added to A&G expenses (other expenses as per audited accounts).Details are as follows:

Table Number: 3.8

SL No. PARTICULARS Current Year 2014-15 1 Rent 13.82 2 Postage stamps & Telephone charges 7.22 3 Remuneration to contract agencies 109.61 4 Professional, legal and consultancy 3.54 5 Conveyance & Travel expenses 38.72 6 Vehicle running expenses 3.10 7 Fees & Subscriptions 3.92 8 Printing & Stationery 6.20 9 Advertisement Expenses 2.77 10 Computer stationary and floppies 0.55 11 Contributions 0.30 12 Electricity Charges 2.33 13 Freight & other material related expenses 1.12 14 Miscellaneous including provisions 0.00 Rates & Taxes 0.68 Insurance/fee 0.05 Security Charges 0.00 Water Charges 0.36 DSM Expenses 4.77 License Fees 0.00 Miscellaneous expenses 4.50 15 Details of Payments to Auditors (including legal & Professional charges) 0.00 a) Audit Fees 0.00 - Statutory Audit Fees 0.08 - Tax Audit Fees 0.02 b) For Re-imbursement of expenses 0.00 c) For Service Tax 0.01 16 Expenses towards CSR- (Corporate Social Responsibilities) 0.00 17 Other Expenses charged to capital works (Credit Account) -6.37 197.31 OTHER DEBITS 18 Small & Low value items Written off 0.27 19 Asset decommissioning cost -0.04 0.23 Material cost variance -15.09

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Miscellaneous losses and Write offs including provisions 5.03 Bad Debts written off 0.01 Loss of materials by pilferage, etc., 0.00 Provision for Loss on obsolescence of stores, etc in stock -10.98 -21.05 FINANCE CHARGES 20 Bank charges 10.19 21 Interest to Consumers 210.38 22 Stamp duty 0.00 220.57 TOTAL 397.07

Items added to the other expenses are removed and added to the respective heads for the purpose of Regulatory computation.

Corrected Administrative and General Expenditure after removing finance and other debits is as under:

Table Number: 3.9

Sl No. PARTICULARS Current Year 2014-15 1 Rent 13.82 2 Postage stamps & Telephone charges 7.22 3 Remuneration to contract agencies 109.61 4 Professional, legal and consultancy 3.54 5 Conveyance & Travel expenses 38.72 6 Vehicle running expenses 3.10 7 Fees & Subscriptions 3.92 8 Printing & Stationery 6.20 9 Advertisement Expenses 2.77 10 Computer stationary and floppies 0.55 11 Contributions 0.30 12 Electricity Charges 2.33 13 Freight & other material related expenses 1.12 14 Miscellaneous including provisions 0.00 Rates & Taxes 0.68 Insurance/fee 0.05 Security Charges 0.00 Water Charges 0.36 DSM Expenses 4.77 License Fees 0.00 Miscellaneous expenses 4.50 15 Details of Payments to Auditors (including legal & Professional charges) 0.00 a) Audit Fees 0.00 - Statutory Audit Fees 0.08 - Tax Audit Fees 0.02 b) For Re-imbursement of expenses 0.00

6 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

c) For Service Tax 0.01 16 Expenses towards CSR- (Corporate Social Responsibilities) 0.00 17 Other Expenses charged to capital works (Credit Account) -6.37 197.31

By considering Rs 197.31 Cr. as Administrative & General Expenditure, revised O&M expenses are tabulated as follows:

Table Number: 3.10

FY - 15 Particulars Actual as per Accounts Other operating (Repair & Maintenance) expenses 54.94 Employee Benefits Expense 802.35 Other expenses 197.31 Total 1054.60

Commission is approving the O&M expenses on normative basis by considering weighted inflation index of composite series of CPI and WPI and consumer growth rate. Actual inflation rate and consumer growth rate for FY-15 is now available. Considering the actual data, normative O&M expenses is computed as under.

The Commission in its Tariff Order 2008 issued on 11.01.2008, vide page No.141 ruled that ‘For fixing the inflation indices, the Commission has considered the weighted average rate of Consumer Price Index (CPI) of Industrial Workers (IW) & Wholesale Price Index (WPI) to compute average inflation rate. CPI (IW) represents the inflationary increase for employee expenses and WPI represents the inflationary increase for A&G and R&M expenses. The Commission has therefore considered the weightage of employee expense as a percentage of total O&M cost for CPI (IW) [70%] and the weightage of R&M and A&G as a percentage of total O&M cost for WPI [30%] to determine the weighted average rate for inflation’

Hence for the purpose of computation of composite series, weightage of employee expense as percentage of total O&M cost for CPI (WI) and the weightage of R&M and A&G as a percentage of total O&M cost for WPI is to be considered to determine the weighted average rate of inflation.

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Actual percentage of employee cost, R&M cost and A&G cost over total O&M cost for FY-15 are as follows: Table Number: 3.11

FY - 15 Particulars Actual as per Accounts % of cost over total cost Other operating (Repair &Maintenance) 54.94 5% expenses Employee Benefits Expense 802.35 76% Other expenses 197.31 19% Total 1054.60 100%

Central Electricity Regulatory Commission (CERC) vide notification dated 31.03.2015 notified the escalation rates 2015 for Inflation rate, escapable transmission charges for payment by arriving composite series of CPI at 55% and WPI at 45%.

CERC work sheet is as follows:

Table Number: 3.12

ANNUAL INFLATION RATE FOR Escapable for Transmission charges for payment Period WPI CPI Composite Series Jan-14 179 237 210.9 Feb-14 179.5 238 211.7 Mar-14 180.3 239 212.6 Apr-14 180.8 242 214.5 May-14 182 244 216.1 Jun-14 183 246 217.7 Jul-14 185 252 221.9 Aug-14 185.9 253 222.8 Sep-14 185 253 222.4 Oct-14 183.7 253 221.8 Nov-14 181.2 253 220.7 Dec-14 178.7 253 219.6 Average Index (Jan 14-Jun-14) 213.9 Average Index (July 14-Dec-14) 221.52 Half-Yearly Inflation 3.57% Annual Inflation 7.13%

Recomposing the above table by considering CPI at 76% and WPI at 24% being the weightage of employee expense as percentage of total O&M cost for CPI (WI) and the weightage of R&M and A&G as a percentage of total O&M cost for WPI respectively. Actual weighted inflation is as follows.

8 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

Table Number: 3.13

Period WPI CPI Composite series (WPI24% CPI76% Jan-14 179 237 223.08 Feb-14 179.5 238 223.96 Mar-14 180.3 239 224.91 Apr-14 180.8 242 227.31 May-14 182 244 229.12 Jun-14 183 246 230.88 Jul-14 185 252 235.92 Aug-14 185.9 253 236.90 Sep-14 185 253 236.68 Oct-14 183.7 253 236.37 Nov-14 181.2 253 235.77 Dec-14 178.7 253 235.17 Average Index (Jan 14-Jun-14) 226.54 Average Index (July 14-Dec-14) 236.13 Half-Yearly Inflation % 4.23% Annual Inflation % 8.47%

Weighted inflation rate to be considered for FY-15 is 8.47%

Consumer Growth rate:

For the purpose of computation of normative O&M expenses, Commission in its Tariff Order -2008 dated 11.01.2008 stated that ‘‘In addition to the inflationary increase, there is a need to factor in the business growth as well, which is also an important cost driver. . In this regard, the Commission has considered the increase in number of consumers …….”

Actual Consumer growth rate for FY-15 is tabulated as under:

Table Number: 3.14

Particulars Numbers Consumers as on 31.03.2014 (As per Accounts) 8924652 Consumer as on 31.03.2015 (As per Accounts) 9444518 Annual Growth rate 5.83%

Based on the above inputs, O&M cost for FY-15 on normative basis is tabulated as under.

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Formula for working out the O&M expenses on normative basis as prescribed by the Commission in its Tariff Order-2008 dated 11.1.2008 is as follows:

O&M Cost t = O&M Cost t-1 * (1 + WII + CGI – X) Where, ‘O&M Cost t’ is the normative O&M cost approved by the Commission for the financial year t ‘WII’ is the weighted inflation index of CPI and WPI based on the contribution of employee cost, R&M and A&G towards the total O&M cost ‘CGI’ is the Consumer growth index, which is linked to increase (CAGR) in no of consumers from FY03 to FY07 which is 5.47% ‘X’ is the efficiency factor. For BESCOM the Commission fixes the same as 1%

Here t year = FY-15, t-1= FY-14, WII= 8.47%, CGI=5.83%, X=1%

Table Number: 3.15

Particulars FY15 Weighted Inflation Index (WII) 8.47 Consumer Growth Index (CGI) based on 3 Year CAGR 5.83 True up O & M expenses for FY14 in Rs. Crs 957.46 O&M expenses in Rs. Crs = t-1 cost * (1+WII+CGI-X) 1084.80

Note:

1. BESCOM has filed an appeal petition before Hon’ble Appellate Tribunal for Electricity regarding true up of expenses for FY- 14 including O&M expenses. However, for the purpose of computation Commission approved O&M cost for FY-14 is considered. 2. Tabulation of approved O&M cost for FY-15 vide table5.10 of T.O 2014, dated 12.05.2014 needs to be relooked as computation of O&M cost as per the formula works out Rs.1002.62Crs.as against 1110.95Crs. 3. Commission in its Tariff Order -2013, for computation of FY-15 O&M expenses, FY-13 figures were considered instead of FY-14.

