punjab state electricity regulatory commission …

Order in O&M Regulations

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PUNJAB STATE ELECTRICITY REGULATORY COMMISSION

SCO NO. 220-221, SECTOR 34-A, CHANDIGARH

Date of Order: 14.10.2015

Present: Smt.Romila Dubey, Chairperson Shri Gurinder Jit Singh, Member ORDER

Hon’ble APTEL in its judgment dated 11th Sept., 2014 passed in Appeal No.

174 of 2012 and judgment dated 30th March, 2015 in Review Petition No. 6 of 2015

held that the State Commission was not justified in applying the Wholesale Price

Index (WPI) to increase in employee cost and dearness allowance. Hon’ble APTEL

directed the State Commission to re-examine the issue in the light of its findings

recorded earlier in judgments dated 02.03.2012 and 18.10.2012 in Appeal No. 76 of

2011 filed by PSTCL versus PSERC & others and Appeal No. 7 of 2011 filed by

PSPCL versus PSERC & others respectively.

The Commission sought Review of the Judgment dated 11th Sept. 2014

passed in Appeal No. 174 of 2012 vide Review Petition No. 6 of 2015 on the

ground that findings of the Hon’ble Tribunal was not in terms of the PSERC

Regulations having the force of sub- ordinate legislation. The Hon’ble APTEL did

not find any legal and valid ground for interference and turned down the review. The

Commission in Tariff Order for FY 2015-16 decided to continue determination of

employee cost as per its existing Regulations and considered the legal recourse by

filing Civil Appeal before the Hon’ble Supreme Court which was filed but not

allowed.

The relevant extracts from the decisions of Hon’ble APTEL delivered in the

above judgments are reproduced here under:

1. APTEL judgment dated 11.09.2014 in Appeal No. 174 of 2012:


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“This point came up for consideration in Appeal no.76 of 2011 decided on 2.3.2012 and in that case the appellant was one of the successor entities of the erstwhile Punjab State Electricity Board and accordingly the reasoning assigned on account of that issue is equally applicable to this Appeal. It appears that the Commission amended its own Tariff Regulations to provide a two part consideration of employees cost namely a) terminal benefits to the retired employees; and b) other employees cost. For the year 2009-10, the Commission computed the terminal benefits at Rs.737.43 crore in accordance with the Regulations but again after such computation reduced the total employees cost including terminal benefits on the ground that the appellant needed to revise its manpower requirement and reduce the employees cost. In our view, the approach is not sound particularly when Regulations have been framed. In this connection, reference may be made to the decision of the Supreme Court in West Bengal Electricity Regulatory Commission Vs. Central Electricity Regulatory Commission Ltd.(2002) 8 SCC 715 wherein it has been held that when the utility needs to comply with the lawful agreements entered into with the employees the same cannot be avoided and wriggled out.”

and

“the State Commission is not justified in applying the Wholesale Price Index (WPI) to increase in employees cost and dearness allowance. We do not approve this approach of the State Commission. We agree to the findings laid down by this Appellate Tribunal in its judgments dated 02.03.2012 & 18.10.2012 delivered in Appeal No. 76 of 2011 and Appeal No. 7, 46 & 122 of 2011 respectively. Thus, both the issues i.e. Issue Nos. (i) & (ii) are allowed by us directing the State Commission to re-examine both these issues in the light of our findings recorded earlier in the judgments dated 02.03.2012 and 18.10.2012 in Appeal No. 76 of 2011 and Appeal No. 7 of 2011 & batch.”

2. APTEL judgment dated 30.03.2015 in Review Petition No. 6 of 2015 :

“This Appellate Tribunal while dealing with the issue of Wholesale Price Index, framed the said issue and discussed the same at length and then decided the said issue. This Appellate Tribunal in its previous judgment also considered the Regulations and the Wholesale Price Index and held that actual costs need to be considered. We after considering the previous judgment and discussion on the said issue at length in our judgment dated 11.09.2014 in the said Appeal No. 174 of 2012, after referring to the decision of the State Commission on the Wholesale Price Index, directed that the actual amount spent, subject to prudence check, is to be considered. We do not find any error apparent on the face of our judgment dated 8 11.09.2014 warranting us to review our aforesaid judgment. For a moment, if we accept the contention of the Review Petitioner/State Commission that the finding in para no. 40.1. of our judgment dated 11.09.2014 is to be deleted, then it would result in the Issue No. (ii) framed being rendered without any finding and would also


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result in the previous decisions also being overruled/reversed. While disposing of the Issue Nos. (i) & (ii) in our judgment in Appeal No. 174 of 2012, we expressed our view in para nos. 17 & 18 of our judgment which we have already quoted above.”

