Installed Capacity of Power Stations

APresentation

onARR & Tariff Proposal of OHPC for

FY 2008-09Analysis/Objections/Suggestions

January 31, 2008

ByDr. Shibalal Meher

(Consumer Counsel)Nabakrushna Choudhury Centre for Development Studies, Bhubaneswar

Installed Capacity of Power Stations

Sl.No.

Name of the Power Station

Present Installed Capacity as on

1.4.1997(MW)

Installed Capacity considered for 2008-09

(MW)

1 Hirakud 307.5 347.5

2 Balimela 360 510

3 Rengali 250 250

4 Upper Kolab 320 320

5 Upper Indravati - 600

6 Machhkund(Orissa Share )

34.5 34.5

Total 1972 2062

Design Energy

Sl. No.

Name of the Power Stations

Design Energy(MU)

Design Energyfor sale (MU)

1 HPS(Burla & Chiplima)

1174 1162.26

2 BHEP 1183 1171.17

3 RHEP 525 519.75

4 UKHEP 832 823.68

5 UIHEP 1962 1942.38

Total 5676 5619.24

Project Cost (Rs in Crore)

Sl. No.

Name of the Power Stations

Transferred Cost as on

01.04.06

Project Cost considered for

FY 2007-08

Project Cost considered for

FY 2008-09

1 HPS 295.17 368.09 370.42

2 BHEP 334.66 297.66 297.74

3 RHEP 259.01 93.69 93.81

4 UKHEP 307.96 109.18 112.19

Total (Old PS) 1196.80 868.62 874.16

UIHEP - 1195.42 1195.42

Total 1196.80 2064.04 2069.58

Annual Fixed Charges

Annual fixed charges comprises of

A. Interest on Loan

B. Depreciation including Advance Against Depreciation (AAD)

C. Return on Equity (ROE)

D. Operation & Maintenance (O&M) Expenses

E. Interest on Working Capital

Annual Fixed Charges (Contd..)

A. Interest on Loan(Rs. in Crore)

Sl. No.

Description of the Loans

Interest on loan for the FY 2008-09

HPS BHEP RHEP

UKHEP UIHEP

1 Govt. loan @ 9.8% 0.28 0.37 0.41 0.49 -

2(i)(ii)

(iii)(iv)

PFC LoanFor 3 & 4 Burla @8.75%For 7 & 8, Balimela @ 9.60%For UIHEP @8.75%Guarantee Commission

4.21-

-0.44

-7.88

-0.64

--

--

--

--

--

4.101.60

3 Deemed loan @ 12% 0.99 3.24 - - -

Total Interest with G. C. 5.92 12.13 0.41 0.49 5.70

Annual Fixed Charges (Contd..)B. Depreciation including AAD C. Return on Equity

Name of the

Power Stations

Depreciation considered

for FY 08-09

Remark

HPS(Burla & Chiplima)

10.72 To the extent of Loan

Repayment

BHEP 13.55 To the extent of Loan

Repayment

RHEP 2.41 -

UKHEP 2.88 -

UIHEP 32.07 Limited to Loan Repayment


RoE (@14% per

annum)

HPS (Burla & Chiplima)

12.96

BHEP 11.70

RHEP 3.30

UKHEP 3.95

UIHEP 41.82

Annual Fixed Charges (Contd..)D. O&M Expenses (Rs. in Crore)

Sl. No.

Particulars HPS BHEP RHEP UKHEP UIHEP

1 Actual O & M Expenses for FY 2006-07.

32.33 19.58 18.12 13.61 30.62

2. 4% Escalation for FY 2007-08. 33.62 20.36 18.85 14.16 31.84

3 Pension liability in FY 2007-08 - 5.00 - - -

4 Total for FY 2007-08 33.62 25.36 18.85 14.16 31.84

5. 4% Escalation for FY 2008-09. 34.97 26.37 19.60 14.73 33.12

6. Major repair - - 2.00 6.00 8.00

7 Proposed for infrastructure Dev

1.00 1.00 1.00 1.00 1.00

8 Arrear Electricity charges - - 2.50 3.14 -

TOTAL 35.97 27.37 25.10 24.87 42.12

E. Interest on Working Capital

Annual Fixed Charges (Contd..)