Comparison of approved, actual and proposed for truing up for FY15 is depicted below:

Table Number: 3.16

Approved by the Actuals as per Proposed for Truing up Sl.No. PARTICULARS Commission for FY-15 Accounts on normative basis 1 O&M Expenses 1110.95 1054.60 1084.80

10 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

Commission is requested to true up the O&M expenses of Rs.1084.80 Cr. on normative basis.

Depreciation:

Depreciation amount of Rs. 310.28Crs is worked out as per annual accounts for FY- 15. After deducting an amount of Rs. 110.50 Crs. as per Accounting Standard (AS) – 12, the net depreciation works out to Rs. 199.78Crs.

Computation of Depreciation as per audited accounts for FY-15 is shown below:

Table Number: 3.17

PARTICULARS Amount in Rs. Crs. Gross fixed asset at the beginning of the year 5605.28 Additions 1645.01 Deductions 175.93 Gross fixed asset at the end of the year 7074.36 Depreciation provided 310.28 Average rate of Depreciation ( on 90% gross fixed asset) 4.87% Assets created on Contributions, subsides and grant at the beginning of the year 1426.28 Additions 396.12 Deductions 110.49 Gross fixed asset created on contributions, subsidies and grants at the end of the year 1711.89 Depreciation with drawn as per AS-12 110.49 Average rate of depreciation with drawn as per AS-12 6.45%

The average rate of depreciation works out to 4.87%, which is comparable with the KERC prescribed rate of depreciation at 5.04%. Depreciation rate for the assets created under contribution, subsidy and grants is at the rate of 6.45%.

It is ascertained that the average depreciation rate of depreciation for the assets held works out to 4.87% and average depreciation withdrawn as per AS-12 works out 6.45%. The difference is only by 1.58%. The error occurred in the previous years is rectified duly considering the average life of all the assets.

Commission is requested to true up the depreciation of Rs.199.78 Cr. as per actual.

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Interest and Finance Charges:

As per MYT regulations, Commission is allowing actual interest incurred on the loans borrowed towards creation of Capital Assets, interest paid towards consumer deposit and interest on working capital on normative basis.

Breakups of interest and finance charges are as under:

Long term loan

As per the final Accounts, an amount of Rs.1763.87 Crore of long term borrowings are existing as at the end of FY-15. Details of loans outstanding and interest paid are shown below:

Table Number: 3.18

Amount in Crs.

Loan Loan Interest outstanding Sl.No. PARTICULARS outstanding as paid for FY- as on on 31.03.2015 15 31.03.2014 A Secured loans 1 Bank of India 142.8 114. 18 16.62 2 Canara Bank 699.99 659. 99 78.51 3 Bank of Maharashtra 362.48 305. 32 40.59 4 REC- APDRP counterpart funding 56.48 22. 08 14.89 5 PFC- R-APDRP (Part A) 146.65 146. 65 0 6 PFC- R-APDRP (Part B) 197.45 194. 5 0 7 PFC-DRUM project 6.16 4. 11 1.63 8 Japan International co-operative-Agency 214.75 276. 97 Total 1826.76 1723. 8 152.25 B Un-Secured loans 1 Loan from GOK-PMGY 0.77 0.66 0.11 2 Loan from GOK-APDRP 18.62 29.20 4.06 3 GOK-Interest free loan 0.94 0.94 4 Loan from GOK through REC-RGGY 10.63 8.98 1.37 5 REC- NJY 166.33 166.33 54.77 6 REC-DTC metering 118.19 118.19 7 Loan from GOK-Bangalore automation 0.44 0.29 0.05 8 Loan from Gok- Ganga kalyana 0.54 0.12

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Term loan on PFC- Loan accounted as per 9 181.28 0 4.96 advice of KPTCL Total 497.74 40.07 65.44 A+B Total long term borrowings 2324.51 1763.87 217.69

Interest paid on Long Term borrowings for the year FY-15 is Rs.217.69. Weighted Average interest rate works out at 10.65%

Long term borrowing for the year FY-15 is Rs.1763.87Crs. Out of which Rs.341.15 Cr is drawn from PFC towards R-APDRP part A and Part B works, which will be converted as grants, if the projects conditions are fulfilled.

BESCOM request the Commission to consider Rs217.69Cr as interest on Long term loans.

Short term loan and Over drafts.

To meet the day to day expenditure ie., for working capital, BESCOM borrowed short term loan and over drafts. As per the final Accounts, an amount of Rs.2493.81 Crore of short term and over draft borrowings are existing as at the end of the year FY-15. Details of loans outstanding and interest paid are shown below:

Table Number: 3.19

Amount in Crs.

Sl. Loan outstanding as Loan outstanding Interest paid PARTICULARS No. on 31.03.2014 as on 31.03.2015 for FY-15 1 South Indian Bank 200 0 7.90 2 Vijaya Bank 149.99 500.00 21.43 3 Corporation Bank 125 350.00 25.15 4 State Bank of Mysore 100 100.00 10.66 Bank of Maharashtra 6.12 6.12 5 Loan from REC 49.99 0.00 13.72 6 Syndicate Bank 250 131.25 18.40 PFC 5.65 7 Over Drafts a Bank of Baroda 140.53 75.24 138.69

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b Vijaya Bank 196.05 299.38 c Canara Bank 503.01 743.40 d Syndicate Bank 101.18 99.79 e Bank of India 203.09 194.76 Total 2018.84 2493.81 247.73

Interest on working capital paid for FY-15 was Rs.247.73Crs. The weighted average interest on working capital works out at 10.98 % per annum.

Interest on working capital:

Short term borrowing and over drafts for the year FY-15 is Rs.2493.81Crs. BESCOM has incurred an amount of Rs247.73 Crores towards interest on short term loans and bank overdrafts. Details are shown below:

As per the provisions of MYT Regulations, interest on working capital is as under:

“Interest on Working Capital

3.11.1 Working capital shall cover: Operation and maintenance expenses for one month; Maintenance spares @ 1% of the historical cost of assets at the beginning of the year and Receivables equivalent to two month’s average revenue.

3.11.2 Rate of interest on working capital shall be on normative basis and shall be equal to the short-term Prime Lending Rate of State Bank of India as on 1st April of the year. The interest on working capital shall be payable on normative basis notwithstanding that the Distribution Licensee has not taken working capital loan from any outside agency As per the amended version dated 01.02.2012,

3.11.2 The Commission shall considered the allowable interest on working capital calculated on normative basis limited to actual expenditure plus fifty percent of the difference between the actual expenditure and the amount calculated on normative basis. Rate of interest on working capital shall be on normative basis and shall be equal to the short-term Prime Lending Rate of State Bank of India as on 1st April of the year.

As per the data available from the SBI, prime lending rate of interest is as under:

14 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

BENCHMARK PRIME LENDING RATE (HISTORICAL DATA)

Table Number: 3.20

Effective Date Interest Rate (%) 07.11.2013 14.75 19.09.2013 14.55 04.02.2013 14.45 27.09.2012 14.50 13.08.2011 14.75 11.07.2011 14.25 12.05.2011 14.00 25.04.2011 13.25 14.02.2011 13.00 03.01.2011 12.75

Commission notes that Banks have departed from prime lending rates and are now adopting base rate for lending loans w.e.f.01.07.2010..

The actual lending rates charged to borrowers would be the Base Rate plus borrower-specific charges, which will include product-specific operating costs, credit risk premium and tenure premium. SBI lending rates are as under.

Table Number: 3.21

Facility Interest Rate for period upto 3 years Working capital and term loan Base Rate + 2.50% to Base Rate + 5.00%

Note: Appropriate tenure premium will be added for term loans above 3 years Table Number: 3.22

Facility Interest Rate for period upto 3 years Term Loan (Based on Credit Risk Assessment Model) Base Rate + 2.50% to Base Rate + 7.00%

Note: Appropriate tenure premium will be added for term loans above 3 years.

