PETITION UNDER THE
ELECTRICITY ACT 2003
THE PETITIONER RESPECTFULLY SHOWETH:
1.
That the Petitioner (hereinafter
referred to as ‘NDMC’ or ‘petitioner’) is
a Municipal Council entrusted with the distribution of electricity to the
consumers in the New Delhi
area under Section 195 to 201 of the New Delhi Municipal Council Act 1994.
2.
That NDMC has the powers and obligations of a Licensee under
the Indian Electricity Act 1910 in respect of the New Delhi Area.
3.
That under Section 200 of the New Delhi Municipal Council Act
1994, NDMC has the power to fix charges to be levied for the electricity
supplied by it, subject to the provisions of any law for the time being in
force.
4.
That NDMC filed its ARR and Tariff Petition for the Financial
Year 2005-06 under Section 62 of the Electricity Act 2003 (EA 2003) and in
accordance with the Delhi Electricity Regulatory Commission Comprehensive
(Conduct of Business) Regulations, 2001 and the Hon’ble Commission passed its
Order on the aforesaid ARR & Tariff Petition (Tariff Order) on November 2, 2005.
5.
That NDMC is filing this Petition – along with the Retail
Tariff Formats, duly filled-in, and supporting documents in validation of the
various estimates considered in the filing – under Section 62 of the
Electricity Act 2003 (EA 2003) and in accordance with the Delhi Electricity
Regulatory Commission Comprehensive (Conduct of Business) Regulations, 2001
for:
i.
Truing up its Aggregate Revenue Requirement for FY 2005-06 as
approved by the Hon’ble Commission in its Tariff Order
ii.
Approval of Aggregate Revenue Requirement for FY 2006-07
iii.
Determination of Bulk Supply Tariff and Retail Supply Tariffs
(RST) to be charged by NDMC from the consumers served by it in the New Delhi
area for FY 2006-07
6.
That this Petition includes the following documents:
i.
Affidavit verifying the Petition and the Power of Attorney
for filing the same (attached as (i) in Volume I of this Petition).
ii.
Demand Draft No. 940278 dated 28.3.2006 drawn on State Bank
of India, New
Delhi (Main) for an amount of Rs.
1.00 Lac (Rs. One Lac only) towards filing fee.
iii.
Detailed formats along-with explanatory notes (Volume II of
this Petition)
iv.
Soft Copy of the Petition
7.
That in making the aforesaid submission, NDMC has estimated
the annual tariff income from demand estimates, which have been derived from
statistical modelling, as applicable to the different categories of consumers.
8.
That NDMC has projected the financial performance in FY
2006-07 by considering the estimated revenue expenditure based on anticipated
costs, financial charges, etc., which will be involved in conducting the
business activity and meeting the demand for service.
9.
That the double entry accounting system has yet not been
implemented in NDMC. For the purpose of the reforms and efficiency in the urban
governance, the Government of India (GoI) had taken up the initiative of
developing a ‘National Municipal Accounting Manual’ to provide a framework of
National Municipal Accounting and a simplified tool kit to the Urban Local
Bodies for recording the accounting entries. This initiative was taken up
during 2005-06. NDMC has decided to adopt the National Municipal Accounting
Manual and NDMC’s Accounts Manual containing the accounting rules, regulations
and procedures is being modified by customizing the Municipal Accounting Manual
to the requirements of NDMC. Therefore, the schedule for implementation of the
double entry accounting system in NDMC has undergone a change. Meanwhile, NDMC
continues to follow the cash flow accounting system.
10.
That a number of units/offices handling activities related to
the electricity function do not have separate accommodation and are being
accommodated in NDMC buildings both at the headquarter office and site offices.
It is proposed to charge the rent of these accommodations as expenses of the
electricity function. NDMC has adopted the CPWD rates to determine the rent for
these units/offices instead of market value, as the market value of such
offices would be very high.
11.
That the information pertaining to FY 2004-05 submitted by
NDMC during the regulatory process followed up by the Commission for the issue
of the Tariff Order for FY 2005-06 was based on estimates of expenses as
available at that time. NDMC now has more accurate information available on the
expenses incurred during FY 2005-06. The same is being submitted by way of this
petition.
12.
That the entity for supply of electricity in NDMC is
considered as a department of NDMC like other departments and not as a separate
commercial undertaking. Therefore, unlike other electricity utilities, the
systems of obtaining actual expenses as and when incurred are not in place in
NDMC. Therefore, NDMC is not in a position to provide the details of actual
expenses incurred during FY 2005-06 under some expense heads. As a result, the
estimates for FY 2005-06 for such expense heads are based on the budget
estimates as given in NDMC’s budget for FY 2005-06. The Petitioner will
endeavour to provide this information in due course.
13.
That the budget of the Council for an ensuing financial year
is prepared after many deliberations and detailed scrutiny within the Council
on the proposals submitted by the various departments of NDMC after considering
various factors and the ground realities. Therefore, the budget estimates for
FY 2005-06 may be considered for the purpose of truing up of ARR of FY 2005-06
in case of those expense heads where actual information is not available. With
the finalisation of the budget for FY 2006-07 and availability of revised
estimates for FY 2005-06, the same will be submitted to the Honourable
Commission for the purpose of truing up of expenses for FY 2005-06.
14.
That the Tariff Order for FY 2005-06 was issued by the
Honourable Commission on November 2, 2005. The Honourable Commission would
appreciate that the time gap between the issuance of this Order and the filing
of this Petition is very small. The Petitioner has therefore, not been able to
implement complete directives issued by the Honourable Commission in this
Tariff Order. The Honourable Commission would also appreciate that since the
entity for supply of electricity in NDMC is a department of NDMC like other
departments and not a separate commercial undertaking, the requisite systems
for maintenance of separate information desired by the Honourable Commission or
procedures as directed by the Honourable Commission are not in place. Further,
the Honourable Commission would appreciate the regulatory process in the
electricity sector is new to NDMC and NDMC lacks the regulatory preparedness to
cater to the regulatory information set-up.
On account of
the above-mentioned reasons as well as the short time tenure that has elapsed
between the issue of the last tariff Order and the filing of this Petition,
NDMC has not been able to implement complete directives issued by the Honourable
Commission. NDMC is making efforts to institute the procedures and systems
required for the implementation of the directives issued by the Honourable
Commission. NDMC requests the Honourable Commission to take a lenient view,
considering the practical constraints and limited time gap for the compliance
of directives issued by the Honourable Commission.