3. APTEL judgment dated 02.03.2012 in Appeal no. 76 of 2011:

“While we could advise the Commission to amend its Tariff Regulations and specify normative O&M expenses in line with the Central Commission’s Regulations so far as the transmission utility is concerned we cannot find too much fault when the Commission fixed a sum of Rs. 105.04 crore in respect of other employees expenses for transmission utility because for the FY- 2010-11 the Commission approved Rs. 99 crore upon which by applying average annual increase in WPI of 8.91% and after deducting Rs. 2.55crore for SLDC business the Commission reached a figure 105.04 crore, but we do not find any logic behind reducing the arrear pay of Rs.35.49 crore by 28.48%. The Commission’s reasoning that in the past it has been reducing the figure by the said percentage is no ground for maintaining that reduction particularly when the appellant is now a separate entity and as per the Government of Punjab notification the appellant has to pay 40% of the total areas amounting to Rs. 35.49 crore . The matter of the fact is that the appellant, it being a new entity, projected all its figures provisionally. The transfer of assets Page 40 of 58 Appeal no. 76 of 2011 and liabilities of the bifurcated entities are yet to be finalized. There is ample scope for review and true up. Therefore, subject to review as it may happen after the expiry of the current financial year 2011-12 which will happen only after a little over two months the Commission therefore, will re-examine the matter and pass appropriate order.”

4. APTEL judgment dated 18.10.2012 in Appeal Nos. 7, 46 & 122 of 2011:

“In Appeal No. 76 of 2011 we did not approve of blanket reduction 28.48% in all the successive of the years without any reason. In the case of the employees of the PSPCL, they are regular staff of the Corporation and it being a Govt. company, they are to be governed by the rules and regulations of the Govt. We find merit in the submission of Mr. Ganeshan as he read out the West Bengal decision. Reduction of Rs. 100 crores does not appear to be based on specific premises. Again, reduction as usual on regular basis in terms of the practice of the past by 28.48 % does not appear to be justified. Our finding on this issue is the same plus the observation that in course of true up in respect of the tariff order for 2011-2012 the Commission will review the matter. The issue is answered in favour of the appellant”.

After dismissal of Civil Appeal filed by the Commission in the Hon’ble

Supreme Court, in order to implement the directions of Hon’ble APTEL vide


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judgments referred to above, the Commission decided to amend existing clause 3

(a) of Regulation 28 of Punjab State Electricity Regulatory Commission (Terms and

Conditions for determination of Tariff) Regulations, 2005 providing for increase in

Employees Cost by WPI. Accordingly, a staff paper was prepared in the light of the

above referred judgments and a notice was issued in the leading news papers.

Copies of notice and staff paper were also posted on the PSERC website with a

view to elicit comments of the public/stakeholders.

Issue brought out in the Staff Paper

The provisions in the existing PSERC Tariff Regulations provide for determination

of employee cost as under:-

Terminal benefit including BBMB share on actual basis.

Increase in other employee expenses limited to average increase in

Wholesale Price Index on the base O & M expenses as approved by the

Commission for the Year 2011-12.

Exceptional Increase in employee cost on account of pay revision etc. to be

considered separately by the Commission.

Since the provision of Wholesale Price Index (WPI) increase in Employee Cost is

based on the existing PSERC (Terms and Conditions for Determination of Tariff)

Regulations, 2005, the regulation was required to be amended in the light of

Hon’ble APTEL Judgments.

