SUBSTANTIVE ISSUES (OTHER THAN LEGAL) RAISED BY THE PUBLIC AND THE STAFF:

Publication of Defaulters’ list

324. Some of the objectors have requested to publish the list of consumers whose dues are more than Rs.50,000, as per Commission’s Guideline 11(g).

325. The Commission agrees with the request of the objectors and directs the

DISCOMS to file the list of defaulters whose dues are more than Rs.50,000 along with the reasons for non-collection and details of litigation involved, if any, along with the ARR filings as per the Guideline 11(g) of Revenue and Tariff filing for Distribution licensees.

Tariff Order in Telugu

326. Many objectors have suggested to publish Tariff order in Telugu.

327. The Commission accepts the suggestion and accordingly arrangements are made to publish Tariff order in Telugu also from 2004-05.

ARR in Telugu

328. Some objectors have suggested to prepare ARR in Telugu (local language) as in the case of Karnataka.

329. The ARR filings comprise huge data, which is required to be furnished in prescribed formats. The licensees are presently filing a summary of the ARR and Tariff filings in Telugu which is being supplied to the public on payment of Rs.10. The

Commission is of the view that the present arrangement of supply of summary in Telugu would facilitate the public to read, understand and participate in public hearings.

Providing TA and food during public hearing

330. Many objectors suggested to pay TA and arrange lunch for the persons coming from distant places to attend public hearings.

331. The Commission is agreeable to provide lunch for the participants in the public hearings.

Copy of Tariff Order

332. Some objectors have requested for sending copies of the Tariff Order to them. The Commission noticed the persistent demand from the objectors to supply a copy each of the tariff order. The Commission appreciates the spirit of participation of the public in the proceedings and the Commission will be pleased to send copies of the tariff order to all those who participated in the public hearings.

Filing of seven copies of objections

333. Some of the objectors have pointed out that the Commission has allowed petitioners to file only two copies vide Tariff Order 2003-04 in paragraph 259 of page 120, whereas APTRANSCO and DISCOMS are insisting on filing of seven copies. The requirement of submission of objection in six copies was inadvertently incorporated in the public notice. The Commission regrets the inconvenience caused on this account, and assures that such omission will not be allowed to occur in future.

Presence of representative of GoAP at public hearings

334. It has been represented that the Commission should ensure the presence of a responsible representative of the GoAP at the public hearings at all places and not just at Hyderabad. Many objectors appear to be under the impression that the State Government representative has to reply to the objections raised by them on the issues pertaining to Government. The Commission would like to make it clear that the

public notice was issued by the licensees calling for objections on their filings from the general public and hence basically the licensees have to answer the objections and not the State Government, while the Government is however at liberty to send its representative to the public hearings if it so chooses.

Xerox as industrial activity

335. A representation has been made during the public hearing requesting that Xeroxing (photostat) is an industrial activity as per the Industries department and so the Commission may consider Xeroxing as industrial category instead of commercial category. Xeroxing is a service activity rather than a manufacturing activity. It is more a commercial activity comparable to typing institutes, photo studios, telephone booths, etc. The Commission does not therefore find any merit in the request for classification of these units under industrial category.

Meters provided to all except agricultural consumers

336. In the tariff order of 2002-03 the Commission directed the licensees to submit a comprehensive plan for metering of Agricultural connections. The licensees have furnished the plan though belatedly. As per this plan, meters will be provided for all Agricultural connections by 2007. Section 55 of the Electricity Act, 2003, mandates metering of all the services within 2 years of the appointed date i.e. by 10.06.2005. This matter will be pursued.