PRAYER
NDMC requests the
Honourable Commission:
1.
To examine the petition as deemed appropriate and approve the
accompanying Revenue Requirement for FY 2006-07 so that the Petitioner is able
to earn a reasonable and justified return after due provision of all legitimate
expenses.
2.
To determine the Retail Supply Tariff chargeable to the
consumers and the Bulk Supply Tariff that will be payable to the Delhi Transco
Limited for purchase of power.
3.
To true up the Aggregate Revenue Requirement for FY 2005-06
and any shortfall in revenue requirement arising out of this truing up exercise
be allowed to be adjusted in FY 2006-07.
|
ARR
|
Annual Revenue
Requirement
|
|
BST
|
Bulk Supply Tariff
|
|
DA
|
Dearness Allowance
|
|
EHT
|
Extra High Tension
|
|
Existing Tariff
|
Tariff for supply of
electricity approved by DERC in Tariff Order dated November 2, 2005.
|
|
FY
|
Financial Year
|
|
GFA
|
Gross Fixed Assets
|
|
GNCTD
|
Govt. of National
Capital Territory of Delhi
|
|
DERC/Commission
|
Delhi Electricity
Regulatory Commission
|
|
NDMC
|
New Delhi Municipal
Council
|
|
HT
|
High Tension
|
|
kVAh
|
Kilo Volt Ampere hour
|
|
kW
|
Kilo Watt
|
|
kWh
|
Kilo Watt Hour or Unit
|
|
MU
|
Million Units
|
|
NFA
|
Net Fixed Assets
|
|
PF
|
Power Factor
|
|
Rs.
|
Indian Rupees
|
|
T&D
|
Transmission and
Distribution
|
TABLE OF C O N T E N T S
|
Sl.No.
|
Description
|
Page No.
|
|
1
|
ANNUAL REVENUE
REQUIREMENT
|
7
|
|
1.1
|
Capital Base
|
7
|
|
1.2
|
Reasonable
Return
|
9
|
|
1.3
|
Sales Projection
|
9
|
|
1.4
|
Transmission and
Distribution Loss
|
10
|
|
1.5
|
Power Purchase /
Energy Requirements
|
10
|
|
1.6
|
Employee Cost
|
11
|
|
1.7
|
Administration
and General Expenses
|
12
|
|
1.8
|
Other Admissible
Expenses
|
13
|
|
1.9
|
Allocation of
Expenditure Relating to (A) Administrative Department (B) Civil Engineering
Department to Electricity Supply
|
16
|
|
1.10
|
Repairs and
Maintenance Expenses
|
18
|
|
1.11
|
Depreciation
|
18
|
|
1.12
|
Interest Charges
|
19
|
|
1.13
|
Non-Tariff
Income
|
19
|
|
1.14
|
Annual Revenue
Requirement
|
19
|
|
2
|
TARIFF PROPOSAL
FOR FY 06-07
|
21
|
|
2.1
|
Expected Revenue
at Existing Tariff in FY 2005-06
|
21
|
|
2.2
|
Revenue from
Sale of Power at Existing Tariff in FY 2006-07
|
21
|
|
2.3
|
Revenue Deficit
at Existing Tariff
|
21
|
|
2.4
|
Coverage of
Revenue Gap
|
22
|
|
2.5
|
Tariff Revision
Proposal For FY 2006-07
|
22
|
|
2.6
|
Revenue from
Sale of Power at Proposed Tariffs
|
23
|
|
2.7
|
Additional
Revenue from Tariff Hike
|
23
|
|
|
Annexure
I-Capital Works Programme
|
27
|
|
|
Annexure II -
Replacement Works
|
31
|
|
|
Annexure III -
Cost of Purchased Energy
|
32
|
1.
ANNUAL REVENUE REQUIREMENT
1.1 CAPITAL BASE
The Capital Base is the value of
original gross fixed assets, works in progress, investment made and working
capital reduced by accumulated depreciation, government loans, approved
borrowings, security deposits, tariffs and dividend control reserves. The
capital base is estimated at Rs. 8974.62 in FY 2005-06 and at Rs. 8920.08 in FY
2006-07 as per the summary in Table 1.1.
Table 1.1:
Computation of capital base Rs.
Lakhs
|
|
|
FY 2005-06
|
FY 2006-07
|
|
|
|
Revised estimates
|
Projected
|
|
1 (a)
|
Original Cost of
Fixed asset (excluding consumers contribution)
|
31155
|
31934
|
|
(b)
|
Cost of intangible
assets (including expenses on account of new capital issue)
|
|
|
|
( c)
|
The Original cost of
works in Progress
|
274.00
|
506
|
|
(d)
|
The Amount of
investment compulsorily made under para-IV of the sixth schedule together
with investment made from contributions towards depreciation.
|
|
|
|
(e)
|
An amount on account
of working capital equal to the sum of:
|
|
|
|
(e) (I)
|
Average cost of
stores (1/ 12th of the sum of the book cost of stores, materials and supplies
including fuel in hand at end of each month of the year.)
|
126
|
136
|
|
(e) (ii)
|
Average cash and bank
balance (1/ 12th of the sum of cash and bank balances whether credit or debit
and call and short term deposit at end of each month of the year.)
|
607
|
667
|
|
NA
|
Capitalized loss
allowed by the Commission
|
|
|
|
|
Sub-Total of Positive elements of Capital base
(Sum of above) – A
|
32162
|
33243
|
|
(Less I)
|
The amounts written
off or set aside on account of depreciation of fixed / intangible assets.
|
21568
|
22703
|
|
ii-a)
|
The amounts of any
loans borrowed from organizations or institutions approved by the State Govt.
|
-
|
-
|
|
ii-b)
|
The amount of any
debenture issued by the licensee.
|
-
|
-
|
|
NA
|
Part of accumulated
subventions from State Government used for capital expenditure
|
-
|
-
|
|
iii)
|
The amounts deposited
in cash with the licensee by consumers by way of security
|
1899
|
2434
|
|
iv)
|
The amounts standing
to the credit of Tariff and Dividends Control Reserve at the beginning of the
Year
|
-
|
-
|
|
v)
|
The amounts standing
to the credit of the Development Reserve at the close of the Year
|
-
|
-
|
|
vi)
|
The amount carried
forward (at the beginning of the Year of accounting) in the accounts of the
Licensee for distribution to the consumers.
|
-
|
-
|
|
|
Sub-Total of negative elements of capital Base (Sum
of above) – B
|
23466.55
|
25136.97
|
|
|
Net Capital Base (A-B)
|
9029.08
|
8435.48
|
The computation of
capital base has been undertaken in accordance with the provisions under the
Sixth Schedule and is explained below.
a.