(Rs. in Crore)

HPS BHEP RHEP UKHEP UIHEP

O & Expenses for one month

3.00 2.28 2.09 2.07 3.51

Receivables for two months

11.25 11.13 5.37 5.50 21.95

Maintenance spares for one year

0.70 0.70 0.70 0.70 1.00

Working Capital 14.95 14.11 8.16 8.27 26.46

Interest on Working Capital

1.80 1.69 0.98 0.99 3.18

Total Annual Fixed Charges(Rs. in Crore)

HPS BHEP RHEP UKHEP UIHEP

Interest on Loan 5.92 12.13 0.41 0.49 5.70

Depreciation 10.72 13.55 2.41 2.88 32.07

Return on equity 12.96 11.70 3.30 3.95 41.82

O&M Expenses 35.97 27.37 25.10 24.87 42.12

Interest on working capital 1.80 1.69 0.98 0.99 3.18

ED on Aux. Consumption @20 P/U

0.12 0.12 0.05 0.08 0.20

Income tax for previous year

0.00 0.21 0.00 0.00 6.63

Total ARR/AFC 67.49 66.77 32.25 33.27 131.72

Average Tariff (P/U) 58.07 57.01 62.06 40.39 67.81

Rate of Primary & Secondary Energy

• As per the CERC Tariff Regulations, rate of Primary Energy for the Hydro Generating Stations shall be equal to average of the lowest variable charges of the Central Sector Thermal Power Generating Stations of the concerned Region for all the months of the previous year.

• In case, the primary energy charges recoverable by applying the above primary energy rate exceeds the Annual Fixed Charges of a generating station, the primary energy rate for such generating station shall be calculated by the following formula :

Primary Energy Rate = Annual Fixed Charges

Saleable Primary Energy

Rate of Primary & Secondary Energy

A. Rate of Primary Energy


Rate of Primary Energy

(Paise/KWh)

HPS (Burla & Chiplima) 58.07

BHEP 57.01

RHEP 62.06

UKHEP 40.39

UIHEP 67.81

Machhkund 25.30

B. Rate of secondary energy is same as rate of primary energy.

Analysis of the Proposal

Revenue Requirement and Tariff Proposal of OHPC during 2008-09

Power Stations Design Energy for sale

(MU)

Revenue Requirement (Rs Crore)

Tariff

(P/U)

HPS 1174 67.49 58.07

BHEP 1183 66.77 57.01

RHEP 525 32.25 62.06

UKHEP 832 33.27 40.39

UIHEP 1962 131.72 67.81

Total 5676 331.50

Comparison of Tariff of Different Power Stations between 2007-08 and

2008-09

Power Stations

2007-08 (P/U)

2008-09 (P/U)

% Change

HPS 54.79 58.07 5.99

BHEP 53.52 57.01 6.52

RHEP 35.17 62.06 76.46

UKHEP 21.24 40.39 90.16

UIHEP 67.16 67.81 0.97

MHEP 18.21 25.30 38.93

Difference in Revenue projected on the basis of diff. Tariffs

Power Stations

Projection of Revenue in 2008-09 on the basis of 2007-08 tariff

Projection of Revenue in 2008-09 on the basis of proposed tariff

Increase in revenue (Rs Crore)

Tariff (P/U)

Revenue (Rs Crore)

Tariff (P/U)

Revenue (Rs Crore)

HPS 54.79 63.68 58.07 67.49 3.81

BHEP 53.52 62.68 57.01 66.77 4.09

RHEP 35.17 18.28 62.06 32.26 13.98

UKHEP 21.24 17.49 40.39 33.27 15.78

UIHEP 67.16 130.45 67.81 131.71 1.26

All 292.58 331.50 38.92

ARR of Different Power Stations(Rs in Crore)

Power Stations

2006-07 2007-08 % Change

2008-09 % Change

HPS 66.36 63.69 -4.02 67.49 5.97

BHEP 25.55 62.68 145.32 66.77 6.53

RHEP 18.48 18.28 -1.08 32.25 76.42

UKHEP 13.47 17.49 29.84 33.27 90.22

UIHEP 127.23 130.46 2.54 131.72 0.97

All 251.09 292.60 16.53 331.50 13.29

O & M Expenses of Different Power Stations (Rs in Crore)

