KERALA STATE ELECTRICITY REGULATORY COMMISSION THIRUVANANTHAPURAM

Transcription

1 KERALA STATE ELECTRICITY REGULATORY COMMISSION THIRUVANANTHAPURAM Present: Shri.K.J.Mathew, Chairman Shri P.Parameswaran, Member ShriMathew George, Member February 9, 2012 Petition No. OP 18/2011 In the matter of Revising Tariff for Railway Traction The Kerala State Electricity Board - Petitioner O R D E R 1. Background As per the Tariff Order dated KSEB was having separate tariff for 110 kv Railway Traction 110 kv Railway Traction Tariff Order 2002 effective from The charges were Demand Charge Rs/kVA of Billing Demand per month 230 Energy Charge Ps/Unit 225 For other 110 kv Consumers the Tariff was Demand Charge Rs/kVA of Billing Demand per month 245 Energy Charge Ps/Unit 290 From Tariff as per the order dated was applicable which is common for all other 110 kv EHT consumers and Railways. The rates are as follows but TOD tariff is not made applicable to Railway Traction. Demand Charge Rs/kVA of Billing Demand per month 245 Energy Charge Ps/Unit 290 1

2 No changes were made in the Tariff in the Tariff order dated effective from In other words the Tariff for 110kV Railway Traction was prevailing from onwards. KSEB vide letter KSEB/TRAC/Tariff Rev /331 dated filed a proposal for revising Tariff for Railway Traction. The petition was admitted on vide Proceedings No 744/CT/OP-18/2011/KSERC and posted for hearing on Public Notice and Summary of KSEB s proposal was published in one issue each of two daily news papers in English and two in Malayalam having wide circulation in the State, as per Clause 5 of Kerala State Electricity Regulatory Commission (Tariff) Regulations, Hearing was first adjourned for on the request of Railways and later conducted on KSEB requested 10 days time for filing counter statement. Railways were to submit their points on the counter points of KSEB. No further hearing prayed. KSEB submitted the counter vide letter No KSEB/TRAC/Tariff Rev/Traction/ /684 dated The reply to the rejoinder by Railways was received on Proposal of KSEB In the tariff petition filed by KSEB it is pointed out that cost of power purchase has considerably increased during the last few years on account of tariff hike of CGS stations, increase in fuel costs, increase in cost of short term purchase of energy etc. The average power purchase cost of KSEB since year as per approved ARR is as follows: Comparison on the cost of power purchase over the year (based on the KSERC orders on ARR) Year Total Power Purchase Cost Unit rate Increase over (MU) (Rs. Cr) (Rs/ kwh) (%)

3 There was considerable increase in cost of power purchase since the year The average cost of supply and revenue gap of KSEB had also increased since Year Comparison of avg. cost, revenue and revenue gap Average Cost of supply Avg. revenue (incl. Non tariff income) Revenue Gap Remarks (Rs/kWh) (Rs/kWh) (Rs/kWh) Audited accounts Audited accounts Prov. accounts ARR for ARR for There was considerable increase in cost of power purchase resulting in widening of the revenue gap during last 5 years. There was no increase in Traction Tariff correspondingly. Further, the Traction Tariff was below average cost of supply during the last three years as can be seen from the table below and hence is subsidized. Subsidy allowed to Railway Traction ( to ) Average Cost of supply Cross subsidy allowed to railway traction Year Avg. Tariff (Rs/kWh) (Rs/Kwh) (Rs/Kwh) (%) Further KSEB pointed out that Railway is operating on commercial principles throughout the length and breadth of the country and traction tariff is the lowest among the southern states as can be seen from the table below. Prevailing tariff schedule for Railway Traction among southern States 3

4 Energy Demand Charge Charge State (Rs / kva/month) (Rs/ kwh) Kerala (w.e.f ) Tamilnadu (w.e.f ) Karnataka (w.e.f ) Andhrapradesh Nil 4.45 Since Tamil Nadu is adjacent to the State of Kerala and most part of Tamil Nadu forms part of Palghat and Trivandrum Railway Divisions, it is appropriate to have a uniform Tariff for the Railway Traction for Kerala and Tamil Nadu. Hence KSEB proposes to increase the Railway Traction Tariff in the State of Kerala to the level of what is prevailing in Tamil Nadu as given below. Proposed tariff for railway traction Demand Charge (Rs/ kva/ month) Energy Charge (Rs/ kwh) Proposed Proposed Existing (as that of TN) Existing (as that of TN) With the proposed revision, average tariff for Railway Traction is likely to increase from Rs 3.60/Unit to Rs 4.70/Unit. The level of subsidy with the proposed revision for the year is as given below. The Traction tariff is subsidized by 6.19% during the year as shown below. Level of subsidy/cross subsidy with the proposed revision Particulars Existing Tariff Proposed Tariff Average tariff (Rs/ kwh) Average cost of supply (Rs/ kwh) Cross subsidy (Rs/ kwh) Cross subsidy (%)