The revised estimates of gross block of fixed
assets as at March 31, 2006 is Rs. 31934 Lakh on the basis of the capital
expenditure being undertaken in FY 2005-06. The capital expenditure programme
during 2005-06 is estimated at Rs. 386 Lakhs including replacement works of Rs.
233 Lakhs. Replacement works are necessary as the distribution network of NDMC
with ageing has become weak, and the existing assets need to be replaced to maintain the distribution
network to a normal satisfactory level. It is
expected that the entire works-in-progress and 50% of the capital expenditure
works for FY 2005-06 would be completed and the assets would be put into use
during the current year itself. Thus, an amount of Rs. 780 Lakhs gets
transferred to the assets that are in use.
b.
The capital expenditure programme during FY
2006-07 is estimated at Rs. 1448 Lakhs including replacement works of Rs. 522
Lakhs. Capital expenditure to the extent of Rs. 1573 Lakhs is estimated to be
completed and put into use during FY 2006-07. The Capital Expenditure includes
capitalization of Employee cost. The details of
capital expenditure programme for FY 2005-06 and FY 2006-07 is provided in
Annexure I. The capital expenditure programme during FY 2006-07 includes
replacement works planned for FY 2006-07. The revised estimates of replacement
works for FY 2005-06 and the proposed replacement works for FY 2006-07 are
provided in Annexure II.
c.
Cost of stores under capital base is estimated at
average Rs. 126 Lakhs in FY 2005-06 and is projected at average Rs. 136
Lakhs. The revised estimates for
average cash/bank balances is Rs. 607 Lakhs for FY 2005-06. For FY 2006-07,
average cash/bank balances are projected at Rs. 667 Lakhs.
d.
The security deposit available as on April 1,
2005 was Rs. 1899 Lakhs. The security deposit as on February 28, 2006 is Rs.
2231 Lakhs and is estimated at Rs. 2434 Lakhs at the end of FY 2005-06.
1.2
REASONABLE RETURN
Reasonable return has been computed
at 16% of the capital base plus 0.5% on outstanding loans as per provisions of
the Sixth Schedule. NDMC requests the honourable Commission to approve the
reasonable return as submitted by NDMC.
Table 1.2: Reasonable Return Rs.
Lakhs
|
|
FY
2005-06
|
FY
2006-07
|
|
|
Revised
estimates
|
Projected
|
|
Return of 16% on
Capital Base
|
1445
|
1350
|
|
Return of 0.5% on
outstanding loans
|
0
|
0
|
|
Total
Reasonable Return
|
1445
|
1350
|
1.3
SALES PROJECTION
NDMC has estimated sales of 987.32 MU
during FY 2005-06 and projected sales of 1020.31 MU for FY 2006-07. The sales
for FY 2005-06 have been estimated on the basis of actual sales for the period
April 2005 – October 2005 and the anticipated sales during the period November
2005 – March 2006. For FY 2006-07, NDMC has used the Compounded Annual Growth
(CAGR) methodology to arrive at the total sales for the year. The CAGR for the
period 2000-01 to 2005-06 i.e. 3.57% has been used for this purpose. The
category wise sales are estimated in proportion to the category-wise sales
during FY 2004-05.
Table 1.3:
Consumer Category wise Energy Sales (MU)
|
S.
No.
|
Category
|
2002-03
|
2003-04
|
2004-05
|
2005-06
|
2006-07
|
|
1
|
Domestic
|
(Actual)
|
(Actual)
|
(Actual)
|
(Re. Esti.)
|
(Proj.)
|
|
|
a. Single Delivery Point
|
46.241
|
49.491
|
51.7
|
54.67
|
55.43
|
|
|
b. Separate Delivery Point
|
120.966
|
117.798
|
121.25
|
121.39
|
130.01
|
|
|
c. domestic Power
|
26.136
|
23.657
|
22.66
|
21.10
|
24.30
|
|
2
|
Non domestic
|
|
|
|
|
|
|
|
a. Single Phase
|
56.172
|
53.283
|
53.43
|
52.11
|
57.29
|
|
|
b. Three Phase
|
148.24
|
150.423
|
162.08
|
169.48
|
173.79
|
|
3
|
Mixed Load
|
|
|
|
|
|
|
|
a. Supply at 11 kV (HT)
|
283.337
|
285.294
|
326.07
|
349.80
|
349.62
|
|
|
b. (i) Supply on LT
where supply is given from NDMC sub-station
|
6.704
|
6.842
|
7.28
|
7.59
|
7.81
|
|
|
b. (ii) Supply on LT
where applicant provides built up space for sub-station
|
188.006
|
190.62
|
195.61
|
199.53
|
209.74
|
|
4
|
Small Industrial Power (SIP)
|
0.302
|
0.291
|
0.32
|
0.33
|
0.34
|
|
5
|
Public Lighting
|
7.479
|
7.492
|
7.51
|
7.53
|
8.05
|
|
6
|
Others
|
3.43
|
3.39
|
3.68
|
3.81
|
3.95
|
|
|
Total
|
887.013
|
888.581
|
951.59
|
987.32
|
1020.31
|
1.4
TRANSMISSION AND
DISTRIBUTION LOSS
The Honourable Commission has approved target Transmission and Distribution
(T&D) loss level of 11.60% for FY 2005-06. As against this, the T&D
losses for FY 2005-06 are estimated at 11.5%. The Honourable
Commission
would appreciate that NDMC’s network is of old vintage and little efforts have
been made towards strengthening and refurbishment
of system in the past. Therefore, there are practical constraints at present beyond
the reasonable control of NDMC to further reduce the technical losses in the
system.
NDMC would like to
highlight that commercial losses by way of theft are negligible in NDMC’s area.
