cesc - karnataka orders/tariff 2017/cesc order.pdf3.3 the gist of the objections, replies by cesc...
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KARNATAKA ELECTRICITY REGULATORY COMMISSION
TARIFF ORDER 2017
OF
CESC
ANNUAL PERFORMANCE REVIEW FOR FY16
&
REVISION OF ANNUAL REVENUE REQUIREMENT FOR
FY18
&
REVISION OF RETAIL SUPPLY
TARIFF FOR FY 18
11th April 2017
6th and 7th Floor, Mahalaxmi Chambers
9/2, M.G. Road, Bengaluru-560 001
Phone: 080-25320213 / 25320214
Fax : 080-25320338
Website: www.karnataka.gov.in/kerc - E-mail: [email protected]
http://www.karnataka.gov.in/kerc
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C O N T E N T S
CHAPTER
Page No.
1.0 Introduction 3
1.1 The CESC at a glance 5
1.2 Number of Consumers, Sales in MU to various
categories of consumers and details of Revenue
for FY16
5
2 Summary of Filing and Tariff Determination
Process
7
2.0 Background for current filing 7
2.1 Preliminary Observations of the Commission 7
2.2 Public Hearing Process 8
2.3 Consultation with the Advisory Committee of the
Commission
8
3.0 Public consultation – Suggestions / Objections
and Replies
9
3.1 List of persons who filed written objections 9
3.2 List of persons, who made oral submissions
during the Public Hearing held on 22.02.2017
10
3.3 The gist of the objections, replies by CESC and
the Commission’s views is appended to this
order as Appendix-1
10
4 Annual Performance Review for FY16 11
4.0 CESC’s Application for APR for FY16 11
4.1 CESC’s Submission 11
4.2 CESC’s Financial Performance as per Audited
Accounts for FY16
13
4.2.1 Sales for FY16 14
4.2.2 Distribution Losses for FY16 23
4.2.3 Power Purchase for FY16 24
4.2.4 RPO Compliance by CESC for FY16 28
4.2.5 Operation and Maintenance Expenses 30
4.2.6 Depreciation 34
4.2.7 Capital Expenditure for FY16 35
4.2.8 Interest and Finance Charges 46
4.2.9 Interest on Working Capital 47
4.2.10 Interest on Consumer Deposit 48
4.2.11 Other Interest and Finance Charges 49
4.2.12 Interest on belated payment of power purchase
cost
49
4.2.13 Capitalisation of Interest and finance charges 49
4.2.14 Other Debits 50
4.2.15 Net Prior Period Charges 50
4.2.16 Return on Equity 51
4.2.17 Income Tax 52
4.2.18 Other Income 52
4.2.19 Fund towards Consumer Relations / Consumer 53
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Education
4.2.20 Carrying cost on Regulatory Assets 53
4.2.21 Revenue for FY16 54
4.2.22 Revenue and Subsidy for FY16 54
4.3 Abstract of Approved ARR for FY16 54
4.3.1 Gap in Revenue for FY16 56
5.0 Revised Annual Revenue Requirement (ARR) for
FY18
57
5.1 Annual Performance Review for FY16 58
5.2 Revised Annual Revenue Requirement for FY18 58
5.2.1 Capital Investments for FY18 58
5.2.2 Sales forecast for FY18 63
5.2.3 Distribution Losses for FY18 73
5.2.4 Power Purchase for FY18 75
5.2.5 RPO Target for FY18 78
5.2.6 O & M Expenses for FY18 81
5.2.7 Depreciation 84
5.2.8 Interest on Capital Loans 86
5.2.9 Interest on Working Capital 87
5.2.10 Interest on Consumer Security Deposit 88
5.2.11 Other Interest and finance charges 89
5.2.12 Interest and other charges capitalised 90
5.2.13 Other Debits & Prior Period Charges 90
5.2.14 Return on Equity 90
5.2.15 Other Income 92
5.2.16 Fund towards Consumer Relations / Consumer
Education
92
5.2.17 Contribution towards Pension and Gratuity Trust 93
5.3 Abstract of ARR for FY18 94
5.4 Segregation of ARR into ARR for Distribution
Business and ARR for Retail Supply Business
95
5.5 Gap in Revenue for FY18 97
6 Determination of Retail supply Tariff for FY18 99
6.0 CESC’s Proposal and Commission’s Decision for
FY18
99
6.1 Tariff Application 99
6.2 Statutory Provisions Guiding Determination of
Tariff
99
6.3 Factors considered for Tariff Setting 100
6.4 New Tariff Proposals by CESC 101
6.5 Revenue at Existing Tariff and Deficit for FY18 107
6.6 Wheeling and Banking charges 136
6.6.1 Wheeling within CESC area 137
6.6.2 Wheeling of Energy using Transmission Network
or network of more than one licensee
139
6.6.3 Charges for Wheeling of Energy by RE sources
(non REC route) to consumer in the State
140
6.6.4 Charges for Wheeling Energy by RE sources
wheeling energy from the State to a consumer /
others outside the State and for those opting for
140
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renewable energy certificate (REC)
6.6.5 Banking charges and Additional surcharge 140
6.7 Cross Subsidy Surcharge (CSS) for FY18 140
6.8 Other issues 143
6.8.1 Tariff for Green power 143
6.9 Other Tariff related issues 143
6.10 Cross subsidy levels for FY18 146
6.11 Effect of Revised Tariff: 146
6.12 Summary of Tariff Order 147
6.13 Commission’s Order 149
Appendix 150
Appendix - I 196
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LIST OF TABLES
Table
No.
Content Page
No.
4.1 APR for FY16 – CESC’s Submission 12
4.2 Financial Performance of CESC for FY16 13
4.3 CESC’s Accumulated Profits / Losses 14
4.4 Approved and actual Sales for FY16 15
4.5 Format for submission of details of IP Set Installations 17
4.6 Approved and actual Sales for FY16 22
4.7 Penalty for exceeding targeted loss levels in FY16 24
4.8 Source wise power purchase during FY16 25
4.9 Difference between source-wise approved and
Actual energy Purchase
26
4.10 RPO Compliance for FY16 28
4.11 Non- Solar RPO Compliance 29
4.12 Solar RPO Compliance 30
4.13 O & M Expenses –CESC’s submission 31
4.14 Approved O & M Expenses as per the Tariff Order
02.03.2015
31
4.15 Inflation to be allowed for FY16 32
4.16 Normative O&M Expenses for FY16 33
4.17 Allowable O&M Expenses for FY16 33
4.18 Depreciation for FY16 – CESC’s Submission 34
4.19 Category wise Capital Expenditure of CESC for FY16 35
4.20 Division wise summary of sample selection 39
4.21 Category wise summary of sample selection 40
4.22 Summary of prudence check results for CESC in FY16 42
4.23 Gist of prudence check findings for FY16 42
4.24 Summary of works having cost overrun 43
4.25 Summary of works having time overrun 43
4.26 Details of amounts disallowed in APR FY16 44
4.27 Allowable Interest on capital Loans – FY16 46
4.28 Allowable Interest on Working Capital for FY16 48
4.29 Allowable Interest and Finance Charges 49
4.30 Allowable other Debits 50
4.31 Status of Debt Equity Ratio for FY16 51
4.32 Allowable Return on Equity 52
4.33 Approved Revised ARR for FY16 as per APR 55
5.1 Revised ARR for FY18 – CESC’s submission 57
5.2 Capital expenditure for FY18 – CESC’s Submission 60
5.3 Additional capex sought by CESC 61
5.4 Approved & Actual capital investment 62
5.5 Computation of IP Set consumption 70
5.6 Approved sales for FY18 73
5.7 Approved and actual Distribution Losses for FY11-16 74
5.8 Approved Distribution Losses for FY18 75
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5.9 Power Purchase Cost as filed by CESC for FY18 75
5.10 Approved Power Purchase quantum and cost for the
State
77
5.11 Approved Power Purchase cost for CESC for FY18 78
5.12 Estimated solar RPO for FY18 79
5.13 Anticipated capacity addition from RE sources 79
5.14 Anticipated solar capacity and energy during FY17
and FY18.
80
5.15 O & M Expenses for FY18 – CESC’s submission 82
5.16 Approved O & M Expenses for FY18 as per the Tariff
Order dated 30th March, 2016
82
5.17 Approved O & M Expenses for FY18 84
5.18 Depreciation – FY18 – CESC’s submission 84
5.19 Approved Depreciation for FY18 85
5.20 Interest on Capital Loans – CESC’s submission 86
5.21 Approved Interest on Loans for FY18 87
5.22 Approved Interest on Working Capital for FY18 88
5.23 Approved Interest on Consumer Security Deposits for
FY18
89
5.24 Approved Interest and Finance Charges for FY18 90
5.25 Status of Debt Equity Ratio for FY18 91
5.26 Approved Return on Equity for FY18 92
5.27 Approved Revised ARR for FY18 95
5.28 Segregation of ARR – FY18 – CESC’s submission 96
5.29 Approved basis for Segregation of ARR – FY18 96
5.30 Approved Revised ARR for Distribution Business – FY18 97
5.31 Approved ARR for Retail Supply Business FY18 97
5.32 Revenue Gap for FY18 98
6.1 Revenue Deficit for FY18 107
6.2 Wheeling Charges 138
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LIST OF ANNEXURES
SL.NO. DETAILS OF ANNEXURES Page
No.