SBI is adding 2.5% to base rate plus 5% to 7% for the base rate to arrive at actual lending rate for Small and Medium Entrepreneurs for a period upto 3 years.

Details obtained from the SBI website is reproduced as under:

INTEREST RATES

State Bank of India provides information on the various Interest rates offered by it on various loans and deposit schemes.

MYT 4TH CONTROL PERIOD FOR FY-17 TO FY-19Page 15 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

Details of Up-to-date interest rates scheme-wise is given in the sections one could click on to.

"Please call SBI's 24X7 helpline through Toll free 1800 11 2211, 1800 425 3800 or Toll number080-26599990 these are accessible from all landlines and mobile phones in the country"

INTEREST RATES ON FCNB LOANS TO EXPORTERS / CORPORATES

FCNB LOANS- PRICING WITH EFFECT FROM 26.02.2013

Table Number: 3.23

External Credit Rating Interest Rates w.e.f. 26.02.2013 AAA Libor + 3.00% AA+, AA, AA- Libor + 3.00% A+, A, A- Libor + 3.25% BBB+, BBB, BBB- Libor + 4.00% BB+ and below (Only Roll Overs) Libor + 4.25%

i) The existing separate rates for Demand Loans and Term Loans are dispensed with and uniform rates are quoted based on External Credit Rating, subject to reset every 6 months @ 6 month's LIBOR.

ii) The FCNB Loans shall continue to be made available for a period up to 12 months only. The loan shall be rolled over at the end of 12 months subject to availability of funds for a further period of 12 months at interest rate prevailing at the time of roll-over.

 Domestic deposits (Below Rs one crore) interest rates revised w.e.f. 19.08.2015.

 Domestic deposits (Rs one crore & above) interest rates revised w.e.f. 17.07.2015 .

 Benchmark Prime Lending Rate (BPLR) reduced from 14.60% p.a. to 14.45% p.a. w.e.f.08.06.2015.

 Base Rate reduced from 09.85% p.a. to 9.70% p.a. w.e.f. 08.06.2015.

16 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

Hon’ble Commission in its earlier Tariff Orders considered only 11.75% as rate of interest on working capital. Commission continued the same in Tariff Order dated 02.03.2015, had considered 11.75% as the rate of interest for the computation of working capital without looking into the short- term prime lending Rate of State Bank of India as on 1st April of the year.

As per the notified MYT regulations, Interest and finance charges are termed as controllable expenditure. Commission approves the expenditure based on the normative basis. Expenditure over and above the normative level shall be charged to the Licensee and any gain on this count shall be allowed to be retained by the Licensee.

Commission by amending the regulation 3.11.2 opted to charge the Licensee for over and above the cost on normative basis but chose to limit the gains on this count by 50%.

This amendment will not encourage competition and will not support the improvement in the efficiency of the Licensee which is against the core objective of the Electricity Act-2003. Electricity Act 2003 is enacted with an ambition to encourage competition and for improvement in the efficiency of the electrical industry.

It is submitted to the Commission that any regulations which are not in line with the Electricity Act-2003 will become null and void.

Hon’ble Appellate Tribunal for Electricity in its judgment dated 2nd January 2013, vide appeal No.108/2010, FKCCI V/s KERC and other ruled vide para 39 that :“The Commission has no power to deviate from its own MYT Regulations and ………without amending the MYT Regulations”

Hon’ble Commission is requested to adhere to the regulations prevailing for the computation of working capital. Rate of interest on working capital existed as on 1st of April 2014 is 14.60% as per SBI web site.

MYT 4TH CONTROL PERIOD FOR FY-17 TO FY-19Page 17 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

Computed interest on working capital on normative basis is as under: Table Number: 3.24

Sl.No Particulars Amount Amount 1 2 months Receivables (Rs.13479.60/6M) 13479.60 2246.60 2 One month O&M expenses (Rs.1054.60/12 M) 1084.80 90.40 3 1% of Gross fixed Assets as on 01.04.2014 (Rs.5605.27) 5605.27 56.05 Total 2393.05 4 Allowable Interest on working capital at 14.60% 349.38

5 Actual interest incurred for working capital 247.73 6 Savings to the Normative cost 101.65 2 Allowable interest on working capital (50% of savings+ actual cost) ( As 7 98.35 per amended version)

It is submitted before the Commission that, Hon’ble Appellate Tribunal in OP 01/2011 has ruled that, interest on working capital cannot be comparable with the actual cost or normative expenditure cannot be shared to the consumers. It should be fully passed to the Licensee. The extract of the judgment of the Hon’ble ATE of OP01/2011 dated 5th January 2012 is reiterated for kind reference:

4.6.5.2 Rate of interest on working capital so assessed on normative basis, shall be equal to the short-term prime lending rate of State Bank of India as on the 1st April of the year preceding the year for which tariff is proposed to be determined or at the actual rate of borrowing whichever is less”.

The Regulations provide that the working capital will be assessed on normative basis but the interest rate on working capital shall be the short term prime lending rate of SBI as on 1stApril of the preceding year or the actual rate of borrowing, whichever is less.

8.4. This issue has already been decided by this Tribunal in the case of Reliance Infrastructure Ltd. vs. Maharashtra Electricity Regulatory Commission &Ors. Reported as 2009 ELR (APTEL) 0672. The relevant extracts of the judgment are reproduced below:

“ 11. The Commission has directed that the interest on working capital be treated as efficiency gain and is required to be shared as per Regulation No. 19. The treatment given to the interest on working capital is as under:

“Interest on Working Capital

18 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

As discussed in the above paragraphs, the actual interest on working capital incurred by REL during FY 2006-07 is nil and the normative interest on working capital approved by the Commission considering other elements of expenses as approved after truing up, works out to Rs.0.60 Crore. As the actual expenditure under this head is zero, the Commission has considered the entire normative interest on working capital as efficiency gains and has considered sharing of the same with the distribution licensees in the appropriate ratio, as discussed while sharing efficiency gains due to reduction in R&M expenses.

12) It is submitted on behalf of the appellant that when working capital is funded through internal sources of the appellant, the internal funds also carry cost. It is further submitted that such funds employed elsewhere would have carried interest income.

13) The Commission observed that in actual fact no amount has been paid towards interest. Therefore, the entire interest on working capital granted as pass through in tariff has been treated as efficiency gain. It is true that internal funds also deserve interest in as much as the internal fund when employed as working capital loses the interest it could have earned by investment elsewhere. Further the licensee can never have any funds which has no cost. The internal accruals are not like some reserve which does not carry any cost. Internal accruals could have been inter corporate deposits, as suggested on behalf of the appellant. In that case the same would also carry the cost of interest. When the Commission observed that the REL had actually not incurred any expenditure towards interest on working capital it should have also considered if the internal accruals had to bear some costs themselves. The Commission could have looked into the source of such internal accruals and the cost of generating such accruals. The cost of such accruals or funds could be less or more than the normative interest. In arriving at whether there was a gain or loss the Commission was required to take the total picture into consideration which the Commission has not done. It cannot be said that simply because internal accruals were used and there was no outflow of funds by way of interest on working capital and hence the entire interest on working capital was gain which could be shared as per Regulation No. 19. Accordingly, the claim of the appellant that it has wrongly been made to share the interest on working capital as per Regulation 19 has merit”.

In the above judgment the Tribunal has held that the working capital funded through internal sources also carry cost. Such funds employed elsewhere would have carried interest income.

MYT 4TH CONTROL PERIOD FOR FY-17 TO FY-19Page 19 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

8.5. The above issue has also been dealt with in this Tribunal’s judgment dated 28.8.2009 in Appeal No. 117 of 2008 in the matter of Reliance Infrastructure Ltd. vs. Maharashtra Electricity Regulatory Commission &Ors. The relevant extract is reproduced below:

“15. In Appeal No.111/08, in the matter of Reliance Infrastructure v/s MERC and Ors., this Tribunal has dealt the same issue of full admissibility of the normative interest on Working Capital when the Working Capital has been deployed from the internal accruals. Our decision is set out in the following paras of our judgment dated May 28, 2008 in Appeal No. 111 of 2008.

“ 7) The Commission observed that in actual fact no amount has been paid towards interest. Therefore, the entire interest on Working Capital granted as pass through in tariff has been treated as efficiency gain. It is true that internal funds also deserve interest in as much as the internal fund when employed as Working Capital loses the interest it could have earned by investment elsewhere. Further the licensee can never have any funds which has no cost. The internal accruals are not like some reserve which does not carry any cost. Internal accruals could have been inter corporate deposits, as suggested on behalf of the appellant. In that case the same would also carry the cost of interest. When the Commission observed that the REL had actually not incurred any expenditure towards interest on Working Capital it should have also considered if the internal accruals had to bear some costs themselves. The Commission could have looked into the source of such internal accruals or funds could be less or more than the normative interest. In arriving at whether there was a gain or loss the Commission was required to take the total picture into consideration which the Commission has not done. It cannot be said that simply because internal accruals were used and there was no outflow of funds by way of interest on Working Capital and hence the entire interest on working capital was gain which could be shared as per Regulation No. 19. Accordingly, the claim of the appellant that it has wrongly been made to share the interest on Working Capital as per Regulation 19 has merit.