5 3.Public hearing 3.1 Railways in the objection filed on and in the hearing conducted on raised the following points. Railways stated that the proposals for revising Tariff for Railway Traction filed before the Hon Commission by the Chief Engineer (Commercial and Tariff) KSEB is not maintainable neither in law or on facts. The Petition is filed under mere surmises and conjectures and it lacks legal provision required in the matter of procedures to be complied with. A mere proposal without incorporating the provisions of law and cause title with respondents array is unsustainable and the same is liable to be dismissed in limine. Regulation 24(3) of KSERC (Conduct of Business) Regulatiions, 2003 provides the mandatory requirements of filing a petition before the Commission and hence maintainability of the proposal is challenged as the petition is not based on facts and not in accordance with the provisions contained in Electricity Act, 2003 as well as regulations in force. It is pointed out that petition of KSEB is incomplete as the petitioner has not submitted the mandatory information to be furnished along with the petition and has not complied with the requirements of tariff filing as per the Act and relevant regulations Railways stated that KSEB filed the petition on grounds that the present tariff was approved by the Commission in and considering the average cost of power purchase, overall cost of supply and revenue gap based on ARR and ERC approved for the year, there exists 63.21% increase in the cost of power purchase for the year which is not factually correct. Without declaring Cost to Serve Railway Traction at 110 kv as required under the Electricity Act, 2003 the averment of KSEB that the Railway Traction Tariff is highly subsidized is patently irregular, unfounded and therefore the same is unsustainable for want of factual basis and legal provision. The Railway is singled out from EHT consumers in the matter of proposal for tariff hike which is highly irregular and discriminatory apart from a legal conscience bound to be observed by the KSEB to state when acted against the Railways defined a state. Characteristic difference between Railway Traction Load and Industrial load is admitted. However from the last tariff revision with effect from Railway Traction has been brought under a common 110 kv Tariff applicable to all 110 kv consumers. Hence revision of tariff to one particular consumer in a 5

6 band of consumers covered under a common tariff category is irrational, discriminatory and against provisions of the Act and also amounts to increasing the cross subsidy, which is not permitted by the Act. Railways stated that the averment of KSEB that most of the places in Tamil Nadu forms part of Palghat and Trivandrum Railway Divisions and Railways are using power at cheaper rate from Kerala to run trains in Tamil Nadu area is baseless. The proposal to increase Railway Traction Tariff in Kerala to the level in Tamil Nadu is unwarranted and does not stand for reasons. The comparison of tariff prevailing in the other states has no meaning and does not lend any support to the claim of the petitioner to revise only Railway Traction Tariff. Tariff should only be based on cost of supply and approved OH of utility and the proposal of petitioner KSEB is arbitrary and against provisions contained in Sec 61 and 62 of the Act.The proposal lacks legal basis as there exist no such provision either in the Electricity Act, 2003 or the KSERC (Terms and Conditions of Tariff for Retail sale of Electricity) Regulation 2006 to the effect that tariff of adjacent States should be the same. The Commission approved ARR and ERC for the year as Rs Crore and Crore respectively with a revenue gap of Rs Crore and directed KSEB to submit proposals for bridging revenue gap without delay. The petitioner submitted a piecemeal proposal singling out Railway alone with a tariff hike of 28.10% giving a Tariff Shock. The Cost to serve Railway Traction is much lower than the average cost of supply since Railways availed the supply at 110 kv and does not use distribution network. The average cost of supply during is lower than that during and therefore tariff of Railways being a subsidizing category should progressively come down. Through eight Traction Substations Railways have consumed MU and paid Rs Crores towards electricity charges ie 1.07% of total sales and 1.3% of total ARR with a current level of 60 % Cross Subsidy. Railways pointed out that as per the Tariff Policy the electricity tariff should progressively approach Cost to serve that category of consumer. Accordingly the tariff for subsidized consumers should be increased and that of subsidizing consumers to be reduced to approach the permitted subsidy level, which the petitioner KSEB has failed to follow. Railway Traction being a subsidizing consumer, the tariff need to be brought down where as petitioner has proposed a steep hike of 28.1% against all guiding principles and law. Railway has stated that Section 61 (d) and (g) of Electricity Act, 2003 stipulate that tariff should be reasonable and related to the cost of supply. Section 61 (d) Safeguarding of consumers interest and at the 6