Existing provisions and proposed amendment

The existing provisions contained under Clause 3(a) of Regulation 28 of PSERC

(Terms and Conditions for Determination of Tariff) Regulations, 2005 and proposed

provisions are given in annotated form as under:


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EXISTING PROVISIONS Punjab State Electricity Regulatory

Commission (Terms and Conditions for Determination of

Tariff) Regulation, 2005

PROPOSED PROVISIONS Punjab State Electricity Regulatory

Commission (Terms and Conditions for Determination of


I II

28. OPERATION AND MAINTENANCE EXPENSES

(3) The employee cost for a distribution licensee (s) shall be determined as follows:

(a) The employee cost as claimed by the distribution licensee (s) shall be considered in two parts:

(i) Terminal benefits such as Death cum-Retirement Gratuity, Pension, Commuted Pension, Leave Encashment, LTC, Medical reimbursement including fixed medical allowance in respect of pensioners and share of BBMB employee expenses; and

(ii) all other expenses accounted for under different subheads of employee cost taken together.

The cost component of terminal benefits and BBMB expenses shall be allowed on actual basis and increase in all other expenses under different sub-heads shall be limited to the increase in Wholesale Price Index (all commodities) as per clause (2) (b) above.




(i) Terminal benefits such as Death-cum-Retirement Gratuity, Pension, Commuted Pension, Leave Encashment, LTC, Medical reimbursement including fixed medical allowance in respect of pensioners and share of BBMB employee expenses; and


The cost component of terminal benefits and BBMB expenses shall be allowed on actual basis. All other expenses under different subheads of employee cost shall be determined by the Commission, limited to actual expenses after prudence check as per formula given below:-

Employee cost other than terminal benefit

(EMPn)= (EMPbase) * (INDXn/INDXbase)

Where,

EMPn – Employee Cost approved by the Commission for nth year.

EMPbase - Employee Cost approved by the Commission for the base year.

INDEXn - Inflation Factor to be used for indexing the Employee Cost. This will be a combination of the Consumer Price Index (CPI) and the Wholesale Price Index (WPI) (all commodities) of nth year and shall be worked out as under:-

INDXn=(0.40*CPIn+0.60*WPIn)


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INDEXbase - inflation Factor to be used for indexing the Employee Cost. This will be a combination of the Consumer Price Index (CPI) and the Wholesale Price Index (WPI) (all commodities) of base year and shall be worked out as under:-

INDXbase=(0.40*CPIbase+0.60*WPIbase) .

Stakeholders’ Responses

In response to public notice, comments from PSTCL, PSPCL, EPPL and

Athena Kynshi Power Pvt. Ltd., have been received by due date. The summary of

these comments is given in Annexure-1 of this Order.

Besides, PSTCL vide its letter No. 2755 dated 09.09.2015 has also furnished

parawise comments on the view points of M/s Athena Kynshi Power Pvt. Ltd., New

Delhi and M/s Everest Power Pvt. Ltd., Gurgaon (objector no. 3 & 4 above) as

given in Annexure-II.

The Commission also held a public hearing on 7th Oct., 2015 to hear the

views of stakeholders on the issue. The hearing was attended by officers of Punjab

State Power Corporation Limited and Power State Transmission Corporation

Limited who reiterated their views which they had earlier submitted to the

Commission.

Commission’s views

It is gathered from the comments received from PSPCL, PSTCL, Everest Power

Private Limited (EPPL), Gurgaon and Athena Kynshi Power Pvt. Ltd., New Delhi

that :

(i) PSPCL & PSTCL are of the view that employee cost should be

allowed on actual basis as both companies being Govt. Companies,

cannot retrench or remove its employee and it is not possible either to

deny the payment of full wages or otherwise provide any less

favorable terms and conditions of the services applicable to the


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personnel as per the tripartite agreement notified by the Govt. of

Punjab.

(ii) (a) Everest Power Private Limited (EPPL), Gurgaon and Athena

Kynshi Power Pvt. Ltd., New Delhi based on the tariff policy and

CERC Regulations has suggested that the concept of ‘Lower of Actual

or Norms’ should be replaced with ‘normative’. In case of private

generating company the actual employee cost should be allowed,

subject to maximum of say 2% over and above the norms (linked to

WPI/CPI) now being proposed for Employee Cost (other than terminal

benefits).

