ARR FOR 5TH CONTROL PERIOD - karunadu · 500 85% 3499.62 66 2309.75 2309.75 2309.75 5.10 5 BTPS...
Transcript of ARR FOR 5TH CONTROL PERIOD - karunadu · 500 85% 3499.62 66 2309.75 2309.75 2309.75 5.10 5 BTPS...
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ARR FOR 5TH CONTROL PERIOD
MYT 5TH CONTROL PERIOD FOR FY-20 TO FY-22 Page 64
CHAPTER – 5
Annual Revenue Requirement for the 5th Control Period
(FY-20 to FY-22)
Every Distribution Licensee shall file an application for approval of Annual
Revenue Requirement (ARR) and Expected Revenue from Charges (ERC) under the Multi
Year Tariff framework for the Control Period as per KERC (Terms and Conditions for
Determination of Tariff for Distribution and Retail Sale of Electricity) Regulations, 2006
and its amendments.
A principle for computation of Annual Revenue Requirement (ARR) of the
Distribution Licensee is laid down in chapter-III of MYT regulations -2006 framed by the
Commission. Computation of ARR of each year of the Control period shall comprise of
the following, namely:
(a) Power Purchase Costs } for Retail Supply
(b) Transmission and SLDC Charges } Business
(c) Operation and maintenance expense
(d) Interest on loan capital
(e) Return on equity
(f) Depreciation
(g) Interest on working capital
(h) Taxes on Income
(i) Other expenses if any
(j) Less: Non-tariff income, income from Other Business.
The contents of the MYT filing as per the Chapter II of the MYT regulations are:
ARR for Distribution Business:
The ARR for Distribution Business under the MYT framework shall contain the
following:
https://www.karnataka.gov.in/kerc/Regulations/Regulations/FinalRegulationsonMYT-DistributionTariffMay2006.pdfhttps://www.karnataka.gov.in/kerc/Regulations/Regulations/FinalRegulationsonMYT-DistributionTariffMay2006.pdf
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(a) The Operation and Maintenance (O&M) costs which include employee-related
costs, repairs & maintenance costs and administrative & general costs, estimated
for the Base Year and the actuals for the previous two years prior to the Base
Year in complete detail, together with the forecast for each year of the Control
Period based on the norms proposed by the Distribution Licensee including
indexation and other appropriate mechanisms;
(b) Detailed scheme/project-wise Capital Investment Plan with a capitalization
schedule covering each year of the Control Period;
(c) A proposal for appropriate capital structure to meet the capital investment plan
with details of cost of financing including interest cost on debt and return on
equity;
(d) Range of Distribution losses (upper and lower) for each year of the Control Period
for the purpose of incentive / penalties. The Distribution Licensee shall file a
trajectory of the loss levels in respect of technical and commercial losses for each
of the years of the control period, backed up by proper studies to justify the loss
levels indicated;
(e) Details of depreciation and capitalization schedule for each year of the Control
Period;
(f) Description of external parameters proposed for indexation;
(g) Details of taxes on income;
(h) Any other relevant expenditure;
(i) Proposals for sharing of gains and losses;
(j) Proposals for efficiency parameter targets;
(k) Proposals for rewarding efficiency in performance;
(l) Expected revenue from charges at the existing tariff including non-tariff income;
and
(m) Any other matters considered appropriate.
ARR for Retail supply Business:
The ARR for Retail Supply Business shall contain;
(a) Power purchase costs for each year of the Control Period.
(b) All other items mentioned for the distribution business to the extent applicable
and in accordance with the cost allocation statement.
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(c) Expected revenue from charges at the existing tariff including non- tariff income,
tariff from wheeling of electricity, income from Other Business, Receipts on
account of cross-subsidy surcharge and additional surcharge if any.
(d) Any other matters considered appropriate.
Based on the above Principles, the following cost are estimated
as under:
Power Purchase Costs:
Estimated Power availability and Power Purchase Cost for Multi Year Tariff for 5th
Control Period 2019-20 to 2021-22:
1.0 BESCOM is procuring power from various sources like hydel, thermal, nuclear,
non-renewable sources like wind, solar, biomass co-generation & Mini hydel
through long term/medium term contracts. The rates are mutually agreed in
contracts approved by the State/Central Commission based on prevailing Tariff
Regulations.
1.1 The quantum of energy required for control period 2019-20 to 2021-22 is as
furnished below:
Table 5.1
SL. No Year Energy Requirement In MW
1. 2019-20 34091.02
2. 2020-21 35491.68
3. 2021-22 37009.65
2.0 Source wise power availability details:-
Government of Karnataka vide order dtd: 24.04.2018 had approved share of
allocation for power purchase payment to various sources for the FY 2018-19. The same
percentage of share of allocation is considered for MYT Control Period 2019-20 to 2021-
22.
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2.1 State Owned Generating Stations of KPCL:-
A. KPCL Hydel:-
The power is procured from KPCL Hydel stations as per power purchase
agreement dtd: 22.05.2010 based on Tariff norms approved by the State Commission
vide order dtd: 03.08.2009. The actual energy purchased upto FY-18 is more than the
designed energy in most of the Hydel Power stations. As such the following quantum of
energy is considered for control Period FY-20 to FY-22 as furnished below:
Table 5.2
Sl.
No
Name Capaci
ty 100%
in Mw
Design
Energy 100% in
Mw
Energy
as per actuals
Mu
Share
of Allocat
ion in
%
BESCOM share in Mu AV.PP
Rate Ps/uni
t
2019-20 2020-21 2021-22
1 Sharavathi Valley
Project
1090 3737.95 4906.41 1.431 70.21 70.21 70.21 44.65
2 Kalli Valley Project 955 2058.77 3129.82 2 62.60 62.60 62.60 96.22
3 Varahi Valley Project 230 848.69 1079.22 17.917 193.36 193.36 193.36
126.50
4 Bhadra & Bhadra
Right Bank
39.2 50.49 48.1 17.917 8.60 8.60 8.60 456.13
5 Ghataprabha 32 84.97 72.36 17.917 12.96 12.96 12.96 175.75
6 Kadra 150 419.90 365.42 17.917 65.47 65.47 65.47 180.2
7 Kodasalli 120 372.48 348.39 17.917 62.42 62.42 62.42 150.8
8 Gerusoppa 240 442.62 513.09 17.917 91.93 91.93 91.93 160.20
9 Aalmatti 180 286.00 442.40 17.917 79.27 79.27 79.27 125.20
10 Shiva & Shimsha 59.2 252.00 242.74 17.917 43.49 43.49 43.49 135.40
11 Munirabad 28 65.00 91.44 17.917 16.38 16.38 16.38 105.50
12 MGHE-JOG 139.2 119.00 211.37 17.917 37.87 37.87 37.87 160.45
Total 8737.87 11450.65 744.56 744.56 744.56
B. KPCL Thermal:-
The power is procured from KPCL thermal stations as per terms & conditions
agreed in power purchase agreements. The Tariff norms for RTPS 1 to 7 and BTPS unit
1 are approved by commission by vide order dt 3.8.2009. The annual fixed cost and
variable cost is approved for RTPS 1x250Mw(8th Unit) and BTPS unit 2, vide order dtd:
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25.02.2015.The Tariff for BTPS Unit 3 and Raichur Thermal Power Corporation Ltd.,
(RPCL) at Yeramarus is yet to be approved and as per PPA the tariff filed before
Commission by KPCL/RPCL is considered. The 370 Mw Yelahanka gas based power
plant is expected during last quarter of FY-20 and the fixed cost and variable cost given
by KPCL is considered. The power availability as per agreed PPA at target norms, actual
energy procured and corresponding average rate for said power is as below.
Table 5.3
The average PP cost of the thermal station stated above is on higher side. Hence
the energy is considered under merit order in respective year as below:
Table 5.4 SL.No
Name BESCOM’s share Energy in Mu
2019-20 2020-21 2021-22
1 RTPS 1 to 7 4574.16 4894.35 5341.18
2 RTPS 1x250 (8th unit) 850 901 928.03
3 BTPS Unit 1 1059 1155 1351
4 BTPS Unit2 1081 1177 1373
5 BTPS Unit 3 1280 1375.79 1475.79
6 RPCL-YTPS 605 762.55 785.43
7 Yelahanka gas Plant 510 378.47 378.47
SL.