7 same time recovery of cost of electricity in a reasonable manner. (g) that the tariff progressively reflects the cost of supply of electricity and also, reduces crosssubsidies in the manner specified by the appropriate Commission Regulation 5 of KSERC (Terms and Conditions of Tariff for retail sale of electricity) Regulation, 2006 reads as follows Regulation 5. Tariff Principle (1) While determining tariffs, Commission may apply the principle that will reward performance and efficiency and reduction of losses and costs. (2) Tariff should be based on average cost of supply to various categories of consumers based on Tariff Policy announced by the Government of India as per Order No 23/2/2005-R&R Vol III dated 6 th January The licensee should conduct a study based on average cost method and the report of the study indicating the cost of providing electricity to various categories of consumers should form part of tariff revision proposal. The Hon ble Appellate Tribunal in Orders rendered in Appeal Nos 102, 103,112 of 2010 in the matter of M/s Tata Steel Vs OERC have ruled as under We do not agree with the findings of the State Commission that cost of supply for a consumer category is the same as average cost of supply for the distribution system as a whole and average cost of supply can be used in calculation of cross subsidy instead of actual cost of supply. This is contrary to Regulation 7(c)(iii) of the State Commission and findings of this Tribunal in Judgement reported in 2007 (APTEL) 931 SIEL Limited, New Delhi Vs PSERC and Ors 41.3 The State Commission has expressed difficulties in determining cost of supply. It would be adequate to determine the voltage wise cost of supply taking into account the major cost element which would be applicable to all the categories of consumers connected to the same voltage level at different locations in the Distribution System (emphasis supplied) Accordingly, the State Commission is directed to determine cross subsidy for different categories of consumers within the next six months from FY onwards and ensure that in future orders for ARR and Tariff of distribution licensees, cross subsidies for different consumer categories are determined according to the directions given in this Judgment and the Cross Subsidies are reduced gradually as per the provisions of the Act. Similarly the Hon Appellate Tribunal in the Orders in Appeal No 192 and 206 of 2010 in the matter of Tamil Nadu Electricity Consumers Association Vs TNEB and TNERC has also reiterated the above as under regarding cost to serve each category of consumer, we have noticed that the State Commission has not determined the cost of supply according to its 7

8 regulations as also the variation in tariff of different categories of consumers with reference to average cost of supply.. The issue regarding cost of supply has been dealt with in this Tribunals Order dated 30 th May 2011 in Appeal Nos 102, 103 and 112 of 2010 in the matter of TATA Steel Limited Vs OSERC accordingly, the State Commission is directed to determine the voltage wise cost of supply within six months from the date of this judgment to ensure that in future tariff orders cross subsidies for different categories are determined according to Regulations and cross subsidies reduced as per the provisions of the Act. The State Commission is also directed to determine the variation of tariff of different categories of consumers with respect to average cost of supply and provide consequential relief, if any to the appellants consumer category. The petitioner has failed to declare cost of supply in the tariff revision petition and also has not submitted relevant data. Hence Railway has adopted the model used by APERC for computation of cost of supply at 110 kv with the available data and has given reasonable explanation in the objection petition for the same. It is the duty of the petitioner to submit correct data and furnish cost of supply to each category of consumer; in the absence of the method adopted by this respondent and values thus obtained are fair enough for comparison purpose. It is further submitted that the contention of the petitioner in Para 29 is factually wrong. This respondent has considered all overhead expenditure of the utility approved in the ARR and apportioned 40% for combined activity of Generation and Transmission and 60% for Distribution activity. If the petitioner wants to dispute the ratio adopted, the petitioner may furnish the correct data for the scrutiny of the Hon Commission. In the light of the above judgment of the Hon Tribunal, there should be a relief to the subsidizing category of consumers in the State of Kerala as the Average Cost of Supply has come down from Rs 4.04/Unit for the year to Rs 3.92/Unit for the year The Irrational Tariff revision proposal of KSEB is liable to be disallowed, at the same time matter in the issue with due regards need be analyzed as to provide a special tariff including all charges under permitted heads more particularly termed as single part tariff. KSEB has submitted irrelevant, exaggerated and wrong information in their proposal. KSEB has to function on Commercial principles, which the Hon Commission is insisting from the first Tariff Order onwards. The Commission directed KSEB to segregate the accounts of Generation, Transmission and Distribution. The petitioner is deliberately not complying with the directions of the Commission to avoid transparency. TOD tariff is not made applicable to Railways but Railways are not 8

9 availing any concession but because of the nature of operation of Railways TOD Tariff cannot be applied. Traction is an essential service and main trains cannot be stopped or staggered to meet TOD requirement. Further no State has applied TOD tariff for Railways. The concept of TOD pricing is aimed at discouraging and avoiding unimportant loads and loads that can work at off peak hours conveniently to enable the utility to supply power to the essential loads during peak hours with the limited resources of the utility. But it seems that the petitioner KSEB is wrongly considering the TOD as a means of generating additional revenue. Railways submitted that while considering contention of the petitioner at Para 3 that the present tariff was approved by the Hon Commission by its Order regarding ARR&ERC it is to be born in mind that this Hon Commission has never permitted any increase in tariff based on actual power purchase cost and ARR of the KSEB. Railways pointed out that the averments and supported figures contained in Para 4 are baseless, concocted and actuated by malafides with the intension of misleading the Commission. Average Cost of supply has come down from Rs 4.04/Unit during to Rs 3.92/Unit for the year for the year , the tariff for subsidizing consumer has to come down accordingly. But KSEB proposed a steep rise of 28.10% in contravention to the tariff setting principles, increasing tariff to a subsidizing consumer when the average cost of supply has come downrailway stated that the average cost of energy furnished by KSEB in Table-3 of the proposal is false and baseless; KSEB has given un approved figures to artificially inflate the average cost. It could be seen that the average cost per unit as indicated by KSEB is much higher than what is actually approved. It is submitted in respect of para 6 of the proposal that the KSEB has projected unapproved Table-4 of the petition to artificially inflate the cost of power purchase and to project otherwise that Railway Traction has been highly subsidized in the State. Railway has stated that Cross subsidy is the difference between actual cost of supply to Railway Traction at 110 kv and actual charges realized. Average cost of supply is relevant only to the extent for verifying whether rate of realization is within + or 20% of the average cost of supply for all categories of consumers except those below poverty line. Without declaring the cost of supply it is not possible to declare whether a consumer is subsidizing or subsidized. From the cost of service worked out based on relevant available 9

