CRISIL Risk and Infrastructure Solutions Limited Uttar Gujarat Vij Company Limited (UGVCL ) Category Wise Cost of Service Study for FY 2011-12 Final Report December 2012 Consultant Team Project Leader Project Manager Analyst Team Leader Associate [ii ] Abbreviations A&G : Administrative and General Expenses CoS : Cost of Service DGVCL : Dakshin Gujarat Vij Company Limited DISCOM : Distribution Company EA 2003 : Electricity Act, 2003 FY : Financial Year GERC : Gujarat Electricity Regulatory Commission GFA : Gross Fixed Assets GoG : Government of Gujarat GUVNL : Gujarat Urja Vij Nigam Limited HT : High Tension JGY : Jyoti Gram Yojana LT : Low Tension MGVCL : Madhya Gujarat Vij Company Limited MU : Million Unit MW : Mega Watt O&M : Operation & Maintenance PGVCL : Paschim Gujarat Vij Company Limited PSL : Public Street Lighting PWW : Public Water Works RoE : Return on Equity R&M : Repairs & Maintenance UGVCL : Uttar Gujarat Vij Company Limited [iii ] Contents 1. Background .................................................................................................................................................... 1 2. Objective ........................................................................................................................................................ 3 3. Basic Methodology ........................................................................................................................................ 5 3.1 Classification of Costs ............................................................................................................................ 5 3.2 Allocation of Costs................................................................................................................................. 5 3.3 Approach for Segregation of Costs ....................................................................................................... 6 3.4 Basis of Determination of Cost of Service ............................................................................................. 7 3.4.1 Costs for FY 2011-12 ............................................................................................................... 7 3.4.2 Category wise sales and revenue ........................................................................................... 7 3.4.3 Distribution Losses ................................................................................................................. 8 4. Definitions ..................................................................................................................................................... 9 4.1 System Peak Demand (Restricted) ........................................................................................................ 9 4.2 Co-incident Peak Demand ..................................................................................................................... 9 4.3 Non Co-incident Peak Demand ............................................................................................................. 9 4.4 Connected Load .................................................................................................................................... 9 4.5 Contracted Demand .............................................................................................................................. 9 4.6 System Load Factor ............................................................................................................................. 10 4.7 Category Load Factor .......................................................................................................................... 10 4.8 Diversity Factor ................................................................................................................................... 10 5. Classification of Expenses ............................................................................................................................ 11 5.1 Classification of Power Purchase Expenses ......................................................................................... 11 5.2 Classification of Other Distribution Costs ........................................................................................... 11 6. Allocation of Demand Related Cost ............................................................................................................. 14 6.1 Range of Methods ............................................................................................................................... 14 6.1.1 Co-Incident Peak Demand .................................................................................................... 14 6.1.2 Non Co-Incident Peak ........................................................................................................... 14 6.1.3 Average and Excess .............................................................................................................. 14 6.2 Choice of Methods .............................................................................................................................. 15 6.2.1 Demand related power purchase costs ................................................................................ 15 [iv ] 6.2.2 Demand Related Other Distribution Costs ........................................................................... 16 6.2.3 Demand Related Total Distribution Costs ............................................................................ 17 7. Allocation for Energy Related Costs............................................................................................................. 18 7.1 Allocation of Losses ............................................................................................................................. 18 7.1.1 Determination of Technical and Commercial Losses............................................................ 18 7.1.2 Allocation of Commercial Losses .......................................................................................... 18 7.1.3 Allocation of Technical Losses .............................................................................................. 19 7.2 Allocation of Energy Related Costs ..................................................................................................... 21 8. Allocation of Customer Related Costs ......................................................................................................... 22 8.1 Category Wise Consumer Weightages ................................................................................................ 22 8.2 Allocation of Customer Related Costs ................................................................................................. 22 9. Cost of Service ............................................................................................................................................. 24 10. Conclusion ................................................................................................................................................... 25 [v] List of Tables Table 1: Classified Power Purchase Expenses....................................................................................................... 11 Table 2: Classified Distribution Expenses ............................................................................................................. 12 Table 3: Category- Wise Average and Excess Demand ......................................................................................... 16 Table 4: Allocation Factor for Demand Related Costs .......................................................................................... 16 Table 5: Allocation Factor for Demand Related Other Distribution Costs ............................................................ 17 Table 6: Allocation Factor for Demand Related Total Distribution Costs ............................................................. 17 Table 7: Losses at UGVCL ...................................................................................................................................... 18 Table 8: Allocation of Commercial Losses ............................................................................................................ 19 Table 9: Allocation of Technical Losses................................................................................................................. 20 Table 10: Allocation of Losses to Categories ........................................................................................................ 20 Table 11: Allocation Factor for Energy Related Costs ........................................................................................... 21 Table 12: Category - Wise Customer Weightages ................................................................................................ 22 Table 13: Allocation Factor for Customer Related Costs ...................................................................................... 23 Table 14: Category Wise Total Cost of Service ..................................................................................................... 24 Table 15: Category - Wise per Unit Cost of Service .............................................................................................. 24 Table 16: Cost of Service against Average Realization ......................................................................................... 25 Table 17: Category - Wise Non-Co- Incident Demand .........................................................................................