No
Name Capacity
in Mw
PAF/
PLF
Target
Availability in Mw
% of
Allocation
BESCOM’s share Average
PP Cost Ps/Unit 2019-20 2020-21 2021-22
1 RTPS 1
to 7
1470 72% 8437.14 68.4 5771.00 5771.00 5771.00 490.25
2 RTPS
1x250(8th
unit)
250 85% 1703.27 66 1124.16 1124.16 1124.16 540.10
3 BTPS Unit 1
500 80% 3241.20 66 2139.19 2139.19 2139.19 5.20
4 BTPS
Unit 2
500 85% 3499.62 66 2309.75 2309.75 2309.75 5.10
5 BTPS
Unit 3
700 85% 4899.47 66 3233.65 3233.65 3233.65 5.8
6 RPCC-
YTPS
1600 85% 11228.57 66 7410.86
7410.86
7410.86
6.1
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C. Central Generating Stations:
Ministry of Power, Government of India allocates the power of Central Generating
Stations to all States in the country. The Thermal stations and Atomic stations situated
in southern region & thermal station of NTPC in Talcher is allocated to Karnataka
ranging from 8.5%, 10.40%, and 17% to maximum of 34% for various power stations.
BESCOM is allocated this power at share of allocation approved by Government of
Karnataka. BESCOM is having bilateral contract with Damodar Valley Corporation. The
Tariff of thermal stations of Central Generating Stations approved by the Central
Electricity Regulatory Commission and Tariff of the atomic stations is approved by
department of atomic energy. The ex-bus generation available as per details furnished
by CGS to CEA Karnataka’s share, BESCOM’s share and average PP cost of the CGS for
control period is furnished as below.
i. NTPC Table 5.5
Sl.
No Name
Energy
Availability
in MU
Karnatak
a share of
allocation
%
BESCO
M share
%
Energy Availability Average
PP rate
Ps/UNI
T 2019-20 2020-21 2021-22
1
RSTPS I &
II 13886 18.28 48.7226 1236.76 1236.76 1236.76 395.62
2 RSTPS III 3238 19.37 48.7226 305.59 305.59 305.59 325.2
3 Talcher II 13280 17.79 48.7226 1151.08 1151.08 1151.08 274.95
4 Simhadri II 5846 17.76 48.7226 505.86 505.86 505.86 490.75
5 Vallur I &II 8670 10.4 48.7226 439.32 439.32 439.32 620.4
6
Kudgi I,
II&III 16535.22 53.96 61.00 5442.67 5442.67 5442.67 630.7
ii. NLC Table 5.6
Sl.
No Name
Target
Availability
in Mw
Karnatak
a share of
allocation
%
BESCO
M share
%
Target Availability Average
PP Cost
Ps/UNIT 2019-20 2020-21 2021-22
1 NLC Stage 1 3310 22.51 48.7226 363.02 363.02 363.02 375.20
2 NLC Stage 2 4421 22.78 48.7226 490.69 490.69 490.69 375.2
3
NLC
Expansion 1 2792 25.61 48.7226 348.38 348.38 348.38 450.52
4
NLC
Expansion 2 1731.54 25.75 48.7226 217.24 217.24 217.24 530.6
5 NTPL 6160 20.18 48.7226 605.66 605.66 605.66 520.25
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iii. Atomic Stations Table 5.7
Sl.
No Name
Target Availability
in Mw
Karnataka share of
allocation %
BESCOM
share %
Target Availability Average PP Cost
Ps/UNIT 2019-20 2020-21 2021-22
1 MAPS 2404 8.5 48.7226 99.56 99.56 99.56 290.00
2
Kaiga unit 1
& 2 2791 31.57 48.7226 429.3 429.3 429.3 385.05
3
Kaiga unit 3
& 4 2718 34.07 48.7226 451.18 451.18 451.18 3850.5
4
Kudankulam
unit 1 5220 23.29 48.7226 592.34 592.34 592.34 420.50
5 Kudankulam unit 2 5760 22.1 48.7226 620.22 620.22 620.22 420.50
iv. DVC Table 5.8
Sl.
No Name
Energy
Availability
in MU
Karnataka
share of
allocation
%
BESCOM
share %
Energy Availability
Average
PP Cost
Ps/UNIT 2019-20 2020-21 2021-22
1
DVC Mejia unit
7&8 1489.2 20.00 48.7226 145.12 145.12 145.12 386.50
2 DVC Koderma unit 1&2 1861.5 20.00 48.7226 181.39 181.39 181.39 386.50
v. Bundled Power Table 5.9
Sl.
No Name
Energy
Availability
in Mw
BESCOM
share % Energy Availability
2019-20 2020-21 2021-22
1 NTPC NVVN 499.54 46.643 233 233 233
2 NTPC NSM 2 1865.23 46.643 870 870 870
D. Major Independent Power Producer:-
Udupi Power Corporation Ltd is a thermal power plant having installed capacity
of 1200MW (600MWx2 units). Out of 1200MW, 101.5 Mw is the share of Punjab State
Power Corporation Ltd (PSPCL), 1080 MW is the share of ESCOM’s of Karnataka. The
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remaining 18.50 Mw is traded by Udupi Power Corporation Ltd under Open Access. The
tariff of Udupi Power Corporation Ltd is governed by Central Electricity Regulatory
Commission Tariff Regulations. The tariff for control period FY 14 to FY 19 is yet to be
approved by Central Electricity Regulatory Commission. Hence tariff already approved
for control period 2010-2014 excluding secondary fuel oil cost in annual fixed cost is
considered for control period FY 20 to FY 22. The ex-bus availability and rate for control
period FY 20 to FY 22 of Udupi Power Corporation Ltd is as below.
Table 5.10
Sl.
No Name
Capacity in
Mw
Karnataka
share of
allocation %
BESCOM
share %
Target Availability AVERAGE
PP Cost
Ps/UNIT 2019-20 2020-21 2021-22
1 UPCL 1080 7522.99 65.28 4911.00 4911.00 4911.00 565.20
The energy requirement for control period is considered in merit order as the rate
is on higher side.
E. Jurala & TB dam power:-
Jurala hydel power of 117 Mw is allocated to Karnataka and remaining 117 Mw
to Telangana (Andhra Pradesh). The Tariff is approved by Telangana State Electricity
Regulatory Commission (TSERC). The amount being paid for 2018-19 and energy is
considered for control period 2019-20 to 2021-22.
The 1/5th share of revenue expenditure and energy from TB dam is to be shared
between two States, Karnataka & Andhra Pradesh/Telangana. The energy and cost
considered for 2019-20 to 2021-22 is detailed below.
Table 5.11
Sl. No
Name Energy in MU Amount Rs in Cr.
BESCOM share %
BESCOM shares 2019-20 to 2021-22
Energy in
Mu
Amt Rs in
Crs
1 Jura project 90.72 58.66 17.917 16.254 10.51
2 TB Dam 17.93 1.62 17.917 3.212 6.29
F. Non-Conventional Energy Sources:- (NCE Sources)
BESCOM is procuring power from NCE sources like Biomass, wind, Mini hydel &
Solar by executing long term power purchase agreements, at the rates agreed & PPAs
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are approved by the State commission. Further, BESCOM is procuring power from
bagasse based co-generation power plants by executing the medium contracts at the
rate approved by State Commission vide order dt 11.4.2017. Some of the points in the
Tariff order dt 11.4.2017 is under review by State Commission in a review petition filed
by ESCOM’s.
The actual generation & cost for 2017-18 along with new projects commissioned
during 2018-19 & power from expected new projects during control period 2019-20 to
2021-22 is considered as detailed below:
Table 5.12
Sl. No
Name Capacity in Mw
2019-2020 2020-2021 2021-2022
Energy in MU
Amt in Rs in Crs
AV PP Cost
Energy in MU
Amt in Rs in Crs
AV PP Cost
Energy in MU
Amt in Rs in Crs
AV PP Cost
1 Co-generation 305
575 269.68 4.69 575 284.05 4.94 575 284.05 4.94
2 Mini hydel 181.4 342.53 108.58 3.17 342.53 108.58 3.17 342.53 108.58 3.17
3 Biomass 56.5 63.87 35.19 5.51 63.87 35.19 5.51 63.87 35.19 5.51
4 Wind 1400 2926.92 1041.94 3.56 2926.92 1041.94 3.56 2926.92 1041.94 3.56
5 Solar:-
a) Mega Solar Plant 321 380 247.76 6.52 399 260.15 6.52 399 260.15 6.52
b) Land owned
Framer Scheme ( 1 to 3MW) 152 220 150.04 6.82 224.40 153.04 6.82 224.40 153.04 6.82
c) Taluka wise Scheme 536 776 372.48 4.80 814.8 391.10 4.80 814.8 391.10 4.80
d) NTPC-NVVN and NTPC -NSM Scheme (Pavagada), KPCL 315 566 296.63 5.24 566 296.63 5.24 566 296.63 5.24
e) SECI-VGF
Scheme 480 700 336 4.50 735 352.80 4.50 771.75 370.44 4.5
f) Solar New park Pavagada 650 200.01 57 2.85 996.54 284.01 2.85 1366.56 389.47 2.85
Total 4396.9 6750.33 2915.29 4.32 7644.06 3207.50 4.33 8050.83 3330.59 4.33
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i. Transmission Charges
a. KPTCL Transmission charges:-
BESCOM has to pay transmission charges for using KPTCL’s transmission
system. The Transmission charge paid by BESCOM for FY 19 is considered at an
increase of Rs 180 Crore every year (increase of Rs. 15 Crore per month) as below:
Table 5.13
Year Transmission Charges
Rs in crore
2019-20 1740
2020-21 1920
2021-22 2100
KPTCL is filing MYT for transmission tariff for control period FY 20 to FY 22. Any
increase in transmission charges claimed by KPTCL over and above the amount
considered by BESCOM in the instant tariff filing, approved the same by this Hon’ble
Commission may be allowed as a pass through in the tariff of BESCOM and to recover
the same from the consumer tariff.
