BEFORE THE HIMACHAL PRADESH ELECTRICITY REGULATORY COMMISISON AT

SHIMLA

AMENDED REVIEW PETITION NO 119of 2011:

IN THE MATTER OF:

Review of MYT Order for Second Contrl Period (Fy-12-14) dated

19.7.2011/14.9.2011 passed by the Hon’ble Commission in case no 224/2010

IN THE MATTER OF:

Himachal Pradesh State Electricity Board Limited

Vidyut Bhavan, SHimla-171004

….Petitioner

VERSUS

1. The Associated Cement Companies Limited

Gagal Cement Works,PO Barmana – 174013

2. M/s Auro Spinning Mills

(A Unit of Vardhman Textiles Ltd) Baddi (HP)

3. Confederation of Indian Industry

Himachal Pradesh State Council

Northern Region, Sector –31 A, Chandigarh

4. BBN Industries Association

C/o. Single Window Clearance Agency

Industrial Area, Baddi, Distt. Solan

5. Parwanoo Industries Association

HPCED Building, Department of Industries Complex

Sector – 1, Parwanoo, Distt. Solan

6. Kala Amb Chamber of Commerce & Industry

Trilokpur Road, District Sirmour (HP)

7. Mr G.D. Sharma

S/o Sh. Murli Dhar,

P.O. Devli, Tehsil & Distt Solan (H.P.)

8. M/s H.M. Steel Limited Trilokpur Road,

Kala Amb, Distt Sirmour, H.P.

9. M/s J.B. Rolling Mills (P) Limited Trilokpur Road,

Kala Amb, Distt Sirmour, H.P.

10. M/s Sri Rama Steels Limited Baddi Road,

Barotiwala, Distt Solan, H.P.

11. M/s Karan Synthetic (India) Private Ltd

Village Goal Jamala, Tehsil Nalagarh

12 M/s Laghu Udyog Bharti

224 H.P.S.I.D.C.,Industrial Area,

Baddi.

13. Nalagarh Industries Association,Nalagarh

14. M/s Reliance Communications Limited

15. Mr Tek Chand S/o Sh. Kahan Chand,

village Bhatgra,P.O. Pipla Agahe,

Distt Kullu.

16. Mr Tirath Ram

S/o Sh. Murli Dhar,

P.O. Pipla Agahe,

Distt Kullu (H.P.)

17. Ambuja Cement Limited,Daralaghat

18. M/s C.B. Healthcare,

Village Messa Tibba

Nalagarh Solan

19. Mr Dola Ram

S/o Sh. Tulsi Ram, Village Bhatgra,

P.O. Pipla Agahe, Distt Kullu (H.P.)

20.M/s Himachal Hotel Association

Himland East , Shimla

21 M/s Karan Poly Pack (India) Private Ltd

Village Goal Jamala, Tehsil Nalagarh

22. M/s Kullu Hotel and Guest Houses Association

Hotel Naman Akhara Bazar, Kullu

23 M/s Manali Hotelier’s Association

224 H.P.S.I.D.C.,Industrial Area,

Baddi.

24. Mr. P N Bhardwaj

ARCADIA, P.O. Dharampur

Distt. Solan – 173209

25. M/s Samrat Plywood Limited

182/11 Industrial Area , Phase I

Chandigarh

26. M/s Theon Pharmaceuticals Ltd

Village Saini Majara , Ropar Nalagarh Road ,

Tehsil Nalagarh

27. Yamada Automation Private Limited

Village Dherowal , P.O. Majholi,

Tehsil Nalagarh

REVIEW PETITION UNDER SECTION 94 (1) OF THE ELECTRICITY ACT, READ

WITH REGULATION 63 OF THE HIMACHAL PRADESH ELECTRICITY REGULATORY

COMMISSION (CONDUCT OF BUSINESS) REGULATIONS, 2005 FOR REVIEW OF

THE MYT ORDER FOR 2ND CONTROL PERIOD (FY12-FY14) DATED 19TH JULY

2011/14th September,2011.

Most Respectfully Showeth

1. The Petitioner, Himachal Pradesh State Electricity Board Limited (hereinafter

referred to as HPSEBL‘or the Petitioner‘) is a deemed licensee under the first

proviso to Section 14 of the Electricity Act, 2003 (hereinafter referred to as the

Act‘) for distribution and supply of electricity in the State of Himachal Pradesh.

