Sri.P.Naredranath Chowdary, Managing Director,The Andhra Sugars Ltd.,Chemicals & Fertilisers Division, Kovvur, West Godavari Dist

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1 Sri.P.Naredranath Chowdary, Managing Director,The Andhra Sugars Ltd.,Chemicals & Fertilisers Division, Kovvur, West Godavari Dist ) ON INCREASE OF DEMAND CHARGES: It is observed that Demand Charges in the proposed Tariff Schedule for financial year are exorbitantly increased to Rs. 600/- per KVA i.e., inflated by 42% from the current rate of Rs. 350/- per KVA. Demand Charges are collected on an objective to recover the fixed costs. But, the licensees are also levying development charges during initial release of demand and also whenever additional demand is emancipated over and above the existing CMD. Despite the levy of such hefty development charges it is weird to impose heavy burden on the consumers by levying demand charges at an exorbitant rate of Rs. 600/KVA. 2) On increase of Energy Charges: The licensees have resorted to increase the energy charges from current rate of Rs.4.90/-Unit to Rs.5.34/Unit i.e., inflated by 9% for 132 KV and above HT -1 category consumers for the financial year At 132 KV potential the power transmission losses are less. Therefore, it is a mere bizarre to increase the energy charges for 132 KV and above category of consumers. Indeed the losses accrued due to power pilferage and AT & C losses are accounted and levied on the consumers by the licensees. Licensees are trying to recover the revenue loss due to power pilferage and AT & C losses from the consumers by inflating the energy charges. Variable cost of energy is not increased to the extent. It appears that other than fuel charges are added in energy charges. Average variable cost in North-Eastern States was not more than Rs. 2.50/KVAH. The STUs should implement appropriate metering and billing of energy to curb power pilferage and to reduce the AT & C losses. Also, the tariff proposed is comparatively much higher when compared to the tariff of our neighboring states. The abnormal increase in (tie power tariff may cripple the industrial sector and effect our economy. Andhra Pradesh Industries cannot compete in the open market with the industries of other states and countries. For bulk power consumers the energy charges shall be at lower level than normal consumers. Therefore Bonnie APERC may consider the exorbitant hike in the energy charges as irrational & absurd and therefore pass an order it deems to be fit. Development charges are collected from prospective consumers to meet the part cost of development of network ahead. Whereas demand charges are to recover the fixed cost of maintaining the network for providing power to the HT consumers. Based on the cost allocation and with contracted demand projected for FY 14-15, Demand charges to be recovered is around Rs. 520/kVA/Month. With the proposed increase in Demand charges by Rs. 250/kVA/ Month for all HT consumers and resetting billable demand to 100% of CMD, the weighted average realization from HT categories is estimated to be Rs. 528/ kva/ Month. Licensees have proposed hike in demand charges with an objective to recover increased fixed charges allocated to HT consumers. In the Tariff Order for FY , the average Cost to Serve (CoS) as approved by the Hon ble Commission for the state was Rs 5.25/Unit. Since then, there has been a significant increase in the average CoS during the year and the licensee expects the trend to continue for the ensuing year. The Licensee estimates the state level CoS for the year FY to be at Rs. 6.32/Unit. This implies that an increase of Rs.1.07/ Unit (20 % increase) The abrupt increase in the CoS is due to the following reaons Increase in Power Purchase Cost The Power purchase cost as approved by the Hon ble Commission in FY for the state is Rs. 4.33/Unit adjusted to the consumer level ( computed on sales basis) whereas the licensee estimates the power purchase cost for the ensuing year to be Rs 4.70/Unit (Power purchase cost computed on a per unit sales basis) which is an increase of Rs. 0.37/Unit. Some of the factors leading to such a rapid increase in power purchase cost are: The WPI index has grown by 6.6% over the period Sep 2012 to Sep This has lead to an increase in the coal cost and transportation of coal cost by more than 5% The current gas purchase price is $4.6/SCM including transportation and marketing margin. As per recent price revision of gas in the country, gas price has been revised to $8.6/SCM including