(b) The proposed amendment be made applicable to entire O&M and

not confined merely to Employee Cost. PSTCL has also supported the

view of Everest Power Private Limited (EPPL), Gurgaon and Athena

Kynshi Power Pvt. Ltd., New Delhi on this issue.

As far as the suggestion of private sector that the concept of ‘Lower of Actual or

Norms’ should be replaced with ‘normative’ is concerned, the same cannot be

considered as regulations on ‘Administrative & General expenses(A&G)’ and

‘Repair & Maintenance Expenses (R&M)’ are on similar lines. Similarly, scope of

amendment from ‘Employee Cost’ to ‘O&M expenses’ cannot be enhanced as it is

equivalent to separate amendment in regulation which is outside the scope of the

proposed amendment and was not subject matter of the judgments of the Hon’ble

APTEL.

The Commission also examined the methodology being used by other Electricity

Regulatory Commissions like Haryana Electricity Regulatory Commission, Uttar

Pradesh Electricity Regulatory Commission, Madhya Pradesh Electricity Regulatory

Commission, Chhattishgarh State Electricity Regulatory Commission, Jharkhand

State Electricity Regulatory Commission, Delhi Electricity Regulatory Commission

etc. to allow increase in employee cost other than terminal benefits. It has been

observed from the relevant extracts of Regulations as given in Annexure-III that


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escalation on employee cost other than terminal benefits is being allowed on the

basis of increase in WPI and CPI.

From the perusal of Annexure-III, it is evident that the other State Electricity

Commissions are allowing increase in employee cost by considering annual

increase in WPI and CPI in varying proportions. For example, HERC is applying the

ratio of 55% CPI + 45% WPI, UPERC is applying the ratio of 60% WPI + 40% CPI,

Madhya Pradesh Electricity Regulatory Commission is allowing escalation in

employee cost @ 6.14%, considering a weighted average of WPI and CPI in the

ratio of 60:40.

The Commission has examined the issue in detail and also considered the

objections raised by all parties. After due deliberation, the Commission is of the

opinion that CPI and WPI are determinants for measuring the inflation and both

determinants carry equal weightage. The Commission has therefore decided to

enhance the Employee Cost other than terminal benefits of the utility by allowing

annual increase in employee cost by the INDEXbase = (0.50*CPIbase+0.50*WPIbase).

This will take into account the equal effect of both the inflationary factors.

Therefore, the Commission decides to amend clause 3 (a) of Regulation 28 of

PSERC Tariff Regulations as under:


(3) The employee cost for a distribution licensee (s) shall be determined as

follows:

(a)The employee cost as claimed by the distribution licensee (s) shall be

considered in two parts:

(i)Terminal benefits such as Death-cum-Retirement Gratuity, Pension,

Commuted Pension, Leave Encashment, LTC, Medical reimbursement

including fixed medical allowance in respect of pensioners and share of

BBMB employee expenses and

(ii)all other expenses accounted for under different subheads of employee cost

taken together.

The cost component of terminal benefits and BBMB expenses shall be

allowed on actual basis. All other expenses under different subheads of


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employee cost shall be determined by the Commission limited to actual

expenses after prudence check as per formula given below:-

Employee cost other than terminal benefits

(EMPn)= (EMPbase)* (INDEXn/INDEXbase)

Where,

EMPn – Employee Cost approved by the Commission for nth year.

EMPbase - Employee Cost approved by the Commission for base year.

INDEXn-Inflation Factor to be used for indexing the Employee Cost. This will

be a combination of the Consumer Price Index (CPI) and the Wholesale

Price Index (WPI) of nth year and shall be calculated as under:-

INDEXn=(0.50*CPIn+0.50*WPIn)

INDEXbase - Inflation Factor to be used for indexing the Employee Cost. This

will be a combination of the Consumer Price Index (CPI) and the

Wholesale Price Index (WPI) of base year and shall be worked out as

under:-

INDEXbase=(0.50*CPIbase+0.50*WPIbase) .