G. PGCIL Transmission charges:-
Central Electricity Regulatory Commission determines the transmission charges
payable to PGCIL for each quarter by all States in the Country by collecting the Load
injection & withdrawal details from National Load Despatch Centre (NLDC) & Regional
Load Despatch Centers (RLDC). The transmission charges is on increasing trend year
on year due to addition of new capacities. The present transmission charges paid by
BESCOM as per Regional Transmission Account (RTA) is considered with an increase of
Rs 10% over previous year in control period FY 20 to FY 22, as furnished below.
Table 5.14
SL. No Particulars Amount Rs in Crs
2018-19 2019-20 2020-21 2021-22
1 POC Charges
1007.44 1105.70 1193.70 1301.70
2 HVDC CHARGES
66.84 67.84 68.84 69.84
3 Reliability Support charges
102.36 103.36 104.36 105.36
4 Loss STOA/MTOA Credits
151.20 151.20 151.20 151.20
5 Net transmission charges 1025.70 1125.70 1215.70 1325.70
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H. Other charges:-
BESCOM has to pay for revenue expenditure incurred by PCKL, SLDC as
approved by State Commission in KPTCL Transmission Tariff Order and Posoco charges
(SRLD charges). The charges paid for FY 19 with an increase of 5% is considered for
control period FY 20 to FY 22 as below.
Table 5.15
SL. No Particulars FY 19 Rs in crore
FY 20 Rs in crore
FY -21 Rs in crs
FY 22 Rs in crs
1 PCKL Revenue expenditure 3.20 3.36 3.36 3.36
2 SLDC Charges 15.26 16.02 16.02 16.02
3 POSOCO Charges 0.29 0.30 0.30 0.30
By considering the above facts the energy available & probable power purchase
cost for the control period FY 20 to FY 22 is as below.
Table 5.16
Sl. No
Source
2019-2020 2020-2021 2021-2022
Energy
in MU
Amt in Rs in
Crs
Avg PP
Cost
Energy
in MU
Amt in Rs in
Crs
Avg PP
Cost
Energy
in MU
Amt in Rs in
Crs
Avg PP
Cost
1
KPCL
Thermal 9959.16
6330.64 4.30 10644.16 733.18 6.89 11632.90 7943.45 6.83
2
KPCL
Hydel 744.56 99.25 1.28 744.56 102.23 1.37 744.56 102.23 1.37
3
Other
Hydel 19.46 8.96 3.77 19.46 10.8 3.77 19.46 10.80 3.77
4 CGS 13403.72 6027.89 4.50 13174.84 6092.70 4.62 13174.84 6100.80 4.63
5 UPCL 3214.6 1867.11 5.81 3264.6 1958.89 6.00 3387.06 2081.41 6.15
6
NCE
Projects 6750.33 2915.29 4.33 7644.06 3207.50 4.33 8050.83 3330.59 4.33
7
KPTCL
Transmission
charges 1740 1920 2100
8
PGCIL
Transmis
sion
charges 1125.70 1215 1325.70
9 Other charges 19.68 19.68 19.68
10 Total 34091.83 20134.53 5.91 35491.68 21859.97 6.16 37009.65 23014.66 6.22
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I. Renewable Purchase Obligation (RPO)
BESCOM has to meet the target solar& non-solar RPO fixed by Karnataka
Electricity Regulatory Commission every year. As per draft KERC (Procurement of
energy from Renewable Sources) (Sixth Amendment) Regulations, 2018, BESCOM has
to achieve 12% Non- Solar RPO for FY 20 to FY 22 and 7.25%, 8.5%, & 10.5% Solar
RPO respectively for FY 20 to FY 22. The estimated RPO based on available Non-Solar
and solar power during control period FY20 to FY 22 is as shown below.
Table 5.17
SL.No Name 2019-20 2020-21 2021-22
1
Total Energy excluding Hydel
Generation In MU 33327.81 34727.66 36244.98
2 Non-Solar RPO 12% 12% 12%
a Target energy at 12% In MU 3999.38 4167.32 4349.40
b Estimated energy available In MU 3908.32 3908.32 3908.32
C Surplus Energy Deficit energy(-) In MU -91.06 -258.99 -441.08
3 Solar RPO
Target RPO (%) 7.25% 8.5% 10.5%
Target Energy In MU 2416.27 2951.85 3805.72
Estimated Energy available In MU 2842.01 3735.74 4142.51
Surplus (+)/ Deficit (-) in MU 425.74 783.89 336.79
4
Set off deficit non-solar RPO against
surplus solar RPO in MU -91.06 -258.99 -441.08
5 Surplus Solar RPO - in Mu 334.68 524.90 -104.29
It could be seen from the above, there is surplus solar RPO of 334.68 Mu and
524.90 Mu for FY 20 and FY 21 respectively and there is deficit of Non-Solar RPO of
104.29 Mu during FY 22. The Hon’ble Commission is requested to permit BESCOM to
carry forward the surplus solar RPO of FY 20 and FY 21 and set off the deficit non-solar
RPO of FY 22. However, the figures may vary depending on actuals during respective
years.
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Sales and Distribution Loss for FY-19 and 5th control period (FY-
20 to FY-22):
The Commission, in its Tariff Order dated 14.05.2018, had approved sales of
28286.75MU for FY-19. For computing sales for FY-19, half yearly (from Apr-18 to Sept-
18) figures are considered. For the remaining period of FY 19, the sales under BJ/KJ
and IP set are altered slightly for arriving at the final figures of FY19. Compounded
Annual Growth Rate upto 10 years are calculated. The Maximum, Minimum & average
CAGR are computed. Using an empirical formula the growth rates are calculated. For
the 5th control period from FY-20 to FY-22, the growth rates calculated as per the
empirical formula are considered except for few categories. The sales under BJ/KJ and
IP set are calculated based on average/specific consumption. The same is illustrated
during each category wise briefing in Chapter 4. It is projected that future
increase/growth will be both because of relocation/migration and natural growth. It is
also envisaged that the land use pattern will continue to change in future which will
have some impact on industrial and commercial activity. The details of energy in MU
and distribution loss in percentage for the 5thcontrol period are shown in the table below:
Table 5.18 Rs. Crs.
Particulars FY-19 FY-20 FY-21 FY-22
Total energy sales projected MU 27235 28912 30140 31471
Sales growth rate projected in
MU 6.16% 4.25% 4.42%
Distribution Loss In % 12.5 12.4 12.3 12.2
Energy at IF Points in MU 31125.83 33004.3 34366.6 35843.84
Transmission Loss in % 3.08 3.19 3.17 3.15
Energy at Gen. Points in MU 32114.97 34091.83 35491.68 37009.64
Energy Input growth rate in
percentage 6.16% 4.11% 4.28%
Average MW Requirement 3666 3892 4052 4225
Peak MW requirement at LF of
74% 4954 5259 5475 5709
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Capital Investment Plan:
Capital Investment Plan is formulated for enhancing and upgrading the
Infrastructure so as to enable BESCOM to cater to increasing demand, releasing new
connections under Residential, Commercial, Industrial and Agriculture categories and
Renovation/Modernization works to be taken up during the period between 2019-20
and 2021-22. While formulating the scheme, expected load Growth up to 2021-22 has
been considered.