2 transportation and marketing margin which implies doubling the gas price from existing level. This in addition to the variation in Dollar exchange rate which itself has increased the variable cost of Gas based IPP s. Reduction in availability from the gas based IPP s due to reduction in Reliance KG D6 gas and meeting the shortfall in energy from short term purchases/ R-LNG. Shortfall in energy availability due to the above mentioned points is expected to be met through power purchase from short term sources and R- LNG. The actual power purchase cost for H1 FY from bilateral sources was Rs. 5.52/Unit which the licensee expects to continue for FY Considering the increase in the R-LNG price and Dollar exchange variation rate, the licensee expects the variable cost of R-LNG to be around Rs /Unit Realistic projections of variable costs of APGENCO and CGS thermal stations has been considered by taking into account the quantum of imported coal that is expected to be used in these stations. In recent years, there has been an increase in quantum of imported coal usage due to scarcity in the domestic coal availability. Increase in Network Cost The Distribution business of the licensee has witnessed a huge increase in the expenditure for the Second control period. The overall expenditure of all the Distribution Licensees put together for the Second control period was higher than the APERC approved figure by Rs. 2,575 Crs. The major reason for this sudden increase was higher Operation & Maintenance (O&M) costs. The licensee expects a similar increase in the other components of network cost like Transmission cost & SLDC charges, PGCIL cost & ULDC charges. The Network cost for FY as approved by the Hon ble Commission was Rs. 0.91/Unit while the Distribution licensee has projected the Network cost of Rs. 1.26/Unit computed at consumer sales level which implies an increase of Rs. 0.35/Unit. Distribution Business truing up for the Second Control period and Revenue Deficit for Retail Supply Business for FY Hence, the Distribution licensee feels that the increased CoS should reflect appropriately in the tariff structure and proposes tariff revision for various categories.

3 Further, Average variable cost of power in Andhra Pradesh cannot be compared with that of in North-Eastern states as the availability of hydel power is much higher in North-Eastern states. 3) ON BILLING DEMAND; The distribution licensee has proposed to levy the demand charges on 100% of CMD. According to the National Tariff Policy the amount levied shall be on par with power consumption. Increasing the tariff by the same amount irrespective of consumption as proposed by DISCOMS, defeats the very purpose and objectives of the National Electricity Policy. Supply of reliable and quality power of specified standards in an efficient manner and at reasonable rates is one of the main objectives of the "National Electricity Policy". Also, Sec, 61(i) of E. A. mandates that the National Electricity Policy must be followed while determining the tariff. Actual average demand utilization will not be more than 60%. Therefore, the irrational rate increase and levy of demand charges on 100% of CMD violates the law, 4) ON LEVY OF CROSS - SUBSIDY SURCHARGE The power purchase in the open market through power exchanges is already on a higher end ranging from Rs. 6/KVAH to Rs. 8/KVAH on an average. Therefore, levy of cross-subsidy surcharge will further burden the consumers. According to clause 8.5,1 of National Tariff Policy, the amount of cross-subsidy surcharge and the additional surcharge levied from consumers who are permitted Open Access should not be so onerous that it eliminates competition, which is intended to be fostered in generation and supply of power directly to the consumers through Open Access. A consumer would avail of open access only if the payment of all the charges leads to benefit him. Also clause of NTP states that the computation of crosssubsidy surcharge, therefore needs to be done in a manner that while it compensates the distribution licensee, it does not constrain introduction of competition through Open Access and also cross-subsidy surcharge to be phased out step by step in the subsequent years. Therefore, Hon'ble commission may take in to record of the recommendations of NTP and restructure the cross-subsidy charges. 5) ON LEVY OF SHORTFALL REVENUE INCURRED BY LICENSEES: It may be noted by the Hon'ble Commission that revenue losses as projected by the licensees is due to the non-sale of power to the consumers by enforcing mandatory restriction & control measures and load shedding on all categories of H. T. & L T, consumers during the second half year of financial year and first half year of financial year For the financial year the percentage of metered sales is lower than the tariff order level by 15% and lower by 556 MU for the first half of financial year During the R & C period, in order to revive the industrial sector and since there is no other option left industries have purchased power in the Open Market through energy exchanges by paying higher prices at an average unit rate of Rs. 6/- to 8/- per KVAH. Thus the purchase of expensive power has increased the The DISCOM has to project and procure for the contracted demand of the consumer on 24 hr.s basis. The Licensee is incurring Distribution Net work expenditure whether the consumer utilizes the CMD or not. Hence, it is proposed to levy demand charges on 100% of CMD. Due to demand supply gap, there is a possibility that HT consumers may switch over to open access resulting in loss of cross subsidy to subsidized categories consumers. To regulate the open access consumers transactions, there is a provision in the Act for levy of cross subsidy surcharge on consumers opting for open access. As per section 42 (2) of Indian Electricity Act, 2003 and clause 17.1 (iii) of APERC Regulation 2 of 2005, open access consumers of distribution business shall pay cross subsidy surcharge in addition to wheeling charges as determined by the Hon ble commission from time to time In , APDISCOMs were facing energy deficit and the inter-regional transmission corridor constraints limited the extent of power procurement by APDISCOMs. The above situation was appraised to Hon ble Commission seeking permission to impose Restrictions on power supply under sec. 23 of Electricity Act, 2003 and clause 16 of GTCS and based on the representation of DISCOMs, the Hon ble Commission have given R&C (Restrictions & Controls) orders in the month of September 2012 for Industrial consumers in order to maintain equitable distribution of power among all the consumer categories.