10 data it is found that Traction is a subsidizing consumer and considerable amount of cross subsidy is being paid by Railway Traction consumer to the extent of 93% for and 102 %for the year (Proposed). The proposed tariff increase will raise the cross subsidy from 58.4% to 102% which is repugnant to the provision in the Act regarding level of Cross Subsidy. In order to see that cross subsidy percentage is not increased, railway traction tariff shall remain the same or below the rate as on date. Steep increase in Railway Traction Tariff as proposed by KSEB is ultra vires being against the provisions of the Act and connected regulations in force. Even in the absence of cost to serve of different categories of consumers, the rate of realization of subsidizing category of consumers should come down has been stressed by the Appellate Tribunal for electricity in various judgments. KSEB has furnished concocted figures regarding subsidy allowed to Railway Traction (Average cost of supply and cross subsidy allowed to Railway traction). KSEB has not extended any subsidy of any sort to Railways but on the other hand huge amount of money is realized from Railways as cross subsidy by KSEB from the present tariff. Railway Traction being a public utility the cross subsidy should ideally be zero. The importance of reasonable tariff for Railways is well established and upheld in various judgments of APTEL (Appeal No 75 of 2005 in the matter of South Central Railway Vs APERC and Appeal No 148 of 2007 in the matter of Northern Railway Vs PSERC). The Kerala Government has been raising demands inter alia for the renovation, construction of new lines, tourism trains in the model of Palace on Wheels between Kasargode and Kanyakumari, increasing the number of trains/ frequency/ change in the timings/stops etc. A high level committee consisting of Chief Secretary, Secretary (Power), Secretary (Transport), Chairman KSEB and DRM Railways was formed in 1989 for providing power to Railways In a memorandum submitted by the Chief Minister, Kerala to the Union Minister for Railways on the necessity of extending power supply to Railway Traction eliminating unnecessary tariff hike in an irrational manner was stressed. Railways are no longer chartered as Commercial organization where as the fact remains that the Indian Railway is a Government of India Organization and a public utility service. Railways cannot be treated at par with other commercial institutions with profit motives. The operating ratio of Southern Railway is ie spending Rs for every earning of Rs 100. Still passenger fares are not revised for the past seven years due to social obligations. If Railways are put to work on Commercial basis, any positive venture to run Suburban Services and 10

11 Commuter Train Services in the State of Kerala will be in vain. The preponderance of probability of Demand Charge and Energy Charge in consonance with the cost to serve of Railway Traction particularly in the wake of voltage wise cost at 110 kv Supply with required utilization of man power of the KSEB. (considerably very less compared to personnel working on Distribution side) shall form part of the demand for hike in Tariff for Railway Traction. Electricity Tariff is based on cost of inputs. As such electricity tariff in Kerala is generally lesser than in the neighbouring States due to the fact that KSEB is getting 50% of its input at low cost from Hydro Power Stations. Railways pointed out that KSEB vide Para 9 of the petition has stated that most part of Tamil Nadu forms part of Palakkad and Trivandrum Divisions of Southern Railway and it is wrong, irrelevant to tariff application and hence denied. There is no provision in the Electricity Act, 2003 or KSERC( Terms and Conditions of Tariff for Retail Sale of Electricity) Regulation, 2006 that tariff of adjacent States should be the same. The Tariff should be based on the Cost of Supply plus cross subsidy as decided by the Hon Commission and again cost of supply is depended only on the cost of Generation, power purchase and transmission and distribution expenses. In the case of Railway Traction availing power at 110 kv, distribution expenses are non existent. Railways pointed out that the statement of KSEB that the power supply availed from KSEB has been extended over Tamil Nadu territory up to Erode from Kanjikode point of supply and up to Nagerkoil from Kazhakkoottom in order to exploit the benefit of cheaper tariff is denied. Indian Railway has been divided into 15 Zonal Railways and further sub divided into several Divisions for administrative convenience. Zonal Railway or Divisional boundaries have no relevance to State Boundaries. For instance Southern Railway covers the whole of Tamil Nadu, Kerala and parts of Karnataka and Andhra. Southern Railway comprises of six Divisions out of which two Divisions viz Palghat and Thiruvananthapuram are served by KSEB. Railway Traction Sub Stations are located with an inter distance of 40 to 60 KM based on topography of Section such as gradient, curve etc. such that tail end voltage does not fall below 19 kv. Railway Traction Sub Stations are so designed that in case of supply failure of one traction substation 25 kv power supply from adjacent traction Sub Station could be extended over the feeding zone of failed traction substation to maintain essential passenger services duly regulating the freight traffic. This is only an emergency feeding arrangement and power supply can be extended over one adjacent feeding zone only due to voltage drop and cannot be resorted for longer 11

