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Home News Power Sector News PSPCL may face financial crisis after APTEL decision on RoE

PSPCL may face financial crisis after APTEL decision on RoE

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PunjabThe Appellate Tribunal for Electricity (APTEL) has rejected the return on equity (RoE) on inflated equity of Punjab State Power Corporation Ltd (PSPCL) and Punjab State Transmission Corporation Ltd. (PSTCL) and has directed the Punjab State Electricity Regulatory Commission (PSERC) to re-determine the Rate on Equity and the excess amount allowed to the PSPCL with carrying cost shall be adjusted in the next Annual revenue requirement (ARR ).
PSPCL may face financial crisis in next financial year if the APTEL decision is implemented by PSERC. It may be mentioned that Punjab Government had raised the equity of both the power companies on April 16, 2010 in its transfer scheme by including the amount of consumer contribution.

The Appellate Tribunal for Electricity pronounced its judgment on December 17 in Appeal Nos. 142 and 168 of 2013 of Mawana Sugars Ltd. New Delhi, Bansal Alloys and Metals Ltd. Gobindgarh and others had challenged the impugned order of PSERC on the various issues including Return on Equity (RoE).

The tribunal in its order has maintained that issues relating to return on Equity, Consumers Contributions, Grants, Subsidies etc. the findings of this Tribunal in Appeal no. 46 of 2014 shall squarely apply to the present case.

The Tribunal feels that the consumer security deposit is not a capital asset on which RoE can be claimed. Even if the State Government has ordered capitalization of consumer security deposit and accordingly the balance sheet of the Distribution Companies has been drawn up with gross fixed assets including the consumer security deposit, the State Commission should have deducted the amount of consumer security deposit while allowing ROE on the equity component of the capital cost.

In the State Government's Notification dated 24.12.2012 amending the Transfer Scheme of 2010, the equity was increased from Rs. 2946.11 crore to Rs. 6687.26 crore. An amount of Rs. 6081.43 crore assigned to PSPCL (Distribution company) and Rs. 605.08 crore to PSTCL (Transmission Company) The equity notified in the Notification is the summation of equity as on April 16.2010 and consumer contribution, subsidies grants etc of Rs. 3741.34

Further, the State Commission is not bound to follow the audited accounts and the State Commission can scrutinize the same and allow the expenditure only after prudence check. By allowing ROE on consumer security deposit and also allowing interest paid by the Distribution Licensee to the

Consumers against consumer security deposit in the ARR of the Distribution Licensee, the consumer has been burdened unreasonably.

Virinder Singh who recently retired as Member of PSERC said 'implementation of Tribunal decision shall mean reduction of tariff by about 75 to 80 paise per unit during 2015-16. This may lead to serious financial crisis in PSPCL impacting all consumers in the state including the plaintiffs in the case.

Thus the Commission need to treat Rs. 2925 crore as a negative Regulatory Asset and recover it over a period of three years with the permission of Tribunal. This will reduce the tariff by 25 to 30 paise per year helping PSPCL to bear financial shock.

Source- Merinews


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