JOINT ELECTRICITY REGULATORY COMMISSION
FOR MANIPUR AND MIZORAM
AIZAWL : : : MIZORAM
D-31, M.G.Road, Upper Khatla
Tel. No. : 0389-2310623
NO.H.11019/17/09-JERC Dated Aizawl, the 28th October, 2010.
MINUTES OF THE 5th MEETING OF THESTATE ADVISORY COMMITTEE FOR THE STATE OF MIZORAM
Venue : Conference Hall of Directorate of Horticulture,
Date : 21st October, 2010
The list of participants is appended.
The 5th Meeting of the State Advisory Committee (SAC) for the State of Mizoram was held on 21st October, 2010 at the Conference hall of Directorate of Horticulture & Soil Conservation, Aizawl, under the Chairmanship of Shri H. Bihari Singh, Chairperson, Joint Electricity Regulatory Commission for Manipur and Mizoram.
Pu C. Hmingthanzuala, IAS (Retd.), Member, Joint Electricity Regulatory Commission for Manipur and Mizoram welcomed the member present and also informed that the meeting is convened to consider the Tariff Petition filed by the P & E Department, Government of Mizoram, for fixing the retail electricity tariff for the financial year 2010-11. The Member, JERC (M&M) further requested the SAC members to offer views and comments for further interactions and suggestions.
Agenda 1. Confirmation of the Minutes of the 4th Meeting of State Advisory Committee held on 28th July, 2010, at Aizawl:
Before going to the important agenda on Tariff, the Member, JERC sought for the consent of the SAC Members to the Confirmation of the Minutes of the 4th Meeting of the SAC, Mizoram which was held on 28th July, 2010. In reply, Pu C. Thanglura, General Secretary, Mizoram Consumers Union, pointed out an inadvertent error at page 3 of the Minutes where “Club” is written in place of “Union”.
After the Members gave nod to the correction, the Minutes of the 4th Meeting of SAC Mizoram were confirmed with the word “Union” in place of “Club”.
Agenda 2. Tariff Petition of P & E Department, Mizoram for FY 2010-11:
Initiating the discussion, Shri H. Bihari Singh, Chairperson, JERC (M&M) narrated briefly about the Tariff Petition, which is at present under vetting in the Commission.
The Chairperson narrated briefly the provisions of the Tariff Regulations of the Commission for information of the Members and asserted that fixation of tariff, which shall normally be done every year for any utility, shall pass through several procedures prescribed in the Tariff Regulations, including examination of the “merits” and “demerits” of the proposal, collection & verification of data and documents and conduct of a series of public hearing, as required by Tariff Policy, Electricity Act 2003 and CERC guidelines.
The Chairperson also informed the Committee that four different tariffs namely Wheeling charge, Retail tariff, Generation tariff and Transmission tariff are to be fixed by the Commission to provide open access facilities to prospective Consumers & Utilities. However, the Commission is placing before the SAC for discussion only the Retail tariff proposal received from P & E Department for the Financial Year 2010-11 and it is the sale rate (s) at which the P & E Department is going to charge the various consumers for consumption of electricity in the State of Mizoram. The cases of Wheeling, Generation and Transmission Tariffs shall be taken up only when the requisite data/ information which have already been called from the Department, are received - the Chairperson added.
The Chairperson then drew the attention of the Members to the Public Notice which was issued alongwith summary of the tariff petition for determination of the retail tariff and widely published by the P&E Department in local newspapers inviting objections and suggestions.
As mentioned in the notification, general public are allowed to express their views, comments, suggestions, objections on the tariff proposal through prescribed procedures till 12th November, 2010. The issues raised by the individuals or organizations, if found relevant, shall be placed before the public for open discussion during public hearing – the Chairperson reiterated.
The Chairperson then drew the attention of the Members to the summary of the tariff petition, given in the public notice which was already circulated earlier alongwith the meeting notice, and requested them to offer their views & comments.
Pu C. Thanglura, General Secretary, Mizoram Consumers’ Union stated that in Mizoram, Power Sector Reform programmes are not fully implemented yet, the Corporatisation of the P & E Department is not yet done, SLDC is not fully established as it should be, and the loss rate is also not checked. In this welfare State (the Member perhaps would like to mean Special Category State for which 90 p.c. of the CPA is grant), all other sectors have also been suffering losses. Therefore, Electricity Tariff may not be revised till the reform process is complete – the Member opined. The Member also informed the SAC that the PHED has so far not revised the water charges fixed in the late nineties.