12 durations due to limited capacity of traction sub stations. The Divisional Boundary between Palghat and Salem Divisions is at KM and the State boundary between Kerala and Tamil Nadu is at KM The normal feeding zone of Kanjikode traction substation, fed by KSEB in Coimbatore- Palghat Section is up to Madukarai. Sectioning Post at KM is at a distance of 11 KM in to Tamil Nadu territory. Similarly the normal feeding zone of the traction substation at Eranial fed by TNEB in Thiruvananthapuram Nagercoil Section, is up to Balaramapuram. Sectioning Post in Kerala, is at a distance of KM into Kerala Territory. The location of Traction substations and sectioning posts are decided based on technical reasons such as topography of section, permitted voltage drop at tail end etc concerning train operation As such feeding stations of one traction substation covering small distances in adjascent Railway Division.Similarly feed extension from one traction substation over the feeding zone of adjascent traction substation during power failure for short durartions is also an essential requirement to maintain bare minimum passenger traffic The legal position regarding Railway Traction Tariff are furnished below. Constitution of India under Article 287 (b) secures that the cost for energy consumed for Railway operation should be lower than other consumers of substantial quantity. The spirit of the above constitutional provision is that the net price or the rate charged to Railway operation is not to be more than that charged to other consumers. Hence Hon Commission is requested to secure that price (cost per unit) charged to Railway Traction is not more than EHT Industrial Consumers. Railway stated that Indian Railway is a GOI organization and public utility which has no profit motive like other HT&EHT Industrial establishments. The Indian Railway is an essential part of the transport infrastructure of the country and plays a vital role in not only economic growth but also in integrating even the most backward under developed areas of the country with centres of growth and development. Unreasonable hike in power tariff for Railway Traction Tariff will impede the growth of energy efficient and low cost mass transport system in Kerala. Electric Traction was extended to State of Kerala by Railway Administration on specific invitation and assurance given by the Government of Kerala and KSEB that electricity will be provided at cheaper rate for Railway Traction to offset the huge capital investment on Railway electrification and little freight revenue from State of Kerala when compared to with other States. Rail traffic in Southern Railway is at a loss making proposition on commercial terms due to lesser freight traffic originating in southern region. Train operation is at a 12

13 loss in Kerala as the traffic in Kerala is mainly passenger oriented with very little freight traffic due to lack of industrialization and non availability of natural resources. The Operating ratio (Percentage of working expenses to gross earnings) for the year is estimated to be %. Electrification of Railways is capital intensive with Rs 1.13 Crore/Route KM. Though passenger service is not remunerative, to meet the demands of ever increasing passenger traffic more and more trains are introduced every year, frequency of existing services increased, which calls for induction of more coaches and locomotives, improvement in terminal facilities and line capacity by doubling and adding new lines. Based on specific request made by then Hon Chief Minister for running Suburban Electric Train in Kerala, one Main Line Electrical Multiple Unit (MEMU) shed has been opened at Palghat and one MEMU shed at Quilon under construction. Running suburban services which requires frequent start and stop consume more energy than Mail/Express trains and adds further revenue loss to the already strained finances of Southern Railway. Mainline Electrical Multipe Unit (MEMU) is the most appropriate mode of Transport as far as Kerala is concerned where faster commuter traffic over longer distances are required. However if tariff is not favourable, introduction of MEMU services will have to be put on hold and Railway will be constrained to continue with conventional slower passenger services. D.O.Letter of Ministry of Power, Government of India D.O.No 9/9/97 Co-ord dated addressed to Chief Secretaries of all States based on recommendation of the Committee of Secretaries and Public Accounts Committee advised as follows In pursuance of the recommendation made by the Committee of Secretaries and taking into consideration the importance of Railways in the National Economy, I would request you to please consider reviewing tariff charged for electric traction in your State so as to bring it to a level lower or at most equal to the power rate applicable to HT Consumers. Railways have stated that Common Two Part Tariff for Industries and Railway Traction is not appropriate. Railways stated that the common EHT Tariff for all EHT consumers including Railway Traction is not correct due to the Special Nature of Traction Loads. Railway Traction Tariff needs to be categorized separately since the load is unique in nature and cannot be compared with other industrial loads due to following factors.industrial loads are confined to a place and loading pattern is fairly constant, whereas the continuously moving trains only constitute the load on Railway Traction substations The same number of trains moves through the feeding zones of contiguous traction substations.the 13