337. The Commission on its part, has already initiated the process of bringing metering culture in the agriculture sector, as explained below:

a. All new connections given from 01.04.2003 onwards for agricultural

purpose under LT Category V (A) should be provided with meters.

b. All agricultural connections released under LT Category V(B)

out-of-turn (Tatkal) scheme should be released with meters and appropriate metered tariff should be charged.

c. To motivate the agricultural consumers to get the meters fixed,

Commission froze the meter tariff for agriculture for a period of 3 years w.e.f. 01.04.2003 and this was also made applicable to the

existing agriculture consumers who opted for metered tariff by 30.09.2003.

338. The Commission is committed to pursue the efforts initiated in this direction to enforce the statutory mandate for metered supply to all consumers in the shortest possible time.

Separate category for Universities under HT category

339. It has been represented that under LT, Government educational institutions are categorized in LT VII. Universities whose load is more than 75 hp / 56 kw are forced under HT category II, being defined as not falling under any other HT category. Segregation of college and hostel loads in campus is difficult. It is requested to create a separate category under HT for universities. Under the existing tariff conditions, the HT consumers availing supply under category II are entitled to have separate HT connection for domestic loads within their premises under HT category VI which is charged at a lower rate than the tariff under HT category II. This facility is meant to reduce the burden of higher tariff applicable under HT category II. Thus the Commission does not find any need to provide further relief by classifying the entire University loads under a separate category with lower tariff.

Security Deposit

340. Some of the objectors have pointed out that as the high value consumers are being billed monthly, security deposit of two months’ consumption is sufficient. Further, the interest on this deposit should be raised from 3% per annum to bank interest rates under RBI guidelines. The Commission has published the draft Regulation on security deposit under the provisions of the Central Act. This Regulation contemplates collection of security deposit of two months’ charges only wherever monthly billing is done. The Regulation also provides for payment of interest on the security deposit at RBI rate.

Categorization of Hotels as industries

341. It is represented that hotels should be categorized as industries being a part of the tourism and hospitality industry as is done in Tamil Nadu and Kerala and lower

tariffs fixed. The electricity consumer classification and categorization for the purpose of electricity charges are made on the basis of the purpose of use of the electricity, and it are not related to the classification made by different departments of State Government or Central Government for some other purpose. Thus the classification followed either in State Government, or in other States is not a guiding principle for claiming such category for fixation of tariff for any particular class of consumers. However, the Commission recognizes the cardinal principle that any reasonable classification should have a rationale that has nexus to the objective sought to be achieved by such classification. From this point of view, the Commission believes that hotel business is to be treated as a commercial activity and classified as such.

Tariff for Cement and Caustic Soda Industries on par with Ferro Alloys

342. It is represented that power being one of the major inputs for cement and caustic soda industries, they may be treated on par with ferro alloy units and power supplied at the rate of Rs.2.12 per kwh. The Commission does not find any merit in the demand of cement and Caustic Soda industries to treat them on par with Ferro Alloys. The Commission has passed a detailed order classifying Ferro Alloys industry for a special tariff. These industries do not fall under this classification, as they do not satisfy the criteria taken into consideration in the case of Ferro Alloys industry.

Request to categorize under cottage industry

343. The All India Viswakarma Parishat have requested to classify the professions being pursued by them such as blacksmithy, carpentry, kanchari, shilpi, pottery and goldsmithy under L T Cat IV-Cottage industry with connected load up to 10 HP. Recognizing the features of these professions as cottage industries, the Commission agrees to classify these units with connected load up to 5HP only as in the case of other cottage industries already covered under L T Cat IV.

Classification of NIMS under separate HT category

344. It has been represented that energy utilized by Nizam Institute of Medical Sciences (NIMS) being for health care and non-commercial, it is desirable to categorise the consumption of NIMS under LT category VII @ Rs.4.00 per unit

without demand charges. The hospitals, including Government General hospitals like Osmania Hospital, Gandhi Hospital, are also classified under HT Cat II. The claim of NIMS that it is a non-profit institution does not merit any special consideration. The Commission is not inclined to discriminate within this class of consumers.

