The aggregate revenue requirement of the distribution licensees for each year of the control period shall contain the following items:
-
(a) cost of power procurement including own generation;
(b) transmission and load dispatch charges;
(c) operation and maintenance expenses;
(d) financing cost which includes cost of debt including working capital (interest), cost of equity (return);
(e) depreciation; and
(f) income tax;
Less:
(i) non-tariff income;
(ii) cross subsidy surcharge and additional surcharge; and
(iii) income from other business.
2 [14. Cost of Power Procurement.- (1) The licensee shall forecast sales for each customer category and sub-categories for all years of the control period as well as the 1 Added vide Not. No. HPERC/dis/479 dated 30th March, 2012 published in the R.H.P. dated 2nd April, 2012 at p. 02-07.
2 Subs. vide Not. No. HPERC/F(5)(3)(1)(Retail) dated 1 st November, 2013 published in the R.H.P.
dated 4 th November, 2013 at p. 4579- 4596 and before its substitution regulation 14 read as under:- “14. Cost of Power Procurement.-
(1) The licensee shall forecast sales for each customer category and sub-categories for all years of the control period in their business plan filings, for the Commission’s review and approval. The approved category-wise sales forecast shall be applied alongwith distribution loss trajectory for estimating the licensees’ power procurement requirement for each year of the control period.
(2) The distribution licensee shall be allowed to recover the cost of power it procures from sources approved by the Commission, viz. intra-State and inter-State trading licensees, bilateral purchases, bulk suppliers, State generators, independent power producers, Central generating stations, renewable and co-generation sources, generation business of the distribution licensee and others, assuming maximum normative rebate available from each source for payment of bills through letter of credit on presentation of bills in accordance with the tariffs approved from time to time by the Appropriate Commission for supply to consumers of retail supply business:
14 Compendium of HPERC Regulations, March 2021 corresponding source wise power procurement in their business plan filings, for the Commission’s review and approval. The category-wise sale forecast shall be applied alongwith distribution loss trajectory for estimating the licensees’ power procurement for each year of the control period:
Provided that, such sales forecast and power procurement planning proposed by the licensee for providing unrestricted/ round the clock supply to the consumers, shall take into consideration factors such as past trends and various econometric factors giving due consideration to economic condition, anticipated development and growth in the State, etc.
using appropriate methodologies and techniques.
(2) The distribution licensee shall be allowed to recover the cost of power it procures in the most economical manner from sources approved by the Commission (viz.
intra-State and inter-State trading licensees, bilateral purchases, bulk suppliers, State generators, independent power producers, Central generating stations, renewable and cogeneration sources, generation business of the distribution licensee and other sources) at tariff rates approved by the appropriate Commission from time to time:
Provided that the distribution licensee shall propose the cost of power procurement taking into account the fuel adjustment formula specified for the generating stations and net revenues/ costs through bilateral exchanges and unscheduled interchange (UI) transactions:
Provided further that, where the licensee utilizes a part of the power purchase approved or bulk supply allocated or contracted for the retail supply business for its trading business, the distribution licensee shall provide an allocation statement clearly specifying the cost of power purchase that is attributable to such trading activity:
Provided also that, to facilitate round-the-clock supply to all the consumers in the State, the licensee shall in accordance with these regulations, prepare a detailed power procurement plan comprising reasonable contingent surplus.
(3) While approving the cost of power purchase, the Commission shall determine the quantum of power to be purchased from various sources in accordance with the principles of merit order of power purchase. All power purchase costs will be considered legitimate unless it is established that the merit order principle has been materially violated or power has been purchased at unreasonable rates.
(4) The renewable purchase obligation of the distribution licensee will be as per the relevant regulations made by the Commission.
