COCHIN SPECIAL ECONOMIC ZONE Authority (CSEZA)
Aggregate Revenue Requirement (ARR) and Expected Revenue from Charges (ERC)
for the Financial Year 2012-13
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- Background:
Cochin Special Economic Zone (CSEZ), is a Government owned Special Economic Zone is under the Ministry of Commerce and Industry, Department of Commerce, Government of India. The Zone, comprising an area of 105 acres, is located at Kakkanad. The Cochin Special Economic Zone Authority constituted under the SEZ Act, 2005 is the Developer of the Zone providing the infrastructure and other related services to the Zone.
The Zone has been set up with the objective of promoting exports and creating employment opportunities. Exporting industries are provided with infrastructure facilities like power, water, effluent treatment facility, communication etc. The power distribution network was revamped during the period 2003-05 under Central Government funding to provide uninterrupted and quality power to the consumers in the Zone.
Government of Kerala granted Power distribution license to CSEZ vide G.O.(Rt)No.118/02/PD dated 20.6.2002. On obtaining NOC from the KSERC, vide their letter No.KERC/CSEZ/2/71/2005 dated 1.1.2005, CSEZ started power distribution inside the Zone w.e.f. 1.5.2005. There are three categories of consumers viz HT, LT and temporary. CSEZ adopts the same tariff structure of KSEB for the end consumers. Distribution area is limited to the industries and other supporting utility services inside the Zone.
As on 30.10.2011 there are 30 HT connections, 105 LT connections and 4 temporary connections. Consumer pattern is expected to be the same during the year 2012-13 also. The projected income for 2012-13 is Rs.2627.05 lakh against the estimated expenditure of Rs.2702.76 lakh leaving a deficit of Rs.75.71 lakh. Aggregate Revenue Requirement for the year is given in Form E.
Government of India has initially invested Rs.12.46 crores for commissioning the Power Distribution system in CSEZ. This included Rs.228 lakh in the form of working capital, sanctioned for providing security deposit to purchase power from the KSEB.
Long term issues
i)Enhancement in power allocation from KSEB
CSEZ purchases power from the KSEB under the existing power purchase agreement with them for a contract demand of 10000 kVA. The present load requirement is around 13000 kVA. An application for enhancement of 2000 kVA was filed with the KSEB in 2009 anticipating future demand for power in the Zone. It would be worthwhile to note that the system is heavily dependent on the HT connections as 89% of the total revenue comes from the 30 HT consumers. Though space constraint in the Zone restricts increase in the number of consumers, 20% increase in consumption is envisaged to meet the increase in the demand of the existing consumers. However, KSEB has not agreed to for such an enhancement. In the present scenario it is not possible to think of purchase of power from sources otherthan KSEB, for –
(a)purchase of power in small quantities, its management and wheeling is not feasible to CSEZA owing to its stature as a distribution licensee limited to a small area.
(b)At present, CSEZ is getting power at a higher rate than the selling rate on account of Commission’s order dated 13.12.2010. Procurement of additional quantity ofpower at a higher rate will essentially lead to hike in distribution rates as compared to the distribution rates of KSEB to similar class of consumers.
ii) Renewable Energy Purchase Obligation (RPO)
The Licensee is under obligation to procure renewable energy, atleast 3% of the total energy consumed or projected. CSEZ has to source about 1.8 million units of power from renewable energy sources. It was proposed to purchase one million units of energy from small hydro during the year 2011-12. However, it could not proceed further. The option available is to buy energy credit certificates from the market at the existing high rates. For small licensees, this expenditure is unbearable. Therefore, this expenditure is not provided in the ARR&ERC for 2012-13 submitted. It is prayed that the Hon’ble commission may waive off the requirement at least for a period of five years for the small licensees.
Capital Expenditure Programme for the year 2012-13
The Hon’ble Commission had approved implementation of SCADA and web enabled management system in CSEZ under the capital expenditure programme for 2011-12 at a cost of Rs.120.00 lakh. The Commission did not approve the third proposal for revamping general lighting system with SPV back-up and hence the expenditure of Rs.90.00 lakh has beenshifted from capital expenditure for power distribution. The existing substation was supplied by Siemens and had facilities to install SCADA but with their own software and hardware only. However, when M/s.ABB, another substation equipment manufacturer, was contacted as an alternative option, they were ready to undertake the work if the entire system was changed with components of ABB. As this option is not economically viable or feasible, the work has to be executed through M/s.Siemens or their authorized agent. A web enabled system is also to be developed and engaging two agencies may create problems in terms of communication between the two systems. Therefore, CSEZ Authority has approved awarding the work to M/s.Siemens India Ltd.