14 traction load gets shifted from one traction substation to the other registering Demand at every traction sub station but load on the grid remains fairly constant throughout its run. Thus it would be just and proper to measure the simultaneous maximum demand occurring on the Grid from the contiguous Traction Substations as the moving loads do not put any extra burden on the generators and charge on that basis since charging for MD for the same load at many substations is illogical. Since the same train registers Demand at all Traction Sub Stations the Load Factor that could be achieved at Railway Traction is about 15% to 30% only where as for industries they are confined to one place and the load factor achieved is about 60% to 80% depending upon working hours. Two Part Tariff system of billing, due to lower load factor, average cost of energy to Railway Traction gets artificially inflated. The study conducted to assess the simultaneous demand on the generator due to traction load, using load survey data obtained from KSEB, proves that all traction substations are not drawing peak demand simultaneously and simultaneous demand is only 55.98% of the sum of individual maximum demand. While simultaneous maximum demand due to all Traction Substations in Kerala region is only kva the sum of individual maximum demand for the same period is kva( data excludes Chalakudy Traction Sub Station )While simultaneous Maximum Demand is only kva, demand charges are paid for about kva which includes penal charges at some Traction Sub Stations. Hence it would only be just and proper if Demand Charges and Energy charges are reduced to a lower level than that for EHT industries, so that that average cost per unit paid for Railway Traction is not more than the average cost for industries as envisaged in the Constitution of India. 3.2 Response of KSEB: KSEB has given the following comments on the objections filed by Dy Chief Engineerr, Southern Railway vide letter No KSEB/TRAC/Tariff Revision / Traction / /684 dated KSEB Pointed out that they have filed the petition as per Clause 24 of KSERC (Conduct of Business) Regulations, 2003, submitting six copies of petitions duly signed up and verified by an affidavit as specified under Para 24(5) of the above regulations. The General Heading of Petition also is in Form-1 prescribed in Paragraph 23(3)of the Regulation and the required fees specified in Regulation has been remitted. KSEB filed the petition as per Sec 62 and 64 of Electricity Act, 2003 and published the abstract of the petition as per Clause 27(1)(e) of the 14

15 KSERC (Conduct of Business) Regulations, 2003 in one issue each of two English dailies and two Malayalam dailies, for information and inviting objections and responses of all stakeholders. KSEB submitted the Summary of petitions for publication in the dailies vide letter dated KSEB has complied with all the procedural formalities and hence there is no merit in the objections raised by the respondent Railways on the maintainability of the petition. KSEB stated that the objection raised by Railways on increase in the cost of power purchase is without appraising the orders of the Hon Commission approving ARR and ERC for the period from to The Unit rate of purchase for was Rs 2.25/Unit and for it was Rs 3.67/Unit and hence the increase in cost is 63.21% The consumption pattern of Railway traction is entirely different from that of 110 kv EHT Consumers. Further Railway Traction is exempted from TOD tariff. Hence the argument that Railways are singled out from EHT Consumers is without appraising facts. Traction Tariff prevailing in Kerala is the lowest among States. Even though cost of power purchase has increased more than 60% over the period there was no increase in Traction Tariff after Comparison of Traction Tariff in the other States is given to get an impression on the prevailing tariff across the country. KSEB Stated that in order to bridge the approved revenue gap of Rs the existing tariff of all categories of consumers has to be increased by 17.5% during the year As per the Electricity Act, 2003 tariff of highly cross subsidized consumers cannot be increased further. Hence the percentage of increase on the subsidized categories including railway traction may be marginally higher than the average increase required. However despite the increase in cost of power purchase etc, the tariff of Railway Traction has not increased since KSEB Stated that the average cost of supply has been consistently increasing since the year KSEB further submitted that since Audited accounts give a true picture of the actual financial position, the petition has been prepared based on audited accounts. Even with approved ARR the subsidy allowed to Railway Traction has been increasing since the year KSEB has stated that the objector is a subsidized consumer and even with the proposed hike in traction tariff the consumer will be subsidized by 6.19% as per the ARR proposed by KSEB. However as per the approved ARR the cross subsidy level shall be 12.71% which is well within the limit prescribed in the national tariff policy.the Electricity Act, 2003 or National Electricity Policy does not mandate that tariff for each category of consumer should be based on voltage wise cost of supply. Sec 61 of the Act deals with Regulation on Terms and Conditions for determination of Tariff 15