4 overheads of the industries mainly the power intensive industries. Therefore, it is to be noted by the Hon'ble Commission that it is irrational and absurd to levy the shortfall revenue amount of Rs. 655 Crores for financial year and Rs. 725 Crores for financial year incurred by the licensee due to the decrease in metered sales / non sale of power due to R & C measures on to the consumers. Since the licensee has failed to supply the contracted power to the consumers (Industries) and as there is no other option left, the consumers have resorted to purchase of power through Open Access at higher prices. Therefore, it is prayed to the Hon'ble Commission to strongly contend and quash the licensees motive of recovering the incurred revenue loss in the form of tariff hike in both demand charges and energy charges on all the categories of consumers for the financial year as proposed and projected by the licensee. SUGGESTIONS; 1) ON PROPOSED HARMONIC SURCHARGE; Licensees proposal of levying harmonic surcharge in order to improve power quality is welcoming. But, the proposed harmonic surcharge i.e. 25% of Energy Charges X Total energy consumed is very much higher. The Hon'ble commission may note that levy of 25% of energy charges on whole energy consumed is irrational and illogical. The contention of the objector that the shortfall revenue amount incurred by the licensee due to the decrease in metered sales / non sale of power due to R & C measures is being imposed on consumers in the form of tariff hike is wrong. Rs. 655 Crores for financial year and Rs. 725 Crores for financial year are actually the difference between Tariff Order targets and actual Revenue as explained in ARR write-up. Under the purview of Hon ble APERC. Therefore, the harmonic surcharge may be levied only on the quantum of power from the Day / Time / Period in which harmonics are fed in to the system rather than for the whole period. The time period of three months to implement the compensation provision is very less and industries have to be given minimum one-year time for installing harmonics suppression equipment, DISCOMS have to formulate a framework and lay down clear and standard procedures before implementing the harmonic surcharge proposal. 2) ON SEGREGATION OF AGRICULTURAL FEEDERS: DISCOMS are passing the cost of energy given to subsidized sectors like Agriculture, other sectors and un-metered / unbilled energy on the other classes of consumers. To avoid this Agriculture feeders must be separated from industrial and common feeders and appropriate metering shall be employed for the agriculture feeders separately, as per IS! norms and standards. Also clause of NTP states that metering of supply to agricultural / rural consumers can be done by use of self - closing toad limiters may be encouraged as a cost effective option for metering in cases of "Limited use Consumers" who are eligible for subsidized electricity. 3) ON ENERGY AUDIT BY THIRD PARTY: In EPDCL, segregation of Agl. feeders was completed on pilot basis in 6 no.s pre-dominantly agl. mandals duly incurring an expenditure of Rs cr.s. Further, there is a proposal for segregation of 70 no.s pre-dominantly agl. feeders duly incurring an expenditure of Rs. 5 cr.s. Suggestion noted. Under the purview of Hon ble APERC. Clause of NTP recommends that "Third Party Verification of Energy Audit Results for different areas / localities could be used to impose area / locality specific surcharge for greater ATC loss levels and this in turn could generate local consensus for effective action for better governance. The SERCs may also encourage suitable local area based incentive and disincentive scheme for the staff of the utilities linked to reduction in losses.

5 Therefore it is prayed to the Hon ble APERC to take in to record of the aforesaid objections and suggestions and pass an order it deems to be fit. Additional Objections and Suggestions if any will be submitted on the day of Public Hearing.