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executive summary
The Maharashtra State Electricity Board
(‘Board’) was established by the Government of Maharashtra in 1960, under
Section 5 of The Electricity (Supply) Act, 1948, (ESA) to develop
infrastructure relating to Maharashtra State’s growing needs for electrical
energy. Section 86 of the Electricity Act, 2003 mandates the State Commission
to determine the tariff for generation, supply, transmission and wheeling of
electricity, wholesale, bulk or retail, as the case may be, within the State. For
FY 2003-04, the Board has estimated, based on projections of Revenue
Requirement and Revenues from existing tariffs, that it would face a revenue
gap. Accordingly, it has proposed to revise existing tariffs and has approached
MERC for approval of the proposed Revenue Gap and Tariff Revisions. A brief
description of the proposal is provided herein. The detailed tariff proposal
can be procured from the field offices of MSEB, as directed by MERC.
Demand forecast: The Demand estimation of the Board (i.e. sale of units) has been
summarised in Table 2.1 of the proposal. The explanation for the same,
category-wise, is also discussed in Section 2. The Board’s total energy input
(generation + purchase) for the FY 2003-04 is projected to be 63922 MUs as
compared to 60889 MUs in the FY 2001-02 and 63118 MUs in the FY 2002-03. While
the Board’s total sale (metered + unmetered) in the FY 2001-02 was 37066 MUs
and 38758 MUs in FY 2002-03, for the FY 2003-04, it is projected to be 40517
MUs. Also, the unmetered sales during the FY 2003-04 are expected to be
progressively lower than that in the FY 2001-02 and 2002-03 on account of the
Board’s Master Metering Program.
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2003-04
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63,922
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Sale
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40,517
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- LT metered sale
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15,710
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- HT metered sale
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16,404
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- Unmetered sale
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8,403
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T&D
losses
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23,405
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(As
a % of energy input)
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36.61%
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Transmission & Distribution losses: The T&D loss estimate for FY 2001-02 was 39.12% while it is
estimated to be 38.59% for FY 2002-03 based on provisional figures of sales.
Metered consumption as a proportion of the energy input is targeted to be
increased from 46.4% in FY 2002-03 to 50.2% in FY 2003-04. The Board maintains
that increase in metered consumption is a measurable target compared to
reduction in T&D losses, which are only estimates and guesswork. The
T&D losses targeted for FY 2003-04 is 36.61%. Following measures are being
undertaken to more accurately estimate and reduce T&D losses:
§
An energy audit program, including
monitoring of 5500 agricultural Distribution Transformer Centers (DTCs) is
underway for improving accuracy of T&D loss estimation.
§
Detailed metering plan has been
envisaged to reduce, and eventually eliminate, unmetered consumption.
§
Various system improvement measures
such as addition of lines, transformers, capacitors, etc. have been initiated
to reduce technical losses. Decentralisation of printing of bills,
disconnection of defaulting consumers, detection of thefts, action against
errant staff, implementing Jan Mitra concept, etc. have been initiated to reduce
commercial losses.
§
The T&D loss reduction targets are
feasible only if the existing distortion in tariffs is corrected and metered
tariffs are made more attractive vis-à-vis unmetered tariffs.
Detailed description of the
Board’s strategy to reduce T&D losses is provided in Section 3 of the
Proposal.
Merit Order Dispatch and Least Cost
Procurement approach: The generation and power
purchase expenses for the FY 2003-04 have been estimated based on a simulation
of merit order dispatch. The objective of the exercise is to minimise the power
procurement cost, i.e. the cost of generation and power purchase. The various
sources of power are the Board’s own generating stations, National Thermal
Power Corp. (NTPC), Nuclear Power Corp. (NPC). Other sources being considered
are Power Trading Corp (PTC), various cogeneration and renewable energy plants
and Tata Power. The minimisation of power procurement cost from all these
sources is done considering principles of Merit Order Dispatch. Detailed
description of these principles and the Board’s methodology in projecting its
power procurement costs is provided in Section 4 of the Proposal. Overall, the
Generation and Power Purchase expenses are projected at Rs. 7736 crores.
Annual Revenue Requirement and Revenue
Gap: Other than Generation and Power Purchase
expenses, the projections of various components of the Board’s Revenue
Requirement have been worked out based on figures as per Provisional Accounts
(unaudited) for FY 2002-03. The detailed explanation of Revenue Requirement is
discussed in Section 5 of the Board’s Proposal. For the year 2003-04, the Board
has estimated that the total revenue requirement, including the provision for
statutory revenue surplus will be Rs. 14223 crores. With the existing tariff in
force with effect from 1.1.2002 and subsequent directives by MERC (through its
order dated 9th January 2003) with effect from 1.1.2003, the total
revenue income, including the Miscellaneous Receipts of the Board for the said
year will be Rs. 12761 crores, resulting in a shortfall of Rs. 1463 crores.