Fifteen days’ notice for disconnection of supply

345. One of the objectors pointed out that not less than fifteen days’ notice in writing should be given to consumer who defaults to pay the bill for supply of electricity as per section 56 of the Act, 2003. The Commission notified the Regulation on Electricity supply code U/s 50 of the Central Act, vide APERC (Electricity Supply Code) Regulation 2004, (No.5 of 2004) This Regulation provides for issue of 15 days’ notice as required u/s 56 of the Central Act. Licensees are required to follow the procedure for disconnection as specified in the said Regulation.

Minimum charges

346. It has been represented that in respect of rice mills under HT-I category, demand charges @ Rs.195 / KVA / month and consumption charges @ Rs.3.71 / unit may be reduced to Rs.160 / KVA / month and Rs.3.50 / unit respectively. It has also represented that minimum energy condition of 50 units per KVA per month may be removed. The demand charge rate of Rs.195/KVA/month does not fully cover the fixed charge component of the expenses of the Licensees. The average fixed cost across the board would be of the order of Rs. 600 KVA/month. The minimum energy of 50 Units/ KVA/month corresponds to a load factor of about 8%. Thus any industry which runs even at a very low load factor of 8% will not have any additional burden on account of minimum energy condition. Hence the stipulation of minimum energy is justified.

Development charges for Lift Irrigation (LI) Schemes

347. It is represented that the development charges should be collected from the farmers of Government lift irrigation schemes and not from the private lift irrigation schemes. The development charges for different categories of consumers are being

collected by DISCOMS under the terms and conditions of APSEB/TRANSCO, pending approval of fresh terms and conditions by the Commission. The Commission has notified Regulation under the provisions of Sec.46 of the Central Act. Under this Regulation, the licenses are authorized to recover any expenses reasonably incurred by the Licensee to provide any electric line or electrical plant specifically for the purpose of giving supply to the applicant. The Regulation also specifies that if such expenses are covered under any scheme sanctioned with institutional finance, the licensee is not entitled to collect such expenses from the consumer.

Tariff for Government HT Lift Irrigation schemes

348. It is requested to reduce the unit rate for the government LI schemes also by 50% fixing the rate @ Re.1 per unit as against the existing rate of Rs.2.08 as for the private LI schemes to avoid huge pending bills of government LI schemes. The Commission does not find any merit in the request for reduction in the tariff for Government lift irrigation schemes, which was fixed at the level of cost-to- serve. The Commission explained the rationale for such pricing in the earlier orders. The Commission is not inclined to reduce the tariff to below the cost of supply and transfer the burden of cross-subsidy to the other consumers.

Uniform flat rate for all capacities of agricultural pumpsets

349. Many objectors have made forceful pleas before the Commission stating that use of higher horse power does not mean having higher paying capacity or irrigation of larger area of the fields. The Commission is of the view that higher capacity motor draws more power. As long as the tariff remains below the cost of supply, the principle of rationalization demands that higher price should be charged from those who use more power than those who use lesser power in the subsidised categories.

Reasonable Return

350. Some of the objectors have represented that the four DISCOMS should be allowed reasonable return and any surplus should be passed on to the consumers. APTRANSCO and DISCOMS have not claimed in the filings the Reasonable Return that they are eligible for as per the Sixth Schedule of the Electricity (Supply)

Act, 1948. APTRANSCO and DISCOMS have further submitted that since the licensees are presently under public ownership and the State Government meets the subsidy and financial needs of the sector emanating out of the financial gap, it would be appropriate to exclude the reasonable return from the ARR computations for the present. The Commission, however, considers that from the point of view of enabling these entities to operate commercially, it would be in the interest of both the Licensee and the consumers to allow reasonable return they are eligible for. The Commission, therefore, decides to allow the reasonable return calculated as per the principles of Sixth Schedule of the Electricity (Supply) Act, 1948, to all the licensees, and the same is correspondingly included in the computations of the ARR.