I Total Approved Power Purchase Quantum and Cost
of all ESCOMs for FY18
210
II Approved Power Purchase quantum and cost of
CESC for FY18
213
III Proposed and approved Revenue for FY18 216
IV Electricity Tariff – 2018 217
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ABBREVIATIONS
AAD Advance Against Depreciation
AEH All Electric Home
ABT Availability Based Tariff
A & G Administrative & General Expenses
ARR Annual Revenue Requirement
ATE Appellate Tribunal for Electricity
BST Bulk Supply Tariff
CAPEX Capital Expenditure
CCS Consumer Care Society
CERC Central Electricity Regulatory Commission
CEA Central Electricity Authority
CESC Chamundeshwari Electricity Supply Corporation
CPI Consumer Price Index
CWIP Capital Work in Progress
DA Dearness Allowance
DCB Demand Collection & Balance
DPR Detailed Project Report
EA Electricity Act
EC Energy Charges
ERC Expected Revenue From Charges
ESAAR Electricity Supply Annual Accounting Rules
ESCOMs Electricity Supply Companies
FA Financial Adviser
FKCCI Federation of Karnataka Chamber of Commerce & Industry
FR Feasibility Report
FoR Forum of Regulators
FY Financial Year
GFA Gross Fixed Assets
GoI Government Of India
GoK Government Of Karnataka
GRIDCO Grid Corporation
HP Horse Power
HRIS Human Resource Information System
ICAI Institute of Chartered Accountants of India
IFC Interest and Finance Charges
IW Industrial Worker
IP SETS Irrigation Pump Sets
KASSIA Karnataka Small Scale Industries Association
KEB Karnataka Electricity Board
KER Act Karnataka Electricity Reform Act
KERC Karnataka Electricity Regulatory Commission
KM/Km Kilometre
KPCL Karnataka Power Corporation Limited
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ix
KPTCL Karnataka Power Transmission Corporation Limited
KV Kilo Volts
KVA Kilo Volt Ampere
KW Kilo Watt
KWH Kilo Watt Hour
LDC Load Despatch Centre
MAT Minimum Alternate Tax
MD Managing Director
MFA Miscellaneous First Appeal
MIS Management Information System
MoP Ministry of Power
MU Million Units
MVA Mega Volt Ampere
MW Mega Watt
MYT Multi Year Tariff
NFA Net Fixed Assets
NLC Neyveli Lignite Corporation
NCP Non Coincident Peak
NTP National Tariff Policy
O&M Operation & Maintenance
P & L Profit & Loss Account
PLR Prime Lending Rate
PPA Power Purchase Agreement
PRDC Power Research & Development Consultants
REL Reliance Energy Limited
R & M Repairs and Maintenance
ROE Return on Equity
ROR Rate of Return
ROW Right of Way
RPO Renewable Purchase Obligation
SBI State Bank of India
SCADA Supervisory Control and Data Acquisition System
SERCs State Electricity Regulatory Commissions
SLDC State Load Despatch Centre
SRLDC Southern Regional Load Dispatch Centre
STU State Transmission Utility
TAC Technical Advisory Committee
TCC Total Contracted Capacity
T&D Transmission & Distribution
TCs Transformer Centres
TR Transmission Rate
VVNL Visvesvaraya Vidyuth Nigama Limited
WPI Wholesale Price Index
WC Working Capital
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KARNATAKA ELECTRICITY REGULATORY COMMISSION,
BENGALURU - 560 001
Dated 11th April, 2017
In the matter of:
Application of CESC in respect of the Annual Performance Review for FY16,
Revision of Annual Revenue Requirement for FY18 and Revision of Retail Supply
Tariff for FY18, under Multi Year Tariff framework.
Present: Shri M.K. Shankaralinge Gowda Chairman
Shri H.D. Arun Kumar Member
Shri D.B. Manival Raju Member
O R D E R
The Chamundeshwari Electricity Supply Corporation Ltd., (hereinafter
referred to as CESC) is a Distribution Licensee under the provisions of the
Electricity Act, 2003, and has, on 30.11.2016, filed the following
applications for consideration and orders:
a) Review of Annual Performance for the financial year 2015-16
(FY16) and approval of revised ARR thereon.
b) Approval for revision of ARR for the financial year 2017-18
(FY18).
c) Approval for revision of Retail Supply Tariff, for the financial year
2017-18 (FY18).
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xi
In exercise of the powers conferred under Sections 62, 64 and other provisions
of the Electricity Act, 2003, read with KERC (Terms and Conditions for
Determination of Tariff for Distribution and Retail Sale of Electricity) Regulations
2006, as amended and other enabling Regulations, the Commission has
considered the applications and also the views and objections submitted by
the consumers and other stakeholders. The Commission’s decisions are brought
out in the subsequent Chapters of this Order.
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CHAPTER – 1
INTRODUCTION
1.0 Chamundeshwari Electricity Supply Corporation Limited (CESC):
The Chamundeshwari Electricity Supply Corporation Ltd., (CESC) is a
Distribution Licensee under Section 14 of the Electricity Act, 2003
(hereinafter referred to as the Act). The CESC is responsible for purchase
of power, distribution and retail supply of electricity to its consumers and
also for providing infrastructure for Open Access, Wheeling and Banking
in its area of operation which includes five Districts of the State as
indicated below:
1. Mysuru
2. Hassan
3. Mandya
4. Chamarajnagara
5. Kodagu
The CESC is a company registered under the Companies Act, 1956,
incorporated on 19th August, 2004. The CESC commenced its operations
on 1st April, 2005, with four districts in its area of operation.
Susequently, the Madikeri Division (Kodagu District) which was earlier
under the MESCOM, was transferred to the CESC with effect from 1st
April, 2006.
At present the CESC’s area of operations is structured as follows:
CESC, Mysore
HASSAN
MANDYA
KODAGU MYSORE
CH NAGAR
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O&M Zones O&M Circles O&M Divisions
Mysore zone
Mysore Works Circle
VV Mohalla
NR Mohalla
Nanjangud
Hunsur
Mysore O&M Circle
Chamarajnagara
Kollegala
Madikeri
Hassan Circle
Hassan
CR patna
Arasikere
HN Pura
Mandya Circle
Mandya
Pandavapura
Nagamangala
Maddur
These O & M divisions of the CESC are further divided into sixty one O&M
sub-divisions with accounting / non-accounting sections and each O&M
sub division section offices.
The section offices are the base level offices looking into operation and
maintenance of the distribution system in order to provide reliable and
quality power supply to the CESC’s consumers.
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xiv
1.1 The CESC at a glance:
The profile of the CESC is as indicated below:
*Includes Posts & Personnel on deputation to CESC
1.2 Number of Consumers, Sales in MU to various categories of
consumers and details of Revenue for FY16 are as follows:
CATEGORY
CESC
No. of
Installation
Sales in
MU
Revenue in
Rs.Crs.
Domestic 2196013 997.76 420.81
Commercial 215323 366.75 306.84
Industrial 38083 886.65 598.54
Agriculture 317955 2390.44 1051.59
Others 82665 763.63 478.45
Total 2850039 5405.23 2856.23
The CESC has filed its application for Annual Performance Review for FY16,
Revision of Annual Revenue Requirement (ARR) for FY18 and revision of
Revision of Retail Supply Tariff for FY18.
Sl.
No. Particulars (As on 30.09.2016) Figures
1. Area Sq. km. 27772.8
2
2. Districts Nos. 5
3. Taluks Nos. 29
4. Population lakhs 815536
9
5. Consumers Lakhs 29.01
6. Energy Sales MU 2958.56
7. Zone Nos. 1
8. DTCs Nos. 100063
9. Assets (including current
assets)
Rs. in Crores 2669.54
10. HT lines Ckt. kms 49289.1
4
11. LT lines Ckt. kms 80600.1
4
12. Total employees strength:
A Sanctioned Nos.* 10428
B Working Nos.* 5461
13. Revenue Demand Rs. in Crores 1644.87
14. Revenue Collection Rs. in Crores 1610.94
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The CESC’s application, the objections / views of stakeholders thereon and the
Commission’s decisions on the application for the Annual Performance Review for
FY16, Revision of ARR for FY18 and Revision of Retail Supply Tariff for FY18
are discussed in detail in the subsequent Chapters of this Order.
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CHAPTER – 2
SUMMARY OF FILING & TARIFF DETERMINATION PROCESS
2.0 Background for Current Filing:
The Commission in its Tariff Order dated 30th March, 2016 had approved
the ARR for FY17 to FY19 and the Revised Retail Supply Tariff of CESC for
FY17 under the MYT principles for the control period of FY17 to FY19.
CESC in its present application filed on 30th November, 2016 has sought
for Annual Performance Review (APR) for FY16 based on the audited
accounts, Revision of ARR for the second year of the second year of the
fourth control period i.e. FY18 and revision of Retail Supply Tariff for FY18.