2. In accordance with provisions of the Act, vide Notification No. MPP-A(3)-1/2001-

IV dated 15 June 2009, the functions, assets, properties, rights, liabilities,

obligations, proceedings and personnel of Himachal Pradesh State Electricity

Board (HPSEB) were vested with the Government of Himachal Pradesh. Also in

accordance with the provisions of the Act, vide the Himachal Pradesh Power

Sector Reforms Transfer Scheme, notified vide No. MPP-A(3)-1/2001-IV, dated 10

June 2010, the above mentioned functions, assets, properties, rights etc earlier

vested with the Government of Himachal Pradesh were re-vested into corporate

entities by the name of Himachal Pradesh State Electricity Board Limited

(HPSEBL) and Himachal Pradesh Power Transmission Corporation Limited

(HPPTCL). Thus, the HPSEBL came into being with effect from 10th of June,

2010, from the date of re-vesting, the functions of generation, distribution and

trading of electricity shall be undertaken by the HPSEB Ltd

3. The HPSEBL had filed petition with the Himachal Pradesh Electricity Regulatory

Commission (hereinafter referred to as the Commission‘ or HPERC‘) for true-up

of FY10 and approval of its Aggregate Revenue Requirement (ARR) and

determination of Wheeling and Retail Supply Tariff for the Second MYT Control

Period (FY12 - FY14) under Sections 62, 64 and 86 of the Act, read with the

Himachal Pradesh Electricity Regulatory Commission (Terms and Conditions for

Determination of Wheeling Tariff and Retail Supply Tariff) Regulations, 2011 and

the Himachal Pradesh Electricity Regulatory Commission (Terms and Conditions

for Determination of Hydro Generation Tariff) Regulations, 2011 (hereinafter

referred to as MYT Regulations, 2011).

4. The H.P. Electricity Regulatory Commission has announced its MYT Order for 2nd

Control period (FY-012 to FY-014 ) and determination of tariff for FY-2011-2012

under section 62 of the Electricity Act, on dated 19.07.2011. The Hon’ble

Commission further orders that the approved tariffs alongwith the Schedule of

General and Service charges will come into force w.e.f. 01.04.2011.

5. It is submitted that Hon’ble Commission has issued a corrigendum on 9-8-2011 to

MYT Order for Second Control Period (Fy 12 To Fy 14) on dated 5th August, 2011

,which was received by the HPSEB Ltd on 9-8-2011.

6. it is submitted further that based upon the corrigendum the corrected copy of

the MYT order has been issued by Hon’ble Commission vide letter no

HPERC/478-AVol I/TFASec/2011 -2010-2011- 2010-2029 dated 14-09-2011 and

received by HPSEB Ltd on dated 15-9-2011. The copy of the Corrected MYT Order

is annexed as Annexure A

7. It is submitted that the present review petition has been filed within the

limitation period from the date of receipt of the Final MYT order i.e. corrected

copy of the MYT Order on dated 15-9-2011.

8. That HPSEBL is aggreived by the order dated 19th July 2011/14-9-2011 in regard

to the matters listed below and also in regard to other issues. HPSEBL reserves

the right to file an appropriate appeal against the order dated 19th July 2011/14

Sept,2011,if so warranted and the present petition for review is being filed

without prejudice to the above.

9. The review and re-consideration of the issues decided by the Hon’ble Commission

in order dated 19th July 2011/14th September,2011 is being sought on the

following issues :

A Issues of True up Petition for 2009-10

10) Revenue from Sale of power

It is submitted that as per the MYT regulations the Hon’ble Commission considered the

true up petition of the HPSEBL after the availability of Audited Accounts. In

accordance with the above, the Hon’ble Commission in its MYT order for FY (2012-14)

while determining and approval of True up petition for 2009-10 has specified in clause

5.8 as under :-

Clause 5.8

However, during the interaction with the Petitioner, it came to the knowledge

of the Commission that revenue from sale of banking power includes an amount of Rs.

1.39 Cr., being the amount of penalty recovered as a result of default committed by

the PSPCL under banking arrangement. The commission has decided to consider Rs.

1.39 Cr. under revenue for sale of power for the purpose of true up.

HPSEBL would like to clarify that this amount of Rs. 1.39 Cr. is not appearing

anywhere in the Audited Accounts of HPSEBL for the year 2009-10 and as such taking

the amount of Rs. 1.39 Crore on the basis of interaction with the petitioner, in the

True up petition, without any authentication from the audited accounts for FY 09-10

appears to be an error.