Return of Equity and Interest on Working capital
The entire expenditure of Rs.12.46 Crores for setting up of a sub-station in CSEZ was met by the Government of India and had been transferred to the CSEZ Authority as capital contribution. This contribution included Rs.228 lakh sanctioned for providing security deposit to purchase power from the KSEB. The CSEZ Authority has decided to return this sum back to the Central Government in 2011-12 which would lower the contribution by Government of India to that extent. Clause 20 of KSERC Regulation No.1/1/KSERC-2006/XVI dated 12.10.2008 permits return @14% on the equity not exceeding 30% of the funds invested. Further, Clause 22 of the said Regulation allows interest at the prime lending rate of the SBI on working capital. The provision, as at the admissible rate above,for equity isRs. 42.76 lakhs per year and for working capital the return would be Rs.54.37 lakhs for 2011-12 (on 418.24 lakh @ 13%) and Rs. 58.16 lakhs for 2012-13 (on Rs.447.40 lakhs @ 13%) (Annexure – A). The total admissible provision for 2012-13 comes to Rs. 100.92 lakhs. The interest on the working capital has been included in the ARR & ERC (Form ‘O’). The current year surplus position is insufficient to provide any return on capital investments.
Prayers:
(i)The accompanying ARR ERC and the capital expenditure programme for 2012-13 may be approved.
(ii)The petitioner may be allowed to retain the existing tariff structure for 2012-13.
(iii)The delay in filing the return, by one day due to administrative reasons may please be condoned.
2.Features of Distribution System:
The consumption pattern and load curve are enclosed.
3.Details of Power Purchase Agreement for procurement of electricity:
The revised Power Purchase Agreement with KSEB for supply of 10000 kVA energy has been executed on 31.12.2009. This agreement is valid upto 31.03.2025. Application for enhanced power allocation to 12000 kVA is pending with KSEB.
4.Compliance and regulatory impact related to Commission's directives in the previous and current financial year:
All regulations of the KSERC issued from time to time have been complied with.
5.Estimation of consumer category-wise energy requirement, including self consumption:
As on 31st October, 2011 there are 30 HT connections, 105 LT connections and 4 temporary connections. During the year 2012-13 the total estimated consumption is 60.00 million units. The category wise consumption for 2011-12 and projected requirement for 2012-13 is given below:
(In million units)
Category / 2011-12 (Provisional) / 2012-13 (Projected)HT / 51.30 / 52.00
LT / 6.29 / 7.99
Self consumption(LT) / 0.06 / 0.06
Total consumption / 57.65 / 60.05
6.AT & C losses:
The distribution system has underground cabling and pre-paid meters of 0.5 accuracy class. Besides, there is a constant real time computerized monitoring arrangement. This reduces the T&D losses. T&D loss is expected to be around 1%. There is a mismatch between the quantum of energy purchased and sold resulting into an excess sale. As proposed in the ARR&ERC for 2011-12, energy auditing of power distribution is being conducted during 2011-12. The report is expected to receive in this financial year itself. It is expected to address this problem in the findings of the energy audit.
7.Aggregate Annual Revenue Requirement (ARR):
The aggregate Revenue requirement for the year 2012-13 is expected at Rs.2702.76 lakh as explained in form E.
8.Power Purchase
CSEZ purchases power in bulk from the KSEB for distribution. KSEB has allocated CSEZ 10000 kVA power for distribution. Enhancement in power allocation to 12000 kVA is pending with KSEB. The power purchase cost had been enhanced from Rs.2.75 to Rs.3.16 per kWh with effect from 01.12.2010.
9.Interest and Finance charges:
The Govt. of India have met the entire capital expenditure on infrastructure for power distribution. The provision for interest on working capital of Rs.58.16 lakh has been made in the ARR.
10.Depreciation
The total depreciation provided for the year 2012-13 is Rs.54.24 lakh. This is inclusive of the proportionate depreciation on the assets proposed to be created during the year.
11.Employee cost
M/s. Kitco Ltd. are the O&M agency for running the power distribution system on payment of an annual fee of Rs. 108 lakh in 2011-12 which is expected to be continued in 2012-13 also.
The proportionate employee cost of CSEZ staff apportioned is Rs.14.00 lakh in 2011-12. A sum of Rs.14.50 lakh has been apportioned for the services of the staff for the power distribution for the ensuing year.
12.Repairs and maintenance
A provision of Rs.25.00 lakh has been provided for repairs and maintenance including the cost of spares, for 2012-13. The work envisaged are replacement top of RMUs, other maintenance work of RMUs, earthing of them, etc.
13.Other expenses
Rs. 1.41 lakh has been provided for own power consumption for the distribution system which relates to substation and testing lab.
14. Hiring of Vehicles.
The provision for expenditure on travel and hiring of vehicle expenses for 2012-13 is Rs.1.30 lakh.
15. Provision for Insurance.
It is proposed to insure the assets during this year. Govt. of India has constituted a statutory body viz. the Cochin Special Economic Zone Authority to look after the Developer functions of the CSEZ. It is permissible to insure the assets under the Authority name. A provision of Rs.12.00 lakh has been made under the Administration and General Charges for this purpose.
The total under the Administration and General Charges (Form M) has thus been envisaged asRs.32.16 lakh.