2.1 Preliminary Observations of the Commission
After a preliminary scrutiny of the application the Commission had
communicated its observations to CESC on 20th December, 2016 which
were mainly on the following points:
Capital Expenditure
Sales Forecast
Assessment of IP set consumption
Distribution Losses
Power Purchase
Issues pertaining to items of revenue and expenditure
Other new proposals
Compliance to Directives
The CESC has furnished its replies on 30th December, 2016. The Commission
had issued Rejoinders to the replies vide Commission letter dated 10th January,
2017 and the replies to the Rejoinder were received vide letter dated 16th
January, 2017. The replies furnished by CESC are considered in the respective
Chapters of this Order.
2.2 Public Hearing Process:
As per the Karnataka Electricity Regulatory Commission (Terms and
Conditions for Determination of Tariff for Distribution and Retail Sale of
Electricity) Regulations, 2006, read with the KERC Tariff Regulations, 2000,
and KERC (General and Conduct of Proceedings) Regulations, 2000, the
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xvii
Commission vide its letter dated 04th January, 2017 treated the
application of CESC as petition and directed CESC to publish the
summary of ARR and Tariff proposals in the newspapers calling for
objections, if any, from interested persons.
Accordingly, CESC has published the same in the following newspapers:
Name of the News Paper Language Date of Publication
Deccan Herald English
06-1-2017 &
07-1-2017
The Hindu
Kannada Prabha Kannada
Vijayavani
The CESC’s applications on APR of FY16, Revision of ARR for FY18 and
revision of retail supply tariff for FY18 were also hosted on the web sites of
CESC and the Commission for the ready reference and information of the
general public.
In response to the application of CESC, the Commission has received thirty
statements / letters of objections. CESC has furnished its replies to all these
objections. The Commission has held a Public Hearing on 22nd February, 2017
at Mysore. The details of the written / oral submissions made by various
stakeholders and the response from CESC thereon have been discussed in
Chapter - 3 / Appendix to this Order.
2.3 Consultation with the Advisory Committee of the Commission:
The Commission has also discussed the proposals of the KPTCL and all the
ESCOMs in the State Advisory Committee meeting held on 8th March, 2017.
During the meeting the following important issues were also discussed:
Performance of KPTCL / ESCOMs during FY16
Major items of expenditure of KPTCL / ESCOMs for FY18
Members of the Committee have offered valuable suggestions on the
proposals. The Commission has taken note of these suggestions while
passing the Order.
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CHAPTER – 3
PUBLIC CONSULTATION - SUGGESTIONS / OBJECTIONS &
REPLIES
3.1 AS per the provisions of the section 64 of the Electricity Act, 2003, the
Commission has undertaken the process of public consultation, to
invite and suggestions/views/objections from the interested stake-
holders and general public, on the application filed by CESC for
Annual Performance Review for FY16, Revision of Annual Revenue
Requirement for FY18 and Revision of Retail Supply Tariff for FY18. In the
written submissions filed as well as during the public hearing, the Stake-
holders and the public have raised several objections/ made
suggestions, on the CESC Tariff Application. The names of the persons
who have filed written objections and made oral submissions are given
below:
List of persons who filed written objections: -
Sl
No
Applicatio
n No. Name & Address of Objectors
1 AE-01 Sri. Prem Chand, Chief Electrical Traction Engineer,
South Western Railway.
2 AE-02 Smt. Shroti Bhatia, VP (Regulatory Affairs &
Communication), Indian Energy Exchange.
3 CA-01 Sri. K. Krishna Bhat, Koodanahally Estate, Sakaleshpur
Taluk.
4 CA-02 Sri. Ravindra B.N & Others, Kollegal taluk.
5 CA-03 Sri. K.C. Sudarshan, Madikeri, Kodagu.
6 CA-04 Sri. C.A. Subbaiah, Banangala Village, Kodagu.
7 CA-05 Laghu Udyog Bharati - Karnataka
8 CA-06 Sri. Ravindra Prabhu, Chairman, Energy Sub
Committee, HIEMA.
9 CA-07 Sri. Prem Chand, Chief Electrical Traction Engineer,
South Western Railway.
10 CA-08 Sri. Suresh Kumar Jain, Mysore Industries Association.
11 CA-09 Sri. Ravindra Prabhu, Vice President, KIAMA.
12 CA-10 Sri.B. Praveen, Hon’ble General Secretary, KASSIA.
13 CA-11 to
CA-22
Sri. A.B.Yogesh & Others Nanjanagud, Mysuru
14 CA-23 to
CA-28
Sri K.B. Utthappa & Others, Kodagu.
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xix
3.2 List of the persons, who made oral submissions during the Public Hearing,
held on 22.02.2017.
SL.
No.
Names & Addresses of Objectors
1 Sri. K. Ravindra Prabhu, KIADB Manufacturers Association &
HIEMA
2 Sri. S. Sudhakar Shetty, Vice President, FKCCI
3 Sri. K.B. Lingaraju, Mysore Chamber of Commerce
4 Sri. Suresh Kumar Jain, Mysore Industries Association
5 Sri. Mallappa Gowda & Manjunath, KASSIA
6 Dr. M.R. Rangantha, Bharatiya Kissan Sangha, Mysuru
7 Sri. Jayakumar, Bharatiya Kissan Sangha, Gundlupet
8 Sri. Ningaraju, Bharatiya Kissan Sangha, Hunsur
9 Sri. G.R.Vidyaranya, Aam Admi Party, Mysuru.
10 Sri. Rajiv, Bharatiya Kissan Sangha, Kodagu
11 Sri. Chetan Jain, IEX
12 Smt. Savitha Ranganath, Voluntary Consumer Organizations
RTI Activist.
13 Sri. Nagabhushana Aradhya, Mysuru
14 Sri. Rajendra Ramapura, Bharatiya Kissan Sangha, Kollegal
15 Sri. Somashekar, Mysuru
16 Sri. Vasanth. S, Ex-Vice President & All ESCOMS Representative
& Karnataka State Licensed Electrical Contractors
Association.
17. Sri. Ravindra, BJP Ex- District President, Kodagu
18 Sri. M.A. Poonacha, Kodagu.
19 Sri. N. Kumaraswamy, Bharatiya Kissan Sangha, Nanjangud.
20 Sri. Mohammed Arief Khan For V.S ARBATTI for BWSSB
21 Sri. D. Sagayamani Raj, Division Electric Engr. South Western
Railways & Sri. D. Soundar Rajan, Dy. Chief Electrical Engineer,
South Western Railways.
3.3 The gist of the objections, replies by CESC and the Commission’s views is
appended to this order as Appendix-1.
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xx
CHAPTER – 4
ANNUAL PERFORMANCE REVIEW FOR FY16
4.0 CESC’s Application for APR for FY16:
CESC has filed its application for Annual Performance Review (APR) for
FY16, revision of Annual Revenue Requirement (ARR) and revision of
retail supply tariff for FY18 on 30th November, 2016. CESC has sought the
Annual Performance Review (APR) for FY16 and approval of a revised
ARR thereon based on the Audited Accounts.
The Commission in its letter dated 20th December, 2016 had
communicated its preliminary observations on the application of CESC.
In its letter dated 30th December, 2016, CESC has furnished its replies to
the preliminary observations of the Commission. The Commission had
issued rejoinders on the replies vide letter dated 10th January, 2017 and
the replies to the rejoinders were furnished by CESC in its letter dated 16th
January, 2017.
The Commission in its Multi Year Tariff (MYT) Order dated 6th May, 2013
had approved CESC’s Annual Revenue Requirement (ARR) for FY14 –
FY16. Further, in its Tariff Order dated 2nd March, 2015, the Commission
had approved the APR for FY14 and had revised the ARR along with
Retail Supply Tariff for FY16.
During the course of Annual Performance Review (APR) for FY16, revision
of various items of revenue and expenditure with reference to the
audited accounts for FY16, are being discussed in this Chapter.
4.1 CESC’s Submission:
CESC in its application dated 30th November, 2016, has submitted its
proposals for revision of ARR for FY16 as follows:
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xxi
TABLE – 4.1
ARR for FY16 – CESC’s Submission Amount in Rs. Crores
Sl.
No Particulars As Filed
1 Energy at Gen Bus in MU 6444.86
2 Energy at Interface in MU 6256.07
3 Distribution Losses in % 13.60
Sales in MU
4 Sales to other than IP & BJ/KJ 3060.25
5 Sales to BJ/KJ 38.13
6 Sales to IP & BJ/KJ 2306.85
Total Sales 5405.23
Revenue
7
Revenue from other than IP & BJ/KJ and
Misc. Charges 1814.45
8 Tariff Subsidy to BJ/KJ 23.82
9 Tariff Subsidy to IP 1017.96
Total 2856.23
Expenditure
10 Power Purchase Cost 2410.17
11 Transmission charges of KPTCL 305.42
12 SLDC Charges 2.16
Power Purchase Cost including cost of
transmission 2717.75
13 Employee Cost 327.65
14 Repairs & Maintenance 39.24
15 Admin. & General Expenses 51.58
Total O&M Expenses 418.47
16 Depreciation 117.46
Interest & Finance charges
17 Interest on Loans 83.52
18 Interest on Working capital 40.40
Interest on belated payment of PP Cost 7.05
19 Interest on consumer deposits 38.07
20 Other Interest & Finance charges 0.47
21
Less: interest & other expenses
capitalised 19.22
Total Interest & Finance charges 150.29
22 Other Debits 4.79
23 Net Prior period Debit/Credit (5.89)
24 Return on Equity 0.00
25 Provision for taxation 14.97
26
Funds towards Consumer
Relations/Consumer Education 0.00
27 Other Income 105.08
Net ARR 3312.76
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Considering the revenue of Rs.2856.23 Crores against a net ARR of
Rs.3312.77 Crores, CESC has reported a gap in revenue of Rs.456.54
Crores for FY16.