15. b): The interest on Working Capital, for the year in question, shall not be treated as efficiency gain.

16. In view of our earlier decision on the same issue we allow the appeal in this view of the matter and hold that the entire interest on normative interest rate basis is payable to the appellant”.

20 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

From the above judgment, interest on working capital is to be allowed on normative basis and it cannot be considered as efficiency gain and entire interest on normative interest rate basis is payable to the Licensee. Hence it is requested to allow interest on working capital on normative basis which works out to Rs.348.98 Crs.

Interest on consumer Security Deposit:

As per Section 47(4) of the Electricity Act 2003 and KERC Regulations on interest on security deposits, the ESCOMs have to pay interest on consumer deposits at prevailing bank rate.

Reserve Bank of India vide letter No. RPCD.CO.RRB.RCB.BC. No. 82 /03.05.33/2013- 14 January 29, 2014, revised the Bank rate from 8.75 to 9 percent from 28 January 2014. Hence, 9 percent Bank rate is paid to the consumer deposit.

As per the final accounts, Consumer deposit held as on 31.03.2015 is Rs. 2831.86Crs.Applying bank rate of interest at 9% on consumer deposit, interest component works out to Rs.254.86Crs.

As per accounts, BESCOM has incurred Rs.210.37 Crores towards payment of interest on consumer security deposit for the year FY-15. Interest incurred is within the Bank rate of RBI. Calculations are as follows:

Interest on consumer deposits for FY15

Table Number: 3.25

Rs. in Crore Particulars FY15 Opening balance of consumer deposit 2453.79 Outstanding balance of consumer deposits. 2831.86 Interest on consumer deposits 210.37 Weighted average Rate of Interest 7.96%

BESCOM requests the Commission to allow the amount of Rs. 210.37Crs for FY-15 towards interest on security deposit which is within the Bank rate of 9%.

MYT 4TH CONTROL PERIOD FOR FY-17 TO FY-19Page 21 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

Other finance charges: As per accounts of BESCOM, Rs. 10.19 Cr. is incurred towards other finance charges. Table Number: 3.26

Finance charges Bank charges 10.19

Interest and Finance Charges approved actual and proposed for truing up for FY-15 is tabulated as under:

Table Number: 3.27

Approved by the Proposed for Sl. Actuals as per PARTICULARS Commission for Truing up on No Accounts FY-15 normative basis 1 Interest on Loan Capital 160.92 217.69 217.69 2 Interest on Working Capital 265.15 247.73 348.98 3 Interest on Consumers Deposit 214.74 210.37 210.37 4 Other Interest & Finance Charges 7.63 10.19 10.19 685.98 Total 648.44 787.23

The Commission is requested to approve the interest and finance charges of Rs.787.23Crs. For FY-15

Expenses capitalized.

As per the audited accounts following are the expenses capitalized.

Table Number: 3.28

SL. NO PARTICULARS Current Year 2014-15 1 Interest and finance charges 67.75 2 Employee cost 4.75 3 Administrative and General expenses 6.37 Total 78.87

Commission requested to allow 78.87 Cr to capitalize for FY-15

Other Debits:

Commission is approving the other debits based on actuals. As per accounts other debits are as under: Table Number: 3.29

22 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

SL. NO PARTICULARS Current Year 2014-15 OTHER DEBITS 1 Small & Low value items Written off 0.27 2 Asset decommissioning cost -0.04 3 Material cost variance -15.09 4 Miscellaneous losses and Write offs including provisions 5.03 5 Bad Debts written off 0.01 6 Loss of materials by pilferage, etc., 7 Provision for Loss on obsolescence of stores, etc. in stock -10.98 8 Losses/gain relating to Fixed Assets 14.10 Total -6.70

Commission is not considering the provisions for bad debts provided in the accounts. Hence, Rs.8.75Crs. provided as Provision for Bad & doubtful debts is not proposed for truing up. Commission is requested to consider Rs. (-) 6.70Crs. As other debits for FY-15

Prior period charges/credits:

Commission is approving the prior period charges/credits based on actuals. As per accounts prior period charges/credits are as under. Table Number: 3.30

SL. NO PARTICULARS Current Year 2014-15 Other Debits 1 Short provision prior period – Depreciation 9.66 2 Short provision -Other expenses 4.93 Total 14.59 Less: 3 Excess provision prior period- Int. finance charges 8.66 4 Excess provisions related prior periods 19.97 Total 28.63 5 Net prior period credit 14.04

Commission is requested to consider Rs.14.04Crs. Of prior period credit for FY-15.

Return on Equity:

RoE computed as per norms is shown in the table below: Table Number: 3.31

Rs. in Crs

Particulars FY14 Paid Up Share Capital 546.91 Add: Net profit for FY-15 113.44

MYT 4TH CONTROL PERIOD FOR FY-17 TO FY-19Page 23 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

Total Share capital 660.35 Reserves & Surplus -589.20 Equity for FY15 71.15

BESCOM carried accumulated loss to an extent of Rs.589.20Cr as against the share capital of Rs.660.35Cr. Thus resulting in net share capital of Rs.71.15Crs.

As per MYT regulations Return on equity means:

“ Return on equity shall be computed on the equity base determined in accordance with clause 3.7 above and shall be @ 14% per annum. For the purpose of return on equity, any cash resources available to the licensee from its share premium account or from its internal resources that are used to fund the equity commitments of the project under consideration shall be treated as equity subject to limitation contained in clause 3.6 above. “ As per the MYT regulations, for the purpose of computation of return on equity any cash resources available to the licensee from its share premium amount and from internal resources that are used to fund the equity commitments of the project under consideration shall be treated as equity.

Now, Electricity Distribution business is regulated business. Income and Expenditure of Distribution Company is approved by KERC and latter it will be trued up based on the actuals. Hence, the difference in the expenditure and the receipts will be validated in truing up exercise and any excess or shortage will be carried to the next tariff revision along with the carrying cost. Hence, any loss in the distribution business will be compensated in the future years which restore the equity.

For an investor, Return on Equity is computed based on the amount of Capital; he has invested into the Business. Total investment is considered as Capital (either as equity or as debt). Investment by way of debt will reduce only when the repayment is done towards the principal amount of debt. Likewise, reduction in equity happens only when Capital is withdrawn from the business by the investor. Loss in business never results in withdrawal of Capital. However, profit or surplus belongs to the investor and investor re-invests the surplus in business until it is withdrawn as dividend/reduction in Capital. That is the reason, surplus should be added while

24 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

computing the Return on Equity and loss “should not be” deducted, while computing the Return on Equity. Share Capital is distinctly shown in Balance Sheet to identify the amount of direct investment by the investor.

It can be understood easily as per below example:

Table Number: 3.32

Particulars Sitation-1 Situation-2 Capital A 100 100 Surplus/Loss B 200 -200 Total A+B=C 300 -100 RoE D 15% 15% Tariff Computation Other Costs E 1000 1000 RoE F=D*C 45 -15 Total Cost G=E+F 1045 985 Total units H 1000 1000 Per unit cost I=G/H 1.05 0.99

From the above table it can be seen that the other cost is Rs.1000 and the total number of units is 1000, the minimum tariff in all circumstances should be Rs.1. However, if RoE is computed by reducing loss from the Capital, in the above situation-2 the tariff falls below the minimum mark of Rs.1 and leads to increase in losses. In situation -2, the RoE must be taken as Rs. 15 by which the total cost works out to 1015. The tariff will then be 1.015 ideally.

Further, Commission is allowing ROE on the equity held at the beginning of the year. Equity induced in the middle of the year or Incremental internal resources accrued in the months and invested during the year should also earn the returns. If the RoE allowed for the equity held at the beginning of the year, it will not give any returns on the equity induced during the year.

Consumers pay additional security deposit (2MMD) in the middle of the year for which interest for that portion of the year is paid. The same analogy is also applicable to the equity investments which are induced during the year. Hence it is requested to allow the Return on equity for the share capital held by BESCOM at the end of year ie., 31.03.2015.