Summary of ARC & ERC
- Total revenue for the year 2012-13 is Rs.2627.05 lakh. This is inclusive of the income from interest on security deposit with KSEB of Rs.9.00Lakh and interest on fixed deposit. The Authority has resolved to invest such amount of funds in fixed deposit leaving sufficient working capital pending clarification from the Ministry of Commerce and Industry.
The Aggregate Revenue Requirement for the year 2012-13 is Rs.2702.76 lakh (Form E) leaving a revenue deficit of Rs. 75.71 lakh.
17.Expected revenue from charges
(i)Revenue from sale of energy:
In 2012-13, it is expected to sell 60.00 million units energy earning total revenue of Rs. 2521.15 lakh. including meter rent and earnings from the collection charges of electricity duty and state levies.
The above figure includes charges for own power consumption.
(ii)Non-Tariff Income
Interest on Security deposits with KSEB is taken as Rs.9.00 lakh and interest from fixed deposit is taken as Rs.96.00 lakhs. Other non-tariff income includes collection charges and other miscellaneous recoveries. As such the total non-tariff income for 2012-13 is expected to be Rs.105.90 lakh.
Thus total revenue from sale of energy and interest on investments is Rs.2627.05 lakh.
18.Review of performance of Licensee, efficiency parameters and indices:
The performance of the Licensee is periodically reported to the KSERC. This licensee has been functioning within the approved limits of the performance standards prescribed by the Commission. The billing is on pre-paid system and therefore there are no outstanding dues from the working units. The T&D loss is below 1 %.
19.Capital expenditure programme and capitalization of interest and expenses
It is proposed to prcure two additional 11kV VCB panels in the substation at an estimated cost of Rs.14.00 lakhs. One panel is required for extending new connections and the other will be kept as a standby to meet any contingencies that may arise. The capital expenditure on this item has been included in the ARR&ERC in Form V and necessary depreciation has been provided for 2012-13. Being a projection, depreciation has been taken for the whole year.
20.This licensee has been following the same tariff pattern of KSEB. A higher tariff for the consumers within the Zone may not be justifiable as the KSEB consumers just outside the boundary of the Zone will be getting power at a lower tariff rate. It is proposed to continue the existing tariff structure as approved by the Commission.CSEZA will approach the Hon’ble Commission for change in tariff structure as and when KSEB revises the tariff for their similar consumers. The Tariff Policy Proposal for the year 2012-13 is enclosed pp.31-32).
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Tariff Policy Proposal for 2012-13.
PART A – HT TARIFF
a.HIGH TENSION – INDUSTRIAL
Normal RatesDemand Charges (Rs. per kVA of billing demand / month / 270
Energy charge (paise/kWh) / 300
b.DEEMED HIGH TENSION (DEEMED HT) INDUSTRIAL
Consumers with more than 100 kVA connected load
RatesDemand charges (Rs./kVA of Billing Demand/Month) / 278
Energy Charge (Paise/kWh) / 310
PART B – LOW TENSION (LT) TARIFF
- LOW TENSION – I (LT-I) – INDUSTRY
LT-I Industrial
Fixed charge (Rs./kW or part thereof of connected load per Month) / 45
Energy Charge (Paise/kWh) / 325
(ii)LOW TENSION – II (LT-II) – NON INDUSTRIAL
Tariff applicable for Commercial consumers such as Commercial premises, hotel and restaurant, Satellite Communications, Offices/ telephone exchanges under telecom companies.
LT -II CommercialFixed charge (Rs./kW) / Single Phase – 50
Three Phase - 100
Energy Charge (Paise/kWh) / Upto 100 kWh – 545
Upto 200 units – 605
Upto 300 units – 675
Upto 500 units – 730
Above 500 units – 805
LOW TENSION – III (LT-III) – TEMPORARY CONNECTION
LT-III TEMPORARY CONNECTIONEnergy charges (Paise/kWh) – 1200 OR
Daily minimum Rs.120/kW or part thereof connected load which ever is higher.
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Annexure – A
Calculation on expected return on equity as per Clause 20 of KSERC Notification No.1/1/KSERC-2006/XVI dated 12.10.2006
Year 2012-13
Equity in 2012-13Rs.1018.13 lakh
Equity @30% of funds invested Rs.305.44 lakh
14% on equity eligible Rs.42.76 lakh.
Calculation on interest on working capital payable on normative basis as per Clause 22 of KSERC Notification No.1/1/KSERC-2006/XVI dated 12.10.2006
(Rs. in lakhs)
Year 2011-122012-13
(Provisional)(Projected)
1. Operation and maintenance for one month14.3415.09
2. Maintenance spares @1% of historical cost
of assets at the beginning of the year11.9212.12
3. Receivables equal to two month’s average
Revenue391.98420.19
Total normative working capital as per
Clause 22418.24447.40
SBI PLR as on 1st April 13%13%
Interest on working capital54.3758.16