National Electric Power Regulatory Authority Islamic Republic of Pakistan 2nd Floor, OPF Building, G-5/2, Islamabad Ph: 9206500, 9207200, Fax: 9210215 E-mail: [email protected] Registrar No. NEPRA/TRF-175/MEPCO-2011/01-03 January 2, 2012 Subject: Determination of the Authority in the matter of Petition filed by Multan Electric Power Company Ltd. for Determination of its Consumer end Tariff Pertaining to the FY 2011-12 [Case # NEPRA/TRF-175/MEPCO-2011 Intimation of Determination of Tariff pursuant to Section 31(4) of the Regulation of Generation, Transmission and Distribution of Electric Power Act (XL of 1997 Dear Sir, Please find enclosed herewith the subject Determination of the Authority along with Annexure-I, II, III, IV & V (64 pages) in Case No. NEPRA/TRF-175/MEPCO-2011. 2. The Determination is being intimated to the Federal Government for the purpose of notification of the approved tariff in the official gazette pursuant to Section 31(4) of the Regulation of Generation, Transmission and Distribution of Electric Power Act (XL of 1997) and Rule 16(11) of the National Electric Power Regulatory Authority (Tariff Standards and Procedure) Rules, 1998. 3. Please note that only the Order of the Authority at para 25 of the Determination along with Annexure-I (Fuel Price Adjustment Mechanism), Annex-III (Schedule of Electricity Tariffs), Annex-IV (CpGenE, CpGenCap & USCF) and Annex-V (Terms and Conditions) needs to be notified in the official Gazette. Enclosure: As above __7Etilv^ ( Syed Safeer Hussain ) Secretary Ministry of Water & Power `A' Block, Pak Secretariat Islamabad CC: 1. Secretary, Cabinet Division, Cabinet Secretariat , Islamabad. 2. Secretary, Ministry of Finance , Islamabad. Decision of the Authority in the matter of Multan Electric Power CompAny Limited No. NEPRAITRF-175/MEPCO-2011 NATIONAL ELECTRIC POWER REGULATORY AUTHORITY (NEPRA) PETITION NO: NEPRA/TRF-175/MEPCO-2011 TARIFF DETERMINATION FOR MULTAN ELECTRIC POWER COMPANY (MEPCO) DETERMINED UNDER NEPRA TARIFF (STANDARDS AND PROCEDURE) RULES - 1998 PERTAINING TO THE FY 2011-12 ISLAMABAD ^uMWOw 02, 2n12 1 Decision of the Authority in the matter of Multan Electric Power Company Limited No. NEPRAITRF-175/MEPCO-2011 DETERMINATION OF THE AUTHORITY IN THE MATTER OF PETITION FILED BY MULTAN ELECTRIC POWER COMPANY LIMITED (MEPCO) FOR DETERMINATION OF ITS CONSUMER END TARIFF PERTAINING TO THE FY 2011-12 CASE NO. NEPRA/TRF/175/MEPCO-2011 PETITIONER Multan Electric Power Company Limited (MEPCO), MEPCO Headquarter, Khanewal Road, Multan. INTERVENERS 1. Pakistan Cotton Ginners Association, Multan 2. Masood Spinning Mills, Multan 3. Ahmad Hassan Textile Mills, Multan 4. Roomi Cotton Ginning Industries, Multan 5. Multan Chamber of Commerce & Industry COMMENTATORS None. REPRESENTATION 1. Ch. Guftar Ahmad, Chief Executive Officer, MEPCO 2. Syed Mushtaq Hussain Bukhari, Finance Director, MEPCO 3. Mr. Malik Imtiaz Ahmad, Manager Commercial 4. Mr. Jahangir Bhutta, Manager Finance (CP&C) 5. Khawaja Azam, Representative of the Interveners 2 Decision of the Authority in the matter ofMultan Electric Power Company Limited No. NEPRAITRF-175/MEPCO-2011 Abbreviations CpGenCap The summation of the capacity cost in respect of all CpGencos for a billing period minus the amount of liquidated damages received during the months CPPA Central Power Purchasing Agency DISCO Distribution Company DM Distribution Margin FY Financial Year GOP Government of Pakistan MoWP Ministry of Water and Power GWh Giga Watt Hours KV Kilo Volt kW Kilo Watt kWh Kilo Watt Hour MW Mega Watt NEPRA National Electric Power Regulatory Authority O&M Operation and Maintenance PEPCO Pakistan Electric Power Company PPP Power Purchase Price PYA Prior Year Adjustment RAB Regulatory Asset Base RORB Return on Rate Base SRO Statutory Regulatory Order T&D Transmission and Distribution TOU Time of Use USCF The fixed charge part of the Use of System Charges in Rs./kW/Month 3 Decision of the Authority in the matter of Multan Electric Power Company Limited No. NEPRAITRF-175/MEPCO-2011 The Authority, in exercise of the powers conferred on it under Section 7(3) (a) read with Section 31 of the Regulation of Generation, Transmission and Distribution of Electric Power Act, 1997, Tariff (Standards and Procedure) Rules, 1998 and all other powers enabling it in this behalf, and after taking into consideration all the submissions made by the parties, issues raised, evidence/record produced during hearings, and all other relevant material, hereby issues this determination. 