MYT 4TH CONTROL PERIOD FOR FY-17 TO FY-19Page 25 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

Table Number: 3.33

Rs. in Crs

Particulars Amount Equity held as on 31.03.2015 546.91 Return on Equity 15.5 % Total 84.77

The Commission is requested to allow Rs 84.77Crs. as RoE.

1.13 Income Tax

As per the Annual Accounts, an amount of Rs.25.75 Crores is paid towards Income tax. The Commission is requested to allow the same.

1.14 Other income:

Commission had approved other income to an extent of Rs. 225 Crs. As per the final accounts for FY-15 other income is tabulated as under:

Table Number: 3.34

Current Year 2014- SL. NO PARTICULARS 15 1 Interest on Bank Fixed Deposits 10.72 2 Profit on sale of stores 0.98 3 Rent 1.90 4 Incentives received 141.39 5 Excess provision made in prior period which is no longer required 0.01 6 Value of materials found excess during physical verification 0.03 7 Miscellaneous 47.13 8 Rebate at 0.5% for collection of Electricity Duty 2.97 Total 205.13

Major portion of other income is from incentives received ie., Rs.141.39 Crs. Commission in its tariff Order -2014 issued on 12th May 2014 notes that: ‘ The Commission notes that timely payment to Generators is as agreed in the power purchase agreements. The incentive earned for such timely payments is further translated as savings in the cost of power purchase. However, providing incentives on such financial prudence is required, to encourage ESCOMs to be disciplined in payments to generators without incurring costs of interest on belated payment as being reported in their accounts.

26 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

It is pertinent to focus on the Tariff Policy wherein it states that,

“…….Making the distribution segment of the industry efficient and solvent is the key to success of power sector reforms and provision of services of specified standards. Therefore, the Regulatory Commissions need to strike the right balance between the requirements of the commercial viability of distribution licensees and consumer interests. Loss making utilities need to be transformed into profitable ventures which can raise necessary resources from the capital markets to provide services of international standards to enable India to achieve its full growth potential. Efficiency in operations should be encouraged. Gains of efficient operations with reference to normative parameters should be appropriately shared between consumers and licensees…………….”

The Commission is therefore of the view that BESCOM’s efforts in making timely payments to generators and earning incentives in the form of rebate under the terms of PPA need to be encouraged even though BESCOM is bound to endeavor to make prompt payments as a normal prudence in financial management. Hence, the Commission decides to allow10% of the total incentive“

It is brought to the kind notice of the Commission that as per the MYT regulations gains of efficient operations with reference to normative parameters should be appropriately shared between consumers and licensees. Hence, Commission is requested to share the efficiency gain by at least 50%.

It is submitted before the Commission, that as per the corporate cash book, closing balance on each day is negative. This means to say always there is an overdraft. Maximum overdraft stood at 2100 Cr. and minimum overdraft is at Rs. 700 Crs. Such being the case, earning of interest on security deposit does not arise. It is learnt that the amount received from the Central Government towards R-APDRP is kept as deposit in the banks for disbursement as per Schedule. Interest earned on this deposit is considered as receipts as per final accounts. For the purpose of truing up, this cannot be termed as Revenue receipts. If the amount released by the Central Govt. is converted into grants, then the interest earned on this amount is also termed as grant by the Central Govt. If it is termed as loan, then the loan amount will be reduced to the extent of interest. On both the counts, interest earned will be

MYT 4TH CONTROL PERIOD FOR FY-17 TO FY-19Page 27 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15 a capital receipt and not the revenue receipt. Hence, this cannot be considered as income for the purpose of truing up exercise.

As per the judgment of Hon’ble Appellate Tribunal for Electricity vide Appeal No.46/2014 dated 17.09.2014,

“ The State Commission is not bound to follow the audited accounts and the State Commission can scrutinize the same and allow the expenditure only after prudence check”

Hence, for the purpose of truing up, interest earned on bank fixed deposits may not be considered.

Revised other income is tabulated as under:

Table Number: 3.35

SL. NO PARTICULARS Current Year 2014-15 1 Profit on sale of stores 0.98 2 Rent 1.9 3 Incentives received (50% of Rs.141.39 Cr.) 70.695 4 Excess provision made in prior period which is no longer required 0.01 5 Value of materials found excess during physical verification 0.41 6 Miscellaneous 47.49 7 Rebate at 0.5% for collection of Electricity Duty 2.97 Total 124.44

Commission is requested to consider Rs.124.44Crs. As other Income for FY-15.

1.15 Regulatory Asset:

The Commission in its Order dated 12.05.2014, trued up the Annual Revenue Requirement (ARR) of FY-13 and approved the deficit of Rs. 1,151.65 Cr. ( A Review petition was filed before the Commission vide RP-06/2014 and is pending) and approved the estimates of ARR for FY-15 as Rs.13,586.06 Crs. Commission wrapped up truing up of FY-13 by stating that,

“ Average cost of supply per unit sold works out to Rs.5.24 per unit, as against this revenue realized during FY13 is Rs.4.73 per unit including government subsidy. Thus,

28 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

there is a deficit of 1151.65 Crores which also includes the cost of providing supply of 1002 MU in excess of the quantity included in the ARR to IP Sets and BJ/KJ consumers during the year beyond the quantum approved in the ARR for FY13.No subsidy had been determined by the Commission from the Government of Karnataka. The sales under metered category of consumers achieved is lower than that factored in the approved ARR forFY13, due to which there is no additional cross subsidy available to cover the cost for excess supply to IP Sets and BJ/KJ consumers. Therefore, the entire cost of supply of this additional quantity of power supplied to IP Sets and BJ/KJ Consumers has to be recovered from the State Government at Rs.5.24 (ACS) per unit as additional subsidy. This amounts to Rs.524.53 Crores. With this additional subsidy from the Government of Karnataka, the unfilled gap for FY13 will be reduced from Rs.1151.65 Crores to Rs.627.13 Crores”.

Commission had carried Rs.627.13 Crs. of deficit of FY-13, for determination of Tariff for FY-15. The calculated table of the Commission is as follows.

Revenue gap for FY15

Table Number: 3.36

Particulars FY15 Net ARR including carry forward gap of FY13 (in Rs. Crores) 14213.19 Approved sales (in MU) 25395.07 Average cost of supply for FY15 (in Rs./unit) 5.60 Revenue at existing tariff (in Rs. Crores) 12653.88 Gap in revenue for FY15 (in Rs. Crores) 1559.31 Regulatory asset to be recovered over next two years (in Rs.Crores) 611.00 Balance revenue gap to be collected by revision of tariff forFY15 (in Rs. Crores) 948.31

In the above table, Commission carried the deficit of Rs.627.13 Cr. trued up gap of FY-13 to FY15. The Commission approved annual revenue requirement of FY-15 at Rs.13, 586.06 Cr. to sum up net ARR of Rs.14, 213.19 Cr.(13,586.06+627.13). Of which Rs.611.00 Cr. was set aside as regulatory asset. Thus absorbing Rs. 16.13 Cr of trued up deficit of FY-13 in the ARR of FY-15. (Rs.627.13-Rs.611 =Rs.16.13) Hence, Commission is requested to consider Rs.16.13 Crs for the purpose of truing up of FY-15.

MYT 4TH CONTROL PERIOD FOR FY-17 TO FY-19Page 29 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

Carrying cost of regulatory asset:

Commission apportioned the trued up gap of FY-13, Rs.1151.65 into two parts.  Rs. 524.53 Cr. payable by Government of Karnataka and  Rs. 627.13 Cr. recoverable from tariff in the next two years. Ie., FY-16 and FY-17.

A claim for payment of Rs.524.53 Crs. was made to the Government and the said amount is not yet considered by the government for payment. Rs.627.13 Cr apportioned to be recoverable from tariff is deferred for the next two years ie., FY-16 and FY-17. Hence, BESCOM is eligible for carrying cost at the rate of 12% p.a. on Rs.1151.65 Crs. Hence, Commission is requested to allow Rs.138.198 Cr as carrying cost on Rs.1151.65 Crs.at 12% p.a.

Table Number: 3.37

SL. NO PARTICULARS Current Year 2014-15 1 Regulatory asset ( trued up gap of FY-13) absorbed in FY-15 ARR 16.130 2 Carrying cost at 12% on Rs.1151.65 Crs. 138.198

1.16 Revenue from sale of power:

Revenue from sale of power is one of the topics which is not dealt by the Commission for the purpose of truing up exercise in the previous years.