While some commercial losses do occur on account of non-performing and under
performing meters, the magnitude of these losses is minimal. Further, in view of the already low level of T&D losses,
NDMC submits that the T&D losses be maintained at the current level of
11.5% for FY 2006-07.
1.5
POWER PURCHASE / ENERGY
REQUIREMENT
The Honourable Commission has in its tariff order for NDMC
for FY 2005-06 approved the ARR on the basis of energy requirement of 1126.31
MUs i.e. 1251 MkVAh. As against the energy requirement considered by the
Honourable Commission, NDMC has consumed 1155.23 MkVAh between April 2005 and
February 2006. Further, NDMC has estimated its energy requirement for FY
2005-06 at 1239 MkVAh. For FY 2006-07, NDMC has projected energy requirement of
1281 MkVAh to meet the projected energy sales of 1020.31 MU at 11.5% T&D
loss.
Table 1.4:
Energy requirement
|
|
FY 2005-06
|
FY 2006-07
|
|
|
Revised
estimates
|
Projected
|
|
Sales projections (MU)
|
987.32
|
1020.31
|
|
Sales projections (MkVAh)
|
1097.02
|
1133.68
|
|
T&D losses (%)
|
11.5
|
11.5
|
|
Energy Required (MkVAh)
|
1239
|
1281
|
The power purchase cost for FY 2005-06 has been estimated
at Rs. 31847.85 Lakh as against Rs. 32164 Lakh approved by the Honourable
Commission. NDMC would like to submit that the power purchase cost for the
energy consumed during the period April 2005 – February 2006 is Rs. 29691 Lakh.
The same can be seen in Annexure III. For FY 2006-07, NDMC has projected the
power purchase cost at the prevailing BST of Rs.2.57/kVAh.
Here, NDMC would like to submit that NDMC does not own any
generating stations and the entire energy requirement is met by purchasing
power from Delhi Transco Ltd. at the rates fixed by the Honourable
Commission. NDMC is not contemplating to
procure power from any other source during FY 2006-07.
The projected power purchase cost for the FY 2006-07 has
been summarized in table 1.5.
Table 1.5: Power Purchase Cost
|
|
FY
2005-06
|
FY
2006-07
|
|
Revised
estimates
|
Projected
|
|
Energy Purchased
(MkVAh)
|
1239
|
1281
|
|
BST (Rs/kVAh)
|
2.57
|
2.57
|
|
Meter Rent (Rs.)
|
14790
|
14790
|
|
Total variable
cost (Rs. Lakhs)
|
31846
|
32922
|
|
Total fixed cost
(Rs.)
|
177480
|
177480
|
|
Power Purchase
Cost (Rs. Lakhs)
|
31848
|
32923
|
1.6
EMPLOYEE COST
The expense head of employee cost involves cost of manpower
in service and terminal benefits payable to them. Cost of manpower in services
includes salary and allowances, bonus, LTC and honorarium. Terminal benefits
are payable to retiring employees and includes pension, death cum retirement
gratuity as well payments to the family of deceased employee.
As mentioned in the prayer to this Petition, the entity for
supply of electricity in NDMC is considered as a department of NDMC like other
departments and not as a separate commercial undertaking. Therefore, unlike
other electricity utilities, the practice of maintaining separate records of
expenses for electricity sector is not presently followed in NDMC. As a result, the estimates
of employee cost for FY 2005-06 are based on the budget estimates reasonably
and justifiably allocated to the electricity utility, as given in NDMC’s budget
for FY 2005-06. The Petitioner requests the Honourable Commission to consider this estimate for the purpose of truing up of ARR
of FY 2005-06 as against the approved expenditure of Rs. 6071.28 Lakhs (before
capitalisation).
For FY 2006-07, NDMC has adopted the component wise CAGR
for FY 2000-01 to FY 2005-06 to project the various components of employee cost
for FY 2006-07, except in case of the bonus to be paid to employees. It has
been assumed that the payment of bonus will be in the proportion to the salary
and allowance during FY 2005-06. Table 1.6 summarises the break-up of employee
expenses. This table also indicates the revised estimates of employee costs for
FY 2004-05.
Table 1.6: Employee Expenses Rs.
Lakhs
|
S.
No.
|
Particulars
|
FY
2004-05
|
FY
2005-06
|
FY
2006-07
|
CAGR
FY 2000-01 to FY 2005-06
|
|
|
|
Revised
estimates
|
Revised
estimates
|
Projected
|
|
|
1
|
Salary and
Allowances
|
3,944.53
|
5,245.81
|
5748.21
|
9.58%
|
|
2
|
Contribution to
PF
|
4.17
|
4.45
|
5.14
|
15.45%
|
|
3
|
Pension and
Terminal Benefits
|
820.39
|
905.64
|
1000.62
|
10.49%
|
|
4
|
Ex-gratia
|
59.66
|
70.80
|
72.26
|
2.07%
|
|
5
|
Bonus
|
2.17
|
2.86
|
3.13
|
|
|
6
|
LTC
|
11.57
|
16.20
|
18.82
|
16.16%
|
|
7
|
Honararium/OTA
|
8.90
|
16.00
|
16.70
|
4.37%
|
|
8
|
Total
|
4,851.39
|
6,261.76
|
6,864.88
|
|
As mentioned in the ARR and Tariff Petition for the
Financial Year 2005-06, the practice of capitalisation
of employee cost has not been pursued in NDMC. The
direct and indirect expenses relating to construction are not being separately
maintained in NDMC. However, from FY 2005-06, NDMC has proposed capitalisation
of cost of employees involved and associated with capital expenditure in
respect of transmission and distribution network. It is proposed that
capitalisation of the employee cost be continued at 10% for FY 2006-07.
Table 1.7:
Employee expenses after capitalization Rs. Lakhs
|
|
FY
2005-06
|
FY
2006-07
|
|
Revised
estimates
|
Projected
|
|
Gross Employee
Cost
|
6,261.76
|
6,864.49
|
|
Less
capitalization
|
626.18
|
686.45
|
|
Net Employee Cost
|
5,635.58
|
6,178.04
|
1.7
ADMINISTRATION AND GENERAL
EXPENSES
Administration and General (A&G) expenses include
expenses on computerisation, communication, security and other expenses.