Capital Investment Plan is prepared keeping in view the following Objectives:
1. System Reliability Improvement
2. Growth development plan for meeting the load growth
3. Creation of infrastructure facilities including administration buildings
4. New Service Connections
5. Up-gradation of existing system
6. Reduction in DTC Failure Rates.
Due to technology up gradation, Innovations, Statutory adherence, System
compulsion etc., and Capital investment plan may vary in the future. The detailed
proposed Capital Investment Plan is furnished below.
Hence the proposed capital investment plan will prone for deviations in the future
years. Any changes in the proposal that may happen in due course will be brought to
the kind knowledge of the Commission for approval.
Capital Investment plans, Capitalization of the past five years are tabulated
below:
Table 5.19 Rs. Crs.
Sl.No. Year FY-14 FY-15 FY-16 FY-17 FY-18
1 Capital Investment Approved
848 763 1374.31 2000 3272.32
2 Capital Deployed 1057 1495 1374.32 1318.25 1979.01
3 Assets Categorized 812 743 1770.27 1370.03 1522.66
4 % of Deployment over approved capital Investment
125% 196% 100% 66% 60%
5 % of Assets categorized over Capital Deployed
77% 97% 129% 69% 47%
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From the above table, capital investment plan has increased from FY-16 onwards.
This is due to technology up gradations and some approved projects of Government of
India/Karnataka.
BESCOM has significant capital expenditure plans with respect to investments
for infrastructure improvement, feeder separation program, village and household
electrification etc.
The need to extend and expand our networks is driven by increases in electricity
demand. Bangalore is the most densely populated and expensive part of the State. We
also face additional operational challenges from the urban environment. Our urban
customers are typically more sensitive to power cuts and require us to do more of our
work out-of-hours or at weekends - fitting this in between high profile public events.
We also have to deal with congestion under pavements and roads due to road
widening, metro works, White topping roads, etc., which increases the complexity of
what we do. We also regularly have to put our equipment into small spaces and often
underground to minimize how much land we use. This leads to higher costs to install
and maintain our equipment. We are also aware of our responsibility to ensure that
BESCOM’s electricity network is fit for purpose and comparable to other urban cities in
terms of resilience, quality of supply, and the ability to deliver new connections. In order
to ensure this, our Capital Investment plan proposes Rs. 11029 Crores of strategic
investment including capex for model sub division, Model village from FY-20 to FY-24
as shown below:
Table 5.20 Rs. Crs.
Sl.
No.
Particular of the works under Major/ Minor heads
FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24
1 Ganga kalyana Works 82.81 80.00 80.00 80.00 80.00
2 Service connection works 60.77 66.85 73.54 75.00 77.00
3 Water Works 21.52 23.67 26.04 28.00 30.00
4 11 KV Evacuation line 182.17 185.00 190.00 195.00 200.00
5 Providing Additional DTC's /Enhancement of DTCs
75.16 77.00 80.00 82.00 84.00
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6
Strengthening of HT network including OH/UG cable, Covered conductor and AB cable
253.42 258.75 260.00 262.00 265.00
7
Strengthening of LT network including OH/UG cable, Covered conductor and AB cable
195.32 197.00 200.00 205.00 210.00
8 SDP Progress 30.00 30.00 30.00 30.00 30.00
9 Local planning, Safety works, Emergency / Calamity Works
85.27 93.80 95.00 97.00 100.00
A E&I Total 986.45 1012.07 1034.58 1054.00 1076.00
10 Smart grid & EV 41.78 45.96 50.00 50.00 50.00
11 NJY 50.00 25.00 0.00 0.00 0.00
12 DDUGJY 165.00 90.75 82.50 0.00 0.00
13 IPDS 275.00 151.25 137.50 0.00 0.00
14 Civil 110.00 100.00 100.00 100.00 100.00
15 IT initiative 75.64 77.00 80.00 80.00 80.00
16 Meters and Commercial (with relevant accessories)
247.83 250.00 200.00 200.00 200.00
17 DSM 96.03 100.00 100.00 100.00 100.00
18 UNIP 100.00 80.00 60.00 60.00 60.00
19 HVDS 121.00 61.00 0.00 0.00 0.00
20
Erection of distribution transformer centers using 11 mts Spun poles
49.39 0.00 0.00 0.00 0.00
21 Model Sub division 580.44 290.22 0.00 0.00 0.00
22 Technology Innovative Center 25.07 27.58 30.34 33.37 36.71
23 Corporate reserve fund 50.00 50.00 50.00 50.00 50.00
24 Auto reclosure and sectionalizer
50.00 0.00 0.00 0.00 0.00
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25 Model Village 50.00 10.00 0.00 0.00 0.00
26 Smart city 100.00 80.00 0.00 0.00 0.00
B Projects Total 2187.19 1438.76 890.34 673.37 676.71
C Grand Total (A+B) 3173.64 2450.83 1924.92 1727.37 1752.71
Operation and Maintenance expenses:
BESCOM is computing O&M expenses as per the norms prescribed by the
Commission in its MYT regulations-2006:
“2.5.1 a) The Operation and Maintenance (O&M) costs which include employee-related
costs, repairs & maintenance costs and administrative & general costs, estimated for the
Base Year and the actual for the previous two years prior to the Base Year in complete
detail, together with the forecast for each year of the Control Period based on the norms
proposed by the Distribution Licensee including indexation and other appropriate
mechanisms; “
Clause 3.10 of 2nd amendment to KERC (Terms and Conditions for
Determination of Tariff for Distribution and Retail Sale of Electricity) Regulations, 2015,
is reiterated:
“3.10 Operation and Maintenance expenses:
Operation and Maintenance expenses shall be computed in the following manner:
(i) The Distribution licensee in its first or subsequent filings shall submit the consolidated
O&M expenses comprising of Employee Cost, Repair and Maintenance and
Administrative and General expenses, excluding contributions towards pension and
gratuity, Newly defined Contributory Pension Scheme and leave encashment if any, for
the Base Year of the control period and for two years preceding the Base year.
(ii) The O&M expenses for the Base Year of the control period shall be computed based on
the latest audited accounts, best estimates of Licensee of the actual O&M expenses for
relevant years and other factors considered relevant.
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(iii) The O&M expenses for each financial year of the control period shall be
computed/projected considering the O&M expenses reckoned for the Base Year
excluding uncontrollable employee cost duly considering the growth in the number of
consumers, inflation and efficiency factors for each distribution licensee as follows:
Formula :( 1+ consumer growth rate +inflation rate-efficiency factor)* O&M expenses for
the base year
(iv) The contribution towards pension and gratuity, Newly defined Contributory Pension
Scheme and leave encashment if any, shall be accounted separately as uncontrollable
O&M expenses computed on the basis of latest actuarial valuation report.
(v) Employee cost proposed to be incurred on accounting of wage revision, if any, and
proposed recruitments during the control period shall be factored in separately as
addition of O&M expenses.
The Commission in its Tariff Order dated 11.01.2008 approved the following
formula for approval of O&M expenses.
O&M Cost t = O&M Cost t-1 * (1 + WII + CGI – X)
Where,
‘O&M Cost t’ is the normative O&M cost approved by the Commission for the
financial year.
‘WII’ is the weighted inflation index of CPI and WPI (CPI 70% WPI 30%) based on the
contribution of employee cost, R&M and A&G towards the total O&M cost.
‘CGI’ is the Consumer growth index, which is linked to increase (CAGR) in no of
consumers.
‘X’ is the efficiency factor. For BESCOM the Commission fixes the same as 1%
As per the above norms, BASE YEAR means, the financial year immediately
preceding the first year of the Control Period. Hence FY-19 is considered as base year
for the 5th control period. FY-17 and FY-18 is considered as two years preceding the
Base year.
Actual Operation and Maintenance expenses (O&M) expenses for the years
preceding the base year as per annual accounts are as under:
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Table 5.21 Rs. Crs.
Sl. No. Particulars FY-17 FY-18
1 R&M Expenses 78.55 86.46
2 Employee cost 879.97 1118.43
3 Administrative & General Expenses 194.72 250.78
O&M Cost in Rs. Crs. 1153.24 1455.67
The half yearly O&M figures for FY-19 as on Sept-18 are available. Based on the
half year figures, estimated FY-19 figures are as under:
Table 5.22 Rs. Crs.
Sl.No. Particulars FY-19 (As on 30.09.2018)
1 R&M Expenses 50.85
2 Employee cost 641.64
3 Administrative & General Expenses 138.83
O&M Cost in Rs. Crs. 831.32
It is to state that the O&M expenses for FY-19 have been computed by doubling
the half year figures. Thus estimation for the base year is Rs.1662.64 Crs.