1 [(5) The licensee shall avail maximum rebate available from each source for early payment of power purchase bills such as through letter of credit:
Provided that the distribution licensee shall propose the cost of power procurement taking into account the fuel adjustment formula specified for the generating stations and net revenues through bilateral exchanges and unscheduled interchange (UI) transactions:
Provided further that where the licensee utilises a part of the power purchase approved or bulk supply allocated or contracted for the retail supply business for its trading business, the distribution licensee shall provide an allocation statement clearly specifying the cost of power purchase that is attributable to such trading activity.
(3) While approving the cost of power purchase, the Commission shall determine the quantum of power to be purchased from various sources in accordance with the principles of merit order schedule and despatch based on a ranking of all approved sources of supply in the order of their variable cost of power purchase. All power purchase costs will be considered legitimate unless it is established that the merit order principle has been materially violated or power has been purchased at unreasonable rates.
(4) The renewable purchase obligation of the distribution licensee will be as per the relevant regulations made by the Commission.” 1 Subs. vide Not. HPERC-F(1)-1/2018 dated 22 nd November, 2018 published in R.H.P. dated 27 th November, 2018 at p. 6265-6277.Before its substitution it stood as under:- Compendium of HPERC Regulations, March 2021 15
Provided that, 50% of the maximum normative rebate available to the licensee shall be allowed to be retained by him and the remaining 50% of the maximum normative available rebate shall be adjusted in the Power Procurement Cost:
Provided further that, the delayed payment surcharge, if any, paid by the licensee against the Power Purchase Bills shall be to the account of the licensee.]
1 [14-A Treatment of Incremental Power Procurement Cost.-
(1) Identification of Incremental cost and process of recovery.- (i) The distribution licensee shall recover the incremental cost incurred due to the following:-
(a) Variation in fuel surcharge rate;
(b) Incremental power required over and above or within the quantum of power purchase approved by the Commission;
(c) Revision of tariff of generating stations, tariff of intra-State and inter-State transmission system as approved by the Appropriate Commission after notification of retail supply tariff.
(ii) The incremental cost on account of variation in fuel surcharge shall be computed and charged on the basis of actual variation in fuel surcharge rate vis-avis the cost approved in the tariff order for each project and shall not be computed on the basis of estimated or expected variation in fuel surcharge.
(iii) The incremental cost due to:-
(a) incremental power purchase on account of short term requirement of power by the distribution licensee over and above the quantum as approved by the Commission to be computed as the differential of the cost as approved in the tariff order and the actual purchases and/or
(b) within the quantum approved by the Commission and if such requirement is on account of any factor beyond the control of the licensee (shortage/non-availability of fuel, snow capping of hydro resources inhibiting power generation in sources stipulated in the plan, unplanned/forced outages of power generating units or acts of God), to be computed as a differential of average power purchase cost and weighted average price of power exchange rates and bilateral market purchases.
shall be computed and charged.
“(5) The licensee shall avail maximum rebate available from each source for early payment of power purchase bills such as through letter of credit:
Provided that, 25% of the maximum normative rebate available to the licensee shall be allowed to be retained by him and the remaining 75% of the maximum normative available rebate shall be adjusted in the Power Procurement Cost:
Provided further that, the delayed payment surcharge, if any, paid by the licensee against the Power Purchase Bills shall be to the account of the licensee.” 1 Added vide Not No. HPERC/Dis/479 dated 30 th March, 2012 published in the R.H.P. dated 2 nd April, 2013 at p. 02-07.
16 Compendium of HPERC Regulations, March 2021
Provided that the cost of such power shall be allowed at the weighted average price of power exchange rates of the Northern Region and bilateral market purchases for the same quarter.
Provider further that the distribution licensee shall inform the Commission the purchase of power over and above approved quantum or increase in Short Term Power Purchase within the approved quantum, with all the supporting documents.
Unless the Commission is satisfied that the aforesaid power is capped by weighted average price of power exchange rates and bilateral market purchases for the same quarter, it may, in the true up orders, disallow the cost which is over and above weighted average price of power exchange rates of the Northern Region and bilateral market purchases in the same quarter.