CPI = Consumer Price Index (Industrial Workers) WPI = Wholesale Price Index (All commodities)

However the judgments of Hon’ble APTEL, in so far as Employee Cost for FY 2012-

13, 2013-14, 2014-15 etc. of PSPCL and PSTCL is concerned, shall be

implemented during true-up exercise of ARRs for these years after applying

prudence check.

The Secretary of the Commission shall issue the necessary Notification for

amendment in clause 3 (a) of Regulation 28 of Punjab State Electricity Regulatory

Commission (Terms and Conditions for Determination of Tariff) Regulations, 2005

as decided in this Order.

Sd/- Sd/- (Gurinder Jit Singh) (Romila Dubey)

Member Chairperson Chandigarh Dated: 14.10.2015


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Annexure-1

EXISTING PROVISIONS Punjab State

Electricity Regulatory

Commission (Terms and

Conditions for Determination of


PROPOSED AMENDMENT Punjab State

Electricity Regulatory

Commission (Terms and

Conditions for Determination of


COMMENTS BY PSTCL

Objection No. 1

COMMENTS BY PSPCL

Objection No. 2

COMMENTS BY Everest Power Private Limited

(EPPL), Gurgaon And

Athena Kynshi Power Pvt. Ltd., New

Delhi Objection No. 3 & 4

I II III IV V




(i) Terminal benefits such as Death-cum-Retirement Gratuity, Pension, Commuted Pension, Leave Encashment, LTC, Medical reimbursement including fixed medical allowance in respect of pensioners and share of BBMB employee expenses and


The cost


(3)The employee cost for a distribution licensee (s) shall be determined as follows:

(a)The employee cost as claimed by the distribution licensee (s) shall be considered in two parts:

(i) Terminal benefits such as Death-cum-Retirement Gratuity, Pension, Commuted Pension, Leave Encashment, LTC, Medical reimbursement including fixed medical allowance in respect of pensioners and share of BBMB employee expenses and


The cost component of terminal benefits and BBMB expenses shall be allowed on actual basis. All other

PSTCL has submitted following comments wherein they have pleaded that all other expenses under different sub-heads of employee cost may be allowed on actual basis:-

(1) Proposed Amendment is not keeping in with APTEL judgment dated 11/09/2014 and 30/03/2015 wherein APTEL has found merit in the submission of the petitioner in the pleadings that employees of PSPCL are regular staff and being a Govt. company, the employees are to be governed by rules of Govt.

(2) The employees of PSTCL are the transferred employees under the Transfer Scheme notified by Government of Punjab u/s 131-133 of the Electricity Act, 2003. The Employees cannot be placed at less favourable term than which would have

PSPCL has commented that the actual employee expenses should be allowed based on the following reasons.

(1) Supreme Court in WBERC V/s CERC case held that lawful agreements entered into with the employees cannot be avoided and wriggled out.

(2) There is a lawful Tripartite Agreement between GoP, Management of the Two successor companies of erstwhile PSEB and all unions / associations of employees according to which the terms and conditions of the services applicable to personnel shall not in any way be less favourable than those applicable to them immediately before the Effective Date of

EPPL & Kynshi Power Pvt. Ltd. have quoted judgment of APTEL dated 29.04.2015 in Appeal 99 of 2013 filed by Powergrid v/s CERC which relates to RoE and Capital Spares:-

“There may be cases where actual may be lower than the normative. However, the principle is that once the norms are notified, the same will be applicable”. (In fact, this is not part of the judgment but arguments offered by the respondent).

Besides, they have quoted another judgment of APTEL dated 24.05.2011:-

It is expected that if NTPC performs better than the operational norms it will be rewarded for efficiency and if it performs at lower than normative parameters it will have to bear the consequential loss”.

EPPL & Kynshi Power Pvt. Ltd. have offered the following comments:-

(1) It is requested to amend the Regulations for


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component of terminal benefits and BBMB expenses shall be allowed on actual basis and increase in all other expenses under different subheads shall be limited to the increase in Wholesale Price Index (all commodities) as per clause (2) (b) above.

expenses under different subheads of employee cost shall be determined by the Commission limited to actual expenses after prudence check as per formula given below:-

Employee cost other than terminal benefits

(EMPn)= (EMPbase)* (INDXn/INDXbase)

Where,

EMPn – Employee

Cost approved by the Commission for nth year.