However, the HPSEBL submits that this amount has been taken from PSPCL

under banking arrangement but could not be adjusted in the Annual accounts for 2010-

11 and will be taken in the prior period expenses for the year 2011-12.Therefore,

HPSEB Ltd prays that amount of Rs. 1.39 Crs should be considered in the First APR

Order for second MYT control period instead of True up petition for 2009-10

11) EMPLOYEE EXPENSES

That HPSEBL submits that there is an error while computing the captilisation of

employee cost. The HPSEB Ltd in its petition for first APR of MYT Order 2008-2011, had

claimed the employees cost taking into account the 6th

Pay Commission

recommendations. However, the Hon’ble Commission in its first APR Order had

postponed the recovery of the 6th

Pay Commission recommendations but while

deducting the capitalized employees cost for capital works in progress, the State

Commission had probably considered the captilisation of employee cost on the 6Th pay

commission recommendation also.

The HPSEB Ltd in its appeal no 186 of 2009 filed in APTEL against the First MYT

tariff order had taken this point of computation error before the Hon’ble APTEL and

on which following judgment has been passed by the APTEL on the Employee Cost (Sr

no 11.5)

However, the appellant has pointed out some computation errors in calculation of

the employees cost capitalized for capital works. This may be examined by the

State Commission.

The copy of Judgment of APTEL is enclosed as Annexure B

.

As per the truing of FY 2009-10, the table no 39-of the order specified as under:- Particulars Approved in

APR Order

True-up

petition

Audited

Accounts FY10

True-up by

Commission

Employee

Expenses

661.33 779.40* 779.40* 706.30**

Less:

Capitalisation

55.66 49.75 49.75 55.66

Net employee

expenses

605.67 729.65 729.65 650.64

Provision for

New

Recruitment

7.97 - - 7.97

The above table reflects that the commission has taken the captilisation of 55.66 cr

against the audited accounts figure of 49.75 cr. Moreover, from the above table it is

amply cleared that HPSEB Ltd has taken the captilisation cost of Rs 49.75 cr against

the total employee cost of Rs 779.40 Cr vis-a-vis the Hon’ble commission has taken the

captilisation of Rs 55.66 Cr against the employee cost of Rs 706.30 Cr.

Further, HPSEBL would like to highlight that the Commission has not allowed the

employees cost in full and has disallowed Rs. 73.10 Crs and, therefore, the

capitalization amount of Rs. 49.75 Crs should also be reduced in the same proportion.

The HPSEBL requests the Commission that the capitalized cost given in the

True up Order for 2009-10 should be corrected.

12) R&M EXPENSES;-

The Commission in its MYT Regulations had considered the R&M expenses as

controllable Expenditure and as such, the value of K-factor should not have been

revised by the Commission in the APR order for 2009-10 & 2010-11

The HPSEB Ltd in its appeal no 186 of 2009 filed in APTEL against the First MYT

Order had taken this point of error before the Hon’ble APTEL and on which following

judgement has been passed by the APTEL on the R&M cost (Sr no 10.5):-

In the MYT order, the value of ‘K’ has been determined based on the data for the

last 4 years i.e. FY 04 to FY 07 and the same was revised in the impugned order

considering the data for last 5 years i.e. FY 04 to FY 08. In our opinion, this is

contrary to the Regulations. The Regulations clearly state that the value of ‘K’ will

be given in the MYT order. The Regulations also do not have any provision for

review of ‘K’ value or review of approved R&M expenses or true up of R&M

expenses. It is also not stated in the Regulations that the value of ‘K’ is to be

worked out on the basis of data of last 4 or 5 years including the immediate

previous year. Thus there was no need for the State Commission to revisit the ‘K’

factor in the impugned order.

In view of the above judgement, the decrease in R&M cost for the year 2009-10

&2010-11, shall now be allowed by the Hon’ble Commission. The details are as

under:-

Tariff

order

K

factor

K

factor

R&M expenses

as per tariff

R&M expenses

allowed as per

Net allowed

by APTEL(in

(R&M=

K*GFA)

As per

APTEL

order

orders of

HPERC (in Rs

crores)

APTEL order

(in Rs crores)

Rs crores)

MYT Order

for first

Control

period ( FY

2008-09)

0.99%

0.99%

36.46

36.46

nil

First APR

issued on

24-8-2009

0.93%

0.99%

38.54

40.90

2.36

Second

APR Order

issued on

10-6-2010

0.93%

0.99%

46.44

49.26

2.82

Net

allowed By

APTEL

5.18

The additional R&M expenses allowed by the APTEL for the year 2009-10 will be

Rs 2.36 Cr and similarly the R&M expenses for the year 2010-11 on the above

analogy is Rs.2.82 cr. The HPSEBL therefore, prayed to the Hon’ble Commission to

consider this amount while deciding the review petition.

13) C.F.L.