Of late, it is noticed over the years, that the expenditure is not the main cause for increase in the deficit year on year, but it is the receipts. Hence, it is submitted before the Commission to consider the revenue receipts from sale of power for the purpose of truing up of respective years. This may show the path for corrective measures. Demand, Collection and Balance (DCB) for FY-15 as per accounts are as follows:

Table Number: 3.38

Average Openi Collection Closi CB to Revenue HO Adjust DESCRIPTIO TARIF No of UNITS % of Realization ng Revenue including ng monthly Collectio & N F Consum SOLD unit Rate per Balanc Demand Adjustment Bala Demand n withdrawal unit(in) e s nce Ratio

Units

30 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

( in KWH) 1 2 3 4 5 6=(8/4)*100 7 8 9 10 10a 11 BJ/KJ ( Upto LT 1 764865 83.98 0% 4.93 20.96 41.4 90.33 -100.7 -10.37 72.74 21 18 Units ) BJ/KJ ( Above 0 4288 51.87 0% 0 109.59 23.17 0 87.39 87.39 45.37 24 18 Units ) Lighting and 118.0 LT 2 6389122 5719 23% 4.75 228.88 2715.12 2737.08 88.87 2825.95 1 AEH 6 Commercial LT 3 864600 1663 7% 8.22 57.13 1368.04 1371.57 41.81 1413.39 11.79 0 Lighting IPSets (10HP & BELOW) FREE 648.1 LIGHTING LT 4A 768516 5939 24% 2.29 434.51 1358.83 1087.61 57.58 1145.19 6 From 01-08- 5 2008 (Subsidy Due for GOK) IPSets (10HP & BELOW) FREEZED 1261.0 1163. 0 0 0 0% 0 0 0 98.08 98.08 BALANCE 9 01 Upto 31-07- 2008 I.P.Sets (10HP & LT 4B 638 0 0% 0 6.57 6 0.29 -4.2 -3.91 16.48 33 Above ) Pvt. HortI, Nuris, Coffee LT 4C 1315 0 0% 0 1.84 10.93 1.23 -0.13 1.1 11.67 13 & Tea Plant LT Industires LT 5 175326 1134 5% 6.37 72.48 722.5 738.72 46.23 784.95 10.03 0 1226.9 1506. Water Supply LT 6 A 58116 431.1 2% 8.34 359.36 312.44 -232.5 79.94 50 9 4 824.3 Street lights LT 6 B 57373 388.9 2% 7.58 708.04 294.75 125.02 53.42 178.44 34 5 Pending for reconcillation of Sundry 127.1 0 0 0 0% 0 0 0 0 -127.14 -127.14 debtors 4 -Revenue & tax 4555 LT TOTAL I 9084159 15411 63% 4.48 4128.1 6900.1 6464.28 8.72 6473 8 .2 Water Supply & Sewerage HT 1 186 664.2 3% 4.33 39.95 287.49 283.23 -6.45 276.78 50.66 2 Pumping HT Industires HT 2A 5414 4750 19% 6.97 44.61 3313.01 3284.73 71.26 3355.99 1.63 0 HT - HT 2B 4893 2796 11% 8.35 14.98 2335.44 2356.63 16.27 2372.91 0 Commercial 22.49 HT Hospitals HT 2C 380 189.3 1% 7.23 3.64 136.86 135.69 1.53 137.22 3.28 0 HT Lift HT 3A 20 17.68 0% 2.21 0.98 3.91 1.82 0.23 2.05 2.84 9 IrrgtnSocities HT Lift Irrig Schemes HT 3B 9 0.61 0% 4.5 -0.01 0.27 0.27 -0.07 0.2 0.07 3 &Govt Hort. HT Residential HT 4 217 127.3 1% 8.52 -9.22 108.41 70.93 32.04 102.98 -3.79 0 Apartment 32.1 HT TOTAL II 11119 8545 35% 7.24 94.91 6185.4 6133.31 114.81 6248.12 0 9 IP SET DEFUNT 0 0 0 0% 0 0 0 0 0 0 0 INSTALLATI ONS 4587 LT + HT III 9095278 23956 98% 5.46 4223 13085 12597.6 123.52 12721.11 4 .4 Temporary - Supply (LT + 0 349240 480 2% 6.25 -66.97 299.98 286.45 -18.26 268.19 35.1 -1 HT) 9 GRAND 0 9444518 24436 100 5.48 4156 13385 12884.1 105.26 12989.31 4552 4 TOTAL (LT + % .2 HT+

MYT 4TH CONTROL PERIOD FOR FY-17 TO FY-19Page 31 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15 temporary) Miscellaneo us Income & 0 0 0 0% 0 -5.29 94.15 102.33 -9.18 93.16 -4.3 -1 Withdrawals GRAND 100 4547 0 9444518 24436 0 4150.7 13480 12986.4 96.08 13082.46 4 TOTAL % .9

From the above table, the total Closing balance is 4 times the average monthly demand. Major dues are from street light and water supply dues which are 34 times and 50 times of their monthly average demand respectively. Subsidy receivable from IP (after 01.08.2008 ie., free supply) is due by 6 times the monthly demand. BESCOM cannot enforce disconnection of the installations to recover the dues as these services are essential to the public. The average realization as per the above table works out to Rs.5.48 per unit as against the Commission approved tariff of Rs.5.36 per unit. Since, Commission approved tariff is Rs. 5.36 per unit, there is no possibility of realization of Rs.5.48 per unit. Hence, the said DCB is further analyzed as under:

For Analysis, a breakup detail of Consumption and Demand figures of DCB of FY-15 is obtained from the concerned section.  Consumption has two components. 1. Consumption for the period from 01.04.2014 to 31.03.2015 and 2. Unbilled consumption of 353.14MUprovision made for the year.

 Revenue Demand is split into Revenue earned from sale of power (Demand), Interest earned on belated payment (int) and Headquarters adjustment towards unbilled revenue (HQ adjustment).

Table Number: 3.39

HQ No of Con. on Un ARR NET CON adjust Total Pure NET Tariff Installati for FY billed Demand Int. Includ -ARR ment Demand ARR ARR on Billed 2014-15 added ing Int billed HT-1 162 656.09 8.15 664.24 283.61 5.94 -2.05 287.49 4.32 4.41 4.33 HT-2A I 3668 2372.87 0.00 2372.87 2336.10 6.18 0.00 2342.28 9.85 9.87 9.87 HT-2A II 1403 2242.22 0.00 2242.22 953.02 1.59 0.00 954.62 4.25 4.26 4.26 HT-2B I 4478 2542.15 0.00 2542.15 2218.26 3.54 0.00 2221.81 8.73 8.74 8.74 HT-2B II 275 195.49 0.00 195.49 135.01 0.10 0.00 135.11 6.91 6.91 6.91 HT-2C I 231 73.31 0.00 73.31 81.57 1.94 0.00 83.51 11.13 11.39 11.39 HT-2C II 171 110.74 0.00 110.74 50.92 0.07 0.00 50.99 4.60 4.60 4.60 HT-3A I 15 15.23 0.00 15.23 3.06 0.05 0.00 3.11 2.01 2.04 2.04 HT-3A II 4 0.52 0.00 0.52 0.37 0.06 0.00 0.42 7.04 8.11 8.11 HT-3B 2 0.31 0.00 0.31 0.19 0.00 0.08 0.27 6.21 6.21 8.89 HT-4A 176 123.91 0.00 123.91 76.45 0.25 0.00 76.70 6.17 6.19 6.19 HT-4B 6 1.74 0.00 1.74 0.59 0.01 0.00 0.61 3.41 3.48 3.48