Power Stations

2006-07

2007-08 (Approved)

% Change

2008-09

% Change

HPS 33.53 33.29 -0.72 35.97 8.05

BHEP 20.34 26.10 28.32 27.37 4.87

RHEP 14.94 14.74 -1.34 25.10 70.28

UKHEP 9.52 13.23 38.97 24.87 87.98

UIHEP 38.54 39.88 3.48 42.12 5.62

All 116.87 127.24 8.88 155.43 22.15

Interest on working capital of different Power Stations (Rs in Crore)

Power Stations

2006-07

2007-08 (Approved)

% Change

2008-09

% Change

HPS 1.28 1.55 21.09 1.80 16.13

BHEP 0.73 1.45 98.63 1.69 16.55

RHEP 0.55 0.55 0.00 0.98 78.18

UKHEP 0.43 0.51 18.60 0.99 94.12

UIHEP 2.48 2.64 6.45 3.18 20.45

All 5.47 6.70 22.49 8.64 28.96

Return on Equity (Rs in Crore)

Power Stations 2007-08 (Approved)

2008-09 (Proposed)

HPS 6.78 12.96

BHEP 7.56 11.70

RHEP 0.00 3.30

UKHEP 0.00 3.95

UIHEP 41.82 41.82

BROAD TARIFF BROAD TARIFF RELATED ISSUES RELATED ISSUES

RAISED BY OBJECTORS RAISED BY OBJECTORS (To be addressed by (To be addressed by

OHPC)OHPC)

• Review of Design Energy OHPC have mentioned in their application that 150 MW is added in

the 360 MW Balimela Power House. Again they have mentioned that the 150 MW units have not yet been commissioned. That should not be taken into consideration for tariff application.

State had to reach a target of generation from Renewable Energy source for 200MU for 2006-07 and 5% of total generation in 2007-08. OHPC have not spelt out whether these targets are achieved.

• Equity Component Equity as notified by Govt. of Orissa should be adopted.

• Electricity Duty Electricity duty may be considered for payment in accordance with

the provisions of PPA.

Issues emerge from the objections/ suggestions submitted by the Objectors

Issues emerge from the objections (Contd..)

• Return on Equity The proposal of return on equity considering 14% per annum for FY

2008-09 for each power station with an equity base of 25% of the original project cost and additional capital expenditure is erroneous.

The state govt. may accept OHPC not to charge ROE in 2008-09 on the transferred asset cost.

In the absence of the statements on extent of capitalization, proper scrutiny of the capital works in progress and status of CWIP be made before allowing return on equity.

• R, M, & U investment The Chiplima HEP should be made fully operational to justify R&M

expenditure. There is urgent need of renovation of the old plant and equipments of

Machkund hydro electricity project. OHPC/state govt. should follow up the A.P. govt. in this regard.

• Balimela Extension Both the 7th and 8th unit of Balimela Power House need to be

operational early.

• O & M Expenses Proposal for infrastructure and peripheral development, and

recovery of arrear electricity charges for RHEP and UKHEP cannot be clubbed as O&M expenses and are primarily capital expenditure in nature with the latter being more revenue related in nature.

Some objectors calculated O&M cost as Rs 132.33 crore instead of Rs 155.43 crore proposed by OHPC.

OHPC being a govt. company, govt. has to earmark the quantum of land, buildings transferred to OHPC. Since the corporation building of the OHPC has not yet been constructed, huge amount of money has been paid by OHPC as rent and that should not be included in the ARR.


OHPC have applied for O&M charge amounting Rs 3 crore per month for HPS, but they have not mentioned the present status of Burla Powerhouse and Chiplima Powerhouse under the system. They should complete the same within this financial year by giving an affidavit in this regard.

OERC may consider 4% escalation on O&M expenditure during 2007-08.

Expenditure on SCADA equipment for UKHEP and RHEP should be treated as capital expenditure instead of including the same under O&M.

OHPC may meet expenditure towards infrastructure and peripheral development work from their own fund.

Arrear Electricity charges if any of RHEP and UKHEP should be met from the O&M allowed during respective years.


OHPC should come up with R&M proposal of units including expenditure towards runner blade.

Replacement of repaired starter of unit-4 of UKHEP should be covered under R&M scheme instead of including the same in O&M.