That HPSEBL submits that the Govt of Himachal Pradesh had launched

the Atal Bijlee Bachat Yojna to provide Four CFL bulbs free of cost to the Domestic

Consumers of the state. The Govt of H.P. had provided a loan to HPSEB Ltd amounting

to Rs. 70 crore to be paid in five equal installments of Rs. 14 crores each. On the

pursuance of the Govt. of HP, the HPSEBL had paid back the loan of Rs. 70 crore as per

details below:-

Sr.No. Date of Payment Amount Paid

(Rs. in Crs.)

1 30.05.2009 14

2 27.07.2010 6

3 17.08.2010 6

4 24.09.2010 6

5 07.10.2010 6

6 08.11.2010 6

7 07.12.2010 6

8 07.01.2011 6

9 25.02.2011 6

10 22.03.2011 8

HPSEBL has paid back the entire loan amount of Rs. 70 crores to the GoHP as

per the instructions received from time to time, by taking short time loans from the

banks for which interest is also being paid by HPSEBL. The HPSEBL, after the

distribution of CFL bulbs have also calculated the energy savings in the state from

January, 2009 to January 2011 as under:-

Financial

Year

Energy

consumption

using CAGR

method

(million

units)

Actual

Energy

Consumption

(Million

Units)

Energy

Savings

(million

Units

Average

Sale Rate of

Energy as

Per Tariff

Order (Rs.

per unit)

Market

Price (Rs.

in Crore)

2008-09

(w.e.f.

Jan.09 to

Mar.,09)

286.53 272.28 14.25 4.06 5.79

2009-10 1241.19 1112.12 129.07 4.04 52.14

2010-11 (till

Jan, 2011) 1120.13 989.58 130.55 3.91 51.05

Total 2647.85 2373.98 273.87 108.97

The above energy savings / cost have also been reflected in the reduction in

the growth of energy consumption in the ARR of the HPSEBL for the respective years.

Further, the scheme of CFL had been acknowledged by the Commission as

energy conservation initiative in reducing the growth of energy consumption for the

Domestic Consumer categories.

The Hon’ble Commission in its Second APR Order had allowed the expenses of

Rs. 14 crores (for 2010-11) on providing CFL bulbs as it analyzed that “the Board will

not be able earn any carbon credits by implementing this scheme which could have

off set the cost of implementing this scheme, since the scheme has been initiated

at the instance of the GoHP. Accordingly, the Commission approves the expenses of

Rs. 14 Cr on providing cost free CFL bulbs.”

However, it is submitted that in the Truing up order of FY 2009-10, the Commission

has stated that the scheme for providing CFLs envisaged availing the benefits of CDM

and accordingly the claim for availing the carbon credits is already under process.

Considering the CDM befits, Commission has directed the HPSEBL to pursue the matter

for getting the benefit under the CDM mechanism. Accordingly, the Commission has

not considered the expenses of Rs 14.00 crore on providing cost free CFL bulbs.

It is therefore submitted that the Commission has erred in not granting the

expenditure of Rs. 14 crores on CFL in the Truing up Order for 2009-10, in complete

contradiction of its earlier stands taken in the APR Order for 2010-11

Further, the various activities of CDM timelines and CER revenue is as under:-

1. Web Posting of PDD.

2. HCA Process

3. Validation Process

4. Registration Process

5. Verification Process

6. Issuance of CER

The first two activities have been completed by HPSEB Ltd and the third

activity i.e. the validation process for CDM benefit of HPSEB Ltd., is in progress and it

is anticipated that it will take considerable time for the CDM benefit to be passed to

on the HPSEB Ltd., if it is approved in validation process.

HPSEB Ltd. therefore prays to the Hon’ble Commission to allow

expenditure of Rs 14 cr in the true up petition and also allowed the balance

expenditure incurred by the HPSEB Ltd on the Atal Bijlee Bachat Yojna amounting to

Rs 42 Cr as the e CDM credits are yet to be decided in the validation process.

In the end, HPSEB ltd would also like to submit that the Commission has

already allowed the expenditure in the FY 10-11 because of the saving of energy in the

state and now requests the Commission to allow the remaining expenditure as well.

Considering the current position of the energy available to HPSEBL, Commission should

appreciate the saving in the energy witnessed in the state in the recent years due to

the implementation of this scheme.

14) The Power Purchase Cost :-

The commission in the Truing up Order has approved the Power Purchase cost

of Rs. 1629.18 crore for FY-2010 including an amount of Rs. 10.05 crores to be

recovered in view of Commission order dated 29 August 2009 in case no. 149/09 as per

the details given in the table below:-

Power

Purchase Cost

Approved in

APR Order

True – up

Petition

Audited

Accounts

FY-10

True-up by

Commission

Power

Purchase cost

1290.30 1629.18 1619.13 1629.18

The HPSEB ltd, in its petition on Ist Annual Performance Review of MYT

order for FY 2008 to 2011 had claimed a power purchase cost of Rs. 1640.84 crore and

against which the Commission had approved the Power Purchase cost of 1290.30 crore

. This disallowance of Power Purchase cost in the APR order had been taken up in the

Appeal no. 186 of 2009 before the Hon’ble APTEL.