32 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

HT-5 230 280.17 5.42 285.59 -145.03 0.03 219.79 74.79 -5.18 -5.18 2.62 HT Total 10821 8614.74 215.98 8830.72 5993.99 19.75 246.44 6260.18 6.96 6.98 7.09 LT-1 I 401079 53.03 0.42 53.45 36.29 1.16 3.96 41.40 6.84 7.06 7.75 LT-1 II 2 0.00 0.00 0.00 0.00 0.00 0.00 0.00 47.21 47.57 47.57 LT-1 II 180861 82.40 0.00 82.40 23.77 3.13 -3.74 23.17 2.88 3.27 2.81 LT-2AI 4451787 5087.33 0.00 5087.33 2433.99 9.37 0.00 2443.37 4.78 4.80 4.80 LT-2A II 1289234 527.43 0.00 527.43 199.69 3.26 0.00 202.94 3.79 3.85 3.85 LT-2A FL 5394 13.00 0.00 13.00 6.47 0.02 0.00 6.49 4.98 4.99 4.99 LT-2B I 6517 33.63 0.00 33.63 25.01 0.07 0.00 25.08 7.44 7.46 7.46 LT-2B II 1676 7.19 0.00 7.19 2.92 0.01 0.00 2.93 4.06 4.08 4.08 LT-3 I 656707 1496.24 0.00 1496.24 1226.95 4.40 0.00 1231.35 8.20 8.23 8.23 LT-3 II 105295 150.53 0.00 150.53 119.37 0.53 0.00 119.90 7.93 7.97 7.97 LT-3 OL 569 2.05 0.00 2.05 1.83 0.00 0.00 1.84 8.96 8.96 8.96 LT-4A I 711573 5864.25 0.00 5864.25 1304.31 94.37 0.00 1398.68 2.22 2.39 2.39 LT-4A II 403 4.38 0.00 4.38 3.16 -0.19 0.00 2.97 7.23 6.79 6.79 LT-4A III 0 0.17 0.00 0.17 0.04 0.00 0.00 0.04 2.14 2.14 2.14 LT-4B 501 1.87 0.00 1.87 1.25 2.65 2.10 6.00 6.68 20.86 32.07 LT-4C 984 6.58 0.00 6.58 1.68 9.30 -0.05 10.93 2.55 16.68 16.61 LT-5A I 33508 112.66 0.00 112.66 66.61 0.71 0.00 67.32 5.91 5.98 5.98 LT-5 A II 37714 421.46 0.00 421.46 191.82 0.73 0.00 192.55 4.55 4.57 4.57 LT-5 A III 11747 278.61 0.00 278.61 233.79 0.60 0.00 234.38 8.39 8.41 8.41 LT-5 A IV 779 48.88 0.00 48.88 56.90 0.09 0.00 56.99 11.64 11.66 11.66 LT-5B I 22915 34.54 0.00 34.54 28.22 0.06 0.00 28.27 8.17 8.19 8.19 LT-5B III 24918 126.47 0.00 126.47 70.66 0.48 0.00 71.14 5.59 5.63 5.63 LT-5B III 3102 91.88 0.00 91.88 59.77 0.14 0.00 59.92 6.51 6.52 6.52 LT-5B IV 648 15.01 0.00 15.01 7.75 0.05 0.00 7.80 5.16 5.20 5.20 LT-6A [WS] 48979 435.66 -4.61 431.06 259.03 99.97 0.35 359.36 5.95 8.24 8.34 LT-6B [SL] 50218 390.32 -1.38 388.94 227.68 71.35 -4.29 294.75 5.83 7.66 7.58 LT-7 53817 182.67 11.78 194.45 210.53 0.63 14.03 225.18 11.52 11.56 11.58 TOTAL LT Total 8100927 15468.23 137.15 15605.38 6799.48 302.90 22.90 7125.28 4.40 4.59 4.57 LT+HT 8111748 24082.97 353.13 24436.10 12793.47 322.65 269.34 13385.46 5.31 5.45 5.48 TOTAL

From the above table, following major errors are noticed. 1. Commission determined tariff for BJ/KJ installations for the consumption of 18 units and below is Rs.5.36 per unit but demanded is Rs.6.96 per unit. For 10 HP and below Irrigation pump sets, Commission determined tariff is Rs.2.03 per unit but demanded at Rs.2.22 per unit.

2. Interest is charged to BJ/KJ installations and also IP sets to an extent of Rs.1.96Crs. and 94.36 Cr. respectively though the GoK is releasing subsidy on timely basis.

3. Rs.14.03 Cr. adjustment was made in HQ which is not warranted as the billing is done on weekly basis. Hence no need to make provision for UN billed energy for this tariff.

4. Boosting of Average revenue realization in respect of LT-6, water supply and Streetlights due to charging of interest.-On enquiry, it is learnt that the computation

MYT 4TH CONTROL PERIOD FOR FY-17 TO FY-19Page 33 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

is based on the data obtained from MIS report. MIS report is considered for uniformity and to avoid comments from the statutory/ AG’s audit.

Interest on BJ/KJ installations and IP sets levied at the Sub-division may be due to:

 Government directly releases the funds to M/s KPCL on behalf of Power purchase bills payable by BESCOM and directs BESCOM to set off the same towards the amount payable by Government towards supply of power to BJ/KJ installations and IP consumers.  Electricity tax collected from the consumers of BESCOM on behalf of Government will be adjusted to BJ/KJ and IP dues.  Amount directly released to BESCOM head office towards amount payable for supply of Power to BJ/KJ and IP consumers. Amount received from the Government at the head office, later will be transferred to subdivisions and then to individual consumers. The lag in communication may have resulted in demanding the interest to the respective consumers. The error areas are noticed and corrective measures are initiated to rectify the same.

Revenue realization from local bodies towards street lights and water supply dues is becoming a challenge to BESCOM, that too collection of due from Village panchayat is not forthcoming.

Commission is allowing interest on working capital which equals to 2 months receivables, over and above 2 months receivables Company has to bear the cost. Hence, Interest earned on Streetlight and Water supply dues is necessary to suffice the borrowings of the Company to that extent. Thus, it is submitted before the Commission that it is not appropriate to recognize the interest earned from Street light and water supply dues as revenue for purpose of tariff determination.

This contention is supported by the Hon’ble Appellate Tribunal for Electricity. The verbatim of Hon’ble Appellate Tribunal for Electricity vide appeal No. 42/2014 is quoted for kind reference of the Commission.

34 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

“ 47. ……………the State Commission is not bound to follow the audited accounts and the State Commission can scrutinize the same and allow the expenditure only after prudence check”

Portraying of higher tariff to LT4 (a) and BJ/KJ installations in demand is a mistake and the same needs to be corrected. By incorporating the corrections which are commented supra, demands of the respective categories are modified as under: Correction in Revenue Receipts

Table Number: 3.40

NET Demand Demande Total No of Tariff CONSUMPTION revenue total - d Difference Installation -ARR ARR corrected 1 2 3 4 5 6 LT-1 I 558910 53.45 36.29 41.40 5.11 LT-4A I 766654 5930.30 1304.31 1203.85 -100.46

Correction in interest Receipts

Table Number: 3.41 Tariff Interest Demanded Interest Corrected Difference 1 2 3 4 LT-1 I 1.16 0.00 -1.16 LT-4A I 94.37 0.00 -94.37 LT-6A [WS] 99.97 0.00 -99.97 LT-6B [SL] 71.35 0.00 -71.35

After considering the corrections, a Revenue receipt to be considered for truing up is corrected as follows: Table Number: 3.42

HQ ARR Net Con. Un NET CON adjust Total Pure Includ NET Tariff on for FY billed Demand Int. -ARR ment Demand ARR ing ARR 2014-15 added billed Int HT-1 656.09 664.24 283.61 5.94 -2.05 287.49 4.27 4.36 4.33 HT-2A I 2372.87 8.15 2372.87 2336.1 6.18 0 2342.28 9.85 9.87 9.87 HT-2A II 2242.22 0 2242.22 953.02 1.59 0 954.62 4.25 4.26 4.26 HT-2B I 2542.15 0 2542.15 2218.26 3.54 0 2221.81 8.73 8.74 8.74 HT-2B II 195.49 0 195.49 135.01 0.1 0 135.11 6.91 6.91 6.91 HT-2C I 73.31 0 73.31 81.57 1.94 0 83.51 11.13 11.39 11.39 HT-2C II 110.74 0 110.74 50.92 0.07 0 50.99 4.6 4.6 4.6 HT-3A I 15.23 0 15.23 3.06 0.05 0 3.11 2.01 2.04 2.04 HT-3A II 0.52 0 0.52 0.37 0.06 0 0.42 7.12 8.27 8.08 HT-3B 0.31 0 0.31 0.19 0 0.08 0.27 6.13 6.13 8.71

MYT 4TH CONTROL PERIOD FOR FY-17 TO FY-19Page 35 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