16 and the guiding factors to be specified in the said regulation. 61 (g) of the Electricity Act, 2003 states (g)that the tariff progressively reflects the cost of supply of electricity and also reduces cross subsidies within the period to be specified by the Appropriate Commission. KSEB has been continuing as a single utility doing Generation, Transmission and Distribution. The assets of KSEB are yet to be segregated into different functional areas. Hence with available details it is difficult to determine cost at various voltage levels of each category of consumer. Hence KSEB filed the tariff proposal based on embedded cost of supply (average cost of utility).since KSEB is continuing as a single entity doing generation, transmission and distribution, the KSERC (Terms and Conditions of Tariff for retail sale of Electricity ) Regulations,2006 applicable to distribution function cannot be made applicable to KSEB as such. The said regulation also stipulates that a study based on average cost method forms part of the tariff revision proposal. The objector has been repeatedly stating that average cost of supply for the year has been less than that of The average cost as per approved the ARR for was Rs 4.04/Unit and for was Rs 4.17/Unit. In order to bridge the gap of ARR of Rs Crore for , the tariff of all categories of consumers has to be increased by about 17.5%.However as per the provisions of National Tariff Policy 2006, the tariff of highly subsidizing categories including Commercial consumers could not be increased further. Hence it is inevitable to increase tariff of subsidized category of consumers like Railway Traction. As part of reinvesting the assets and liabilities of KSEB to a new Company, the same is now vested with the Government. The function wise segregation of accounts into generation, transmission and distribution may be completed along with re investing of assets and liabilities. KSEB has been working strictly as per the provisions of Electricity Act, 2003 and also as per the directions and orders issued by the Commission. Proposal of tariff revision has been made as part of bridging the approved revenue gap for the year All EHT and HT consumers are billed under TOD tariff by charging during peak hours Demand and Energy higher by 50% and 40% over normal rates. The respondent is benefitted by way of exempting them from TOD. The Cost of Generation and Power Purchase from thermal stations is one of the most critical expense components of KSEB and the same contributes about 60% of the Total 16

17 ARR.. Generation and Power Purchase from Thermal Stations was 46% of Total ARR during the year which has been increased to 62.61%during The Revenue Gap of KSEB also increased due to the increase in cost of generation and power purchase. Since the year Commission has not made any Tariff Revision to bridge the revenue gap. For the years and Hon Commission has adjusted and approved revenue gap against the approved revenue surplus while issuing the truing up of accounts for the year The Cost of Supply for the year in Table 4 of the petition dated was prepared as per Audited Accounts. The Hon Commission has been disallowing various expense components including power purchase and employee costs while approving the ARR. For the year the actual cost of power purchase considerably increased on account of delay in the Commissioning of Kudamkulam and NLC Expansion Projects and the Hon Commission considered this additional liability through the truing up process. Further the Hon Commission has ordered to release the DA as and when the same is released by the State Government. Hence the approved ARR does not represent the true financial position of KSEB. For the year also that Hon Commission has disallowed the cost of power purchase and employee cost as part of restricting expenses. The Average Tariff Rs 3.60/Unit is the average per unit tariff realization expected from Traction Tariff It does not include the fuel surcharge, charges for excess consumption, excess demand charges when billing demand exceeds the Contract Demand etc. The figure adopted by Railways is the total amount paid by the Railway for traction including fuel surcharge, charges for excess consumption, penalties etc. So the figures stated by the objector cannot be adopted for arriving at the average revenue from the existing tariff. Further the ARR adopted by the Railway for the year was after deducting the non tariff income from the Total ARR where as total ARR was adopted for arriving at cost of supply for FY to By adopting wrong figures the objector has stated that the average cost of supply for the year is lower than that of The Commission has not revised the tariff, though the cost of power purchase and revenue gap has considerably increased during the last few years. Approved revenue gap for the year was Rs Crore and Hon Commission has directed KSEB to file proposals for bridging the revenue gap. KSEB has no other means other than to revise the 17

18 tariff of all subsidized categories of consumers including Railways for bridging the revenue gap.as a public utility the Accounts of KSEB is audited and certified by the C&AG. The ARR is an estimate approved in the beginning of the year. The actual ARR will be much different from the approved ARR due to various external factors. The actual financial position of KSEB is reflected in the audited accounts and hence KSEB has adopted the audited figures for tariff proposals whenever such details are available. As stated earlier, as the function wise segregation of accounts is yet to be completed, it is difficult to arrive at the cost of Generation and Power purchase of KSEB. The figures for average cost of generation and power purchase as per Table-2 of the objection is without any supporting documents and hence may be rejected. While computing average cost of input energy, the objector has considered only the cost of power purchase and fuel cost of generation. The actual functional cost of generation including R&M Cost, depreciation, employee cost, A&G Expenses is not reflected in the figures computed under Table-2 by the objectioner. Amount remitted by Railways under Traction Tariffs include all other miscellaneous receipts other than tariff including fuel surcharge, charges for excess consumption, excess Demand Charges Penalties and other levies. Hence the same cannot be held as revenue from the existing tariff.the Electricity Act, 2003 or National Tariff Policy does not define cross subsidy as suggested by the objectioner. KSEB has been using the average cost of supply (Embedded cost of Supply) for determining the tariff which is strictly as per Para 8.3 (2) of National Tariff Policy. The level of Cross Subsidy/ Subsidy of consumers is also arrived based on the average cost of supply. As stated in Para 14 to 18, Electricity Act, 2003 and National Tariff Policy also mandates to determine the tariff based on average cost of supply only. Hence the objection raised by Railways that KSEB has not declared the cost of supply is without appraising the facts. The figures arrived at under Table.3 of objection is without any supporting documents or evidence. The Hon Commission or KSEB has not arrived at / published such data elsewhere through the orders on ARR, truing up petitions or audited accounts. As detailed under Table-4 and Table-5, the Railway Traction Tariff was highly subsidized by KSEB. Further as detailed under Table-6 even with the approved ARR the cross subsidy level for proposed tariff shall be 12.71% only which is within the limit stipulated under Para 8.3 (2) of National Tariff Policy. The Statement of the objector that with proposed tariff increases the cross subsidy level is without appraising the facts. As detailed in Table 5 and Table 6 the subsidy level is likely 18