(iv) The incremental cost due to revision of tariff of generating stations and tariff of inter-State and/or intra-State transmission system as approved by appropriate Commission shall be computed and charged if such revision takes place after the notification of retail supply tariff by the Commission .
(v) The incremental cost incurred for the quarter due to incremental power purchase for reason stipulated in 14-A (1) shall be computed on the basis of formula given in sub-regulation (2) of regulations 14-A, and shall be charged to the consumer from the first month of the following quarter itself, in accordance with sub-regulation
(3) of regulation 14-A without prior approval of the Commission.
(vi) The distribution licensee shall submit details of the incremental cost incurred and to be charged to all consumers for the entire quarter, along with the detailed computations and supporting documents as may be required for verification by the Commission within first 28 days of the quarter end.
(vii) The Commission shall examine the incremental cost charged by the Distribution Licensee against supporting documents as submitted:
Provided that discrepancies, if any, shall be notified to the Distribution Licensee before the end of the second quarter:
Provided further that the distribution licensee shall adjust for the discrepancy notified by the Commission in third quarter’s charge computation.
(viii) In case the distribution licensee is found guilty of charging unjustified adjustment cost to the consumers on regular basis, the Commission shall adjust the unjustified additional cost along with interest on the same.
Provided that the interest rate shall be in accordance with the State Bank Advance Rate (SBAR) as on the date on which the application of determination of tariff is made and benefits shall be passed on to the consumers.
(ix) The distribution licensee shall ensure appropriate accounting of Incremental Cost (IC) by upgrading the billing and IT software within three months from the notification of these regulations.
(2) Formula for computation of Incremental cost.- The formula for calculation of the incremental cost will be as under:- Variables shall be in `crores unless otherwise stated ICq1 = Cq1 + Fq4 +Aq3 ICq1 = Incremental Cost incurred in quarter q1 to be recovered in quarter q2 Compendium of HPERC Regulations, March 2021 17
Explanation.- For the purpose of ICq1, incremental power purchase cost shall include all the bills paid or bills received and payable, and credits received by the distribution licensee, to the suppliers of power, during the quarter q1 irrespective of the period to which they pertain. This shall include arrears and refunds, if any, not settled earlier.
Cq1 = Incremental cost in quarter q1 due to factors specified under regulation 14-A(1) Fq4 = Carry forward factor for over-recovery / under-recovery of incremental cost of quarter q3 (ICq3) to be recovered in quarter q4 of previous year but could not be fully recovered.
Explanation.- For the purpose this regulation over recovery/ under recovery of incremental cost of a quarter (ICq) shall be on account of the incremental cost adjustment ceiling as specified under clause (iii) of sub-regulation (3) of this regulation, if any, and the differential of amount worked out on the basis of estimated sales of the quarter and the recovery affected on account of actual sales in that quarter.
Aq3 = Adjustments on the basis of the Commission’s order pertaining to discrepancies, if any, in computation of ICq3 from previous year in accordance with the Clause (vi) of sub-regulation (1) of regulation 14-A and any other adjustment as ordered by the Commission Similarly IC for respective quarters will be computed.
q = quarter of a year
(3) Computation of Incremental cost per unit (IC`/kWh) of electricity consumption.- (i) Calculation of IC `/kWh for a quarter shall be as per the following formula:
IC (`/kWh) q = (IC q/(estimated sales within the State for the next quarter as approved by the Commission in the tariff order excluding the sales to BPL consumer category) *10 Where IC q is in ` lakhs and Unit sales are in Million units
(ii) The per unit Incremental cost (IC `/kWh) shall be recovered from all categories of consumers in addition to the tariff notified in the tariff order of the Commission except from the Below Poverty Line (BPL) consumers.
