Northern Power Distribution Company of AP Ltd
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Contents
1 Executive Summary
1
2 Background
2
3 The Licensees View
3
1 Executive SummaryThe Hon’ble Commission has directed
the licensees to file an approach paper in the context of tariffs for LT
Category II (Non-Domestic), duly indicating the number of slabs and charges.
The licensees have analyzed the same by considering the
following:
·
Present
and projected cost-to-serve for LT – II Category;
·
Present
telescopic tariff structure for LT – II Category.
Firstly, the licensees believe that
the cost-to-serve for this category of consumers has increased at a CAGR of
11.5 %, considering the commission approved cost-to-serve for this category of
consumers. The licensees expect a further substantial increase in cost-to-serve
for this category of consumers, due to increase in network cost and also due to
substantial increase power purchase cost due to increase in coal, natural gas
costs and costs of other sources of fuel. The cost-to-serve is also expected to
increase due to higher quantum of expensive power purchase, as projected in the
ARR filings of the distribution licensees for FY 2010-11.
Secondly, the licensees feel that there
is no steep jump in tariffs with increase in consumption. It has been observed
that there is gradual increase in effective tariff with increase in consumption.
The licensees also believe that the small consumers are benefited with the
present telescopic tariff structure and hence find no purpose to introduce more
slabs with lower tariff at lower consumption.
Finally, the licensees propose to introduce a new slab for consumption greater than 100 units per month and propose to increase the telescopic tariff for this new slab from Rs. 6.20 / kWh to Rs. 6.70 / kWh. The licensees feel that the increase of 50 paise / kWh is justified as there has been no increase in tariff for this category from FY 2002-03. This tariff increase shall impact only 4.4 lakh consumers out of the total consumer base of 17 lakh consumers in the state, i.e. 26 % of the total consumers would be impacted due to this tariff increase. 2 BackgroundThe Hon’ble Commission has directed
the licensees to file an approach paper in the context of tariffs for LT
Category II (Non-Domestic), duly indicating the number of slabs and charges. The
Hon’ble Commission has directed so because of the following:
“Some consumers and objectors
expressed the view that there are only two slabs in LT II: Non domestic tariff
with steep increase in energy charge from first slab up to 50 units to second
slab for above 50 units from Rs. 3.85 / kWh to Rs. 6.20 / kWh. They further
stated that there should be more slabs for the benefit of small consumers such
as pan shops, hair cutting saloons, etc. whose total consumption is very
limited.” – Para 440
in Wheeling Tariff for 2009-14 and Retail Supply Tariff for 2009-10.
The licensees have evaluated the
above concerns expressed by consumers / objectors in this directive. The
licensees’ view on the number of slabs and charges for LT Category II is as
described below.
3 The Licensees ViewThe licensees have examined the
concerns expressed by consumers / objectors in the tariff order (for FY 2009-10).
The licensees have analyzed by categorizing the problem in hand in two parts:
·
Steep
increase in energy charges in the present slab structure;
·
More
slabs to benefit small consumers.
The Commission approved cost-to-serve
of LT – II category, at the state level, has increased at a CAGR of 11.5 % in
the three years: 2007-08 to 2009-10. The table below captures the
The average cost of supply to LT – II
category (at the state level) is Rs. 4.39 / kWh in FY 2009-10. If the same growth
in cost-to-serve is considered for FY 2010-11, the expected cost-to-serve is
Rs. 4.90 / kWh. The licensees, as a part of ARR filing for FY 2010-11, have
carried out the exercise of estimating the category-wise cost-to-serve for FY
2010-11. As per the licensees’ projections, the power purchase cost (including
expensive power purchase) is expected to increase from Rs. 2.16 / kWh in FY
2009-10 (as approved in tariff order for FY 2009-10) to Rs. 2.50 / kWh in FY
2010-11. In the 34 paise / kWh increase in power purchase cost, the impact of
increase in fuel-cost is 21 paise / kWh and the remaining portion is
attributable to costly power purchase estimated by the licensees for FY 2010-11.
There is also a substantial increase in the network costs (distribution +
transmission), estimated at 30 paise / kWh increase in FY 2010-11 over FY
2009-10. The cost-to-serve for this category of consumers has been detailed in
the distribution licensees’ filing of ARR for FY 2010-11.
The licensees,
from their analyses on the present tariff structure for this category, believe
that though there may be a steep increase in telescopic tariff across slabs,
the increase in effective tariff with increase in consumption is gradual. The
licensees hope to clarify the same using the chart below. It can be seen from
the chart below that there is a gradual increase in effective tariff with
increase in consumption.
The effective tariff is correct
indicator of the tariff a consumer pays for his / her consumption. The gradual
increase in effective tariff with increase in consumption is due to the
telescopic nature of the tariff structure for this category of consumers. For
this reason, the licensees believe that the argument of consumers / objectors
that there is a steep increase in tariff across slabs is not valid.
The graph also helps us calculate the
subsidized consumption, considering the cost-to-serve at Rs. 4.90 / kWh, which
has been calculated by considering the CAGR growth on FY 2009-10 COS for this
category. All consumers whose consumption is less than or equal to 90 units
remain subsidized (as the effective tariff of consumers is less than the
projected LT – II Category COS for FY 2010-11). The licensees believe that
small consumers (such as pan shops, small hair cutting saloons etc.) may not
have more than 300 Watts of installed capacity and hence their consumption
mayn’t exceed more than 90 units / month (assuming 10 hours per day and 30 days
of operation per month). Hence,
these consumers are anyways subsidized and the licensees do not wish to further
subsidize consumption below 90 units. The distribution licensees already have
very high revenue gap and do not wish to jeopardize their already precarious
financial state. For this reason, the licensees do not wish to create new slabs
with lower tariffs, as the licensees believe that the consumers who need to be
benefited / subsidized are already taken care of in the present scenario.
As the licensees have been incurring
substantial increases in cost (power purchase + distribution + transmission) year-on-year,
the distribution licensees propose to pass-on a certain portion of the increase
in cost-to-serve to consumers having consumption greater than 100 units per
month. There has been no increase in tariff for this category of consumers from
FY 2002-03, though the costs have substantially increased. The licensees propose
to increase the telescopic tariff for consumption greater than 100 units per
month by 50 paise / kWh, i.e. from Rs. 6.20 / kWh to Rs. 6.70 / kWh. The actual
increase in effective tariff for any consumer having consumption greater than
100 units per month would be way lower compared to the actual increase in
telescopic tariff of 50 paise / kWh. The proposed increase is also way lower
when compared to the total increase in cost-to-serve incurred from FY 2002-03.
The proposed tariffs for LT – II (Non-Domestic) category is as
follows:
The licensees hope to have answered
all the concerns expressed by consumers / objectors in this approach paper and
request to the Hon’ble Commission to consider the revised tariff proposal.
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