EMPbase - Employee

Cost approved by the Commission for base year.

INDEXn-inflation

Factor to be used for indexing the Employee Cost. This will be a combination of the Consumer Price Index (CPI) and the Wholesale Price Index (WPI) (all commodities) of nth year and shall be calculated as under:-

INDEXn=(0.40*CPIn+0.60*WPIn)

INDEXbase - inflation

Factor to be used for indexing the Employee Cost. This will be a combination of the Consumer Price Index (CPI) and the Wholesale Price Index (WPI) (all commodities) of base year and shall be worked out as under:-

INDEXbase=(0.40*CPI

base+0.60*WPIbase) .

been applicable to them if there had been no such transfer.

(3) Under the Tripartite agreement signed amongst Govt. of Punjab, Management of two successors companies and unions / associations of the companies, all transferred employees are entitled to get benefits which they were entitled before transfer.

(4) As per the existing / proposed amendment, the cost component of terminal benefits and BBMB expenses shall be allowed on actual basis. This means that increase in DA shall be allowed as per actual to the retirees. Then the logic of restricting increase due to annual increment & DA for the working employees to WPI/CPI is not justified. It is pertinent that present employees become the ex-employees after retirement. If after retirement the cost is allowed on actual basis then why actual cost is not to be allowed to the working employees.

Transfer.

(3) Keeping in view the directions of APTEL orders, PSERC has allowed actual employees cost to PSPCL in the true-up of FY 2011-12.

(4) PSPCL is a State Government owned entity. Any increase in employees cost due to revision in DA, Arrears of Pay etc. have to be paid by PSPCL and is beyond its control. PSPCL cannot retrench or remove its employees.

(5) The proposed amendment by PSERC will not give the adequate relief to the utility and it does not fully cover the cost incurred on account of the actual employee expenses.

(6) Hon’ble APTEL vide its Judgement dated 11.09.2014 in Appeal No. 174/2012 and judgment dated 30.03.2015 in review Petition 6/2015 ‘held that actual costs need to be considered’.

PSPCL has requested for allowing actual employee cost subject to prudence check as directed by Hon’ble APTEL.

O&M expenses for generation companies on the lines of CERC 2014 Tariff Regulations so as to remove the ambiguity in the PSERC Tariff Regulations with regard to the Generating companies.

(2) Alternately, following amendments may be made to the existing Regulations:-

i. It is proposed that in the case of Independent Generation Companies/ IPPs, the actual employee cost may be allowed, subject to maximum of say 2% over and above the norms (linked to WPI/CPI) now being proposed for Employee Cost (other than terminal benefits).

ii. Outsourcing of services/ manpower may also be considered as a part of the overall employee cost.

iii. The proposed amendment be made applicable to entire O&M and not confined merely to ‘Employee Cost’.

iv. The proposed amendments be made applicable from the FY 2011-12, i.e. the year considered in the Regulations for computing the base O&M expenses.


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Annexure-II

Issues raised by objector No. 3 & 4.

M/s Athena Kynshi Power Pvt. Ltd., New Delhi and M/s Everest

Power Pvt. Ltd., Gurgaon

Comments of PSTCL

1. Need to align the Regulations with CERC Regulations in order to remove ambiguity with regard to Generating Company/ Independent Power Producer. It is therefore, requested to amend the Regulations for O&M expenses for Generating Companies on the lines of CERC 2014 Tariff Regulations so as to remove the ambiguity in the PSERC Tariff Regulations with regard to Generating Company

1. PSTCL offers no comments on this issue, but if the norms of O&M of CERC is adopted for generation companies, then it should also be applied on Transmission Companies.

2.1 It is submitted that the current Legislative, Policy and Regulatory Regime, do not support the concept of “Lower of Actuals or Norms’. The provisions of the Electricity Act, 2003 and the National Tariff Policy strive to balance the interests of the consumers as also of the investors and also to incentivize efficiency in operation with a view, inter-alia, to attract the much needed private investment into the sector.