(iii) The incremental per unit adjustment to be carried out in a quarter shall be upto ceiling of 10% of average per unit power purchase rate for the year as per tariff order approved by the Commission and any under or over recovery shall be carried forward to the next quarter which shall further be subject to ceiling of 10% of average per unit power purchase rate.
Provided that the Commission, may by order, modify ceiling of incremental rates that can be recovered from the consumers on monthly basis.
Example: 1
(a) Average per unit power purchase rate as per the tariff order of the Commission for a financial year = Say ` 3/kWh
(b) 10% ceiling as per Regulation 14.A(3) (iii) = 30 p/kWh
(c) Incremental cost of quarter q1 (ICq1) due to factor specified under regulation 14.A (1) & (2) = Say 75 crores
(d) Estimated sales for the quarter q2 excluding BPL consumers = =Say 2000 MUs
(e) Per unit incremental cost i.e I C q1 `/kWh chargeable from the consumers in quarter q2 to recover incremental cost = 37.5 p/kWh 18 Compendium of HPERC Regulations, March 2021 IC q1 in accordance with sub-regulation (2) and clause (i) of sub regulation (3) of regulation 14.A
(f) Per unit incremental cost recoverable after applying ceiling of 10% = 30p/kWh
(g) Under recovery of IC q1 to be carried forward and to be recovered in quarter q3 = 7.5x2000=15 Crore
(h) Incremental cost in quarter q2 (IC q2) due to factor specified under regulation 14.A (1) excluding the under recovery of IC q1 to be recovered in quarter q3 = Say 25 crores
(i) Incremental cost in quarter q2 (ICq2) in accordance with formula under regulation 14.A(2) including under recovery of IC q1 = 25+15=40 crores
(j) Estimates sales for quarter q3 excluding BPL consumers = Say 2000 MUs
(k) Per unit incremental cost IC q2 `/kWh for quarter q2 to be recovered in quarter q3 in accordance with sub-regulation
(2) and clause (i) of sub regulation (3) of regulation 14.A including under recovery of IC q1 = 20 p/kWh Example: 2
(a) Average per unit power purchase rate as per the tariff order of the Commission for a financial year = Say `3/kWh
(b) 10% ceiling as per Regulation 14.A(3) (iii) = 30 p/kWh
(c) Incremental cost of quarter q1 (ICq1) due to factor specified under regulation 14.A (1) & (2) = Say 60 crores
(d) Estimated sales for the quarter q2 excluding BPL consumers = =Say 2000 MUs
(e) Per unit incremental cost i.e I C q1 `/kWh chargeable from the consumers in quarter q2 to recover incremental cost IC q1 in accordance with subregulation (2) and clause (i) of sub regulation (3) of regulation 14.A = 30 p/kWh
(f) Actual sales of quarter q2 available in first two months of quarter q3 = 1500 MU
(g) Recovery effected in quarter q2 @ 30p/kWh = 45 crore
(h) Under recovery of ICq1 on account of differential between the estimated sales of q1 and actual of quarter q2, to be carried forward and to be recovered in q4 = 60- 45=15 crores Note.- Any over recovery on account of higher actual sales of quarter q2 shall be considered as credit received by the licensee as specified in sub-regulation (5) of regulation 14-A.
(iv) All consumers shall have to pay the incremental cost as determined under clause (i) of sub-regulation (3) of regulation 14-A.
Provided in case the State Government decides to provide subsidy on Incremental Power Purchase cost to any class or classes of consumers then, it shall do the same as per the provisions of Section 65 of Electricity Act, 2003. It shall be the responsibility of the licensee to seek prior approval of the State Government in this regard and maintain appropriate record of the same.
Compendium of HPERC Regulations, March 2021 19
(v) The licensee shall within two months of the quarter end, provide information related to Incremental cost per unit of electricity consumption and under recovery/ over recovery so as to enable the Commission to expedite the process of validation of IC recovered from the consumers within a month for any discrepancy to be taken into account in the next quarter or as per Commission’s directions.