Table 5.23
Sl. No. Particulars FY-16 (As on
30.09.2012)
FY-16
( Projected)
1 R&M Expenses 50.85 101.7
2 Employee cost 641.64 1283.28
3 Administrative & General Expenses 138.83 277.66
O&M Cost in Rs. Crs. 831.32 1662.64
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Estimation of O&M expenses as per Commission approved formula is under:
Central Electricity Regulatory Commission (CERC) vide notification dated
06.04.2018 notified the escalation rates 2018 for Inflation rate, escapable transmission
charges for payment by arriving composite series of CPI at 55% and WPI at 45%.
BESCOM is adopting the same inflation rate with the composite series based on actuals
expenditure for last 5 years are tabulated below:
Weighted Inflation index is to be computed taking the Consumer Price Index (CPI
(IW)) as weight age of employee cost to the total O&M expense and Whole Sale Price index
(WPI) as weight age of R&M and A&G expenses to the total O&M expenses.
Table 5.24
Rs. Crs.
Sl.
No Particulars FY14 FY15 FY16 FY17 FY18 AVERAGE
1 R&M Expenses 51.65 54.94 83.37 78.55 86.46 70.99
2 Employee cost 755.66 807.10 880.25 879.97 1118.43 888.28
3 Administrative &
General Expenses 154.84 197.31 214.96 194.72 250.78 202.52
Total 962.15 1059.35 1178.58 1153.24 1455.67 1161.80
% of Employees
Cost 79% 76% 75% 76% 77% 76%
Hence, 76% of CPI being the weight age of employee cost to the total O&M expense
and 24% of WPI being the weight age of R&M and A&G expenses to the total O&M
expenses is considered for arriving at the Weighted Inflation Index (WII).
Composite series are tabulated considering actual of CPI and WPI for the years
2006 to 2017 as considered by CERC. For calendar year 2018 to 2022, it is based on
the 6 years moving average. Tabulations are as follows:
Table 5.25 Rs. Crs.
Year WPI CPI 24% of WPI 76%of CPI Composite
series
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1 2 3 4=24% of
(2)
5=76% of
(3) 6=(4+5)
2006 70.2 122.9 16.53 93.97 110.49
2007 73.6 130.8 17.33 100.01 117.33
2008 80 141.7 18.83 108.34 127.17
2009 81.9 157.1 19.28 120.11 139.40
2010 89.7 175.9 21.12 134.49 155.61
2011 98.2 191.5 23.12 146.42 169.53
2012 105.7 209.3 24.88 160.03 184.91
2013 111.1 232.2 26.16 177.53 203.69
2014 114.8 246.9 27.03 188.77 215.80
2015 110.3 261.4 25.97 199.86 225.83
2016 110.3 274 25.97 209.72 235.69
2017 114.1 281 26.86 215.00 241.86
2018 115.5 293 27.19 224.16 251.35
2019 116.2 303 27.36 231.93 259.30
2020 116.5 313 27.42 239.12 266.55
2021 117.5 321 27.66 245.67 273.33
Note: WPI and CPI from 2006 to 2017 are figures as per CERC notification and
from 2018 to 2022 is on 6 years moving average.
Weighted Inflation Index is calculated considering the 12 years data and the
statistical formula adopted by CERC for the purpose of escalation of inflations.
Table 5.26
Year
Composit
e series
YT/Y
1=Rt
Ln
Rt
Year-
1(t-1)
Product
[(t-1) x
(Ln Rt)
YT/
Y1=
Rt
Ln
Rt
Year-
1(t-1)
Product
[(t-1) x
(Ln Rt)
YT/Y
1=Rt
Ln
Rt
Year-
1(t-1)
Product
[(t-1) x
(Ln Rt)
2006 110.49
2007 117.33
2008 127.17
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2009 139.40 1.10 0.09 1 0.09
2010 155.61 1.22 0.20 2 0.40 1.12 0.11 1 0.11
2011 169.53 1.33 0.29 3 0.86 1.22 0.20 2 0.39 1.09 0.09 1 0.09
2012 184.91 1.45 0.37 4 1.50 1.33 0.28 3 0.85 1.19 0.17 2 0.35
2013 203.69 1.60 0.47 5 2.36 1.46 0.38 4 1.52 1.31 0.27 3 0.81
2014 215.80 1.70 0.53 6 3.17 1.55 0.44 5 2.19 1.39 0.33 4 1.31
2015 225.83 1.78 0.57 7 4.02 1.62 0.48 6 2.89 1.45 0.37 5 1.86
2016 235.69 1.85 0.62 8 4.94 1.69 0.53 7 3.68 1.51 0.42 6 2.49
2017 241.86 1.90 0.64 9 5.79 1.74 0.55 8 4.41 1.55 0.44 7 3.09
2018 251.35 1.98 0.68 10 6.81 1.80 0.59 9 5.31 1.62 0.48 8 3.84
2019 259.30 2.04 0.71 11 7.84 1.86 0.62 10 6.21 1.67 0.51 9 4.60
2020 266.55 1.91 0.65 11 7.13 1.71 0.54 10 5.38
2021 273.33 1.76 0.56 11 6.20
A = Sum of
"product" 37.77 34.67 30.00
B= 6 times (6 x
A) 226.64 208.04 179.99
C= (n-1) x n x
(2n-1); n = No.
of Years of data
= 12 3036.00 3036.00 3036.00
D = B/C 0.07 0.07 0.06
g (Exponential
Factor) =
Exponential (D)
-1 0.08 0.07 0.06
e = Annual
Escalation Rate
(%) = g x100 7.75 7.09 6.11
Thus estimated Weighted Inflation Index (WII) for FY-20, FY-21 to FY-22 will be 7.75%,
7.09% & 6.11% respectively.
Consumer growth Index (CGI):
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To compute the consumer growth rate, 4 year Compounded Annual Growth
(CAGR) is worked out considering the actual consumers existing from FY-15 to FY-18.
Table 5.27 Rs. Crs.
Sl. No. Year No. of consumers existing as on
31st of March
1 FY-15 9444518
2 FY-18 11244760
3 3 Years CAGR 5.99%
Considering the above indices, an estimated O&M charge for FY-20 to FY-22 on
normative basis is computed as under:
Table 5.28 Rs. Crs.
Sl.No. Particulars FY-19 FY-20 FY-21 FY-22
1 Inflation index in% 7.75 7.09 6.11
2 Consumer Growth Index
in % 5.99 5.99 5.99
3 BESCOM efficiency in % 1 1 1
4 Base year O&M Cost 1662.64
O&M expenses t-year=
0&M (t-1)*(1+WII+CGI-X)
(Rs.Crs)
1874.44 2100.89 2334.00
In order to ensure quality service and to cope with the increasing consumers in
BESCOM, new workforce needs to be added which will result in increase in employees
cost. As the second phase of reforms are started, Central/State Government may initiate
new reforms process that may result in increase in the employees cost. It is prayed
before the Commission to allow the expenses that may arise on account of new
recruitment and further reform process, which are uncontrollable.
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Since the Employee cost works out to 76% of O&M cost, R&M and A&G
expenditure is apportioned at the rate of 6% and 18% respectively.
Table 5.29 Rs. Crs.
Sl.
No. Particulars FY-20 FY-21 FY-22
1 R&M Expenses 112.47 126.05 140.04
2 Employee cost 1424.57 1596.67 1773.84
3 A&G Expenses 337.40 378.16 420.12
Total 1874.44 2100.89 2334.00
Depreciation:
BESCOM is computing Depreciation as per the norms prescribed by the
Commission in its MYT regulations-2006 and its amendments:
Clause 3.8.1 of 2nd amendment to KERC (Terms and Conditions for
Determination of Tariff for Distribution and Retail Sale of Electricity) Regulations, 2015,
is reiterated:
3.8.1 Depreciation shall be computed in the following manner, namely:
i) The value base for the purpose of depreciation shall be the historical cost
of the asset.
ii) Depreciation shall be calculated annually based on straight-line method
over the useful life of the asset and at the rates prescribed in CERC
guidelines/ Notifications issued from time to time.
iii) The residual life of the asset shall be considered as 10% and depreciation
shall be allowed up to maximum of 90% of the historical capital cost of the
asset. Land is not a depreciable asset and its cost shall be excluded from
the capital cost while computing 90% of the historical cost of the asset.
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iv) Depreciation on assets created out of Consumer Contribution/Grants shall
be excluded for the purpose of computation of ARR.
