- (1.) PER HON'BLE MR. RAKESH NATH, TEHNICAL MEMBER This appeal has been filed by Himachal Pradesh State Electricity Board against the order dated 30th May, 2008 passed by Himachal Pradesh Electricity Regulatory Commission by which the State Commission has determined the Annual Revenue Requirements and tariff of the Appellant for the Multi Year Tariff period 2008 -09 to 2010 -11.
(2.) THE Appellant is the Electricity Board responsible for generation, transmission and distribution of electricity in the State of Himachal Pradesh. The State Commission is the Respondent. In the impugned order the State Commission Page 3 of 27 did not allow some costs. Aggrieved with the State Commission's order the Appellant has filed this Appeal.
(3.) VARIOUS issues had been raised by the Appellant in the Appeal. However, during the hearing, in view of the truing up proceedings conducted by the State Commission subsequent to passing of the impugned order, the Appellant has restricted the present Appeal to the following issues: a) Interest and Finance Charges - Disallowance of equity for the projects of the Appellant. b) Power purchase cost payable for Baspa Hydro Electric Project. c) Employees cost. d) Disallowance of Pension and Gratuity Fund. e) Working Capital Requirements of the Appellant. f) Capital cost for the Larji and Khauli projects. The learned counsel for the Appellant in support of his case has submitted the following on the various costs not allowed to the Appellant in the impugned order: i) Interest and Finance Charges - Disallowance of equity for the projects of the Appellant. The State Commission has not allowed any equity for the hydro projects of the Appellant for the Multi Year Period. The State Commission has not considered any equity in the old projects; and for the new projects also the State Commission has considered 100% debt with no equity contribution. The only reason given by the State Commission for the above is that the old projects of the Appellant have been funded based on 100% debt and the same practice is being continued for the future. Old projects were generally funded through Government funds and the Government being 100% share holder of the Appellant, the funding was generally through equity. Further, in terms of the Regulations framed by the State Commission, the normative debt: equity ratio to be considered is 70:30 and, therefore, the Appellant is entitled to 30% of the capital cost to be considered as equity. ii) Power Purchase cost payable for Baspa Hydro Electric Project: Baspa Hydro Electric Project is a generating station established by an Independent Power Producer (IPP) in the State of Himachal Pradesh. The power from Baspa Project is supplied to the Appellant at the tariff regulated by the State Commission. The capital base for the purpose of tariff for Baspa Project was determined by the State Commission by order dated 24.2.2007 to be applied for the period 2003 -04 onwards. The State Commission earlier directed that the arrears from 2003 -04 onwards be paid over a period of 7 years to avoid tariff shock. However, by the order dated 7.2.2008 passed in the review petition, the State Commission directed the entire arrears to be paid by the Appellant within the first three months of the tariff year 2008 -09. However, the State Commission by the impugned order directed the recovery of the same by the Appellant in the retail tariff over a period of 6 years by creating a regulatory asset to avoid tariff shock. This is wrong. Also, the State Commission while creating a regulatory asset has only applied an interest rate of 10% which is not representative of the prevailing market rate of interest. Even the long term interest rate approved by the State Commission in the impugned order is 10.25%. The Appellant ought not be put to a loss on this account. iii) Employees Cost The State Commission has not taken into account the impact of the Sixth Pay Commission recommendations on the ground that the implementation of the recommendation is likely to take time and may go beyond the control period of the tariff order. However, according to the Appellant, the Sixth Pay Commission recommendations have now been implemented. The Appellant has craved leave to approach the State Commission with requisite material for truing up of the employees cost. iv) Disallowance of Pension and Gratuity Fund The Appellant had proposed creation of a Pension and Gratuity Fund for the terminal benefit liabilities for the Appellant's employees. In the absence of the fund, the Appellant has been paying the terminal benefit liabilities and including the same in the revenue requirements from year to year basis. Creation of Pension and Gratuity Fund being more efficient manner of managing the terminal benefits should have been allowed by the State Commission. v) Working Capital Requirements of the Appellant The State Commission while determining the working capital requirements of the Appellant has reduced the power purchase expenses of the Appellant by one month in line with the provisions of the Tariff Regulations framed by the State Commission. According to the Appellant, power purchase expenses are paid within one week of the bills being raised and consequently, the Appellant does not enjoy the cash for the month. The State Commission ought to have considered the submissions of the Appellant and relaxed the Regulations to the extent. vi) Capital cost for Larji and Khauli Project: The State Commission has determined the provisional capital cost and tariff for Larji and Khauli Poojects of the Appellant for want of various particulars. Subsequently, the Appellant has provided the requisite details and data for the capital cost determination. The petition for determination of the capital cost is pending before the State Commission. In view of this, the Appellant has not sought to press the capital cost determination in the impugned order, without prejudice to its rights in the capital cost determination exercise pending before the State Commission.State Commission (Respondent -1) ;