The APTEL in its order on appeal no 186 of 2009 at sr no 7.4 has specified as under:-

The State Commission has erred in not taking into account the actual cost of

power purchase during the FY 2007-08 and revised schedule of commissioning of

the new generating units while making assessment for power purchase cost. Thus

the objective of updating the power purchase cost from that determined in the

MYT order in the Annual Performance Review was defeated. The State

Commission has since trued up the power purchase cost and, therefore, the

substantive issue does not survive. However, as a matter of principle we are of

the opinion that the State Commission should have taken into account the latest

power purchase cost and the revised schedule of commissioning of the new

generating units while determining the power purchase cost and sale of surplus

power outside the state.

It is submitted that although the Hon’ble Commission has allowed the power

purchase cost to the HPSEB in the truing up petition as mentioned in the MYT

order for Second Control Period (FY-12 to14), the Commission has not allowed the

carrying cost / interest on the short time loan taken by the HPSEB Ltd for paying the

cost of power purchase to meet the demand. For the year 2009-10 , the Commission

had reduced the tariff of all the categories and as such, the HPSEB ltd was in loss

w.e.f. 1-9-2009 upto 31-3-2010 (i.e. when this tariff was implemented), therefore the

question of paying the power purchase bills of utilities thro’ the revenue of the HPSEB

Ltd collected thro’ energy bills does not arises.

HPSEB Ltd, therefore requests the Hon’ble Commission to allow the carrying cost for

paying the power purchase bills

15) Larji Arrears

The Hon’ble Commission has specified in clause 5.23 and 5.24 as under:-

2.23 Since then the capital cost of Larji HEP has undergone change and the

Commission vide Tariff Order dated 7th July 2011 for Larji HEP has worked

out cumulative revenue deficit of Rs. 82.78 crore for the period from FY

08 to FY 11, as tabulated here under

Particulars FY08 FY09 FY10 FY11

AFC approved in MYT order 132.03 123.08 113.37 103.69

AFC Requirement 145.08 141.83 131.94 123.21

Secondary Energy Charge - 4.22 1.28 7.40

Surplus (+)/Deficit (-) (13.05) (22.96) (19.85) (26.92)

Cumulative Surplus(+)/Deficit (-) (13.05) (36.01) (55.86) (82.78)

2.24 The Tariff Order for Larji states that “recovery of deficit, if any, as well as

its carrying cost has to be considered and decided upon for the combined

ARR of distribution and generation of HPSEBL as a whole”. Commission

observes that a surplus of Rs. 288.42 crore was available to the HPSEBL as

the true up order of FY 09 and even as per true up for FY 10 being under

taken by the commission some surplus is likely to be available to the

licensee in FY 10. As such Commission has not allowed any carrying cost

for these arrears.

The Commission after the True up of FY10 has shown a surplus of only Rs.

47.12 crore, the table no 51 of true up order specify the same as under:-

Particulars Approved in

APR

True-up

petition

True-up by

Commission

Aggregate Revenue

Requirement

1892.89 2655.92 2217.52

Total Revenue from sale of 2079.27 2263.06 2264.45

power

GoHP subsidy - 0.20 0.20

Surplus /(Gap) 186.38 (392.66) 47.12

From the above it is observed that the carrying cost of Rs. 8.74 crore

(approximately Rs.55.86 -47.12) is also to be given by the Hon’ble

Commission as this surplus of Rs.47.12 crore has been worked out by the

Commission after the truing up order of FY 09 to FY 10 and as such the

surplus amount of Rs 47 cr only is available against the deficit of 55.86 cr and

therefore carrying cost on Rs 8.74 is to be granted by the Commission.

B Issues on APTEL ORDER

16) Disallowance of power purchase cost for FY 2005-06 amounting to Rs. 24.90 Cr.

The Commission in true up order for FY05 and FY06 under the Tariff Order for FY08

dated April, 16, 2007 has allowed the total power purchase cost of Rs. 1057.74 Cr

against the submission of Rs. 1082.30 Cr made by the HPSEBL for FY06.