A&G expenses for FY 2005-06 have been estimated at Rs. 51.18 Lakh. For FY 2006-07, these
expenses are anticipated to increase to
Rs. 64.45 Lakh. The estimates for FY 2005-06 have been determined on the basis
of actual expenses incurred during part of the year and the projections for the
remaining part of the year. The estimates for FY 2006-07 have been determined
keeping in mind the various schemes being implemented in NDMC and the expected
expenditure as determined during the discussions leading to the finalisation of
the budget proposals of NDMC for FY 2006-07, being noted to the Council for
approval.
In particular, NDMC would
like to highlight that the extent of computerization is increasing in all
departments of NDMC. The
computerisation would require investments for the purchase of hardware and software for the
electricity department as well. Further, NDMC is also implementing the ABT
regime. The implementation of ABT would lead to an increase in costs of
wireless communication.
NDMC requests the
Honourable Commission to approve the A&G expenses as submitted by NDMC.
Table 1.8:
A&G Expenses Rs.
Lakhs
|
S.
No.
|
Particulars
|
FY
2004-05
|
FY
2005-06
|
FY
2006-07
|
|
|
|
Revised
estimates
|
Revised
estimates
|
Projected
|
|
1
|
Computerization
|
0.10
|
0.30
|
0.50
|
|
2
|
Purchase of
vehicles
|
11.58
|
12.00
|
18.00
|
|
3
|
Wireless
communication
|
0.00
|
0.10
|
1.25
|
|
4
|
Telephone
|
30.69
|
27.38
|
34.80
|
|
5
|
Furniture
|
1.63
|
7.70
|
9.30
|
|
6
|
Security &
others
|
5.79
|
4.00
|
4.20
|
|
7
|
|
49.80
|
51.48
|
68.05
|
1.8
OTHER ADMISSIBLE EXPENSES
As shown in Table 1.9, other admissible expenses are
estimated at Rs. 4092 Lakhs for FY 2005-06 and are expected to increase to Rs.
4175.60 Lakhs during FY 2006-07. The major sub-heads under this expense and the
details of the expenses incurred under these sub-heads in the current year and
the ensuing year is enumerated below:
Rent Rates and
Taxes
The Honourable Commission is aware that there are no
separate buildings for NDMC’s electricity offices. All electricity
offices/sub-stations/service stations are located in NDMC buildings. As a
result, the asset value of these buildings is not included in the value of
assets relating to electricity supply. However, the rent for such accommodation
would have to be included in the expenses of the electricity function of NDMC
to determine the true cost of electricity supply to the consumers. NDMC
therefore, proposes to charge rent for the electricity offices/sub-stations/service
stations of NDMC located in NDMC’s buildings as an expense of the electricity
department.
NDMC is aware that this rent should be calculated at
reasonable and justified rates. Accordingly, the rent charged by NDMC for the
buildings owned by NDMC and let out to Ministries and other Government Offices
i.e. Rs. 675/= per sq. m. per month has been used to arrive at the figures for
rent for FY 2005-06. The rent for FY 2005-06 has been worked out at Rs. 3949.15
Lakhs. For FY 2006-07, NDMC has continued with the rent of Rs. 3949 Lakhs.
NDMC would like to draw the attention of the Honourable
Commission to the fact that NDMC has decided to adopt the National Municipal
Accounting Manual. NDMC’s Accounts Manual is being modified by customizing the Municipal
Accounting Manual to the requirements of NDMC. The modification of NDMC’s
Accounting Manual recognises the fact that the activities of the NDMC which are
commercial or quasi-commercial in nature are required to be placed on a
self-sustaining basis. This includes the activities of a) Estate Department, b)
Municipal Housing Department and, c) Municipal Office Buildings being
maintained by the Civil Engineering Department, which must pay for their
maintenance and renewal through rent, license fee, notional rent (in case of
municipal buildings occupied by different departments/functionaries).
With the implementation of the new Accounting Manual of
NDMC, the electricity department would be required to pay rent for the
electricity offices/sub-stations/service stations located in NDMC buildings and
the same would be shown as expenses of the electricity department in NDMC’s
budget and books of account. In light of this fact, NDMC requests the
Honourable Commission to consider the rent for the accommodations of the
electricity department as part of the expenses of the electricity function of
NDMC and approve the rent claimed by NDMC for the electricity department.
Legal charges
Legal charges
are budgeted for inter alia meeting costs to be incurred for protecting the
Council’s legal rights before the Honourable Civil Courts. At the same time,
there is an ongoing litigation with Reliance Energy Ltd. on their application
for distribution and retail supply licence in NDMC’s area for supply of electricity.
The Honourable Commission is aware of the background of this on-going
litigation. NDMC, therefore, has no option but to defend/protect its legal
rights against the aforesaid litigation and in the process has incurred and
will be incurring such expenses
Accordingly,
the revised estimates for legal charges for FY 2005-06 are Rs. 30 Lakh. For FY
2006-07, legal charges are budgeted on an estimated basis since NDMC, at this
stage, cannot precisely indicate the tenure of the proceedings.
Audit fees
The Audit fees
for FY 2005-06 is estimated at Rs. 25 lakhs and is conservatively estimated to
increase to Rs. 30 lakhs.
Processing
fee payable to DERC and consultancy fees
The provision
for processing fees, payable to DERC on the ARR and Tariff Petition and consultancy
charges are estimated at Rs.30 lakhs for FY 2005-06. For FY 2006-07, these charges are estimated
at Rs. 52 lakhs. This is primarily on account of increase in consultancy
charges to be paid by NDMC. NDMC proposes to outsource assignments for (a) development
of a plan for system improvement, improvement in metering system, load
management in short term as well as in the long term in the ABT regime, cost
effective load management, etc. and (b) for evaluation of the existing
distribution system with the objective of bringing about supply and demand side
improvements to improve the system reliability level. NDMC also proposes to
outsource the mapping of distribution assets to the pole level. NDMC is in the
process of holding discussions with agencies technically equipped for
performing these assignments.
Consumer Forum
The expenses
under this head include expenses incurred towards the Consumers Grievance
Redressal Forum as well as the ombudsman’s office. NDMC has estimated Rs. 35
Lakhs under this head for FY 2006-07.
