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Home News Power Sector News Proposal for Rationalisation/revision of KSEB Tariff rejected by KSERC

Proposal for Rationalisation/revision of KSEB Tariff rejected by KSERC

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KSERC Chairman, KJ MathewKerala State Electricity Regulatory Commission (KSERC) disposed of the petition by rejecting the proposal on rationalisation/ revision  of tariff proposed by KSEB for Domestic consumers, Kerala Water Authority, HT-IV Commercial, deferring the proposal on Bulk Supply Tariff applicable to licensees. The commission has said that the situation does not demand a hike. Time of day(ToD) tariff is approved as an optional scheme for LT Industrial consumers who have opted for maximum demand based tariff and having 30 kVA contract demand.  The scheme shall be effective from 1-4-2010.

The commission has said that the situation does not demand a hike. Akshaya Centres shall be continue to be billed under LT VI (B) and cardamom drying and curing units shall be billed under LT IV industrial with TOD metering.  The filtering and packing units using extracted oil brought from out side shall be billed under LT VII(A) and in case, extraction of oil and activities such as filtering, refining, bottling, packing etc., are carried out in the same premises with the same service connection, shall be billed under  LT-IV Industrial Tariff.  Gymnasiums shall be billed under respective LT I(b) and LT VII (C) based on connected load. Tariff applicable to ATM counters of banks shall be the same as that applicable to banks.  All other recategorization proposals are deferred.

With the reasons stated below,  KSERC rejected the proposal on rationalisation/revision of domestic tariff, HT IV Commercial, tariff reduction for KWA and deferring the proposal on revision of bulk supply tariff of KSEB. 

1 . The exact revenue gap position could not be ascertained in the absence of truing up for the years after 2005-06 for which audited accounts were not available then. The Commission is of the view that because of the various measures adopted by the Board in improving productivity and efficiency in operations during the last three years sufficient surplus will be available to meet the estimated net revenue gap for the year 2009-10 once the truing up exercise is carried out for the years 2006/07, 2007/08 and 2008/09. Increasing efficiency through better management practices is noticeable during this period.

2. The arrears have to be collected immediately to reduce borrowing for meeting working capital requirements. KSEB should take up this matter with Government and the Government should help the Board by timely payment of its electricity dues which will ultimately benefit the ordinary consumer. However, the Commission is positive to any tariff revision proposal in line with the provisions of the law, if the Board can substantiate the need for it.

3. Proposal is more towards increasing the distortions in the present structure, by directly flouting the provisions of the Act and Tariff Policy. Such proposals indicate that the Board has made no attempt towards rationalisation following the principles envisaged in the Act.  The Commission would urge that the Board should consider proposals that would fall in line with the objectives envisaged in the Act/policy on a gradual basis, without tariff shock to any section of consumers. 

4. The Commission notes that an increase of one unit, from 200 units to 201, would lead to an increase in bill by Rs.239 which is more than 48%. In certain higher slabs the increase in bill amounts is negligible compared with the lower slabs. Such erratic increase in bill amount with minor changes in sales is highly unscientific.

5. Cross subsidies have to be brought down by degrees without giving a tariff shock to the consumers. Hence, the Commission is of the view that the proposal in the present form is not acceptable.

6. As per Section 64(3)(a) of the Electricity Act 2003, the Commission can modify the proposal submitted by the Board.  However, the notice under section 64(2) is aimed at only part of the domestic consumers, the Commission is constrained to abstain from making any modifications in the proposal under section 64(3)(a).   In the light of above, the Commission is not in a position to accept the proposal of KSEB in this regard.

7. The Commission is of the view that, the proposed 18% increase in tariff for HT IV category alone, is not in line with the provisions of the Act. As per section 61(g), the tariff should progressively reflect cost of supply of electricity and reduce cross subsidies.  In the present case, the cross subsidy level as per the pre-revised rates is about 25%, which would increase to about 48% based on average cost of supply for the year 2009-10.  Such increase in cross subsidy is against the provisions of the Act.  Further as stated by KSEB, the ‘affluence’ of HT IV category cannot be accepted as a criterion for discrimination, which is against Section 62(3).

8. KSEB proposed 10% reduction in the tariff applicable to KWA.  The proposal is also squarely against section 62(3) of the Act which provides that consumers cannot be discriminated.  Hence, the proposal of KSEB could only be treated under section 65 of the Act. If the Government is willing to compensate KSEB for the shortfall in revenue due to reduction in tariff for KWA, the Commission will be in a position to consider the proposal.  Since, KSEB could not produce any commitment on advance payment of subsidy by Government of Kerala, the Commission is not in a position to allow the proposal of KSEB.  If such commitment from the Government of Kerala under Section 65 of the Act is available and the Government pays in advance, KSEB may be allowed to reduce the tariff as proposed.

9. In the present proposal, the KSEB has proposed to increase the tariff for all licensees by 25%, stating the reason that  licensees are making excess profit and the retail supply tariff revision would also fetch additional revenue to licensees. An increase in Bulk Supply Tariff is warranted if any licensee earns higher profits, at the same time the concerns of the licensees on financial viability should also be considered by the Commission.  Hence, the Commission hereby orders that all the licensees shall file the ARR & ERC for 2010-11 in the month of December as provided in KSERC (Tariff) Regulations, 2003.  The Commission would consider the ARR & ERC to determine the BST applicable to each licensee after following the due procedure. The proposal of KSEB on BST is deferred till then.


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