The issue of disallowance of Power Purchase Cost of Rs. 24.50 Cr was raised by the

HPSEBL in Appeal No. 56 of 2008 but the same was not dealt with in the Judgment by

Hon’ble ATE dated 31st May 2010. Therefore, the issue was again raised by the HPSEBL

in Review Petition No. 13 of 2010 in Appeal No. 56 of 2008 and Appeal No. 182 of 2009

Hon’ble ATE in its Judgment dated 27th May, 2011 in Review Petition No. 13 of 2010 in

Appeal Nos. 56 of 2008 and 172 of 2009 (Para 9 of the Order) has observed that the

State Commission has not given any reason for disallowance of power purchase cost

and accordingly directed the commission to consider the submissions of the Petitioner

i.e. HPSEBL and pass a reasoned order.

Accordingly, the HPSEB Ltd had filed a petition before the Hon’ble Commission , to

consider the claim of HPSEB Ltd . The Commission in its order dated 19-7-2011 has

specified the following:-

o In the True Up petition for FY05 and FY06, the HPSEBL filed the power purchase cost at Rs.750.76 Cr and Rs.1082.30 Cr for FY05 and FY06 respectively.

o For verifying the power purchase cost, the Commission prepared the monthly merit order based on the variable cost of the generating stations from the monthly billing data provided by the HPSEBL.

o The Commission used the total cost of monthly power purchased from a generating station as provided in the monthly power purchase bills and calculated the cost of power purchase for State’s own consumption and for trading (as per dispatch schedule).

o The Commission has approved the power purchase cost for both FY05 and FY06 based upon the monthly billing information submitted by the HPSEBL. The Commission used a merit order to divide the power purchase cost for trading and own use. The Commission approved the following power purchase cost for FY05 and FY06 in its Order for FY08.

Trued Up for FY05

(Rs. Cr)

Trued Up for FY06

(Rs. Cr)

Own Use 356.25 574.22

Trading 400.78 483.52

Total 757.04 1057.74

o It can be seen that the Commission approved power purchase cost of Rs 757.04 Cr against Rs 750.76 Cr for FY05 and Rs 1057.74 Cr against Rs 1082.30 Cr. The power purchase expenses approved by the Commission were completely based upon the monthly power purchase details submitted by the HPSEBL and there was no disallowance. The HPSEBL could not substantiate its claim of Rs 1082.30 Cr through monthly bills.

It is submitted that HPSEBL, has actually incurred the Cost of Rs 1082.30 as power

purchase expenses in FY 2005-06 which is evident from the Audited Balance Sheet of

FY 2005-06, copy of which is attached for ready reference. (marked as Annexure-C)

Head wise details of expenses incurred on account for power purchase from various

sources have been detailed in the Schedule 6 of the said balance sheet. As the

balance sheet has already been audited by appropriate agencies after detailed

verification, the figure of Rs 1082.30 crores may be considered as the final figure for

FY 2005-06. The copies of actual bills are not annexed currently as these are quite

voluminous. However, in case the Commission still wants to supplement these figures

with the actual power purchase bills, HPSEBL can provide a copy of all the bills.

It is therefore prayed that Power purchase cost amounting to Rs 1082.80 may kindly be

approved instead of Rs 1057 .74 Cr as per the balance sheet for the year 2005-06

C Issues of MYT for Second Control Period Employee Cost:-

17) Arrears on account of revision in Pay scales:

The Hon’ble Commission in this order has specified the following in Clause no 7.124

The arrears on account of pay revision are not considered and the impact

of these arrears cannot be passed on to the consumers which will increase

the tariff abnormally. If the Commission considers remaining arrears of Rs

295 Cr also along with these, the gross employee expenses for FY12 will

increase by approximately Rs 411 Cr over approved employee expenses for

FY11, which will be difficult to recover from the consumer. Since these

payments of arrears are not in the control of the HPSEBL, therefore, the

Commission requests the GoHP to consider Grant-in-Aid to the HPSEBL and

bear the burden of remaining arrears of Rs 295 Cr (provisional estimates)

through one time Grant-in-Aid to the HPSEBL. Commission further directs

the HPSEBL to take up the matter with GoHP to provide Grant-in-Aid.

In compliance to the above direction of the Hon’ble Commission, the matter

has been taken up with the GOHP to give one time grant in aid to the HPSEB ltd

amounting to Rs 295 cr.

The Hon’ble Commission in this order has not made any provision of the

carrying cost in case the GOHP does not accede to the request of HPSEB ltd ,

enabling the HPSEB Ltd to complete its contingent liabilities for payments of

arrears to the employees .