Provision for bad
and doubtful debts
The arrears
outstanding for more than 3 years in respect of electricity supply were about
1054 lakhs in 2004-05. This has been assessed to increase by about Rs. 55 Lakhs
during FY 2006-07. NDMC proposes to make a provision for bad and doubtful debts
@ 5% for FY 2005-06 as well as for FY 2006-07. NDMC therefore, requests the
Honourable Commission to approve the provision for bad and doubtful debts at
Rs. 52.70 lakhs for FY 2005-06 and at Rs. 55.5 Lakhs for FY 2006-07.
Implementation of
software to meet DERC’s requirements for information filing under RIMS
The Honourable Commission
would appreciate that the software systems available with NDMC are not of the
level required for the purpose of implementation of RIMS, as mandated by the
Honourable Commission. Therefore, NDMC has estimated that NDMC would have to
incur one-time expenses of Rs. 30 Lakhs to implement the software systems
required for the purpose of RIMS.
NDMC requests the
Honourable Commission to approve the above expenses submitted by NDMC.
Table 1.9: Other Admissible Expenses Rs. Lakhs
|
S.
No.
|
Particulars
|
FY
2005-06
|
FY
2006-07
|
|
|
|
Revised
estimates
|
Projected
|
|
1
|
Rent, Rates and
Taxes
|
3949
|
3949
|
|
2
|
Legal charges
|
25
|
30
|
|
3
|
Audit fees
|
25
|
30
|
|
4
|
Fee payable to
DERC and consultants
|
30
|
46
|
|
5
|
Consumer Forum
|
10
|
35
|
|
6
|
Provision for
bad and doubtful debts
|
52.70
|
55.45
|
|
7
|
Implementation
of software to meet DERC’s requirements for information filing under RIMS
|
|
30
|
|
8
|
|
4091.85
|
4175.60
|
1.9
ALLOCATION OF EXPENDITURE
RELATING TO (A) ADMINISTRATIVE DEPARTMENT (B) CIVIL ENGINEERING DEPARTMENT TO
ELECTRICITY SUPPLY
The Honourable
Commission is aware that NDMC has a separate Administrative Department
consisting of NDMC Board, Finance Department, General Administration, Law
Department, Public Relations, Staff and Labour welfare, Vigilance Department,
Auto workshop, Information and Technology, Engineer in Chief etc. There is a
separate Civil Engineering Department and the services of this department are
utilised for civil portion of electrical works. Thus, the services of the
Administrative Department and Civil Engineering Department are common for all
the functions carried out by the NDMC and the expenditure pertaining to these
Departments is allocated to all the functions.
So far the function of electricity has not been separated from the NDMC
and it was considered as part of NDMC functions. Now that the electricity
supply needs to be looked into separately as a distribution licensee and as
such the expenditure in respect of Administrative Department and Civil
Engineering Department needs to be allocated reasonably and justifiably to the
electricity supply.
In its ARR and
tariff petition for FY 2005-06, NDMC had proposed to allocate 30% of the
expenses on these departments to electricity supply. In the tariff order for FY 2005-06, the
Honourable Commission had allocated 19% of expenses of the administrative
department to electricity supply. The Honourable Commission also considered an
amount of Rs.1000 Lakh towards the allocation of expenses of Civil Department
to electricity supply. Further, the Honourable Commission had directed that the
cost of works carried out by civil engineering department for electricity
department should be separately booked and the complete details of such works
and associated costs at the end of the year be provide to the Honourable
Commission.
The Honourable Commission would appreciate that since the
last Tariff Order was issued on November 2, 2005, the time gap between the
issuance of this Order and the filing of this Petition is very small. Further,
the civil engineering department and electricity department being two separate
departments within NDMC, building regulatory preparedness within departments
not subject to the regulatory environment of the electricity sector is a time
consuming process. In view of these factors, NDMC has not been able to
implement the above directive of the Commission at present. NDMC assures the
Honourable Commission that NDMC is making efforts to institute the procedures and
systems required for the implementation of the directives issued by the Honourable Commission.
NDMC would
like to highlight that the benefits of Shiv Shankran Scales were extended to
the employees specifically working in the electricity department of NDMC and
also to common categories of employees working in other departments of NDMC.
The employees working in other departments of NDMC are presently being paid
salaries as per the provisions of the Fifth Pay Commission. As such, employees
working in the electricity department are comparatively better paid employees
as compared to their counterparts working in other departments, and also
entitled for other better allied benefits/facilities based on higher pay
structure, emergency duties performed by them, allotment of municipal
accommodations, official working space, official vehicles, telephone/mobile
phone facilities, advances paid to employees, medical facilities, etc. Further,
the allocation of 30% expenditure of these departments is also justified
considering that while allocating the expenses of 30%, the indirect expenses
having monetary/commercial value as incurred for the smooth functioning of
these departments has not been taken into account.
While NDMC
feels that 30% of the expenses on the Administrative Department and Civil
Engineering departments should be allocated to electricity supply, NDMC is
aware that it has not been able to compile the information desired by the
Honourable Commission. Therefore, NDMC has considered the amount of Rs. 3922
Lakhs (as approved by the Honourable Commission in the last tariff order)
towards the functioning of these departments during FY 2005-06 and FY 2006-07.
NDMC submits to the Commission to approve the allocation of these expenses
incurred on the Administrative Department and Civil Engineering departments to
electricity supply.
Table 1.10: Allocation of expenses of Administrative and Civil Engineering
Departments to Electricity Supply Rs. Lakhs
|
Particulars
|
FY
2005-06
|
FY
2006-07
|
|
|
Revised
estimates
|
Proposed
|
|
Allocation of expenses of Administrative and Civil Engineering
Departments to Electricity Supply
|
3922
|
3922
|
1.10 REPAIRS AND MAINTENANCE EXPENSES
These expenses include expenses on repairs and maintenance
of transformers, capacitor banks, lines, switchgears, cable network etc.,
vehicles, furniture & fixtures, office equipment, etc. R&M expenses in
FY 2005-06 have been estimated at Rs. 1,513.15 Lakh on the basis of actual
expenses incurred during part of the year and the projections for the remaining
year.