About the Corporatisation and the franchisee, the Chairperson informed the Committee that both are under active consideration of the Government of Mizoram and it may take some more time. Pu C. Hmingthanzuala, Member, JERC also informed that a report on the case study carried out by a Senior Officer of the Commission in respect of Corporatisation of the Power Department, Government of Tripura in January 2004, was made available to the Government of Mizoram for reference and necessary adoption.
Participating in the discussion, Shri N. Shyamsundar Singh, Chief (Engineering), JERC stated that Electricity Act, 2003 does not mandate that the Department shall be Corporatised. Corporatisation is an option recommended by Power Sector Reform for a change when the Department fails to deliver to the expectations of other stakeholders. What is important is that, it shall not be a losing concern and so long as it works efficiently and performs technically and commercially well, it can continue to remain as a Department. Therefore, Revision of Tariff has no bearing of any kind with Corporatisation.
Pu, L. Lalhmingthanga, President, Mizoram Chamber of Industries, wanted to have detailed information about the sources of power and the rates at which the power is procured. The President further wanted to know if the energy data provided by the Department in the petition are audited by competent energy auditors.
The Chairperson informed that the details of sources & rate of power procurement are given in the petition. About the energy audit, the Member was told that the energy data provided are not based on audited figure of a competent authority. For the calculation of the tariff, audited figures are required to be furnished. However, accurate energy audit is possible only when proper metering of all consumers, distribution transformers and feeders are completed. The Department has not completed this exercise so far and therefore, the Government approved figures are considered for purposes of fixing the tariff.
Pu Lalduhzuala Sailo, SE (Coml.), P&E Deptt. explained the details of annual accounts given in separate statements of the Aggregate Revenue Requirement (ARR) & Tariff Petition, and also the Compounded Annual Growth Rate (CAGR) calculations in respect of different types of consumers. It was also made clear by the SE (Coml.) that calculations of the details like GFA (Gross Fixed Asset) etc and subsequent assessment of ARR have been done with the help of a renowned consultancy company engaged for the purpose. Referring to the tariff proposal which shows an ARR of Rs. 196.95 crores, Pu Lalduhzuala Sailo, SE (Coml.) stated that based on the ARR, the cost of supply works out to Rs. 9.17 per unit. However, the retail tariff comes down to Rs. 3.69 per unit after the Government of Mizoram assures a tariff subsidy of Rs. 117.62 crores. The proposed tariff may have a reasonable increase of only 23 p.c. above the existing one.
Pu. L. Pachuau, Chief Engineer (D), P & E Deptt. also supplemented that, the Government of Mizoram needs some more time to decide on the Corporatisation. Meanwhile, it has come to the rescue of the consumers by providing a huge subsidy of Rs. 117.62 crore and made the tariff affordable to all categories of consumers. The CE (D) also drew the attention of the SAC to the tariff structure in which the low consuming Domestic Consumers are charged less while high consuming Domestic Consumers, Commercial & Industrial units, who can afford to, need to pay more. Pu C. Hmingthanzuala, Member, JERC (M&M) also supplemented that contention of the Department is that the under-previledged or lower income group of people (BPL) are reasonably subscribed by the proposed tariff.
Pu R. Laltluanga, President, All Mizoram Farmers’ Union, expressed concern about the Load Shedding in other parts of State than the Capital. The President desired to know if the assessment of energy in the tariff petition has considered the provision for lifting the load shedding.
In reply, Pu L. Pachuau, Chief Engineer (D) informed the Committee that power supply to the consumers is reluctantly restricted because of Transmission constraints and power availability constraint in the NER Grid. The energy projected does not include additional requirement for mitigation of load shedding. The restriction may be lifted only after these line and availability constraints are removed through the development of 400 KV system and the enhanced allocation of power from the ongoing projects in the region.
The Chairperson felt that there is definitely avenue for improvement and one way of bringing in relief to the situation is to reduce/ minimize the loss rate through energy audit and also informed that the target for Loss Reduction for next year shall be fixed and indicated in the Tariff Order. Sharing the views, Pu C. Hmingthanzuala, Member, JERC stated that what is really important and essential at the moment is to reduce the technical and commercial losses and imparting education to the Consumers.
