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by Delhi Electricity Regulatory Commission dated August 13, 2003

Multi year Tariffs Principles. by Delhi Electricity Regulatory Commission dated August 13, 2003. Strategy Paper on Power Sector Reforms by GNCTD in February 1999. T&D losses increase from 22.60% in 1991-92 to 42.70% in 1997-98

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by Delhi Electricity Regulatory Commission dated August 13, 2003

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  1. Multi year Tariffs Principles by Delhi Electricity Regulatory Commission dated August 13, 2003

  2. Strategy Paper on Power Sector Reforms by GNCTD in February 1999 • T&D losses increase from 22.60% in 1991-92 to 42.70% in 1997-98 • Precarious financial position –opening losses rose from Rs 250 cr to Rs. 713 cr • Weak billing system –57% billed and collection efficiency – 88% • Imbalance in Demand & Supply • Re-structuring of power sector recommended

  3. Setting up of DERC notified on 3.3.99 under ERC Act, 1998 • DERC established in Dec. 1999 as one member commission • Delhi Electricity Reform Act 2000 Enacted from 3.11. 2000 • Concept Paper on Tariff by DERC- September 2000 • Order on Rationalisation of Tariff by DERC – January 2001

  4. Restructuring of DVB • Learn lesson from Reforms in Orissa • SBI Caps appointed as consultants to give recommendation on restructuring of DVB • RFQ and RFP issued • 32 investors showed interest • 6 investors qualified • 3 investors invited for RFP • 2 investors selected

  5. Multi year ARR/tariff proposal for FY 2000-01 by DVB included a set of tariff determination principle for the years 2002-06 • Tariff setting formula: Tariff in Year ‘Y’ = Tariff in year ‘2001-02’ + Required Revision in Tariffs in year ‘y’ Revision in year “Y”– sum of : Change in power purchase cost, billing revenue due to reduction in T&D losses, salary, O&M, A&G expenses, Interest on loan, Depreciation, RoE, Collection efficiency and Bad Debts

  6. Commission’s Views on Multiyear Tariff Proposal • Different methodology generally followed for fixation of tariff as listed out in the Concept Paper on Tariff • Rate of Return Regulation • Performance Based Regulation • Price/Revenue Cap Regulation • DVB proposal - Performance Based Regulation

  7. Pre-requisite of PBR Regulation: - calls for sound MIS including scientific estimation of T&D losses - energy audit - sound data base to set Bench mark - Any commitment by DVB not binding on the successor companies

  8. Average tariff as proposed by DVB was not acceptable because: • The estimated units billed to various consumers were likely be different from the billed units envisaged in their tariff proposal • Basis of calculation would not remain same for “tariff in year 2001-02 and required revision in the tariff in the year “Y” • How the tariff for different categories will be determined based on average tariff • The requisite inputs for above were not available

  9. Proposal regarding the projection of Annual capital expenditure in each year for the next 5 year on historical basis was not acceptable because : • DVB not able to provide even the present value of fixed assets • Relying on a number of assumption for the same • Projections could only be done based on the present status of the assets, the need for investment and availability of funds

  10. Efficiency Improvements Not Suggested • Needs improvement in quality of service • Parameters would differ for successor entities • Loss reduction ought to be higher in initial years • Can be considered in future • Development of efficient MIS very vital • The Time Not Mature • There fore multi year tariff proposal by DVB suffered.

  11. Conclusion on Multiyear Tariff Proposal The Commission found that “ multiyear tariff setting principles” is an issue that merits consideration, it is not the mature stage for fixation of multiyear tariff principles. “Appreciating the sprit behind the proposal for multi year tariff the Commission shall be willing to consider any suggestion in this regard at an appropriate stage in future”

  12. Transfer Scheme & Policy Directions • Transfer Scheme by GNCTD for unbundling DVB • Notified on 20.11.01 but not made effective • 6 successor entities: 3 DISCOMs, GENCO, TRANSCO, Holding Company • Policy Directions notified by GNCTD on 22.11.02 • bidding criterion: loss reduction programme • AT&C loss true measure of efficiency • 16% return on equity • 50% of additional revenues due to overachievement

  13. Retail tariffs for 3 DISCOMs to be same till 2006-07 • Govt. to bridge gap by loan of Rs. 2600 Cr. to TRANSCO for transition period • DERC to determine opening loss levels and Bulk Supply Tariff to DISCOMs • Differential BST based on paying capacity of DISCOMs

  14. Amendment to Policy Directions notified by GNCTD on 31.05.02 • AT&C losses as per the accepted bid will be the criterion for the purpose of tariff computation • Method of computation and treatment of over-achievement and under-achievement notified • Opening AT&C losses with 5 years loss trajectory and minimum level as fixed by the GNCTD for Discoms

  15. Govt. to bridge gap by loan of Rs. 3450 Cr. to TRANSCO • Transfer Scheme by GNCTD for unbundling DVB • Notified on 26.06.02 and made effective from 01.07.2002 • 6 successor entities: 3 DISCOMs, GENCO, TRANSCO, Holding Company • Opening Balance Sheet as on 01.07.02 for 6 successor entities: 3 DISCOMs, GENCO, TRANSCO, Holding Company notified

  16. Fixed Assets were valued on the Business valuation basis for distribution business • Treatment of DVB arrears(80% to Holding Co and 20% to Discom) • Joint petition by Transco and Discoms filed on 21.12.01 • Order on opening loss levels and BST order issued by DERC on 22.02.2002 • BST – 132p/unit, 152p/unit & 152p/unit for three DISCOMs • Corresponding loss levels – 57.2%, 48.10% and 48.10%

  17. BST & RST order by DERC • Private DISCOMs took over Distribution Business w.e.f. 01.07.2002 • Filed first ARR for the FY 2002-03 and FY 2003-04 in December 2002 • Order on BST on 26.06.2003 • First Order on RST issued on 26.06.2003 for Private Discoms

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