4.2 CESC’s Financial Performance as per Audited Accounts for FY16:
An overview of the financial performance of CESC for FY16 as per its
Audited Accounts is given below:
TABLE – 4.2
Financial Performance of CESC for FY16
Amount in Rs. Crores
Sl.
No. Particulars FY16
Receipts
1 Revenue from Tariff and misc. charges 1814.45
2 Tariff Subsidy 1041.78
3
Income on account of Regulatory Asset/Truing
up Subsidy 464.46
Total Revenue 3320.69
Expenditure
4 Power Purchase Cost 2410.17
5 Transmission charges of KPTCL 305.42
6 SLDC Charges 2.16
Power Purchase Cost including cost of
transmission 2717.75
7 O&M Expenses 418.48
8 Depreciation 91.89
Interest & Finance charges
9 Interest on Loans 83.52
10 Interest on Working capital 40.40
11
Interest on belated payment of power
purchase 7.05
12 Interest on consumer deposits 38.08
13 Other Interest & Finance charges 0.47
14 Less; Interest and other expenses capitalized 19.22
Total Interest & Finance charges 150.30
15 Other Debits 4.79
16 Net Prior Period Debit/Credit (5.89)
17 Other income 79.52
18 Income tax 14.97
Total Expenditure 3312.77
-
xxiii
As per the Audited Accounts, CESC has earned a profit of Rs.7.92 Crores
for FY16. The profits / losses reported by CESC in its audited accounts in
the previous years are as follows:
TABLE – 4.3
CESC’s Accumulated Profit / Losses
Particulars Amount in
Rs. Crs
Accumulated losses as at the end of FY10 (285.15)
Profit earned in FY11 11.38
Losses incurred in FY12 (123.45)
Losses incurred in FY13 (269.63)
Losses incurred in FY14 (15.61)
Profits earned in FY15 40.27
Profits earned in FY16 7.92
Accumulated losses as at the end of FY16 (634.27)
As seen from the above table, the accumulated loss as at the end of
FY16 is Rs.634.27 Crores.
APR Exercise by the Commission:
The Commission has taken up the Annual Performance Review for FY16,
duly considering the actual revenue and expenditure as per the Audited
Accounts vis-à-vis the revenue and expenditure approved by the
Commission, in its Tariff Order dated 2nd March, 2015. The item-wise
review of expenditure and the decisions of the Commission thereon are
as discussed in the following paragraphs:
4.2.1 Sales for FY16:
a) Sales - other than IP sets:
Annual Performance Review for FY-16
-
xxiv
The Commission in its Tariff Order 2015 dated 02.03.2015 had approved
total sales at 5744.83 MU to various consumer categories, as against the
proposed sale of 5798.94 MU. The Actual sales of CESC is 5405.24 MU, as
per the application filed by CESC [D-2 FORMAT], indicating a short fall in
sales to an extent of 339.59 MU as compared to the approved sales. The
reduction in sales is 288.66 MU is in LT-categories and 50.93 MU in HT-
categories. The Commission notes that, as against the approved sales of
3084.08 MUs to categories other than BJ/KJ and IP sets, the actual sales
achieved by CESC is 3060.24 MU, resulting in the reduction of sales to
these categories by 23.84 MU. Further, CESC has sold 2345.00 MU to BJ/KJ
and IP category against approved sales of 2660.75 MU resulting in
decreased sales to these categories by 315.75 MU.
The category-wise sales approved by the Commission in its Tariff Order
2015 dated 02.03.2015 and the actuals for FY 16 are indicated in the
table below:
TABLE-4.4
Approved and actual Sales for FY16
Energy in MU
Category Approved by the
Commission Actuals Difference
LT-2a* 959.55 954.37 -5.18
LT-2b 7.37 7.85 0.48
LT-3 262.46 259.57 -2.89
LT-4b 1.17 1.12 -0.05
LT-4c 11.57 11.59 0.02
LT-5 137.8 136.56 -1.24
LT-6 135.53 162.96 27.43
LT-6 90.66 99.90 9.24
LT-7 13.66 12.95 -0.71
HT-1 438.07 420.40 -17.67
HT-2a 794.17 750.08 -44.09
HT-2b 127.16 107.17 -19.99
HT-2c 31.09 45.15 14.06
HT-3a & b 65.14 82.46 17.32
HT-4 7.75 5.27 -2.48
HT-5 0.92 2.84 1.92
Sub total 3084.08 3060.24 -23.84
BJ/KJ 36.28 38.13 1.85
IP 2624.47 2306.87 -317.6
-
xxv
Sub total 2660.75 2345.00 -315.75
Grand total 5744.83 5405.24 -339.59
*Including BJ/KJ installations consuming more than 18 units/month
The Commission notes that the major categories contributing to the
reduction in sales are HT Industries (44.09 MU), HT Commercial (19.99 MU)
and IP sets (317.60 MU). The increase in sales is mainly in respect of LT-6
water supply installations.
The CESC has attributed the above variation in sales to the following:
i. Reduction in IP set sales is due to reduction in the specific
consumption to 7384 units/year/IP-set as against the approved
figure of 8195 units/year/IP-set, consequent to segregation of Agri-
feeders under NJY scheme.
ii. Reduction in HT-2a sales is due to twelve industries consuming 180.82
MU under Open Access.
iii. Increase in sales to LT-water supply is due to servicing of 1252 new
installations.
b) Sales to IP sets
i) In its Tariff Order dated 2nd March, 2015, the Commission had approved
a specific consumption of IP-sets at 8,195 units/installation/annum for
FY16, whereas, as per the data of IP-set consumption reported by the
CESC in its Tariff filing for APR of FY16, the specific consumption works
out to 7,469 units/installation/annum, which indicates a decrease in
the specific consumption by 726 units/installation/annum. The total IP-
set consumption reported for the FY16 is 2,306.87 MU as against
2,624.47 MU sales quantum approved by the Commission. Thus, the
specific consumption has decreased by 726 units /installation/annum
with the corresponding decrease in sales by 317.6 MU when
compared to the quantity approved by the Commission for the FY16.
ii) Further, the Commission had approved 3,32,629 as the number of
installations for FY16, whereas the actual number of installations
serviced as reported by the CESC is 3,17,674. The difference in number
of installations between the approved and the actuals reported is
-
xxvi
14,955. This indicates a decrease of around 4.5 per cent in the number
of installations serviced, as compared to the approved number of
installations by the Commission for the FY16. Also, it is noted that the
shortfall in the sales by 317.6 MU can be attributed to less number of
installations serviced, when compared to the number of installations
projected for FY16.
iii) The Commission in its Tariff Order dated 2nd March, 2015, had
directed the CESC to furnish feeder-wise IP-set consumption based on
the 11 kV feeders’ energy meter data, every month, to the
Commission, in respect of exclusive agricultural feeders segregated
under NJY scheme considering that the energy consumed by the IP-
sets can be accurately measured at the 11 kV level at the substations
after allowing the losses prevailing in the distribution system, as per the
following format prescribed by the Commission:
TABLE-4.5
Format for submission of details of IP set Installations
Mo
nth
Na
me
of
Su
b-d
ivis
ion
No
.