For the purpose of projected depreciation computation for the 5th control period
following assumptions are considered:
1) Actual closing Gross Fixed Assets (GFA) as per audited accounts of FY-18.
2) Estimated Additions and Retirement of assets for FY-19 and for FY-20 to FY-22
are based on the average for the past five years.
3) Since, the Capital Investment Plan comprises of the spill over works of the past
years, 75% of the capex envisaged during each year of the Control period is
booked on that year and 90% of the booked cost will be capitalized.
4) Capital work in progress at the end of previous year will be categorized in the
succeeding year of the Control period.
5) Depreciation rates as specified by CERC is applied on 90% of the Closing Gross
fixed Asset of each year of the control period.
6) Ministry of Corporate Affairs (MCA) has issued Indian Accounting Standards (IND
AS), which is applicable to BESCOM from FY-17 with comparative period of one
year. In pursuance with Ind AS 20, Government Grants/subsidies received from
the Government or other authorities towards capital expenditure as well as
consumer’s contribution to capital works are treated initially under deferred
income and taken to fixed assets based on commissioning of the assets and
depreciation is charged in accordance with the class of assets it belongs.
Capital Expenditure (Capex) envisaged for each year of the Control period.
Table 5.30 Rs. Crs.
Particulars FY-19 FY-20 FY-21 FY-22
Capital Expenditure (Capex)
envisaged 2836.44 3173.64 2450.83 1924.92
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Estimated Booking Cost at
(75% of the Capex) 2127.33 2380.23 1838.12 1443.69
Assets categorized ( 90% of
booking Cost) 1914.60 2142.21 1654.31 1299.32
Gross fixed assets at the beginning year (FY-18 closing balance), average
additions and retirements for the past five years and estimations for the second half of
FY-19 are as under.
Table 5.31 Rs. Crs.
Particulars FY-18 Total of FY-19
Opening Gross Fixed Asset (GFA) 10454.8 11974.27
Add: Additions during the year 1881.71 1914.60
Less: Retirement 362.24 214
Closing GFA 11974.27 13674.89
Depreciation envisaged for each year of the Control period, considering average
depreciation rate of 5.28%.
Table 5.32 Rs. Crs.
Particulars FY-19 FY-20 FY-21 FY-22
Opening Gross Fixed Asset
(GFA) 11974.27 14028.89 16304.92 18092.21
Add: Additions during the
year 1914.60 2142.21 1654.31 1299.32
Less: Retirement 213.98 230.17 241.02 249.44
Add. Consumer
Contribution 354.00 364.00 374.00 384.00
Closing GFA 14028.89 16304.92 18092.21 19526.09
90% of GFA 12626.00 14674.43 16282.99 17573.48
Average Dep. Rate (In %) 5.28% 5.28% 5.28% 5.28%
Depreciation 666.65 774.81 859.74 927.88
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Less: Depreciation with
drawn from Consumer
contribution/subsidies
plus withdrawal of
depreciation
131.35 148.64 166.42 184.66
Depreciation charged to
the Tariff 535.31 626.17 693.33 743.22
Interest and finance charges:
Interest and finance charges includes following costs.
Interest on loan capital
Interest on Working Capital
Interest payable in consumer Security Deposit/ meter security Deposit.
Other interest and Finance charges
Interest on loan capital:
BESCOM is computing the interest on loan capital as per the norms prescribed
by the Commission in its MYT regulations-2006 and its amendments.
Projection of interest for each of the control period is on following basis.
Loan outstanding as on 31.03.2018 as per provisional accounts duly
considering the rate of interest, and terms of repayment
For FY-19, loan existing as on 30.09.2018 and the estimation for the next
half year is considered for computation of interest.
For financing of future capital cost of projects, a Debt: Equity ratio of 70:30
is adopted as per the norms framed by the Commission under 3.7.1 of
MYT regulations
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Loan Capital outstanding as on 31.03.2018 and loan wise details
are as under:
Table 5.33 Rs. Crs.
Sl.No. PARTICULARS Loan outstanding as
on 31.03.2018
A Secured loans
1 Loan from REC (DTC metering) 138.52
2 Loan from REC NJY PHASE-2) 230.54
3 Loan from REC (APDRP Counterpart funding) (53.3327)
4 Loan from REC APDRP (10 TOWNS) 1.67
5 Loan from PFC APDRP (PART-A) 146.65
6 Loan from PFC APDRP (PART-B) 58.73
7 Loan from PFC APDRP (PART-B) COUNTER FUNDING
149.79
8 PFC-DRUM
9 REC-HVDS 211.69
10 REC_UAIP 238.05
11 REC-General capex 130.45
12 REC-Static meters 105.82
13 REC-rggvy-12th plan 3.12
14 REC-NJY phase-3 600.74
15 REC_HVDS-phase2 158.67
16 Loans from commercial bank-SBI 710.94
17 Loans from commercial bank-BOI 57
18 Loans from commercial bank-Canara 533.27
19 Loans from commercial bank-bank of Maharashtra
191
20 Loans from commercial bank-SBM 0
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21 Loans from commercial bank-Bank of Baroda 75
TOTAL 3741.65
B Un -Secured loans
1 Loans from GOK-PMGY 0.44
2 Loans from GOK-APDRP 20.85
3 Loans from GOK-INT FREE 0.94
4 Loans from GOK-RGGY 6.88
5 Loans from GOK-JICA 407.48
6 Power sector automation
TOTAL 436.59
TOTAL A+B 4178.24
Loan for FY-19:
For FY-19 up to Sept-18, Rs.461.36 Crs. has been booked towards Capex through
long term loans. BESCOM seeks out loans to an extent of Rs. 534.41 Crs. Banks are
yet to sanction the loan. Thus it is estimated that total borrowings for FY-19 will be
Rs.996 Crs. Hence, interest provision to an extent of 3 months is provided for Rs.534.41
Crs.
Interest on new loan capital:
Capex envisaged for each year of the control period is as under:
Table 5.34 Rs. Crs.
Particulars FY-19 FY-20 FY-21 FY-22
Capex with own funds 2258 2725 2132 1627
70% of Capex 1581 1908 1492 1139
90% of INVESTMENT 1423 1717 1343 1025
Internal Resource 426.76 515.08 402.94 307.48
Borrowings 995.77 1201.86 940.19 717.45
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‘For financing of future capital cost of projects, a Debt: Equity ratio of 70:30
should be adopted ‘is the norms fixed by the Commission.
The share of equity i.e., 30% of the future capital cost will be met through
Equity contribution for planned Capital Works GoK
Consumer Security deposit
Return earned on equity for each of the control period.
As Balance sheet of BESCOM will not support any more borrowings from the
Commercial Banks. Government of Karnataka is also not releasing the equity for the
planned works.
It is obvious that BESCOM will have request loans from Power Finance
Corporation or other Financial Institutions recommended by the Ministry of Power,
Government of India. The rates of interest of Central Government financial institutions
are usually higher than the Commercial Banks. Hence following assumptions are
considered for projecting the interest.
3 years moratorium period for repayment of loan
Term loan be 10 years and repayment is on quarterly basis
Reserve Bank of India Base rate at 8.85% to 9.45% plus 200 basis points
i. Means of Finance:
Internal resources generated though collection of Government of Karnataka (GoK)
Loan, MMD, Addl. MMD, and Return on Equity is considered as the internal resources
for the capex plan.
ii. Debt Equity ratio:
Table 5.35 Rs. Crs.
Loan Capital FY-19 FY-20 FY-21 FY-22
Capex after removing GoK grants 1423 1717 1343 1025
Internal Resource 427 515 403 307
Borrowings 996 1202 940 717
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Debt Ratio 70% 70% 70% 70%
Equity Ratio 30% 30% 30% 30%
iii. Borrowings:
Interests on the existing loans are computed taking the repayment schedule into
consideration. Weighted average rate of interest paid for FY-17 and FY-18 is calculated
based on the actual interest paid to the closing balance. The arrived average rate of
interest for FY-18 is applied for the future years.
It is proposed to raise the funds required for the capex plan through various
financial institutions and Commercial banks. In the recent years, it was difficult to borrow
loans from the commercial banks and presumed new borrowings will be from the financial
institutions of Central Government. Hence, REC lending rates of 11 % as on 19th of June
2018 of the year is considered. The new loan drawl for the first year will be spread over to
the whole year; hence interest is computed for 50% of the borrowings of that particular
year. For subsequent years, 50% of the loan drawn for the current year and 100% of the
previous years is reckoned for computation of interest.
Loan repayment schedule for the loan outstanding and as per the existing
commitments and fresh borrowing as per Capital investments is as follows.