R&M charges are estimated to increase to Rs. 1607 Lakh
in FY 2006-07, representing an increase of 6.25% over the current year. NDMC
would like to submit that NDMC has a vintage and weak distribution network,
which warrants a higher degree of maintenance to ensure reasonable
availability, reliability and quality of supply. Further, the Honourable
Commission would appreciate that there has been an inflationary trend in prices
of raw materials required for R&M activities. Therefore, NDMC submits to
the Commission to approve the R&M charges for FY 2005-06 and FY 2006-07,
without any disallowance.
Table 1.11:
Repairs and Maintenance expenses
|
Particulars
|
FY
2004-05
|
FY
2005-06
|
FY
2006-07
|
|
|
Revised
estimates
|
Revised
estimates
|
Projected
|
|
R&M
expenses
|
1,313
|
1,512.85
|
1607.56
|
1.11 DEPRECIATION
In the last Tariff Order, the Honourable Commission
directed to submit the break-up of opening block of assets and assets
capitalised during the year as per the classification specified in the Appendix
II to Central Electricity Regulatory Commission (Terms and Conditions of
Tariff) Regulations, 2004 while submitting the Petition for FY 2006-07. The
Honourable Commission would appreciate that since the last Tariff Order was
issued on November 2, 2005, the time gap between the issuance of this Order and
the filing of this Petition is very small. Therefore, the Petitioner has not
been able to prepare the details of fixed assets asset clarification-wise.
Pending preparation of assets- asset classification wise,
the average rate of depreciation for distribution assets @ 3.6% has been
adopted by NDMC. Further, NDMC has considered the average of opening and
closing balance of fixed assets for estimating the depreciation during the
year. Accordingly, the amount booked under depreciation is Rs. 1136 Lakhs in FY 2005-06 and
Rs. 1178 Lakhs in FY 2006-07. NDMC requests the Honourable
Commission to approve the same.
1.12 INTEREST CHARGES
No loans are outstanding
against power during FY 2005-06. NDMC has made no fresh borrowings during FY
2005-06. Further, NDMC does not propose any borrowings for FY 2006-07.
Therefore no interest expenditure is considered for FY 2006-07.
1.13 NON-TARIFF INCOME
The revised estimates of
non-tariff income for FY 2005-06 and projections for FY 2006-07 are given
below. NDMC would like to submit to the Honourable Commission that NDMC has
billed Rs. 4 Crores as charges for misuse of electricity to various consumers
during FY 2005-06. The same has been duly taken into account in determining
non-tariff income.
NDMC expects that in FY
2006-07, all components of non-tariff income, except meter rent, will increase
by 10% over that in FY 2005-06. NDMC requests the Honourable Commission to
approve the same.
Table 1.12:
Non-Tariff Income Rs.
Lakhs
|
S.
No.
|
Particulars
|
FY
2005-06
|
FY
2006-07
|
|
|
|
Revised
estimates
|
Projected
|
|
1.
|
Meter Rent
|
157.60
|
157.60
|
|
2.
|
Service connection fees
|
14
|
15.4
|
|
3.
|
Recovery of departmental charges
|
188.5
|
207.35
|
|
4.
|
Recovery of storage charges
|
22
|
24.2
|
|
5.
|
Other Receipts
|
78.1
|
85.91
|
|
6.
|
Surcharge for Late Payment
|
41.63
|
45.79
|
|
7.
|
Misuse charges
|
400.00
|
|
|
|
Total
|
901.82
|
536.25
|
1.14 ANNUAL REVENUE REQUIREMENT
The Annual Revenue Requirement for
the current and ensuing year as estimated by NDMC is provided in the Table
below. The Annual Revenue Requirement for FY 06-07 is estimated to be Rs. 50867
Lakhs.
Table 1.13:
Aggregate Revenue Requirement Rs. Lakhs
|
|
FY
2005-06
|
FY
2006-07
|
|
|
Revised estimates
|
Projected
|
|
Expenses
|
|
|
|
Power Purchase
|
31847.86
|
32923.42
|
|
Employee cost
|
5635.58
|
6178.39
|
|
A&G expenses
|
51.48
|
68.05
|
|
R&M
|
1512.85
|
1607.56
|
|
Depreciation
|
1135.60
|
1177.95
|
|
Interest and Finance
|
0
|
0
|
|
Other Admissible
Expenses
|
4091.85
|
4175.60
|
|
Expenses of Administrative & Civil
Engineering Department Expenses
|
3922
|
3922
|
|
Total Expenses
|
48197.22
|
50052.96
|
|
Add Reasonable Return
|
1444.65
|
1350.37
|
|
Less Non
Tariff Income
|
901.82
|
536.25
|
|
Annual Revenue Requirement
|
48740.05
|
50867.09
|
NDMC requests the Honourable
Commission to true-up the expenses of NDMC for FY 2005-06 on the basis of
revised estimates for FY 2005-06. NDMC also requests the Commission to approve
the ARR for FY 2006-07 as submitted above.
2.
TARIFF PROPOSAL FOR FY
06-07
2.1
EXPECTED REVENUE AT
EXISTING TARIFF IN FY 2005-06
The revenue from the sale of power at
the existing tariff and estimated demand for NDMC for FY 2005-06 is Rs. 45537
Lakhs. The same can be seen in table 2.1. NDMC would like to highlight that the
introduction of two-part tariff for consumers with load 10 kW and above has led
to a considerable reduction in the revenues realized by NDMC from these categories.
The Honourable Commission would appreciate that consumers like hotels and large
commercial installations within NDMC’s area of supply are able to manage the
power factor to their advantage, with the result that the introduction of
two-part tariff has led to a loss of revenue from such consumers.
2.2
REVENUE FROM SALE OF POWER
AT EXISTING TARIFF IN FY 2006-07
The revenue from the sale of power at
the existing tariff and projected demand for the NDMC for FY 2006-07 is
projected at Rs. 47299 Lakhs. The details can be seen in table 2.2.
2.3
REVENUE DEFICIT AT
EXISTING TARIFF
The revenue deficit of NDMC for FY
2005-06 and FY 2006-07 is detailed in table 2.3. The computation of revenue,
expenditure and reasonable return has already been detailed in the earlier part
of the petition.
.
Table 2.3:
Revenue Deficit at Existing Tariff Rs.