HT-4A 123.91 0 123.91 76.45 0.25 0 76.7 6.17 6.19 6.19 HT-4B 1.74 0 1.74 0.59 0.01 0 0.61 3.39 3.45 3.51 HT-5 280.17 0 285.59 -145.03 0.03 219.79 74.79 -5.08 -5.08 2.62 HT Total 8614.75 8.15 8628.32 5994.12 19.76 217.82 6231.71 6.95 6.97 7.22 LT-1 I 53.03 215.98 53.45 28.65 0 3.96 28.42 5.36 5.36 5.32 LT-1 II 0 0.42 0 0 0 0 0 LT-1 II 82.4 0 82.4 23.77 3.13 -3.74 23.17 2.88 3.26 2.81 LT-2AI 5087.33 0 5087.33 2433.99 9.37 0 2443.37 4.78 4.8 4.8 LT-2A II 527.43 0 527.43 199.69 3.26 0 202.94 3.79 3.85 3.85 LT-2A FL 13 0 13 6.47 0.02 0 6.49 4.98 4.99 4.99 LT-2B I 33.63 0 33.63 25.01 0.07 0 25.08 7.44 7.46 7.46 LT-2B II 7.19 0 7.19 2.92 0.01 0 2.93 4.06 4.08 4.08 LT-3 I 1496.24 0 1496.24 1226.95 4.4 0 1231.35 8.2 8.23 8.23 LT-3 II 150.53 0 150.53 119.37 0.53 0 119.9 7.93 7.97 7.97 LT-3 OL 2.05 0 2.05 1.83 0 0 1.84 8.93 8.93 8.98 LT-4A I 5864.25 0 5864.25 1190.44 0 0 1190.44 2.03 2.03 2.03 LT-4A II 4.38 0 4.38 3.16 -0.19 0 2.97 7.21 6.78 6.78 LT-4A III 0.17 0 0.17 0.04 0 0 0.04 2.35 2.35 2.35 LT-4B 1.87 0 1.87 1.25 2.65 2.1 6 6.68 20.86 32.09 LT-4C 6.58 0 6.58 1.68 9.3 -0.05 10.93 2.55 16.69 16.61 LT-5A I 112.66 0 112.66 66.61 0.71 0 67.32 5.91 5.98 5.98 LT-5 A II 421.46 0 421.46 191.82 0.73 0 192.55 4.55 4.57 4.57 LT-5 A III 278.61 0 278.61 233.79 0.6 0 234.38 8.39 8.41 8.41 LT-5 A IV 48.88 0 48.88 56.9 0.09 0 56.99 11.64 11.66 11.66 LT-5B I 34.54 0 34.54 28.22 0.06 0 28.27 8.17 8.19 8.18 LT-5B III 126.47 0 126.47 70.66 0.48 0 71.14 5.59 5.63 5.63 LT-5B III 91.88 0 91.88 59.77 0.14 0 59.92 6.51 6.52 6.52 LT-5B IV 15.01 0 15.01 7.75 0.05 0 7.8 5.16 5.2 5.2 LT-6A 435.66 0 431.06 259.03 0.35 359.36 6.01 6.01 8.34 [WS] LT-6B 390.32 -4.61 388.94 227.68 -4.29 294.75 5.85 5.85 7.58 [SL] LT-7 182.67 -1.38 194.45 210.53 0.63 14.03 225.18 10.83 10.86 11.58 TOTAL LT Total 15468.24 210.41 15474.46 6677.98 36.04 12.36 6893.53 4.32 4.34 4.45 LT+HT 24082.99 218.56 24102.78 12672.1 55.8 230.18 13125.24 5.26 5.28 5.45 TOTAL

Commission approved sales and actuals are compared and tabulated below:

Table Number: 3.43 Approved Actuals Sl Category Rate of Rate of No Consumption Revenue Consumption Revenue Realization Realization LT-1[fully 1 62.44 33.45 5.36 53.45 41.40 5.36 subsidized 2 LT-2(a)(i) 5138.53 2466.41 4.80 5228.16 2464.23 4.71 3 LT-2(a)(ii) 565.24 218.2 3.86 532.14 199.69 3.75 4 LT-2(b)(i) 33.36 23.97 7.19 33.63 25.01 7.44 5 LT-2(b)(ii) 5.59 3.31 5.92 7.19 2.92 4.06 6 LT-3(i) 1578.24 1285.64 8.15 1511.47 1228.78 8.13 7 LT-3(ii) 141.72 105.73 7.46 151.85 119.37 7.86 8 LT-4(a)(i)* 5712.98 1159.47 2.03 5930.30 1206.13 2.03 10 LT-4(b) 8.47 2 2.36 1.87 1.25 6.68 11 LT-4 (c) (i) 4.71 1.31 2.78 6.58 1.68 2.55 13 LT-5(a) 890.4 542.51 6.09 863.89 549.11 6.36

36 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

14 LT-5(b) 387.07 225.8 5.83 270.39 166.40 6.15 15 LT-6 534.59 222.4 4.16 431.06 259.03 6.01 16 LT-6 432.62 236.47 5.47 388.94 227.68 5.85 17 LT-7 150.37 168.4 11.20 194.45 210.53 10.83 LT - TOTAL 15646.33 6695.07 4.28 15605.37 6700.94 4.29 1 HT-1 629.29 278 4.42 664.24 283.61 4.27 2 HT-2(a)(i) 2634.33 1723.84 6.54 2441.34 2336.10 9.57 3 HT-2(a)(ii) 2930.38 1841.21 6.28 2308.81 953.02 4.13 4 HT-2(b)(i) 3124.02 2515.58 8.05 2594.57 2218.26 8.55 5 HT-2(b)(ii) 213.61 171.85 8.05 201.32 135.01 6.71 6 HT2©(I) 1.48 1.33 8.99 75.40 81.57 10.82 7 HT2©(ii) 8 5.85 7.31 113.91 50.92 4.47 8 HT-3(a)(i) 6.93 1.04 1.50 17.43 3.06 1.75 9 HT-3(a)(ii) 1.04 0.19 1.83 0.52 0.37 7.04 11 HT - 3b 11.99 4.2 3.50 0.31 0.19 6.21 12 HT-4(a) 128.65 75.79 5.89 127.25 77.04 6.05 13 HT-5 59.06 58.95 9.98 285.59 -145.03 -5.08 HT - TOTAL 9748.78 6677.83 6.85 8830.68 5994.12 6.79 TOTAL 25395.11 13372.9 5.27 24436.05 12695.1 5.19 Misc. Revenue 229.3 0.09 149.95 0.06 Grand Total 25395.11 13602.2 5.36 24436.05 12845.05 5.25

It could be seen from the above table, as against average tariff realized is Rs.5.25 per unit as against approved tariff of Rs.5.36 per unit. Consumption and realization rate in LT category are more or less equal to Commission approved sales and the revenue, but HT sales are reduced by 918 Mu and revenue lost is Rs.683.71Crs. The effect of cross subsidy level is tabulated as below.

Table Number: 3.44 Approved Actuals Consumption Cross subsidy level Rat Rate App Sl No Act Dif Appr Sales Reven e of Sales Reven of d. Actua Diff ual f level Real Real level LT - TOTAL 15646.3 6695.1 4.3 15605.4 6700.9 4.3 0.6 0.6 0.0 1691.4 1663.5 -27.8 - HT - TOTAL 9748.8 6677.8 6.9 8830.7 5994.1 6.8 0.4 0.4 0.0 -1260.9 191.6 1452.5 TOTAL 25395.1 13372.9 5.3 24436.1 12695.1 5.2 1.0 1.0 0.0 238.9 402.7 163.8 Misc. 229.3 0.1 150.0 0.1 0.0 0.0 0.0 229.3 150.0 79.4 Revenue Grand Total 25395.1 13602.2 5.4 24436.1 12834.5 5.3 1.0 1.0 0.0 9.6 263.2 253.6

For the above table. Actual cross subsidy level is calculated taking approved level of Average cost of Supply i.e., Rs.5.36 per unit.

Reduction of 2.25% of HT sales resulted in Rs.191.61 Cr for FY-15 cross subsidy level being lost.

MYT 4TH CONTROL PERIOD FOR FY-17 TO FY-19Page 37 BANGALORE ELECRTICTY SUPPLY COMPANY TRUING UP FOR FY-15

Misc. Revenue approved by the Commission is on higher sides which further worsen the cross subsidy level.

ABSTRACT of Truing up of FY-15:

Table Number: 3.45

Sl.No Particulars Appd Actual

1 Revenue from tariff and Misc. Charges 12407.51 11,829.9 2 Tariff Subsidy 1194.68 1,245.3 3 Total Revenue 13602.19 13,075.2 Expenditure 4 Power Purchase Cost 10887.71 10630.84 5 Transmission charges of KPTCL 1022.49 1037.02 6 SLDC Charges 11.89 17.16 7 Total PP.cost 11922.09 11685.02 8 O&M Expenses 1110.95 1,084.83 9 Depreciation 168.58 199.78 10 Interest on Loans 160.92 217.68 11 Interest on Working capital 265.15 348.98 12 Interest on consumer deposits 214.74 210.38 13 Other Interest & Finance charges 7.63 10.19 14 Less interest & other expenses capitalized 39.99 78.87 Funds towards Consumer 15 1 Relations/Consumer 15 Other debits (6.70) 16 Prior period credits (14.04) 17 ROE 84.77 18 Income tax 25.75 16 Other Income 225 124.44 17 Regulatory asset 16.12 16.13 18 Carrying cost 138.19 ARR 13602.19 13797.65 GAP 0 722.47 19 Sales 25395.07 24436.08 20 Average cost of supply 5.36 5.65

As per proposed trued up figures, average cost of supply shoots up to Rs. 5.65 per unit as against approved average cost of Supply of Rs. 5.36 per unit. Commission is requested to approve the above trued up figures for FY15.