Table 5.36 Rs. Crs.
Sl.
No. Interest on capital loans FY-18 FY-19 FY-20 FY-21 FY-22
1 Opening balance of capital
loans
4,017
4,178
4,737
5,400
5,672
2 less: Repayments
263
437
538
668
802
3 Closing balance(1-2)
3,754
3,741
4,198
4,732
4,870
4 New Borrowings
425
996
1,202
940
717
5 Closing balance(3+4)
4,178
4,737
5,400
5,672
5,588
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ARR FOR 5TH CONTROL PERIOD
MYT 5TH CONTROL PERIOD FOR FY-20 TO FY-22 Page 95
Computation of interest on the existing Loan for control period:
Table 5.37 Rs. Crs.
Particulars FY-17 FY-18 FY-19 FY-20 FY-21 FY-22
Opening balance of capital
loans 3361 4017 4178 4737 5400 5672
Average Repayments 173 263 437 538 668 802
Closing balance as at the
end of the year 3188 3754 3741 4198 4732 4870
Interest 320 343 342 384 432 445
Rate of interest 10.04% 9.14% 9.14% 9.14% 9.14% 9.14%
*Actual
Computation of interest on the fresh Loan for control period:
Table 5.38 Rs.
Crs.
Particulars FY-20 FY-21 FY-22
Fresh borrowings envisaged 1,201.86 940.19 717.45
50% of the borrowings 600.93 470.10 358.73
Borrowings considered for interest
computation 600.93 1,671.95 2,500.78
Interest (RBI declared interest rate +200
base points) 68.81 191.44 286.34
11.45% 11.45% 11.45%
Abstract of interest on Loan capital:
Table 5.39 Rs. Crs.
Particulars FY-20 FY-21 FY-22
Interest on existing loan capital 383.74 432.50 445.16
Interest on new loan capital 68.81 191.44 286.34
Total 452.55 623.94 731.50
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ARR FOR 5TH CONTROL PERIOD
MYT 5TH CONTROL PERIOD FOR FY-20 TO FY-22 Page 96
Interest on working capital:
Norms fixed by the Commission for the purpose of computation of interest on
working capital as per MYT regulations are as under:
3.11.1 Working capital shall cover:
a) Operation and maintenance expenses for one month;
b) Maintenance spares @ 1% of the historical cost of assets at the
beginning of the year and
c) Receivables equivalent to two month’s average revenue.
3.11.2 The Commission for the purpose of ARR, shall consider the allowable
interest on working capital calculated on normative basis at the rate of interest
as per the latest available base rate as notified by RBI plus 250 basis points
or the weighted average rate of interest on working capital proposed by the
distribution licensee, whichever is lower.
Provided that, during annual performance review, the Commission shall
consider the allowable interest on working capital calculated on normative
basis at the allowable base rate of interest as on 1st April of the financial year
as notified by the RBI plus 250 basis points. If the actual expenditure is less
than the normative amount, the allowable interest on working capital shall be
limited to actual expenditure plus 50% of the difference between the actual
expenditure and the amount as calculated on normative basis. Provided further
that, during the APR, if the actual expenditure exceeds the normative amount
calculated above, the total amount of allowable interest on working capital
shall be limited to the amount as calculated on the normative basis.
Table below depicts the estimated cost towards working capital.
Table 5.40 Rs. Crs.
Particulars FY-20 FY-21 FY-22
1/12th Operation and Maintenance 156.20 175.07 194.50
1% of Gross fixed assets at the beginning of
the year 140.29 163.05 180.92
2 months Receivables 3,348 3,490 3,644
Estimated Working Capital 3644.47 3828.28 4019.75
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MYT 5TH CONTROL PERIOD FOR FY-20 TO FY-22 Page 97
Rate of Interest 11.45% 11.45% 11.45%
Interest (RBI base rate as on Nov 2018 is
between 8.85 to 9.45 plus 200 basis
points)
417.29 438.34 460.26
Interest on consumer Security deposit and Meter Security
Deposit:
Norms fixed by the Commission for the purpose of payment of interest on
Consumer Security deposit vide regulation 8 of KERC (Security Deposit) Regulations-
2007 are as under
“The Licensee shall pay interest on Security Deposit (ISD, ASD & Meter Security
Deposit) of the Consumer as specified under K.E.R.C. (Interest on Security Deposit)
Regulations, 2005”
As per Regulations, 2005 ‘interest on security deposit of the consumer at the
Bank Rate prevailing as on 1st April of the financial year for which interest is due’
Following assumptions are made for the purpose of computation of interest on
Consumer Security deposits.
Average security deposit collected in the past three years is approximately Rs.300
Crs. Hence, it is presumed that on an average Rs. 200 Crs., will be collected in each
year of the control period.
Reserve Bank of India, Bank rate at 6.75 per cent per annum as on Nov 2018 is
considered for the future years for computing the interest on security deposit.
Table 5.41 Rs. Crs.
Particulars FY-20 FY-21 FY-22
Security Deposits (ISD and ASD) 4296.21 4596.21 4896.21
Interest on security deposits proposed in Crs. 289.99 310.24 330.49
Rate of interest paid 6.75% 6.75% 6.75%
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ARR FOR 5TH CONTROL PERIOD
MYT 5TH CONTROL PERIOD FOR FY-20 TO FY-22 Page 98
Other interest and Finance charges for FY-20 to FY-22 is considered at approx.
Rs. 20 Crs., for the 5th control period being the actual of FY-18.
Expenses capitalized:
The expenses capitalized for the control period is shown in the table below:
Table 5.42 Rs. Crs.
Particulars FY-20 FY-21 FY-22
Interest & other expenses capitalized 99.75 104.74 109.97
Commission requested to allow the same.
Consolidated Interest and Finance Charges:
Table 5.43 Rs. Crs.
Particulars FY-20 FY-21 FY-22
Interest on Loan Capital 452.55 623.94 731.50
Interest on Working Capital 417.29 438.34 460.26
Interest on Consumer Security Deposit 289.99 310.24 330.49
Other Interest & Finance Charges 20 20 20
Less: Expense capitalised 99.75 104.74 109.97
Total 1080.09 1287.78 1432.28
Other Debits and Prior period Credits:
The Commission has not been considering the projections for other debits and
Prior period Credits for the reason that, the same cannot be estimated beforehand.
Hence, the same is not estimated. However, the Commission is requested to allow these
amounts based on actual.
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ARR FOR 5TH CONTROL PERIOD
MYT 5TH CONTROL PERIOD FOR FY-20 TO FY-22 Page 99
Return on Equity:
BESCOM is computing RoE as per MYT regulations 2006 and its amendments.
As per Regulation 3.5 on Capital Investment read with Regulation 3.9.1 on Return on
Equity, Distribution Licensee has to consider the normative allowable equity base at
30% on the Gross Fixed Assets excluding assets created out of consumer contribution.
Table 5.44
Finan
cial
Year
Particulars GFA Debt Equity
Normat
ive
Debt
@70%
of GFA
Normativ
e Equity
@30% of
GFA
% of
actua
l debt
on
GFA
% of
actual
equity
on
GFA
FY-19
Opening
Balance 11974 4178 858 8382 3592 35% 7%
Closing
Balance 14029 4737 1155 9820 4209 34% 8%
FY-20
Opening
Balance 14029 4737 1155 9820 4209 34% 8%
Closing
Balance 16305 5400 1498 11413 4891 33% 9%
FY-21
Opening
Balance 16305 5400 1498 11413 4891 33% 9%
Closing
Balance 18092 5672 1894 12665 5428 31% 10%
FY-22
Opening
Balance 18092 5672 1894 12665 5428 31% 10%
Closing
Balance 19526 5588 2352 13668 5858 29% 12%
From the above table it is seen that the estimated amounts of debt and equity are
within the normative levels with reference to the opening and closing balance of each of
the 5th control period.
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ARR FOR 5TH CONTROL PERIOD
MYT 5TH CONTROL PERIOD FOR FY-20 TO FY-22 Page 100
Accordingly, the Return on Equity for the 5th control period is computed as
follows:
Table 5.45 Rs. Crs.
Particulars FY-18 FY-19 FY-20 FY-21 FY-22
Opening balance of paid up share
capital 546.91 546.91 546.91 546.91 546.91
Share deposit 464.58 656.42 820.42 984.42 1148.42
Average Equity addition during
the year 191.84 164.00 164.00 164.00 164.00
Reserve and Surplus -290.56 -157.58 21.44 253.62 547.22
Less: Meter Security Deposit
capitalised -54.81 -54.81 -54.81 -54.81 -54.81
Total Equity 857.96 1154.94 1497.96 1894.14 2351.74
Return on Equity @ 15.5% 132.98 179.02 232.18 293.59 364.52
Income Tax is not included in MYT for 5th Control period. Hence, Commission is
requested to allow income tax as per actuals.
