KERALA STATE ELECTRICITY REGULATORY COMMISSION THIRUVANANTHAPURAM DECEMBER 2, 2009 PRESENT: Shri. K.J.Mathew, Chairman Shri. C. Abdulla, Member Shri. M.P.Aiyappan, Member Petition TP No.66 of 2009 IN THE MATTER OF Proposals for rationalisation of existing tariff Kerala State Electricity Board ---- Petitioner ORDER Background 1. KSEB filed a petition on 24-07-2009 for rationalizing the existing tariff structure which would result in additional revenue of Rs.150.86 crore on a yearly basis. Major highlights of the proposal are (a) introduction of non-telescopic tariff for domestic, (b) 15% & 20% increase in demand and energy charges respectively for HT Commercial class, (c) 25% increase in tariff for Bulk supply (BST) to Licensees and (d) reduction to the tune of 10% of the tariff applicable to KWA. Further, KSEB proposed to rationalize the ToD tariff applicable to HT/EHT consumers and proposed to introduce ToD tariff for LT industrial consumers. The Commission sought clarifications from KSEB on the petition vide letter dated 25-07-2009. KSEB furnished clarifications vide letter dated 5-08-2009. The Commission in its proceedings dated 5-08-2009 admitted the petition and directed the Board to publish a summary of the proposals for inviting objections from the stakeholders and general public as required under Clause 5 of KSERC (Tariff) Regulations, 2003. KSEB published the summary of the proposals giving time till 23-9-2009 for furnishing objections/comments by the 1 consumers and the public. The date and venue of the public hearing were also mentioned in the notification. In response to the notification a total of 85 written objections were received at the Commission’s Office. The Commission forwarded the objections to KSEB for reply. KSEB communicated its reply vide letter dated 21-10-2009. Deliberations in the State Advisory Committee 2. The Tariff proposal of KSEB was placed in the 20th State Advisory Committee meeting held on 10-9-2009. The members of the Committee expressed diverse views on the proposal. Many members objected to reduction in tariff for KWA, and increase in HT-IV tariff. Regarding the proposal on domestic category, some members welcomed the proposal on rationalisation, but others opined that the proposal was unscientific. Public hearing 3. The Commission conducted public hearings at three places: Institution of Engineers Hall, Thiruvananthapuram on 09-09-2009; Municipal Town Hall, Kalamassery on 16-09-2009 and at Town Hall, Kozhikode on 22-09-2009. Many stakeholders presented their views in the public hearing. The list of persons who attended the public hearings and those who have given written comments are given in Annexure-I. 4. KSEB in its petition has proposed many changes in the existing tariff for rationalization & recategorisation. For the convenience of disposal of the petition, the Commission segregates the proposal as shown below: Section 1: Tariff revision proposal Section 2: Rationalization of Time of Day tariff Section 3 : Tariff Re-categorization In the first section, the tariff revision proposal for domestic, HT commercial, reduction in tariff applicable to KWA and revision of Bulk Supply Tariff applicable to licensees are included. The second section, deals with 2 rationalisation of ToD tariff for HT/EHT/LT industrial consumers and in the third section, issues regarding recategorisation are addressed. SECTION 1: TARIFF REVISION PROPOSALS 5. Domestic Tariff: KSEB stated that in the present domestic tariff, the benefit of lower slab is enjoyed by all consumers. Considering the situation prevailing in Kerala, the benefit of lower tariffs needs to be continued for the lower consumption groups, where as it need not be extended to high consuming groups. According to KSEB, monthly consumption of a middle class family is about 150 to 200 units only. Of the 75 lakhs domestic consumers only 2.44 lakh consumers have consumption of more than 200 units per month. Accordingly, KSEB proposed that the present telescopic system of billing shall be replaced with a non-telescopic system for domestic consumers having consumption more than 200 units per month. In order to avoid tariff shock, the Board proposed 15% reduction in rates for the existing slabs above 200 units or the non-telescopic category. Thus the cross subsidy for lower slabs can be met from higher slabs. The proposal is as follows. Existing Tariff Proposal Revenue at Revenue at Existing Tariff Slab (units) Existing Remarks proposed Addl income Tariff rate Remarks tariff tariff (Rs/kWh) (Rs. Cr) (Rs/kWh) (Rs.Cr) (Rs.Cr) 0-40 1.15 102.66 1.15 102.66 0.00 41-80 1.90 250.94 1.90 250.94 0.00 81-120 2.40 236.95 2.40 236.95 0.00 No increase 121-150 3.00 173.49 3.00 173.49 0.00 151-200 3.65 186.77 3.65 186.77 0.00 201-300 4.30 154.36 system 3.65 200.33 45.97 Non- telescopic 301-500 5.30 90.42 tariff Telescopic 4.50 110.10 19.68 with reduction in Above 500 5.45 65.61 5.00 69.43 3.82 slab rate Total 1261.21 1330.68 69.47 According to KSEB, the proposed increase for consumers having consumption of more than 200 units/month which constitute only 3.2% of the consumers, but the resultant tariff increase would be in the range of 13.6% to 32.90% per month. 