Se
gre
ga
ted
Ag
ric
ultu
ral
Fe
ed
ers
in
th
e s
ub
div
isio
n
Mo
nth
ly C
on
sum
ptio
n in
MU
as
rec
ord
ed
in
all t
he
ag
ric
ultu
ral
fee
de
rs a
t
the
su
bst
atio
ns
pe
rta
inin
g
to t
he
div
isio
n
Dis
trib
utio
n lo
ss(1
1k
V lin
e,
DTC
s,&
LT
lin
e)
Plu
s sa
les
to o
the
r c
on
sum
ers
if
an
y,
in M
U (
lo
sse
s in
all t
he
ag
ric
ultu
ral fe
ed
ers
on
ly
to b
e c
on
sid
ere
d)
Ne
t c
on
sum
ptio
n d
uly
de
du
ctin
g t
he
Dis
trib
utio
n
loss
(1
1k
V &
LT)
& a
ny
oth
er
loa
ds
if a
ny
No
. o
f IP
se
ts c
on
ne
cte
d
to t
he
ag
ric
ultu
ral fe
ed
ers
in t
he
su
bd
ivis
ion
Av
era
ge
co
nsu
mp
tio
n o
f
IP /
mo
nth
(sp
ec
ific
co
ns
in u
nits
/IP
/mo
nth
)
Tota
l n
o o
f IP
se
ts in
th
e
sub
div
isio
n (
as
pe
r D
CB
)
Tota
l sa
les
of
IP s
ets
in
MU
1 2 3 4 5 6=(4-5) 7 8 9 10=8*9
April to
March
Subdivisi
on-1
Subdivisi
on-2
Subdivisi
on….
iv) Considering the fact that the ESCOMs have bifurcated the 11 KV
feeders into separate rural and agricultural feeders, the Commission
has adopted the above methodology in the Tariff Order dated 12th
May, 2014, for FY15, which shall be applicable for all the future
computations. Prior to this, in the absence of universal metering of IP-
set installations, the Commission had allowed the ESCOMs to assess
the IP-set consumption, based on the readings of the sample meters
fixed to the distribution transformer Centres (DTCs) feeding
-
xxvii
predominantly IP-set loads. The sample was so selected that in each
O&M section, two to three DTCs feeding predominantly IP-set loads,
were covered and in each subdivision, about ten such DTCs were
covered. As per this methodology, the overall IP-consumption for the
Company was being assessed on the basis of specific consumption
arrived at from the metered consumption data of sample meters fixed
to DTCs.
v) For instance, as per the IP-set data for FY13 submitted to the
Commission by the CESC, a total of 798 DTCs covering 7,175 IP-sets out
of the total 2,55,173 IP-sets in its jurisdiction, were considered for
assessing the total IP-set consumption for the Company. It is observed
that the sample IP-sets considered to assess the total IP-
consumption for FY13, based on the sample DTCs meter readings,
constituted only 2.8 per cent. Thus, a small number of IP-sets were
considered for arriving at the total IP consumption, as compared to a
large sample (39% in March 2016) being considered now after
segregating the feeders under NJY. Therefore, this would be a better
representation of sample in terms of metered consumption for
computing the overall IP-set consumption, as compared to the
methodology followed earlier.
vi) Accordingly, the CESC was directed to furnish 11 kV feeder-wise IP-
set consumption based on energy meters’ reading data in respect of
agriculture feeders segregated under NJY scheme, duly deducting
the distribution losses prevailing in 11 kV lines, distribution transformers
and LT system, to the Commission, every month.
vii) The CESC in its current tariff filing has submitted the data of IP-sets
computing the total IP-consumption based on the specific
consumption in respect of the exclusive agricultural feeders
segregated under NJY, for FY16. However, as observed from the
data, there was inconsistency in the number of installations as well as
the total consumption (computed on the basis of exclusive
agricultural feeders) between the data submitted to the Commission
-
xxviii
and the data as reported in D2 format of the Tariff application.
Further, two different figures of the IP-set consumption based on the
exclusive agricultural feeders were submitted to the Commission as
2,024.25 MU and 2,319.576 MU, whereas the consumption reported in
format D2 of Tariff filing was 2,306.87 MU, indicating a large variation in
the data submitted to the Commission.
viii) The Commission in its preliminary observations had directed the CESC
to justify the IP-set consumption of 2,306.97 MU reported in format D2
of its Tariff filing with necessary data of segregated agricultural feeders
in support of the same and also clarify the inconsistency in the
number of installations as well as consumption data of agricultural
feeders reported for FY16.
ix) The CESC, in its reply to the preliminary observations made by the
Commission, has stated that it has submitted the IP-set consumption
based on the energy meters’ data in respect of the segregated
agricultural feeders as desired by the Commission. The CESC while
submitting the IP-consumption as per the agricultural feeders’ meter
reading data has reiterated the consumption as 2,024.25 MU and
2,319.58 MU (two different figures) and the consumption of 2,306.87
MU as claimed in the format D2 of its tariff filing, for FY16. Thus, the IP-
consumption of 2,306.87 MU claimed in the Tariff filing was not
agreeing with the consumption reported on the basis of specific
consumption arrived at from agricultural feeders’ energy meter data.
x) Further, the CESC in its replies submitted to the Commission (on the
Commission’s rejoinder) vide No. CESC/GM(coml.)/F-1/2016-17/19125,
dated 18.1.2017, has revised the IP-set consumption as 2,077.97 MU
based on the specific consumption of segregated agricultural
feeders’ meter reading, for FY16. Also, it has stated that there is still a
difference between the consumption reported as per Format D-2 of its
Tariff filing and the agricultural feeders’ meter reading data furnished
to the Commission due to the following reasons:
-
xxix
The number of IP-set installations as at the end of March, 2016 were
3,17,674, whereas the number of IP-sets connected to the bifurcated
agricultural feeders was only 84,851.
The consumption in respect of IP-sets in the bifurcated feeders was
computed on the basis of data from agricultural feeders’ meters,
whereas in respect of non-bifurcated and rural feeders, the
consumption was arrived at on the basis of readings from the sample
meters provided to DTCs predominantly feeding to the IP loads.
The specific consumption is less in respect of certain agricultural
feeders in Hunsur division, as the areas covered by these feeders are
fed by Kaveri and kabini water canals and hence, these figures cannot
be considered for non-bifurcated feeders.
For agricultural feeders three-phase power supply is being arranged for
7 hours as per orders of GoK and in respect of rural feeders, single-
phase power supply is also arranged in addition to three-phase
supply. Thus, the consumption of IP-sets in rural and non-bifurcated
feeders is higher than those in exclusive agricultural feeders.
The consumption by unauthorized IP-sets has also contributed to the
difference in IP-set consumption.
With the above justification, the CESC has requested the Commission to
consider the sales of IP-sets as 2,306.87 MU as reported in the Format D-2 of
its Tariff Application for the APR of FY16 and not to consider the revised
consumption of 2,077.97 MU which was submitted based on the
agricultural feeders’ meter reading data.
xi) The reply submitted by the CESC for the difference in IP-set
consumption is not convincing due to the following reasons:
a. Even, when 84,851 number of IP-set installations under bifurcated
feeders, out of total 3,17,67 number of IP-sets as at the end of
March 2016, are considered, they constitute around 27%, whereas
the IP-sets connected to DTCs (to which meters are provided)
feeding predominantly IP-set loads constitutes insignificant
number of IP-sets. This means the IP-set consumption based on
specific consumption arrived at from the meter readings data of
agricultural feeder (larger sample of 27%) needs to be considered
-
xxx
while computing the IP-set consumption for the entire company,
instead of considering the readings from the sample meters
provided to DTCs feeding predominant IP loads, which is based on
fewer IP-sets data.
b. As regards lower consumption in Hunsur division due to availability
of canal water, the division’s average IP-consumption could be
considered for computation of subdivision-wise IP consumption if
such a subdivision is not having bifurcated feeders within the same
division.
c. Regarding the contention that the IP consumption is more in non-
bifurcated and rural feeders, compared to bifurcated feeders due
to supply of single phase power in addition to three-phase power,
it is noted that the non-bifurcated agricultural feeders are
supplied with open delta supply/restricted supply with a relay
arrangement in the feeders at the substations to trip the same if
current is drawn more than the predetermined values. This would
even out the difference in power supply position between the
bifurcated and non-bifurcated feeders and therefore, the
average values of IP-consumption would be the same in both
bifurcated and non-bifurcated feeders.
d. As regards unauthorized IP-sets, the CESC has taken them into
account, as and when they are identified in the field by
regularizing them and assigning them with the RR numbers. This
means, barring a very few installations existing in the field as
unauthorized, majority of the IP-sets are being accounted for and
hence the consumption recorded in the exclusive agricultural
feeders at the substation is inclusive of these unauthorized IP-sets
also. The specific consumption of IP-sets is arrived at on the basis
of consumption recorded in the agricultural feeders at substations,
segregated under NJY, deducting the allowable losses prevailing
in the 11kV line, distribution transformers and LT line. This means
that the consumption of unauthorized IP-sets is also reflected in
-
xxxi
the total consumption recorded in the feeders at the substations.
Thus, the unauthorized IP-sets existing in the field are being
accounted for and hence, the contention of the CESC that they
are contributing to the difference in consumption is not
acceptable.
xii) Therefore, as discussed above, the revised IP-consumption submitted
by the CESC as per the segregated agricultural feeders’ meter
reading data is 2,077.97 MU and there is a difference of 228.9 MU
(2,306.87 MU - 2077.97 MU =228.9 MU). In consumption as declared in
tariff filing. There is no justification for accepting this consumption
difference of 228.9 MU in consumption as declared in tariff filing.
Hence, the Commission decides to disallow the consumption of 228.9
MU from out of 2,306.87 MU claimed by the CESC in its Tariff filing.
xiii) Accordingly, the Commission decides to approve IP sets sales of
2,077.97 MU on the basis of the revised meter readings data of
segregated agricultural feeders reported for the FY16, as against
2,306.87 MU claimed by the CESC in its Tariff filing, after disallowing
sales to an extent of 228.9 MU.