18) Interest and finance charges

(I ) The Hon’ble Commission in clause 7.144 (2) has specified the following:-

The Commission has analyzed the funding pattern of Petitioner for the

past projects and has observed that the most of the projects taken up by

the Petitioner have been funded entirely through debt. Thus, the

Commission has considered 100% debt funding for the future projects as

well

In the recent judgment of the APTEL in appeal no186 of 11-7-2011 , the

following is specified :-

The Regulations provide for debt-equity ratio of 70:30 for fresh

capitalization of assets. However, where the actual equity employed is

less than 30%, the actual equity has to be considered. The State

Commission’s finding for considering 100% debt funding for future projects

is thus not in consonance with the Regulations. When the Regulations

provide for 30% equity, the State Commission cannot restrict the same by

a blanket order. Accordingly, this issue is decided in favour of the

appellant with directions to the State Commission to decide debt equity

ratio for future projects as per the Regulations. ) .

As such, Hon’ble Commission, is prayed to amend this as per the order of

APTEL issued on 11-7-2011

(ii) The Commission has disallowed the negotiated loans/short-term loans

projected by the HPSEBL.

Further, the Commission has deducted one month’s power purchase cost

while computing the working capital requirement. Whereas HPSEBL has

already clarified in the MYT petition that the one month’s Power Purchase

component should not be reduced from the total working capital because

HPSEBL historically has paid all its power purchase bills within one week

after the issuance of the bill. HPSEBL, through efficient working capital

management has been able to pay its power purchase bills before the due

date and has been allowed a rebate. Any additional cost arising due to

inefficient management of working capital requirement is borne by the

HPSEBL and is not passed in the ARR.

Now, in the current year, HPSEBL is not in a position to pay the power

purchase bills with in one week because of non-availability of funds. Due to

this, HPSEBL is also not getting the benefit of full rebate. As the tariff is not

appropriate to meet the current level of monthly genuine expenses like

power purchase, employees cost, payment of equity installments for new

projects, payment of loans, etc., HPSEBL is taking some short term loans to

meet the expenses. Commission has neither allowed the one month power

purchase benefit in the working capital nor allowed the genuine short term

loans in the MYT order which has imparted the financial health of the

HPSEBL.

Commission has also dis-allowed loans to the tune of Rs. 141.53 Crs in the

MYT order for second period because of pending true-up of capitalization

and financing plan as well as diversion of funds for meeting the working

capital requirement. HPSEBL would like to highlight that the loans are

majorily taken for the capital works and payment of genuine expenses.

HPSEBL would like to reiterate that loans taken from various banks is as per

the proposed capex plan submitted to the Commission for the first MYT

control period. Further, Rs.141.53 Crs should not be dealt in the next

control period as the HPSEBL is paying huge interest to the banks on these

loans. If these loans will not be considered, this can actually lead to non-

payment of some of the power purchase bills on time and may result in

default of some of other payments.

Moreover, HPSEBL would not be able to get the required revenue requirement

with the interest cost approved by Hon’ble Commission in the previous Tariff

orders, which shall in turn lead to deteriorating financial health of the HPSEBL

19) Non Tariff Income

The Hon’ble Commission in this order has considered the amount of Rs 300 crores to

be recovered by the HPSEB Ltd and accordingly has bifurcated for the MYT period as

under:-

(a). FY 2011-12 Rs 100 Cr

(b) Fy 2012-13 Rs 150 cr

( c) FY 2013-14 Rs 50 Cr

The matter for recovery of reimbursement of investigation fees is under

correspondence with various firms and it is anticipated that the HPSEB ltd may not be

able to achieve the targets fixed by the Hon’ble Commission . The HPSEB ltd therefore

prays to the Hon’ble Commission that it will not be possible for the HPSEB Ltd to

recover the amount of Rs 100 cr during the year 2011-12,even if all out efforts will be

made.

The HPSEB ltd prays to the Hon’ble Commission not to consider the Non tariff

Income on account of survey and investigation charges ,which are yet to be recovered

from the respective I.P.P.’s.

20) Power Purchase Cost

In the Cost of Power from Shared Project specified at sr no 7.76 for UJVNL the

commission has considered the pooled average cost of power for FY12 as 58.95 paise

/KWH as approved by UERC. However, the Commission has not considered the appeal

filed in the Supreme Court against the above order of UERC by the HPSEB ltd ,a copy

of which is already supplied to Hon’ble Commission.

The HPSEB ltd prays to the Hon’ble Commission to consider the average cost of

power for FY12 to FY14 as 34.78 paise per KWH as per MYT Order for first Control

Period till the matter is decided by Hon’ble Supreme Court

21) Administrative and General Charges

The Hon’ble Commission in the MYT order has specified that the HPSEB Ltd has

submitted an expenditure of Rs 14 Cr as a part of A&G cost for providing cost-free CFL

bulbs to domestic consumers during the first two-yeas of the Control Period. As the

initiative of providing cost-free CFL bulbs to domestic consumers was taken by the

HPSEBL on the direction of the Government of Himachal Pradesh, the Commission

requests the Government of Himachal Pradesh to bear the cost during FY12 and FY13

and has not considered this as a part of APR for FY12 and FY13.