19 to be decreased from 7.69% during the year to 6.19% during the year Further as detailed in Table 4 and Table 6 the cross subsidy level will be 12.71% instead of 8.76% for the year with the proposed revision as per figurers approved by the Hon Commission through orders on ARR.As detailed above the tariff revision proposed for Railway Traction is reasonable well within the limit prescribed under the National Tariff Policy. Hence the Commission may kindly approve the tariff. After constitution of the Kerala State Electricity Regulatory Commission and the enactment of Electricity Act, 2003, KSEB has been functioning strictly as per the Regulations and Orders issued by the Commission. Electricity Act, 2003 and National Tariff Policy do not permit KSEB to offer any type of concession or subsidy to any categories of consumers. Any concession offered by State Government shall be strictly as per Sec 65 of Electricity Act, 2003 As detailed under Table7 more than 60% of ARR for the years and is for procuring power from thermal sources alone. Hence statement of the objector that cost of inputs is less when compared to other states is without appraising the facts properly. KSEB has proposed to revise the traction tariff as part of effort of KSEB to bridge the approved revenue gap of Rs Crore for the year and not based on the fact that Traction tariff is higher in other States.KSEB was directed to file their petition to reduce the revenue gap of Rs Crore.It is a fact that some part of Tamil Nadu Railways is under the Railway Divisions of Palghat and Trivandrum and hence it is difficult for KSEB to ascertain breakeven points of traction sub stations in Kerala near Tamil Nadu. Railway itself admits that it uses supply from adjacent Sub Station when supply failure occurs due to the fault in adjacent Sub Stations. KSEB is a Distribution Licensee functioning as per the provisions of Electricity Act, 2003and other prevailing Regulations and directions issued by the Commission. KSEB is not empowered to extend any concession to any group of consumers. Article 287 deals with the imposition of Tax on Price of Electricity. Electricity duty is not being levied from the Railways by the State Government. Hence the above Article does not protect Railways from tariff hike. As far as KSEB is concerned, the objector is a consumer availing electricity from KSEB. The Electricity Act, 2003 empowers KSEB to recover the cost of providing supply at the rates approved by the Hon Commission. Railways also is empowered to recover the reasonable cost through enhancing passenger traffic as well as freight tariff. Hence argument of objector has no relevance in the present context. KSEB has sought attention to the Table.2 on the comparison of Traction Tariff prevailing in other parts of the country. Except in Andhra Pradesh and Maharashtra two part tariff has been prevailing across the country. Further Demand Charge enables the Distribution Licensee to recover a part of infrastructure cost specifically made for providing supply to Railway Traction. Hence KSEB is against single part tariff for railway Traction. Considering the 19

20 special nature of Traction load Railway Traction is exempted from TOD Tariff. It is not appropriate to extend other form of concession on demand and energy charges to Railway Traction. Railway Traction is a moving load. In order to provide quality of supply at different places along the rail route say Trivandrum to Palghat, KSEB has to create Sub Stations and associated infrastructure at different locations along the route. However for an Industry the entire load is met from single substation. Hence there is no rational in the arguments raised by the objector. 4.0 ANALYSIS BY THE COMMISSION 4.1 The Commission notes that the revenue gap of KSEB is growing to alarming levels and a general and comprehensive tariff revision of all categories of consumers would be unavoidable in the near future. An interim revision of tariff at this stage would unsettle the inter-category parity and ratios between the categories. Hence the Commission concludes that revision of Railway Traction Tariff alone at this juncture would not be fair and scientific. 4.2 The Commission shall take into consideration all arguments, views and concerns recorded by both petitioner and the respondent while designing the Railway Traction Tariff as a part of general tariff revision. The Commission expects that KSEB will submit a comprehensive proposal for a general revision of tariff, immediately as provided in the Order dated in OP 1/2011 of APTEL, New Delhi. 5.0 Orders of the Commission The Commission disposes of the petition ordering that the revision of tariff for Railway Traction shall be taken up for consideration along with the general tariff revision proposal to be submitted by the KSEB at the appropriate time. Sd/- Sd/- Sd/- Mathew George P.Parameswaran K.J.Mathew Member Member Chairman Approved for issue Sd/- Secretary 20