In the light of the above discussion, the Commission approves total sales
of 5176.34 MU for FY16 and the category-wise sales as indicated in the
table above:
TABLE – 4.6
Approved & Actual Sales for FY16 Million Units
Category
Approved as
per Tariff
Order dated
02.03.2015
Actuals as
per APR
LT-2a* 959.55 954.37
LT-2b 7.37 7.85
LT-3 262.46 259.57
LT-4b 1.17 1.12
LT-4c 11.57 11.59
LT-5 137.8 136.56
-
xxxii
LT-6 135.53 162.96
LT-6 90.66 99.9
LT-7 13.66 12.95
HT-1 438.07 420.4
HT-2a 794.17 750.08
HT-2b 127.16 107.17
HT-2c 31.09 45.15
HT-3a & b 65.14 82.46
HT-4 7.75 5.27
HT-5 0.92 2.84
Sub total 3084.08 3060.24
BJ/KJ 36.28 38.13
IP 2624.47 2077.97
Sub total 2660.75 2116.10
Grand total 5744.83 5176.34 *Including BJ/KJ installations consuming more than 18 units/month
4.2.2 Distribution Losses for FY16:
CESC’s Submission:
The Commission in its Tariff Order dated 2nd March,2015 had
approved distribution losses for FY16 as shown in the table below:
Distribution Loss Range FY16
Upper limit 15.00%
Average 14.50%
Lower Limit 14.00%
CESC, in its annual accounts, has reported the distribution losses
at 13.60% for FY16.
1 Energy at Interface Points in MU 6256.07
2 Total sales in MU including wheeled
energy 5405.23
3 Distribution losses as a percentage of
input energy at IF points 13.60%
Commission’s analysis and decisions:
The distribution loss of 13.60% reported by CESC is below the targeted
losses fixed by the Commission for FY16 by 0.90% percentage points.
However, as per the revised consumption of IP sets reckoned as
-
xxxiii
discussed in the preceding paragraphs of this Chapter, the percentage
of distribution losses of CESC for FY16 is 17.26%.
In the above context, the Commission notes that the actual overall
distribution losses of 17.26% are far beyond the approved upper limit of
losses for FY16. Hence, penalty for exceeding the targeted loss levels
has been factored in the APR for FY16 as detailed below:
TABLE-4.7
Penalty for exceeding targeted loss levels in FY16 Amount in Rs. Crores
Particulars FY16
Actual input at IF points as per audited accounts in
MU 6256.07
Retail sales in MU 5176.34
Percentage distribution losses 17.26%
Target Upper limit of distribution loss 15.00%
Increase in loss–in percentage point 2.26
Input at target loss for actual sales in MU 6089.81
Increase in input due to increase in distribution losses
in MU 166.26
Average cost of power purchase in Rs./unit 4.217
Increase in power purchase cost due to increase in
losses in Rs. Crores 70.11
Thus, the Commission decides to levy penalty of Rs.70.11 Crores for
exceeding the targeted distribution loss levels for FY16.
4.2.3 Power Purchase for FY16
CESC Submission:
The Commission in its Tariff order dated 30th March,2016, had approved
source-wise quantum and cost of power purchase for FY16. CESC, in its
application has submitted the details of actual power purchase for FY16
for the purpose of Annual Performance Review. The details of power
purchase are as under:
-
xxxiv
TABLE – 4.8
Source-wise Power Purchases during FY16
* Source : D1 format
Commission’s analysis and decisions: [
1. The actual power purchase for FY16 as filed by CESC for approval of
Annual Performance Review is 6444.86 MU amounting to Rs. 2717.75
Crores, as against the approved quantum of 6984.52 MU amounting to
Rs. 2369.15 Crores. This represents reduction in quantum of power
purchase to an extent of 539.66 MU and increase in the cost by Rs.
348.57 Crores. This has been reflected in reduced sales to an extent of
568.50 MU in FY16.
Source of Generation
Actuals for FY16 Approved for FY16 Difference-between Actuals
and Approved-for FY16
% increase
(+)/decrease (-)
over an
approved figures
Energy
in MUs
Cost in
Rs Cr.
Rate in
Rs per
Unit
Energy
in MUs
Cost in
Rs Cr.
Rate in Rs
per Unit
Energy
in MUs
Cost in
Rs Cr.
Rate in
Rs per
Unit
Energy Cost
KPCL Hydel
Stations
1030.87 114.81 1.11 1829.66 91.50 0.50 -798.79 23.29 0.61 -43.66 25.45
KPCL-
Thermal
Stations
1313.99 593.48 4.52 1826.26 715.70 3.92 -512.27 -122.22 0.60 -28.05 -
17.08
CGS 1724.1 539.44 3.13 1549.83 465.73 3.01 174.27 73.71 0.12 11.24 15.83
Major IPPs 991.82 415.36 4.20 970.19 400.92 4.13 21.63 15.44 0.07 2.23 3.85
IPPs -Minor
(NCE
Projects)
469.92 167.47 3.56 627.97 235.47 3.75 -158.05 -68.00 -0.19 -25.17 -
28.88
Other
States
Projects
4.78 8.13 17.01 21.26 3.83 1.80 -16.48 4.30 15.21 -77.52 112.2
7
Short
/Medium
term
480.62 249.24 5.19 159.35 83.66 5.25 321.27 165.58 -0.06 201.61 197.9
2
U I charges 66.74 20.36 3.05
66.74 20.36
Sec-11 331.48 168.25 5.08
331.48 168.25
Transmissio
n Charges
(KPTCL &
PGCIL)
414.65
368.78
45.87
SLDC
Charges
(POSOOC&
SLDC)
2.16
3.57
-1.41
Energy
Balancing 30.54 21.21 6.94
Others
Charges 2.19
TOTAL 6444.86 2717.75 4.22 6984.52 2369.15 3.39 -539.66 348.57 0.82 -7.73 14.71
-
xxxv
2. Against the approved quantum of 6984.52 MU, the actual power
purchased by CESC is 6444.86 MU for FY16, which is about 7.73% less than
the approved quantum.
3. On an analysis of the source-wise approved and actual power
purchases, the following deviations in the quantum of energy and its
cost of purchase are observed:
i. There is shortfall in supply from sources of power like KPCL Hydel, KPCL
Thermal and IPP minor (RE/ NCE) as follows:
TABLE-4.9
Difference between Source-wise approved and Actual Energy Purchase
Source of Generation
Energy Difference
between actual
and approved in
MU
Cost Difference
between actual
and approved in
Rs Cr.
KPCL Hydel - 798.79* 23.29
KPCL Thermal -512.27* -122.22**
IPP Minor(RE/NCE ) -158.05* -68.00**
* (-) indicates deficit **(-) indicated excess cost
The shortfall from the conventional sources has been met from the
un-requisitioned surplus power from CGS & major IPP sources apart from
short-term power to a tune of 480.62 MU at a cost of Rs.249.24 Crores.
CESC has incurred an additional cost Rs.348.57 Crores towards overall
deficit in the availability of power, resulting in an increase in per unit cost
by 82 Paise.
ii. The change in the source-wise mix of supply, reconciliation of energy
and its cost among ESCOMs have resulted in higher average power
purchase cost of CESC at the rate of Rs.4.22 per KWh as against the
approved rate of Rs.3.39 per KWh.
4. In order to ensure proper accounting of energy and its cost, CESC is
directed to reconcile the inter-ESCOM energy exchanges and its costs
-
xxxvi
every month and it shall collect/pay the corresponding amounts out of
the tariff subsidy received from Government of Karnataka,
5. The Commission notes that, the SLDC has not implemented the intra-state
ABT. As per the directions issued by the Government of Karnataka vide
its letter dated 28th January, 2016, intra state ABT has to be
implemented immediately by the KPTCL and ESCOMs. The Commission
therefore directs the SLDC, KPCL and the CESC to take appropriate
action immediately to implement intra-state ABT and to host the details
thereof, on their respective websites.
6. The power purchases made by the CESC during FY16 from different
sources of generation also include the energy purchased under Section
11 of the Electricity Act, 2003, in pursuance of the Government Order
dated 16.09.2015. The Government, in the said order, had fixed a
provisional tariff of Rs.5.08 Per unit subject to determination of final tariff
by this Commission. The Commission in its order dated 18th August,2016,
has fixed the final tariff of Rs.4.79 per unit and has ordered recovery of
the difference amount (Rs.5.08- 4.79) from the generators. However,
some of the generators have filed petitions before the Hon’ble ATE.
Some of the generators have also filed review petitions before this
Commission. The Hon’ble ATE has ordered not to recover the difference
amount pending disposal of the petitions. Hence the power purchase
cost allowed in this order is subject to the decision of the Hon’ble ATE
and also this Commission.
7. On analysis of Power Purchase cost for FY16 in respect of KPCL Hydel
Stations, it is observed that the rates allowed per unit by ESCOMs, varies
among ESCOMs as given bellow:
BESCOM Rs 0.90 per unit.
MESCOM Rs 1.45 per unit.
CESC Rs 1.11 per unit.
HESCOM Rs 0.91 per unit.
GESCOM Rs 0.97 per unit.
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xxxvii
CESC has allowed Rs.1.11 per unit, which indicates that while making
payment of the power purchase bills, adequate checks have not been
exercised. In FY15 the power purchased by ESCOMs from KPCL Hydel is
as under:
BESCOM Rs 0.57 per unit.