3 r2 (G suddin Ahme (Shaukat Ali Kundi) Member Member 1 L,- (Maqbomad Khawaja) alid Sae Vice Chairman 4 Decision of the Authority in the matter ofMultan Electric Power Company Limited No. NEPRA/TRF-175/MEPCO-2011 1. BACKGROUND: 1.1 Multan Electric Power Company Limited (MEPCO), hereinafter, called "the Petitioner" being Distribution Licensee of NEPRA filed tariff Petition for the determination of its consumer end tariff pertaining to the FY 2011-12. The grounds and basis of the Petition are described as under: 1.2 GROUNDS OF PETITION: MEPCO submitted that its tariff consists of two components i.e. pass through cost and distribution margin. The major portion of pass through cost is power purchase price which the company has to pay to ensure continuous flow of power in its distribution system. In addition, MEPCO must earn sufficient distribution margin and adequate stream of cash flow to maintain its system, discharge its financial commitments, invest on the augmentation and expansion of the network and a reasonable return to sponsor on its investments. The Petitioner submitted that the following factors necessitate filing of fresh tariff petition. • Increase in the cost of Power Purchased; • Increase in O&M cost; • Low tariff rate due to unrealistic line losses; • Prior Period Adjustment. 2. RELIEF SOUGHT: 2.1 The Petitioner has sought the following relief- 0 Determination of Consumer-End Tariff as submitted; • Acceptance of Revenue Requirement as computed by the company and its recovery by timely determination; • Assurance of adequate O&M; • Acceptance of Investment Plan; • Introduction of separate tariff for Seasonal Industries; • Bifurcation of Al tariff into Residential and Non-Residential; • Application of Fixed Minimum Charges for A2(C) & D (Agriculture Tariff) and rationalization of Minimum Charges and Fixed Minimum Charges; • Any other relief which the Authority may deem proper. 9 5 Decision of the Authority in the matter ofMultan Electric Power Company Limited No. NEPRAITRF-175/MEPCO-2011 3 PROCEEDINGS: 3.1 In terms of rule 4 of the Tariff Standards and Procedure Rules 1998 (hereinafter referred to as "Rules"), the Petition was admitted by the Authority on 28th June, 2011. In compliance of the provisions of rules 6 & 7 of the Rules, notices of admission and hearing were sent to the parties which were considered to be affected or interested. An advertisement in this regard was also published in the leading national newspapers with title and brief description of the petition on July 1, 2011. 4. FILING OF OBJECTIONS/ COMMENTS: 4.1 Comments/replies and filing of intervention request, if any, was desired from the interested person/ party within 7 days of the publication of notice of admission i.e. July 1, 2011, and in response, five intervention requests were received and accepted by the Authority from the following; 1. Pakistan Cotton Ginners Association , Multan 2. Masood Spinning Mills, Multan 3. Ahmad Hassan Textile Mills, Multan 4. Roomi Cotton Ginning Industries , Multan 5. Multan Chamber of Commerce & Industry 4.2 Pakistan Cotton Ginners Association (PCGA)• 4.2.1 PCGA, as an Intervener, submitted that its association has 1200 members all over Pakistan and about 800 cotton factories are situated in MEPCO's jurisdiction. The concerns raised and relief sought by PCGA is as under: i. In MEPCO's petition it is clearly admitted that industrial and commercial consumers are cross-subsiding domestic and agricultural consumers since last many years but while giving proposed increase in tariff, again the burden is put on commercial and industrial consumers which is against the contents and spirit of Petition therefore it is requested that Industrial Tariff should not be increased rather it should be reduced. ii. MEPCO is charging low power factor penalty on the basis of 90% whereas MEPCO's supply system is over age and is not according to the international standards therefore, the power factor penalty should be reduced to 80%. iii. Increase in rates of B-2, B-3 tariff should not be allowed; 6 e Decision of the Authority in the matter ofMultan Electric Power Company Limited No. NEPRAITRF-175/MEPCO-2011 iv, Due to load shedding, electricity is supplied only for 8-12 hours in the cotton season. Therefore, Fixed Charges should not be imposed for the load shedding period and there should be no increase in the Fixed Charges. 4.3 Masood Spinning Mills. Multan: 4.3.1 As an Intervener, concerns raised by Masood Spinning Mills are as under: i. The Intervener falls under B-3 category and difference between B-2 and B-3 is only 10 paisas which becomes 1%. MEPCO has calculated T&D losses of 15.30% for B-2 and 7.5% for B-3 consumers, therefore, the increase in the rates for B-3 tariff should not be allowed rather it should be lower by 7.8% as compared to B-2 tariff. ii. Feeder losses of B-3 consumers are not more than 7% therefore, the same should be added in electricity purchase rate for B-3 category instead of average loss of 15% added in rates for all consumers categories of MEPCO. iii. O&M cost is added at uniform rates in all consumer categories. However, being B-3 consumers, their O&M, distribution and maintenance costs are very nominal. Therefore, only 25% of total average O&M cost should be added in B-3 tariff. 4.4 AhmadHassan Textile Mills, Multan 4.4.1 Ahmad Hassan Textile Mills, Multan being intervener, opposed the tariff petition inter-alia on the following grounds.