It is submitted that in the Second APR order the scheme of CFL had been

acknowledged by the Commission as energy conservation initiative in reducing the

growth of energy consumption for the Domestic Consumer categories and the Hon’ble

Commission had allowed the expenses of Rs. 14 crores on providing CFL bulbs as it

analysed that the Board will not be able earn any carbon credits by implementing

this scheme which could have off set the cost of implementing this scheme, since

the scheme has been initiated at the instance of the GoHP. Accordingly, the

Commission approves the expenses of Rs. 14 Cr on providing cost free CFL bulbs.”

The current disallowance of Rs 14 Crores for the Fy2011-12 &2012-13 and suggestion

of recovery from the H.P. Govt is in complete contradiction of the order imparted in

the Second APR Order dated 10th June, 2011 issued by the Commission.

Further, the HPSEB ltd., after the distribution of CFL bulbs have saved the energy and

which is reflected in the ARR of the HPSEB Ltd. The Hon’ble Commission has also

admitted in clause7.13 (1)that the sale to the domestic category have shown a

declining trend in the last two years which could be due to increase in usage of CFL in

the state . As such the Hon’ble Commission is prayed to allow this expenditure as a

pass thro’ in the Tariff. Moreover, the recovery of this interest free loan has already

been made by GOHP during 2011-12 and as such, the Govt. may not approve this

expenses.

The Hon’ble Commission is therefore prayed to allow these expenditure

The Hon’ble Commission has also disallowed Rs 1.00 Crs under the head “Incentive

awards to Employees/Outsiders” on a plea that any incentive to employee under the

APDRP Scheme will accrue only during the last year of FY 14.

In this regard it is submitted that the Incentive/Awards proposed by HPSEBL includes

the awards for the increased efficiency of the employees and for achievement of

internal stringent targets fixed by HPSEBL for the parameters other than APDRP which

in line with the Commissions suggestion that HPSEBL must look forward to increase the

operational efficiency.

The HPSEB Ltd therefore prays to Hon’ble Commission to allow these rewards from

FY 12 onwards and not in FY 14 alone as envisaged by the Commission.

22) Provision for IT And Other Initiatives

The Hon’ble Commission has considered NIL against the provision for IT and Other

Initiatives as it had not received any details from HPSEBL in this regard. However,

HPSEBL vide its letter no. HPSEBL/CE(Comm)/SERC/MYT Reply/6016 dated 02 July,

2011, had submitted that it had incurred expenses in tune of Rs 11.34 Crores.

Further, the HPSEB Ltd had also filed an affidavit dated 24-2-2011in which following

submissions w.r.t. Deployment of Call Centre Agents And Supervisor for 24 hrs

operation of the Call Centre had been made

As per the standard of performance regulation issued by the Hon’ble

Commission , there is provision for 24 hrs operation of the call centre . Therefore

in order to comply with the regulation, the HPSEB ltd has to deploy 12 no Call

Centre Agents and one number Supervisor for efficient running of Call Centre.

Presently M/S HCL is maintaining the call centre with staff under the contract

which is valid upto 31-3-2011. The total financial implication of this activity for

second control period amounts to Rs 85,15,142/-i/c of service tax of

Rs7,95,158/- for the FY12 to FY-14. The HPSEB Ltd therefore prays to the Hon’ble

Commission to allow this amount as a pass thro’ in the tariff.

23) That in the facts and circumstances mentioned above, the HPSEB Ltd respectfully

submits that there are sufficient reasons for review and rectification of the Order

dated 19th July 2011 passed by the Hon’ble Commission. The board will suffer

irreparable loss and injury if the Order dated 19th July 2011 is not rectified.

24) That the HPSEB Ltd submits that on the date of the filing of the petition, the

HPSEB Ltd has not filed any appear or any other proceedings challenging the

Order dated 19th July, 2011 passed by the Hon’ble Commission.

Prayer

For the reasons mentioned here in above, it is respectfully prayed that the

Hon’ble Commission may be pleased to:

i) Review the Order dated 19th July 2011/14th Sept,2011 and rectify the

said Order in respect of the matters mentioned herein above to the

extent prayed in respective paras

ii) Pass any such further Order or orders as this Hon’ble Commission

deems just and proper in the facts and circumstances of the case.

Chief Engineer (Commercial),

HPSEBL Vidyut Bhawan,