The expenditure towards replacement of 2 sets existing analog governor and AVR should be capitalized after deducting the original value of replaced assets.

• Depreciation Proper scrutiny of actual loans received and subsequent

capitalization and loan repayment schedule be made as in case of BHEP there is mismatch between the closing balance of net loan in FY 2006-07 and opening balance of net loan in FY 2007-08.

In the absence of loan repayment schedule some objectors propose depreciation of Rs 3.01 crore as against Rs 13.55 crore in case of BHEP.


• Capital costThe consumers of Orissa will be put to severe financial

disadvantage, if the “provisional” capital cost is allowed for determination of tariff for the FY 2008-09.

• Interest on Working CapitalOHPC may not charge interest on working capital to

reduce the impact on tariff. If at all the interest on working capital is charged it

should be computed at 11% instead of at 12% proposed by OHPC.

• Interest on LoansThe calculations made by OHPC is not in line with the

correctives previously suggested by the OERC and accepted by the govt. of Orissa.

The interest on deemed loan should be disallowed.


• Reservoir level & availability of power The availability of power from state hydro stations is

underestimated. It would be 7285 MU against OHPC proposal of 5884 MU.

• Tariff proposal The increase in the projected tariff for the year 2008-09 over that

for past years is unusually high in respect of old power stations, which needs to be examined by the Hon’ble Commission.

• Misc. Income Cash discounts received from PFC on repayment of loans taken

from time to time, and interest received on GRIDCO bonds be included in the ARR of OHPC.

• Truing Up There should be parity in truing up treatment. The benefits of high

hydro conditions should be passed on to the consumers of Orissa by truing up of the performance of OHPC during the previous years (2003-04 to 2006-07) as it was done during FY 2002-03 to pass through the fixed cost due to low hydro conditions.


• Primary and Secondary Energy charges If the secondary energy charges are also made equal to the primary

energy charges, the consumers have to bear the cost of high capital investment a second time.

When two additional units are installed in BHEP, there will be a sharp increase in the primary energy charges (as there will be no increase in the design energy).

OHPC does not have to incur any additional expenditure for generation of secondary energy.

The primary energy charge is very high in Orissa compared to other states. OHPC may be given an incentive for Secondary energy generation to motivate him to maintain 100% machine availability during monsoon.


• Individual station wise PPAs OHPC may produce the detail records from the date of

commissioning regarding how many days the powerhouse was closed due to flood in Hati River as per the direction of the Collector, and how many units were not generated during that period.

Power station wise actual generation from April – October 2007 and reservoir levels on 1.11.2006 and 1.11.2007 may be provided.

OHPC may furnish unit wise generation figures for Hirakud and Chiplima for past five years.

There is need to execute Chiplima B project after constructing second channel and then Hirakud B project be developed.

After finalisation of individual PPAs there is need to separate capacity charges and energy charges.


• Grant under APDP Scheme The grant of Rs 19 crore for RM&U of units 3 & 4 of Burla under

APDP Scheme should not be treated as equity and no returns be allowed on it.

• Utilisation of Secondary Energy Reserve Fund The earnings from secondary energy sale should be considered as

income in the ARR as per Hon’ble Commission’s Tariff order for FY 2007-08.

• Functioning of OHPC OHPC is functioning like a sub-ordinate govt. office of state govt.,

which is against the Orissa Electricity Reform Act, 1995. OHPC should produce all documents how the govt. is interfering in day-to-day affairs of the company.

OHPC has not filled up skilled workers in powerhouses and due to shortage of manpower the work culture and productivity are reducing day-by-day.


OHPC authorities are not giving equal benefit like pension and gratuity to each and every worker in the organization thereby reducing the productivity day-by-day.

OHPC may construct a bridge on the Hati River by which the GRIDCO can meet the expenditure by trading such power within one year.

OHPC has to produce all documents before the Commission along with the status report regarding the signing of MOUs with different companies for Thermal Power Generation.

OHPC has not taken steps to respond early disposal of required papers for early clearance of feasibility reports/detailed project reports for the hydro power stations.

• Perspective Plan for Hydro Development For hydro development, it is suggested to go for Chiplima B

project and Hirakud B project, pump storage projects and River link projects.


Documents

Installed Capacity of Power Stations