Delayed Payment Surcharge

351. It is proposed that the request of the DISCOMS for exclusion of delayed payment surcharge from Non-tariff income should not be permitted. DISCOMS in their filings have projected delayed payment surcharge in the Non-tariff income, with a request to exclude the same from the computations of Non-tariff income. Delayed payment surcharge is collected from consumers who have defaulted in payments. In the Non-tariff income, delayed payment surcharge shall be accounted reducing the borrowings (and the attendant cost of borrowings) to the extent of such non-tariff income. This has to be included in the non-tariff income as the benefits from such collections need to be passed on to the consumers.

Bad Debts

352. It is represented that provision for doubtful debts should not be permitted. All DISCOMS have proposed an amount of Rs.82.93 crs. towards bad and doubtful debts for FY 2004-05, being 1% of the revenue. According to the Electricity (Supply) Annual Accounts Rules, 1985 (paragraphs 4, 2 of Annexure V to Appendix V), the provision for doubtful dues from consumers is to be made as a fixed percentage of dues from consumers and not as a percentage of gross revenue. The Rules also contemplate investigation to be conducted independently and in depth at the time of actual writing off a bad debt and a detailed study to be conducted periodically to ascertain the appropriate percentage and to update the percentage as determined. In this

connection, Commission had directed the licensees to conduct an audit of receivables and then make necessary provisions. The implementation of the directive is in progress but little information provided by the licensees does not indicate any trend, etc. in details. Further, the provisions made in first (finalized) transfer scheme provided adequate amount towards bad and doubtful debts. There is still some unutilized amount available out of this provision for write-off of bad and doubtful debts. The licensees should write off bad and doubtful debts to the extent of the amount so available and only after that include further provision for write-off, if necessary, on the lines explained above. The licensees are advised to pursue vigorously the review of the receivables and put in their best efforts to collect the same.

Reduction in Tariff for Domestic Category

353. Some of the objectors have stated that the tariff for domestic consumers in the slab 0-50 is high and have requested the Commission to lower the rate. The Commission while noting the sentiment of the public would like to point out that the cost-to-serve for the domestic category is Rs.3.97/unit which is the highest as compared to other categories. The cost-to-serve is distributed among the tariffs for the 4 slabs in domestic category in a manner that it is revenue-neutral after taking into account possible paying capacity of the majority of consumers in each slab. It can be seen that the rate for 0-50 slab is kept at the lowest with tariff rising sharply in the next slabs with the last two slabs paying more than the cost-to-serve. The lowest slab tariff covers only about 37 % of the cost-to-serve for the domestic category. The tariff of Rs.1.45 is after taking the government subsidy of Rs.0.62 per unit into account. In the tariff design itself there is an element of in-built inter-slab cross-subsidy. Any further reduction in their tariff is not feasible.

Increase in the number of slabs in LT-II (Commercial)

354. A suggestion has been made that the number of slabs in LT-II be increased from the present two slabs to three slabs. It may be recalled that the number of slabs in this category was reduced from 3 slabs to 2 slabs in FY03, prompted by the fact that the data filed by the DISCOMS showed an unduly high proportion of consumers in the 0-100 slab and the existence of a large number of multiple connections. In the

Tariff Order FY04, the Commission noted that the DISCOMS have not made any headway in detecting multiple connections in this category. Moreover, this is an amorphous group consisting of small shops, big shops, studios, entertainment centers etc. The Commission while retaining the number of slabs at two, kept the first slab at 0-50 to take care of small shops, especially in the rural areas in line with the consumption patterns of rural households. Current data shows that almost 30% of consumers fall into this category. There is, therefore, no substantive justification to increase the number of slabs in this category and thereby encourage the likelihood of multiple connections in single commercial establishments.

Tatkal Scheme

355. A number of consumers have represented that Tatkal Scheme should be discontinued and agriculture connections should be released as per seniority as done earlier. The release of new agriculture connections annually has been a policy of the