MESCOM Rs 0.56 per unit.
CESC Rs 0.58 per unit.
HESCOM Rs 0.56 per unit.
GESCOM Rs 0.59 per unit.
It is seen from the above that there is no significant variation in the rates
allowed in FY15 among the ESCOMs, as compared with the rates paid in
FY16. There should be justifiable reasons for the variations, which are not
available in the tariff applications.
In the light of this, CESC is directed to verify correctness of the payment
made by it at the rate of Rs.1.11 per unit to KPCL Hydel power. The
excess payment, if any, may be recovered from KPCL under intimation
to the Commission.
The Commission decides to approve the power purchase of 6444.86 MU
at a cost of Rs.2717.75 Crores for the purpose of Annual Performance
Review for FY16.
4.2.4 Renewable Purchase Obligation (RPO) compliance by CESC for FY16:
CESC in the petition has filed the details of RPO compliance for solar and
non-solar RPO for 2015-16 as indicated below:
TABLE-4.10
RPO Compliance for FY16
Energy Purchased-MU 6444.86
Non-Solar energy required to be procured at 10% target-
MU
644.49
Non-Solar energy actually procured excluding energy sold
under green tariff -MU
723.73
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Non-Solar compliance as percentage of energy purchased 11.23%
Solar energy required to be procured at 0.25% target-MU 16.11
Solar energy actually procured -MU 25.22
Solar compliance as percentage of energy purchased 0.39%
For validating the RPO compliance, the Commission had directed CESC
to furnish the data as per a specified format, duly reconciling the data
with audited accounts.
CESC in their replies have furnished the following data:
TABLE-4.11
Non-solar RPO Compliance
No. Particulars Quantum
in MU
Cost-
Rs.Crores.
1 Total Power Purchase quantum
from all sources
6444.85 2717.75
2 Non–solar Renewable energy
purchased under PPA route at
Generic tariff including Non-
solar RE purchased from KPCL
457.39 158.17
3 Non –solar Short-Term purchase
from RE sources, excluding sec-
11 purchase
127.55 65.47
4 Non –solar Short-Term purchase
from RE sources under sec-11
138.63 70.36
5 Non-solar RE purchased at
APPC
0 0
6 Non-solar RE pertaining to
green energy sold to
consumers under green tariff
0 0
7 Non-solar RE purchased from
other ESCOMs
0 0
8 Non-solar RE sold to other
ESCOMs
0 0
9 Non-solar RE purchased from
any other source like banked
energy purchased at 85% of
Generic tariff
0.16* 0.06
10 Total Non-Solar RE Energy
Purchased
[No 2+ No.3+No.4+No.5
+No.7+No.9]
723.73
11 Non-Solar RE accounted for
the purpose of RPO
0
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[ No.10- No.5-No.6-No.8]
12 Non-solar RPO complied in %
[No11/No1]*100
11.23
* As per the breakup details furnished, it is 0.48 MU, which is reckoned for the Purpose of RPO.
TABLE-4.12
Solar RPO Compliance
No. Particulars Quantum
in MU
Cost- Rs.
Crs.
1 Total Power Purchase quantum from all
sources
6444.85 2717.75
2 Solar energy purchased under PPA route
at Generic tariff including solar energy
purchased from KPCL
12.65 9.31
3 Solar energy purchased under Short-
Term, excluding sec-11 purchase
0 0
4 Solar Short-Term purchase from RE under
sec-11
0 0
5 Solar energy purchased under APPC 0 0
6 Solar energy pertaining to green energy
sold to consumers under green tariff
0 0
7 Solar energy purchased from other
ESCOMs
0 0
8 Solar energy sold to other ESCOMs 0 0
9 Solar energy purchased from NTPC (or
others) as bundled power
12.56 13.51
10 Solar energy purchased from any other
source like banked energy purchased at
85% of Generic tariff
0 0
11 Total Solar Energy Purchased
[No2+No.3+No.4+No.5+No.7+No.9+No.10]
25.22 22.82
12 Solar energy accounted for the purpose
of RPO [ No.11- No.5-No.6-No.8]
0 0
13 Solar RPO complied in %
[No12/No.1]*100
0.39
The Commission has approved total input energy of 6444.86 MU for FY16
in its APR. Based on this input energy, CESC was required to purchase
644.49 MU of Non-Solar energy and 16.11 MU of solar energy to meet its
RPO targets. Considering the data submitted by CESC, the Commission
notes that CESC has achieved 11.23% of Non-Solar and 0.39% of solar
RPO targets for FY16. Thus, CESC has over-achieved its non-solar and
solar RPO targets by 1.23 percentage points and 0.14 percentage points
respectively.
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xl
4.2.5 Operation and Maintenance Expenses:
CESC’s Submission:
In its application, the CESC, as per its audited accounts, has
requested to approve O&M expenses of Rs.418.47 Crores for FY16.
The break-up of O&M expenses are as follows:
TABLE – 4.13
O & M Expenses – CESC’s submission
Amount in Rs. Crores
Particulars FY16
Employee cost
327.65
Administrative & General Expenses 51.58
Repairs and Maintenance 39.24
Total O & M Expenses 418.47
Commission’s analysis and decisions:
The Commission in its Tariff Order dated 2nd March, 2015 had approved
O&M expenses for FY16 as detailed below:
TABLE – 4.14
Approved O&M Expenses as per Tariff Order dated 02.03.2015
Particulars FY16
No. of installations as per actuals as per Audited
Accts 2864790
Weighted Inflation Index 6.69%
CGI based on 3 Year CAGR 4.12%
Actual O&M expenses for FY13 - in Rs. Crs. 326.07
Total approved O&M Expenses for FY16 – in Rs. Crs. 409.15
The Commission in its preliminary observations, on the application of
CESC, had sought the details of the certain expenses booked under A &
G expenses during FY16 and noted the replies furnished.
The Commission notes that the actual O&M expenses reported by CESC
are more than the approved O&M expenses by Rs.9.32 Crores. The
Commission, in accordance with the methodology adopted while
approving the ARR for FY14-16 and subsequent APRs, proceeds with the
determination of normative O&M expenses based on the 12 Year data
of WPI and CPI besides considering 3 year compounded annual growth
rate (CAGR) of consumers. Considering the Wholesale Price Index (WPI)
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as per the data available from the Ministry of Commerce & Industry,
Government of India and Consumer Price Index (CPI) as per the data
available from the Labour Bureau, Government of India and adopting
the methodology followed by the CERC with CPI and WPI in a ratio of
80:20, the allowable rate of inflation for FY16 is computed as follows:
TABLE-4.15
Inflation to be allowed for FY16
Year WPI CPI
Compo
site
Series
Yt/Y
1=Rt Ln Rt
Year
(t-1)
Product
[(t-1)*
(LnRt)]
2004 98.72 111.1 108.624
2005 103.37 115.8 113.314 1.04 0.04 1 0.04
2006 109.59 122.9 120.238 1.11 0.10 2 0.20
2007 114.94 130.8 127.628 1.17 0.16 3 0.48
2008 124.92 141.7 138.344 1.27 0.24 4 0.97
2009 127.86 157.1 151.252 1.39 0.33 5 1.66
2010 140.08 175.9 168.736 1.55 0.44 6 2.64
2011 153.35 191.5 183.87 1.69 0.53 7 3.68
2012 164.93 209.3 200.426 1.85 0.61 8 4.90
2013 175.35 232.2 220.83 2.03 0.71 9 6.39
2014 182.00 246.90 233.92 2.15 0.77 10 7.67
2015 177.03 261.42 244.542 2.25 0.81 11 8.93
A= Sum of the product column 37.56
B= 6 Times of A 225.37
C= (n-1)*n*(2n-1) where n= No of years of data=12 3036.00
D=B/C 0.07
g(Exponential factor)= Exponential (D)-1 0.0771
e=Annual Escalation Rate (%)=g*100 7.71
For the purpose of determining the normative O & M expenses for FY16,
the Commission has considered the following:
a) The actual O & M expenses allowed for FY13 excluding contribution
to Pension and Gratuity Trust.
b) The three year compounded annual growth rate (CAGR) of the
number of installations considering the actual number of installations
as per the audited accounts up to FY16 at 3.92%.
c) The weighted inflation index (WII) at 7.71% as computed above.
d) Efficiency factor at 2 % as considered in the earlier two control
periods.
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xlii
Thus, the normative O & M expenses for FY16 will be as follows:
TABLE – 4.16
Normative O & M Expenses for FY16
Particulars FY16
No. of Installations As per actuals as per Audited Accts 2848206
Weighted Inflation Index 7.71%
Consumer Growth Index (CGI) based on 3 Year CAGR 3.92%
Base year actual O & M expenses for FY13 excluding
P&G contribution - Rs. Crores 270.60
O&M Index= 0&M (t-1)*(1+WII+CGI-X)- Rs. Crores. 349.27
The above normative O & M expenses have been computed without
considering the contribution to Pension and Gratuity Trust for FY16.