2.1 PSTCL agrees on the view points of the objectors.

2.2.1 The Regulations need to consider the fact that unlike the Public Sector entities, which are in most case quite large in terms of assets as well as manpower, the private generating companies are relatively smaller and function on the SPV mode. Private Companies do face the challenge of stiff market competition and the need to retain talent unlike the Public Sector entities, which though may have relatively smaller salary structures, provide much more in the form of job and social security benefits etc.

2.2.1 No Comments.


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2.2.2 Further, the PSERC Tariff Regulations, 2005 allow exceptional increase in employee cost on account of pay revisions, over and above the norms. In most Government entities, the employees enjoy fixed increments every year and dearness allowance from time to time in order to neutralize the impact of inflation. Over and above this, there are also pay revisions once in every 10 years. However, in the case of private companies, there is no concept of Pay Revisions. On top of that, private companies are constantly constrained to offer higher salaries in order to retain talent in the backdrop of stiff market competition. It is therefore, proposed that in the case of private generating companies, the actual employee cost be allowed, subject to maximum of say 2% over and above the norms (linked to WPI/CPI) now being proposed for Employee cost (other than terminal benefits)

2.2.2 PSTCL does not agree with the view points, as being Govt. employees, the Corporation has to pay DA & increment as per the decision of the Govt. of Punjab. So all other expenses under different sub heads of employee cost may be allowed on actual basis subject to prudence check without limiting to the WPI and CPI.

2.2.3 Private generating companies sometimes opt to outsource the manpower requirements for specific services to independent Consultants which may be for different reasons such as lack of expertise in the relevant areas or at times for marginal savings on costs. It is therefore, proposed that the cost of such outsourcing of services be also considered as a part of the overall employee cost.

This is a valid point as the corporation is outsourcing instead of recruiting regular employees to cut down the employee costs, so the cost of such outsourcing of services be also considered as a part of the overall employee cost.

3.1 The rationale behind the amendment as proposed in the Staff Paper is pertinent for all O&M items and not merely ‘Employee Cost’. It is therefore, requested that the proposed amendment be made applicable to entire O&M and not confined merely to ‘Employee Cost’.

3.1 As per comments submitted vide this office Memo No. 2657/FA/ARR-602 dated 31.08.215, proposed amendment should be made applicable to entire O&M and not confined merely to ‘Employee Cost’.


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Annexure-III

HERC UPERC DERC CSERC JSERC MPERC

Regulation 45.3(b) EMPn(excluding terminal liabilities)+A&Gn= (EMPn-1+A&Gn-1) *(INDXn/ INDXn-1) Where,

INDXn = 0.55*CPIn +0.45*WPIn

Regulation 4.3 For determination of the O&M expenses of the year under consideration, the O & M expenses of the base year shall be escalated at inflation rates notified by the Central Government for different years. The inflation rate for above purpose shall be the weighted average of Wholesale Price Index and Consumer Price Index in the ratio of 60:40.

Regulation 5.5(a) O&Mn = (R&Mn + EMPn + A&Gn) * (1 – Xn) Where, (i) R&Mn = K * GFAn-1; (ii) EMPn + A&Gn = (EMPn-1 + A&Gn-1) * (INDX); (iii) INDX = 0.55 * CPI + 0.45 * WPI;

Regulation 57.4(b) The normalization shall be done by applying weighted average inflation at the rate of 60% weightage to actual variation in CPI and 40% weightage to actual variation in WPI on year to year basis.

Regulation 6.4 b) EMPn excluding terminal liabilities) + A&Gn = (EMPn-1 + A&Gn-1)*(INDXn/ INDXn-1) + Gn Where, INDXn = 0.55*CPIn +0.45*WPIn;

Regulation 32.2. Normative O&M expenses other than expenses on payment of arrears to employees up to 31.08.08 on account of revision of pay scales of the employees based on the Sixth Pay Commission recommenda-tions, as implemented by the Distribution Licensees at the commencement of the Tariff Period have been escalated at the rate of 6.14% considering a weighted average of Wholesale Price Index and Consumer Price Index in the ratio of 60: 40.

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