The Member, representing the Mizoram Consumers Union, felt that the Tariff for the Consumers consuming unmetered energy or with defective meter is very high in comparison with that of normal consumers. Pu L. Pachuau, CE (D), clarified that higher tariff has been fixed for those kinds of consumer with a specific intention to discourage use of defective meters and also to see that consumers initiate for early replacement.
The Chairperson suggested that the Consumers paying higher tariff because of defective meters (unmetered energy consumption) shall lodge complaints timely to the IGRC or Forum for redressal.
The Chairperson then took up the ARR components one after another for detailed discussions.
- Fuel Cost - The Chairperson expressed the desire to raise this amount so as to enable the Department to generate Heavy Fuel Base Power Plant at Vairangte to meet peak power requirement of the State.
- Power Purchase Cost – Some of the Members were interested to know the details of unit rate at which power is purchased from different Central Sector Generating Stations. The Chairperson stated that the details are in petition & the rates of procurement are of 2009-10 and further insisted that the P&E Department may find out if the Tariffs of the Central Sector Generation and Transmission projects are revised/ being revised for 2010-11. The Chairperson also expressed the desire to know if arrears are likely to pay during 2010-11. These informations may be furnished to the Commission before hearing.
The Member, JERC however felt that inclusion of the long outstanding arrear for the calculation of tariff now may not be desired by the consumers.
- Operation & Maintenance Expenses -All the Members expressed their views that the Employee cost is very high. The Chief Engineer (D), P&E Department stated that the reasons are due to large workforce and higher salary as compared to others as detailed in the petition.
On seeing the high employee cost, the Chairperson also had some doubt if the wages of the work-charged & Muster Roll Staff who are exclusively engaged for the execution of particular schemes/ works and whose monthly wages are directly charged to the work, are again booked and accounted in the employee cost thereby resulting in double booking of a portion of wages of the Department.
Pu L. Pachuau, Chief Engineer (D), P & E Department, explained and confirmed that double booking was not done.
Some of the Members of SAC came up with the strong contention that the salary of the employees including other allowances & facilities which is borne by the Government shall not be taken while calculating annual expense of the Department.
In reply, the Chief (Engineering), JERC stated that we have been under the public sector for several years now and we always like that all expenditure be borne by the Government alone. However, it shall not be allowed to continue further simply because, with the kind of meagre assistance by the Government we can not think of large scale development of the State. Accordingly, the Central Government has chosen power sector first for development in the private sector mode and this could attract the private parties also. In case, the huge amount of Rs. 117.62 crore, which the Government commits to pay as tariff subsidy (59.97%) is somehow saved, then the amount can be utilized for development of other sectors like education, Sports etc. We need to follow this kind of trend as done in other States – the C(E), JERC added.
- Depreciation: Pu L. Lalhmingthanga, President, Mizoram Chamber of Industries stated that the purchase rates of creating assets in the Department are very high. As a result, the Gross Fixed Asset becomes high thereby increasing the Depreciation value. The President wanted details of the Asset Calculation. The Chief Engineer (D), P&E Department stated that the value of Asset was calculated based on a certain assumptions. The Chairperson desired that the calculation is furnished.
- Interest & Finance charge – No comment.
- Interest on Working Capital – the Chairperson briefly explained how these amounts are derived.
- Remaining points i.e. Provision of Bad Debts, Return on Equity and Non Tariff Income were also briefly discussed in the meeting.
Lastly, the Members of the SAC were requested to file to the Commission suggestions and objections to the ARR and Tariff Petition for the FY 2010-11 filed by P & E Department, through prescribed procedures within 12th November, 2010 positively.
P & E Department may be requested to furnish the details/ break up on the following before the date of public hearing which is being notified soon.
- Employee Cost: Separately for Regular, Work charged & Muster Roll under Plan and Non-Plan Head of Account.
- Component of O & M expenses capitalized.
- Asset valuation details:
- Arrear Figures payable to each Generating companies.
- Information about revision of generation tariff by CERC for the Central Sector Generating Stations from which State receives power.
The Meeting ended at about 2:20 pm with a vote of thanks to the Members.
State Advisory Committee Mizoram