Other Income:
Other income includes following items.
Interest Income
Profit on sale of Stores
Rental from Staff quarters
Value of materials found excess during physical verification
Rebate for collection of Electricity duty
Interest subsidy received under National Electricity Fund scheme
Misc. Recoveries
Incentives received
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ARR FOR 5TH CONTROL PERIOD
MYT 5TH CONTROL PERIOD FOR FY-20 TO FY-22 Page 101
Actuals of Other income and projections are as under:
Table 5.46 Rs. Crs.
Particulars FY-16 FY-17 FY-18 FY-19 FY-20 FY-21 FY-22
Interest Income 8.28 6.56 6.73 6.73 6.73 6.73 6.73
Profit on sale of Stores -0.71 -0.36 -3.07 0 0 0 0
Loss/gains relating to
fixed deposits 0 -4.38 -7.25 0 0 0 0
Rental from Staff
quarters 3.56 2.49 2.04 2 2 2 2
Value of materials found
excess during physical
verification
0.23 0.01 0.04 0.09 0.09 0.09 0.09
Rebate for collection of
Electricity duty* 3.04 3.66 3.69 4.20 4.40 4.55 4.71
Incentives received 116.78 129.12 192.54 146.15 155.94 164.87 155.65
Miscellaneous recoveries 36.03 73.83 100.35 70.07 81.42 83.95 78.48
Interest subsidy received
under National Electricity
Fund scheme
21.87 20 20 20 20
Total 167.21 210.93 317 249 271 282 268
It is presumed that rental from staff quarters will decrease by 3% due to decrease
in HRA rates to the Urban and Rural areas by the Government of Karnataka.
There is increase in miscellaneous recoveries during FY-18 when compared to
FY-17 due to collection of application charges during recruitment process of Asst.
Engineers, Asst. Accounts Officers and Junior Engineers during FY-18. This is
not a repetitive income. Hence, averages of the past years are considered.
An average increase in incentive for prompt payment of power purchase bills is
considered for FY-19 and the 5th control period.
In order to provide interest subsidy on loans raised by distribution companies to
improve the distribution network, National electricity Fund (NEF), an interest
subsidy scheme has been set up. Under the scheme, loan amount sanctioned by
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ARR FOR 5TH CONTROL PERIOD
MYT 5TH CONTROL PERIOD FOR FY-20 TO FY-22 Page 102
lenders during the financial year 2012-13 & 2013-14 for capital projects in
distribution sector duly approved by the Steering Committee shall be eligible to
take the benefits of interest subsidy for a tenure of 13 years based on annual
evaluation as per guidelines.
On the basis of the other income earned by BESCOM in the past three years and
considering nominal escalation the Other Income for the future years are
computed.
Projected abstract of ARR for FY-19 and 5th control period from
FY-20 to FY-22 is shown in the table below:
Table 5.47 Rs. Crs.
Sl. No Particulars FY-19 FY-20 FY-21 FY-22
Revenue at existing tariff in Rs. Crs.
1 Revenue from tariff and Misc. Charges 17,454.98 18,130.47 18,867.78 19,675.01
2 Tariff Subsidy from BJ/KJ 149.21 149.21 149.21 149.21
3 Tariff Subsidy from IP 2,197.91 2,464.33 2,530.93 2,597.53
Total Revenue 19802.11 20744.01 21547.92 22421.75
Expenditure in Rs. Crs.
4 Power Purchase Cost 14765.18 17249.15 18705.29 19569.28
5 Transmission charges of KPTCL 1528.66 1740.00 1920.00 2100.00
6 Transmission charges of PGCIL 1025.70 1125.70 1215.00 1325.70
7 SLDC Charges 18.39 19.68 19.68 19.68
Power Purchase Cost including cost
of transmission 17337.93 20134.53 21859.97 23014.66
8 Employee Cost 1283.28 1424.57 1596.67 1773.84
9 Repairs and Maintenance 101.7 112.47 126.05 140.04
10 Admin & General Expenses 277.66 337.40 378.16 420.12
Total O&M Cost 1,662.64 1,874.44 2,100.89 2,334.00
11 Depreciation 535.31 626.17 693.33 743.22
Interest & Finance Charges
12 Interest on Loans
341.93
452.55
623.94
731.50
13 Interest on Working capital 380.00
417.29
438.34
460.26
14 Interest on consumer deposits 269.74
289.99
310.24
330.49
15 Other Interest & Finance charges 20
20.00
20.00
20.00
16
Less interest & other expenses
capitalized 95
99.75
104.74
109.97
Total Interest and Finance charges 916.67 1080.09 1287.78 1432.28
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MYT 5TH CONTROL PERIOD FOR FY-20 TO FY-22 Page 103
17 Return on Equity 179.02 232.18 293.59 364.52
18
Funds towards Consumer
Relations/Consumer 1 1 1 1
19 Other Income 249 271 282 268
ARR 20383 23678 25954 27622
GAP -581 -2934 -4406 -5200
Sales 27235.10 28911.76 30139.51 31470.89
Average cost of supply 7.48 8.19 8.61 8.78
Segregation of ARR into Distribution and Retail Supply
Business:
The Consolidated ARR has been segregated into ARR for Distribution
Business and ARR for Retail Supply Business based on BESCOM’s internal
committee report.
Segregation of Costs
Table 5.48 Rs. Crs.
Particulars Distribution
Business Retail Supply
Business
Power purchase cost 100%
R&M Expenses 62% 38%
Employee Expenses 52% 48%
A&G Expenses 62% 38%
Depreciation 71% 29%
Interest & Finance Charges 16% 84%
Other Debits (incl. Prov for Bad debts)
53% 47%
Other (Misc.)-net prior period credit
19% 81%
Other Income 51% 49%
ROE 100%
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ARR FOR 5TH CONTROL PERIOD
MYT 5TH CONTROL PERIOD FOR FY-20 TO FY-22 Page 104
Accordingly, the following are the ARR for the Distribution Business and the Retail
Supply Business:
ARR for Distribution Business –FY19 & control period (FY-
20 to FY-22):
Table 5.49 Rs. Crs.
Sl.
No. Particulars
FY-19 FY-20 FY-21 FY-22
1 R&M Expenses 63.05 69.73 78.15 86.82
2 Employee Expenses 667.31 740.78 830.27 922.40
3 A&G Expenses 172.15 209.19 234.46 260.47
4 Depreciation 380.07 444.58 492.26 527.68
5 Interest & Finance
Charges 146.67 172.81 206.04 229.17
6 Other Debits (incl. Prov
for Bad debts) 0.00 0.00 0.00 0.00
7 Other (Misc.)-net prior
period credit 0.00 0.00 0.00 0.00
Total 1429.24 1637.09 1841.19 2026.54
8 ROE 179.02 232.18 293.59 364.52
9 Other Income 127.11 138.00 143.92 136.51
NET ARR 1,481.15 1,731.28 1,990.86 2,254.56
ARR for Retail Supply Business – FY19 & control period (FY-20
to FY-22)
Table 5.50 Rs. Crs.
Sl. No.
Particulars FY-19 FY-20 FY-21 FY-22
1 Power purchase cost inclusive of transmission charges and SLDC Charges
17337.93 20134.53 21859.97 23014.66
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MYT 5TH CONTROL PERIOD FOR FY-20 TO FY-22 Page 105
2 R&M Expenses 38.65 42.74 47.90 53.22
3 Employee Expenses 615.97 683.80 766.40 851.44
4 A&G Expenses 105.51 128.21 143.70 159.65
5 Depreciation 155.24 181.59 201.06 215.53
6 Interest & Finance Charges
770.00 907.27 1081.73 1203.12
Total 19023.30 22078.13 24100.77 25497.61
7 Other Income 122.13 132.58 138.27 131.15
8 Fund towards Consumer Relations / Consumer Education
1.00 1.00 1.00 1.00
NET ARR 18902.17 21946.55 23963.50 25367.46
Gap in Revenue for FY-20:
Table 5.51 Rs. Crs.
Particulars FY-20
Annual Revenue Requirement (ARR) 23678
Revenue from Sale of power 20744
Revenue Gap (2934)
Business Plan:
The Business Plan for the period of 5 years (FY-20 to FY-24) has already been
submitted to the Commission vide letter dated 14.09.2018.