3 Response of stakeholders 6. The Kerala HT and EHT Consumers Association pointed out that for LT Domestic Consumers, the average cost of supply for 2007-08 is 393 Ps/Unit where as the tariff for monthly consumption up to 40 units is Ps 115/Unit only ie just 29.26% of the average cost. According to them, the clause 5.5 of the National Electricity Policy, provides for recovery of cost. Even for the designated BPL group of consumers tariff shall be at least 50% of the average cost of supply. Solidarity Youth Movement, Ernakulam District Committee and Islamic Centre, Pulleppady, Kochi pointed out that the proposal of KSEB affects most of the consumers who consume between 400 and 600 units bi-monthly, hence the proposal is directed against the middle class in the society. Sri Paul George, Peroorkada, and Kairali Nagar Residents Association, Maradu, Cochin also expressed similar opinion. M/s.Binani Zinc Ltd pointed out that tariff should be rationalized reflecting the categorywise cost of supply, which should move in a manner to reduce cross subsidy. Sri C. Jayapalan, Peroorkada pointed out that demand side management has not been reflected fully in the electricity tariff structure of Kerala even after one decade, especially for domestic consumers and other LT consumers. According to Edappaly Senior Citizens Forum, the Board has proposed a barbarian method of increasing tariff for exploiting consumers, without taking action on reducing losses. The Kerala State A Grade Electrical Contractors Association opined that in order to meet at least part of Cost of Supply (COS), tariff level of domestic consumers have to be increased. M/s Rubber Park India Private Ltd pointed out that the non-telescopic system may not encourage energy efficiency as the saving may not be large to get reflected in the bill. Instead, telescopic tariff structure, maintained with lesser bandwidth for additional/increased tariff/penalty would alone automatically work more efficiently. 7. In reply KSEB maintained that Act or Tariff Policy does not mandate tariff based on category wise cost of supply. As per the section-61(g) and Section 62 (3) of the Act the tariff can be differentiated according to the purpose for which the supply is being required. The ceiling of 200 units/ month was proposed considering the normal monthly consumption of an average middle 4 income domestic family. The non-telescopic proposal aimed at discouraging luxury and wasteful consumption of electricity. Further, the Commission is yet to notify the regulation on reduction of cross subsidy. 8. HT Commercial Category : KSEB proposed 15% increase in demand charges and 20% increase in energy charges of HT IV commercial category. According to KSEB, majority of consumers under this category are Jewellers, Big Textile Showrooms, Wedding Centers , Shopping Complexes, who form only a small portion of total consumers. Considering the affluence of this category, the tariff revision is proposed. Further, KSEB contended that the disparity between HT commercial and LT commercial has to be bridged as the average tariff for LT Commercial consumer is Rs.8.12/Unit and HT Commercial Consumer Rs.4.81/unit. Increase in tariff proposed by KSEB is as follows: Existing Tariff Proposed Tariff Revenue from Tariff Billing Energy Demand Energy Demand Energy Existing Proposed Addl . demand consumption Charge Charge Charge Charge tariff tariff Income (MVA) (MU) (Rs/kVA) (Rs /kWh) (Rs/kVA) (Rs/kWh) (Rs. Cr) (Rs. Cr) (Rs. Cr) 182.00 686.00 350.00 3.70 400.00 4.40 330.26 389.2 58.94 Response of stakeholders 9. Kerala Hotel and Restaurant Association, Kochi unit and Calicut unit pointed out that Hotel and Restaurants cannot control use of electricity hence higher tariff rate will be a heavy burden. M/s Bhatsons Aquatic Products Cochin, Geo Seafoods Cochin, Abad Exports Pvt Ltd Cochin and Accelerated Freeze Drying Company Ltd, Ezhupunna pointed out that Seafood Processing Units shall be brought under HT-I Industrial Tariff and in the event of no consideration of such tariff change to HT-I Industrial, the present tariff HT IV Commercial should not be increased further considering the difficulties faced by seafood industry. The HT and EHT Industrial Consumers Association maintained that the reason given by KSEB in proposing a tariff hike for this category of consumers is not justified and cannot be admitted, since affluence of the consumer cannot be the basis for revising their tariff.