The Commission has treated the employee costs on account of
contribution to P&G Trust as uncontrollable O&M expenses. This
component has been allowed beyond the normative O&M expenses to
enable the ESCOMs to meet their actual employee costs.
CESC, as per the audited accounts has incurred an amount of Rs.64.31
Crores towards contribution to Pension and Gratuity Trust for FY 16.
Considering the request of CESC to treat the pension and gratuity
contribution as uncontrollable O & M expenses, the Commission
computes the allowable O & M expenses for FY16 as follows:
TABLE – 4.17
Allowable O & M Expenses for FY16 Amount in Rs. Crores
Sl.
No. Particulars FY16
1 Normative O & M expenses 349.27
2 Additional employee cost (uncontrollable O & M
expenses)
64.31
Allowable O & M expenses for FY16 413.58
Thus, the Commission decides to allow an amount of Rs.413.58 Crores as
O&M expenses for FY16.
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xliii
4.2.6 Depreciation:
CESC’s Submission:
CESC, in its application has claimed an amount of Rs.117.46 Crores as
gross depreciation as per the audited accounts. Further, an amount of
Rs.25.57 Crores towards the depreciation on account of assets created
out of consumers’ contributions / grants as per Accounting Standards
(AS) – 12, is considered under other income as per the Audited Accounts
for FY16. Thus the net amount of depreciation claimed by the CESC in its
tariff application is Rs. 91.89 Crores for FY16.
The asset-wise depreciation claimed by the CESC is as follows:
TABLE – 4.18
Depreciation for FY16- CESC’s Submission
Amount in Rs. Crores
Particulars
Opening Balance
of Asset as on
01.04.2015
Closing Balance
of Asset as on
31.03.2016
Depreciation
for FY16
Buildings 58.81 70.53 2.27
Civil 1.79 1.93 0.10
Other Civil 0.72 0.72 0.02
Plant & M/c 432.87 575.16 29.77
Line, Cable
Network
1505.59 1926.79 84.62
Vehicles 4.38 4.38 0.09
Furniture 3.90 4.23 0.19
Office
Equipment
5.18 9.56 0.39
Intangible
assets
2.17 2.16 0.01
Sub Total 2015.41 2595.45 117.46
Less: Depreciation on account of Assets created out
of Consumer contribution/grants
25.57
Net Depreciation 91.89
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xliv
Commission’s analysis and decisions:
In accordance with the provisions of the KERC (Terms and Conditions for
Determination of Tariff for Distribution and Retail Sale of Electricity)
Regulations, 2006 and amendments thereon, the depreciation for FY16
has been determined by the Commission. Based on the opening and
closing balances of gross blocks of fixed assets for FY16 and the
depreciation as per audited accounts, the weighted average rate of
depreciation works out to 5.09%. Further, as per the Accounting
Standards (AS) – 12, an amount of Rs.25.57 Crores of depreciation on
assets created out of consumer contribution / grants has been factored
in and deducted from the gross depreciation for FY16.
Based on the above, the Commission decides to allow net depreciation
of Rs.91.89 Crores for FY16.
4.2.7 Capital Expenditure:
I. Capital Investment for FY16
CESC’s submission:
The CESC has indicated an actual capital expenditure of Rs.488.52
Crores as against the Commission approved capital expenditure of
Rs.317 Crores for FY16. The category-wise breakup of the expenditure
furnished by CESC is shown in the table below:
Table -4.19
Category wise capital expenditure of CESC for FY16
Amount in Rs. Crores
Sl.
No Schemes
FY16 As
approved
FY16
Actuals
1 Extension & improvement 80 75.76
2 NJY 50 247.53
3 HVDS 20 -
4 R-APDRP 50 21.23
5 RGGVY(Restructured)+DDG 0 0.66
6 Replacement of failed
Transformers 10 5.00
7 Service Connections 40 25.76
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xlv
8 Rural Electrification(General) - -
A Electrification of Hamlets/HB/JC
under RGGVY
10 87.09 B
Providing infrastructure to
Irrigation Pump sets
&energization of IP SETS
C Kutir Jyothi(RGGVY)
9 Tribal Sub Plan - -
A Electrification of Tribal Colonies
(RGGVY) 3 2 B Energization of IP sets
C Kutir Jyothi (RGGVY)
10 Special Component Plan - -
A Electrification of
HB/JC/AC(RGGVY)
10 6 B Energization of IP sets
C Kutir Jyothi(RGGVY)
11 Tools & Plants 4 8.40
12 Civil Engineering Works 10 9.10
13
Providing Meters to DTC, BJ/KJ,
Street Light for replacement of
electromechanical meters,
providing modems to meters for
communication
30 0.00
Total 317.00 488.52
Commission’s analysis:
The Commission notes that, the overall capital expenditure of Rs.488.52
Crores incurred by CESC for FY16 has exceeded the approved capex of
Rs.317 Crores by Rs.171.52 Crores. Some of the major categories in which
CESC has exceeded the capex are as follows:
i. The CESC has exceeded the approved capex limit of Rs. 50 Crores in
“NJY program” by Rs.197.52 Crores. CESC in its replies to preliminary
observations, has stated that, due to field constraints like Right of
Way (RoW) and objections to lay the lines by the people, the project
that were taken up in previous years were delayed and the
expenditure was not booked during the previous years. During FY16
majority of NJY feeders have been completed and billed, resulting in
excess capex.
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xlvi
ii. In respect of “HVDS” works, it is stated that CESC has not utilized the
approved capex of Rs.20 Crores, for the reason that, the ongoing
NJY works and providing individual transformers to Ganga Kalyana IP
Set works would render the same benefit as that of HVDS. Further,
CESC in its replies to preliminary observations has stated that, the NJY
Phase-I and Phase- II works cover a huge area in its jurisdiction in
which it has increased the number of distribution transformers and
also, it has installed individual DTCs for each of the Ganga Kalyana
works, and hence, the HVDS is not required to be implemented.
Though CESC has taken this stand, it is to be noted that the NJY
program or the individual DTC for Ganga Kalyana would not result in
the conversion of already existing lengthy LT lines emanating from
the 11 kV feeder both in rural loads as well as for IP Sets to HT lines.
Since the HVDS scheme is meant to reduce the HT/LT ratio, the
Commission directs CESC to take up a study of the existing
distribution lines and take suitable action to implement HVDS in order
to reduce the LT lines.
iii. In respect of “Rural Electrification (General)”, CESC has achieved a
capex of Rs.77.09 Crores, over and above the approved capex of
Rs.10 Crores. CESC in its replies to preliminary observations has
stated that, these works are related to social obligation and are
Government’s priority works and hence, CESC has incurred excess
capex for completion of these works.
iv. In respect of “Tools & Plants”, CESC has achieved a capex of Rs.8.4
Crores against the approved capex of Rs.4 Crores. CESC in its replies
to the preliminary observations made by the Commission has stated
that, three phase energy meter testing bench, PGRS software has
been procured during FY16. Further, it has stated that, some of the
T& P materials which were ordered in FY15 have been billed during
FY16 resulting in excess capex.
v. In respect of “Providing Meters to DTC, BJ/KJ, Street Light for
replacement of electromechanical meters, providing Modems to
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xlvii
meters for communication”, CESC has incurred a very meager
/negligible capex of Rs.0.0019 Crore against the approved capex of
Rs.30 Crores. The Commission has been directing CESC to complete
DTC metering and conduct energy audit to quantify the distribution
losses and take remedial measures thereon. But, CESC has not
achieved its own set targets in the above category. CESC in its
replies to the preliminary observations made by the Commission has
stated that, there was a delay in tendering process due to delay in
finalization of the technical specifications, due to which it could not
achieve the progress in FY16.
In the light of the above discussion on excess capex and considering the
reasons furnished by CESC, the Commission decides to recognize the
capital expenditure of Rs.488.52 Crores incurred by CESC for APR of FY16,
subject to disallowance if any, as per the prudence check for FY16,
indicated in the following paras.
II. The prudence check of capital expenditure and material procurement
of CESC for FY16:
The Commission has got the Prudence check of capital expenditure for
FY16, done through third party verification of the capital works
categorized and also the material procurement of CESC during FY16.
This was taken up in two parts:
a) Prudence check of execution of the capital works of FY16:
b) Prudence check of material procurement process of FY16:
a) Prudence check of execution of the capital works of FY16:
The Commission has taken up prudence check of the capital
expenditure incurred by the CESC for the period FY16 by engaging the
services of M/s. Pricewaterhouse Coopers Private Limited, (M/s PWC) as
consultant, being the lowest bidder for the said job, through a
transparent process of e-tendering to evaluate the capital expenditure
incurred during FY16, in respect of categorized works.
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xlviii
The Consultant has taken a list of division-wise and cost-wise total Capex
works carried out, categorized in the CESC during FY16. As per the scope
of work, the sampling technique of stratified random sampling for
finalizing the sample of projects as per KERC guidelines was taken up.
Total number of works of CESC in category of more than Rs.6 lakhs and
between Rs.3 lakhs to Rs.6 lakhs were much higher and exceeding the
maximum limit of sample size specified in the KERC guidelines. Therefore,
120 works and 50 works have been selected from each category of
projects more