Lakhs
|
S. No
|
Particulars
|
FY
2005-06
|
FY
2006-07
|
|
|
|
Revised
Estimates
|
Projected
|
|
1.
|
Annual
Revenue Requirement
|
48740.05
|
50867.09
|
|
2.
|
Revenue
from Tariffs
|
45536.69
|
47298.82
|
|
3.
|
Revenue Surplus/ ( Deficit
): (1)-(2)
|
(3203.36)
|
(3568.26)
|
As shown in the above table, the
shortfall in revenue for the ensuing year viz. FY 2006-07 is estimated at Rs
3568.26 Lakhs. Similarly, the current year’s gap in terms of the shortfall in
the recovery of expenditure (including reasonable return) for FY 2005-06 has
been computed at Rs 3203.36 Lakhs, resulting in the cumulative revenue gap of
Rs. 6772 Lakhs.
Accordingly, NDMC submits following
proposal to cover the shortfall in revenue, for the consideration of the
Honourable Commission.
2.4
COVERAGE OF REVENUE GAP
NDMC proposes to cover the cumulative
revenue gap of Rs. 6772 Lakhs through additional revenue from proposed tariff
revision. ((Revenue at proposed tariff is summarized in Section 2.6 of this
petition).
2.5
TARIFF REVISION PROPOSAL
FOR FY 2006-07
Table 2.4 summarizes the existing and
proposed tariff structure for various consumer categories. NDMC has proposed a
tariff increase of 15% for all categories of consumers to be able to recover
the revenue deficit for FY 2005-06 and FY 2006-07. NDMC requests the Honourable
Commission to accept the tariff proposal as suggested by NDMC.
Table 2.4:
Existing and Proposed Tariff Structure
|
S.No
|
|
Existing
Unit Rate (Average) (Rs./Kwh)
|
Proposed
Tariff (Rs./Kwh)
|
% Increase
|
|
With
Tax
|
Without
Tax
|
Without
Tax
|
|
|
1.1
|
Domestic
Lighting/fan and power
|
3.37
|
3.20
|
3.68
|
15
|
|
1.2
|
Domestic
Lighting/fan and power on separate delivery points. Meters
|
|
|
|
|
|
|
a) Lighting
/Fan
|
2.60
|
2.47
|
2.84
|
15
|
|
|
b) Power
|
3.78
|
3.59
|
4.13
|
15
|
|
2.1
|
Non - Domestic -
LT
|
|
|
|
|
|
a) Single Phase
(<= 5KW)
|
5.27
|
5.00
|
5.75
|
15
|
|
b) Three Phase (
> 5KW)
|
5.70
|
5.42
|
6.23
|
15
|
|
2.2
|
Mixed Load (High
Tension) - MLHT Sanctioned Load>100 KW
|
|
|
|
|
|
a)
|
Supply on 11 KV
|
|
|
|
|
|
|
Consolidate
rate per KWH
|
6.38
|
6.06
|
6.97
|
15
|
|
|
In
case of Two Part Tariff (P/Kvah)
|
4.10
|
3.9
|
4.48
|
15
|
|
b)
|
I) Supply on LT
(400 volts) where supply is given from NDMC Sub-Station.
|
|
|
|
|
|
|
Consolidate
rate per KWH
|
7.64
|
7.26
|
8.35
|
15
|
|
|
In
case of Two Part Tariff (P/Kvah)
|
4.88
|
4.56
|
5.24
|
15
|
|
|
ii) Where the
applicant provides built up space for sub-station.
|
|
|
|
|
|
|
Consolidate
rate per KWH
|
6.45
|
6.13
|
7.05
|
15
|
|
|
In
case of Two Part Tariff (P/Kvah)
|
4.51
|
4.28
|
4.92
|
15
|
|
3
|
Small Industrial
Power - SIP
|
4.31
|
4.10
|
4.72
|
15
|
|
4
|
Public Lighting
|
3.78
|
3.59
|
4.13
|
15
|
|
5
|
Railway Traction
|
|
|
|
|
|
a)
|
Supply on 11 KV
|
|
|
|
|
|
b)
|
Supply on LT
(400 V)
|
|
|
|
|
|
|
Others
|
3.78
|
3.59
|
4.13
|
|
|
Temporary Supply
|
|
|
|
|
|
6.1
|
For the total
Period
|
|
|
|
|
|
a)
|
less than 16
days
|
|
|
|
|
|
b)
|
More than or
equal to 16 days
|
|
|
|
|
|
6.2
|
For religious
function of traditional and established characters and cultural activities
|
|
|
|
|
|
6.3
|
For major
construction Projects
|
|
|
|
|
2.6
REVENUE FROM SALE OF POWER
AT PROPOSED TARIFFS
The revenue from sale of power at
proposed tariff for FY 2006-07 is determined on the basis of energy sales
estimated in Section 1.3 and category wise tariff proposed by NDMC in this
petition. NDMC would like to submit that NDMC expects that there will be an
increase of 15% in the revenue realized by way of demand charges during FY
2006-07. Further, there will be an increase of 10% in the revenue realized by
way of minimum charges in FY 2006-07. The total revenue in FY 2006-07 works out
to Rs. 54070.43 in comparison to Rs. 47298.82 Lakhs at existing tariffs for FY
2006-07. The details can be seen in table 2.5
2.7
ADDITIONAL REVENUE FROM
TARIFF HIKE
The proposed tariff will lead to
additional revenue of about Rs. 6771.60 Lakhs, which would be sufficient to
meet the revenue gap of Rs. 6772 Lakhs for FY 2005-06 and FY 2006-07.
Table 2.6:
Net revenue gap to be addressed Rs.
Lakhs
|
S. No
|
Particulars
|
FY
2005-06
|
FY
2006-07
|
|
|
|
Revised
Estimates
|
Projected
|
|
1.
|
Annual
Revenue Requirement
|
48740.05
|
50867.09
|
|
2.
|
Revenue
from Tariffs
|
45536.69
|
47298.82
|
|
3.
|
Revenue
Surplus/ ( Deficit ) at existing tariffs: (1)-(2)
|
(3203.36)
(Deficit)
|
(3568.26)
(Deficit)
|
|
4.
|
Cumulative revenue gap
|
|
(6771.62)
|
|
|
Covered
by:
|
|
|
|
5.
|
Additional
Revenue from Proposed Tariffs
|
|
6771.60
|
|
6.
|
Net revenue gap to be
addressed
|
|
0
|