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2003-04
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Generation
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4,243
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Power
Purchase
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3,494
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Employee
cost
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1,695
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Administration
& General
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145
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Repairs
& Maintenance
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738
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Depreciation
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1,585
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Interest
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1,308
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Lease Rent
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85
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Provision
for Bad Debt
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250
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Other Expenses
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248
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TOTAL
EXPENSES
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13,790
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Add:
Surplus @ 4.5%
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433
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Revenue
requirement
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14,223
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Revenues
from existing tariff
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11,739
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Miscellaneous
Income
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1,022
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Revenue Gap
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1,463
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Tariff Revision Proposal: In view of the estimated deficit as above, the Board proposes to
revise the tariffs of electricity and details of the proposal are discussed in
Section 6 of the Proposal. Distorted tariff structure makes it difficult to
recover costs through tariffs. The MERC in their earlier tariff orders has
indicated the following tariff principles to rationalise this situation:
a) Reduction in multiple rates for consumers at same voltage level to
enable simplicity in understanding and implementation
1) Reduction in cross subsidy i.e. inter-class and intra-class
2) Increase in the revenues from fixed charges
3) Tariffs to incorporate incentives and / or penalties to encourage
Demand Side Management (DSM), Reactive Power Management, Early payment of bills
b) While tariff rationalisation must continue, the Board has also taken
into consideration the past payment track record of consumer categories Keeping
in mind the Board’s inability to disconnect certain consumer categories which
have a poor payment track record, the Board has also proposed tariff hikes for
consumer categories which are above the average cost of supply. If this is not
done, the Board’s cash losses will keep on mounting in spite of getting year on
year tariff hikes. The tariff revision proposal does not envisage any subsidy
from GoM.
Salient Features of
the Proposal
1. As per Provisional Accounts, in the FY 2001-02, the Board has
incurred an expenditure of Rs 829 crore beyond that estimated in determining
tariffs for the year 2001-02. The revenue is about Rs. 335 crore less than that
estimated in determining tariffs for the current year. Thus, a loss is expected
in the year 2001-02. The highlights are:
§
Rs. 151 crore increase in generation
expenses (primarily on account of disallowance of transit loss in coal and heat
rate by MERC).
§
Rs. 726 crore increase in the power
purchase expenses (primarily on account of disallowance of actual level of
T&D losses by MERC)
§
Approximately 2.8% reduction in MUs
consumed by HT industry and 5.2 % increase in MUs consumed by LT Domestic
category as compared to 2% decrease and 20.4% increase respectively assumed by
MERC in determination of tariffs.
2. Increase in expenses expected in the ensuing year i.e. FY 2003-04
vis-à-vis expenses approved by MERC for FY 2001-02 primarily due to:
§
Rs. 480 crores on account of increase
in the generation expenses
§
Rs. 1180 crores on account of increase
in the power purchase expenses
§
Rs. 135 crores on account of increase
in the employee expenses
§
Rs. 197 crores on account of increase
in the interest expenses
§
Rs. 165 crores on account of increase
in the other heads of revenue requirement
3. This increase in expenses increases the gap between Annual Revenue
Requirement and revenues expected from existing tariffs to Rs 1463 crores in FY
2003-04. This gap needs to be covered by an increase in tariffs.
4. Recognising that unmetered consumption is the bane of power sector,
metered consumption as a proportion of the energy input is targeted to be
increased from 46.4% in FY 2002-03 to 50.2% in FY 2003-04. This is a measurable
target compared to reduction in T&D losses, which are only estimates and
guesswork. Following measures are taken to more accurately estimate and reduce
T&D losses:
§
An improved sample of Agricultural DTC
meters for FY 2002-03 indicates that the estimated T&D losses could be
about 38.59% for FY 2002-03. The T&D losses targeted for FY 2003-04 are
36.61%.
§
An energy audit program, including
monitoring of 5500 agricultural Distribution Transformer Centers (DTCs) is
underway for improving accuracy of T&D loss estimation.
§
Detailed metering plan has been
envisaged to reduce, and eventually eliminate, unmetered consumption.
§
Various system improvement measures
such as addition of lines, transformers, capacitors, etc. have been initiated
to reduce technical losses. Decentralisation of printing of bills,
disconnection of defaulting consumers, detection of thefts, action against
errant staff, implementing Jan Mitra concept, etc. have been initiated to
reduce commercial losses. However, the present distorted tariff structure
continues to incentivise collusion and theft. The T&D loss reduction
targets will be feasible only if the existing distortion in tariffs is
corrected and metered tariffs are made more attractive vis-à-vis unmetered
tariffs.
5. The Revenue Gap for the ensuing year, as discussed earlier, is Rs.
1463 Cr. If the revised tariffs were to be granted for all the twelve months of
the year, the effective increase in tariffs would be 12.5%.
6. Distorted tariff structure makes it difficult to recover costs
through tariffs. The MERC in their earlier tariff orders has indicated the
following tariff principles to rationalise this situation:
a. Reduction in multiple rates for consumers at same voltage level to
enable simplicity in understanding and implementation
b. Reduction in cross subsidy i.e. inter-class and intra-class
c. Increase in the revenues from fixed charges
d. Tariffs to incorporate incentives and / or penalties to encourage
Demand Side Management (DSM), Reactive Power Management, Early payment of bills
7. While tariff rationalisation must continue, the Board has taken into
consideration that certain consumer categories have exhibited a better payment
track record than others have in the past. Keeping in mind the Board’s
inability to disconnect certain consumer categories which have a poor payment
track record, the Board has proposed tariff hikes for consumer categories which
are above the average cost of supply. If this is not done, the Board’s cash
losses will keep on mounting in spite of getting year on year tariff hikes.
8. The Board has installed meters on all its consumers under previously
unmetered categories (except LT Agriculture) and this has led to some reduction
in the number categories and hence multiple rates. These metered connections
are being levied the metered tariffs as determined by MERC.
9. In the ensuing year, 53% of the Board’s Revenue Requirement is
expected to be of a fixed nature and 47% is expected to be variable (i.e.
dependent on the extent of sales). With existing tariffs, only 28% of its
revenue is earned through demand charges or fixed charges and the rest through
energy charges. In this tariff proposal, a higher increase is proposed in the
demand charges. With the proposed tariffs, the fixed proportion of revenues
would be 29% and the variable portion would be 71%. Thus, the fixed revenues of
the Board can be expected to go up on account of proposed tariffs.
10. The proposal does not envisage any subsidy from GoM.
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