(4) The variation in power purchase cost due to UI and other unapproved purchases shall not be covered under Incremental Power Purchase adjustment.]
1 [15. Distribution Losses.- (1) The target for the distribution loss levels to be achieved by the distribution licensee during the control period and the year-wise loss reduction trajectory for the control period shall be fixed in the multi-year tariff order:
Provided that the Commission may, based upon the actual information submitted by the licensee in respect of variations in the mix of consumers or sales at various voltage levels vis-à-vis that already approved, at the time of mid-term performance review, review the costs approved vis-à-vis the actual on account of the distribution loss and revise the targets set for the distribution loss for the balance years of the control period:
Provided further that, the mechanism for pass-through of gains or losses on account of variations in the distribution loss as a result of revision in costs and targets vis-à-vis that approved shall be as follows:-
(a) The approved aggregate gain to the distribution licensee on account of controllable factor of distribution loss shall be dealt with in the following manner:-
(i) 40% of the amount of such gains shall be adjusted in ARR over such period as may be stipulated in the Order of the Commission;
(ii) the balance 60% of such gains, may be utilized at the discretion of the distribution licensee;
(b) The approved aggregate loss to the distribution licensee on account of controllable factor of distribution loss shall be dealt with in the following manner:-
(i) 40% of the amount of such loss may be passed on in the ARR over such period as may be stipulated in the Order of the Commission; and 1 Subs. vide Not. No. HPERC/F(5)(3)(1)(Retail) dated 1 st November, 2013 published in the R H.P.
dated 4 th November, 2013 at p. 4579 to 4596 and before its substitution regulation 15 read as under:
“15. Distributions Losses.-
(1) The target distribution loss levels for the State to be achieved by the distribution licensees at the end of control period and year-wise loss reduction trajectory for the control period shall be fixed for the distribution licensee in the multiyear tariff order:
Provided that profits arising from achieving loss level better than specified in the loss reduction trajectory for the State shall be shared in the ratio of 60:40 with the licensee and the contingency reserve:
Provided further that any financial loss on account of underperformance with respect to distribution loss targets shall be to the licensee’s account.
(2) The licensee shall propose circle-wise baseline distribution loss levels and loss reduction trajectory for each year of the control period. The Commission shall examine the filings made by the licensee for the distribution loss trajectory for each year of the control period and approve the same with modification as it may consider necessary.
(3) The distribution licensee shall also propose voltage-wise losses for each year of the control period for the determination of voltage-wise cost of supply and determination of voltage-wise wheeling tariff. The Commission shall examine the filings made by the licensee for the voltage wise distribution loss trajectory for each year of the control period and approve the same with modification as it may consider necessary:
Provided that till the actual data on voltage wise losses are not available, the distribution licensee shall submit best estimates of the voltage wise losses.” 20 Compendium of HPERC Regulations, March 2021
(ii) the balance 60% of amount of such loss shall be absorbed by the licensee;
(c) Gains and losses on account of controllable factors during the control period shall be shared in the aforesaid manner at the time of mid-term Performance Review and also at the time of tariff determination process of the next control period;
(d) The gain or loss on account of controllable factors other than the distribution loss, unless otherwise specifically provided by the Commission in these Regulations, shall be to the account of the distribution licensee.
(2) The licensee shall also propose circle-wise baseline distribution loss levels and loss reduction trajectory for each year of the control period. The distribution licensee shall also propose voltage-wise losses for each year of the control period for the determination of voltage-wise cost of supply and determination of voltage-wise wheeling tariff:
Provided that, till the actual data on voltage wise losses is not available, the distribution licensee shall submit best estimates of the voltage-wise losses.
(3) The Commission may fix circle-wise and voltage-wise losses with suitable mechanism and modifications as it may consider necessary. On the basis of circle-wise distribution loss, the Commission may fix circle-wise differential tariff by way of separate and distinct distribution loss surcharge.]