DISCOMS INFLATED DUES BY RS 8K CR: CAG
AUDITOR MAKES CASE FOR CUT IN POWER TARIFF
The three private power distribution companies (discoms) in the capital inflated their dues to be recovered from consumers by almost Rs 8,000 crore, the Comptroller and Auditor General (CAG) has said in its report on the discoms and claimed that there is scope for reducing tariffs in the city. The 212page confidential report, accessed by TOI, has indicted the three power distribution companies -BSES Yamuna Power Ltd (BYPL) and BSES Rajdhani Power Ltd (BRPL) controlled by Anil Ambani's Reliance group, and Tata Power Delhi Distribution Ltd (TPDDL) -on several counts.
It says the companies manipulated consumer figures and scrap sale details, and took a series of actions detrimental to consumer interests. These include buying costly power, inflating costs, suppressing revenue, dealing with other private companies without tenders and giving undue favours to group companies. Its most damning revelation relates to inflation of regulatory assets (RA) -previously incurred losses that can be recovered from consumers if permitted by the regulatory authority.
“The RA of three discoms which stood approved as on March 31, 2013, were Rs 13,657.87 crore. However, audit findings contained in various chapters of this report indicate that the RA of the three discoms were inflated by at least Rs 7,956.91 crore,” the report says.
Implementation of the audit findings could lead to a dramatic reduction in the discoms' financial liabilities, resulting in a significant reduction in bills. This would endorse activists' claims that high bills were unjustified. The CAG report also raises questions over the conduct of Delhi Electricity Regulatory Commission (DERC) and government nominees on the board of the three discoms.
The audit endorses the claims of the Aamaadmi Party and other activists that high power tariffs in Delhi were unjustified. The 49-day old AAP government led by Arvind Kejriwal had ordered the special CAG audit of the power sector on January 1, 2014.
“Analysis shows that inefficiencies get loaded to the cost of power at several stages from the source till it reaches the consumer -that is, in generation, transmission and distribution losses -making the retail price significantly higher. There is a scope for reducing the cost of power by reducing inefficiencies at various stages,” the audit report says.
The CAG has also recommended that DERC review the aggregate revenue requirement (ARR, which is the gap between revenue and allowed expenditure) and regulatory assets of various years in the light of the findings. ARR and RA are the crucial figures on the basis of which tariff is decided.
The report goes into detail on how the discoms bloated their regulatory assets.
“The RA of discoms were inflated due to failure on the part of discoms to include certain income as NTI (non-tariff income), non short accounting of certain other incomes, accounting errors, not bringing clerical errors in true up orders to the notice of DERC and non-recovery of wheeling charges from other licensees,” the audit says.
“Further, violation of DERC regulations in reimbursement of taxes, misrepresenting facts to the DERC, netting of income by expenses, misclassification of assets and claiming expenses
thereon, claiming excess return on equity and carrying cost on RA has also resulted in increase in RA,” it adds.
The report accuses the Reliance-led discoms of “uneconomical and inefficient operations“, leading to operational losses and negative net worth. These resulted in their low credit ratings.
“Due to low credit ratings, BRPL and BYPL availed loans at higher interest rates. BRPL and BYPL did not declare dividend or bonus shares, however, TPDDL declared dividend and also issued bonus shares,” it says.
The audit found that the discoms incurred operation and maintenance (O&M) expenditure in excess of norms fixed by DERC.“THE burden of inefficiencies of discoms reflected in the shape of higher rate of WACC (weighted average cost of capital) and carrying cost on RA, which was passed on to the consumers,” it says.
The discoms also paid a significant amount as annual fixed charges to some generating stations with whom they had long term power purchase agreements though they hardly bought any power from them. The report said discoms paid fixed charges of Rs 353 crore to Pragati-iii till 2012-13, corresponding to the declared capacity of the plant, of which fixed charges of Rs 166.82 crore were paid without getting power. Similarly, fixed charges of Rs 201 crore were paid to gasbased power plants of NTPC at Anta, Auraiya and Dadri from 2007-08 to 2012-13, without getting power.
The Rithala plant charged Rs 140.3 crore from TPDDL as fixed charges on the basis of declared capacity between February 2011 to March 2013, whereas the plant generated only 35% of power. “Thus, TPDDL has paid Rs 93.5 crore out of Rs 140.40 crore as fixed charges to Rithala plant without getting power during February 2011 to March 2013,” the audit says, adding that the Rithala plant was continuing to charge fixed cost from the TPDDL.
“During the period under audit, these ‘dead costs’ which formed part of the power purchase cost of the discoms had to be borne by consumers,” the report says.
Delhi State Load Dispatch Centre (SLDC) manages inflow and outflow of power between the national grid and Delhi. It is based on a `merit order of dispatch', which schedules cheap power first and then costlier power. “But the scheduling order submitted by the companies was not considered by SLDC. Had this scheduling been followed, BRPL and BYPL could have saved Rs 203 crore and Rs 147 crore, respectively, while TPDDL could have saved Rs 565 crore on its cost of power during 2011-12 and 2012-13,” the audit found.
The CAG says that the discoms did not undertake any cost benefit analysis, nor did they take steps to reduce their power purchase cost through optimum scheduling.“even TPDDL filed a petition (before DERC) only after the CAG audit,“the report says.
The audit also pointed out that the quantum of power purchased by the discoms was more than what was actually consumed by their consumers during most part of the year, creating a surplus power situation. “The availability of power in Delhi was more than its requirement, making it the only power surplus state in the northern grid,” the report said. “This meant that the consumer paid for higher load (near peak load) for the whole year though this higher load was consumed for only a few hours during the whole year,” it says.
“The surplus power had to be sold in the market. Until 2009, discoms had made a profit in selling off the surplus power but later, they incurred loss in the sale. Therefore, excess purchase and its sale added to the already high cost of power purchased from the generators... This increasing loss has widened the revenue deficit of the discoms, resulting in increasing regulatory assets and tariff bur den on the consumers,” the CAG notes.
The cumulative loss incurred on the sale of surplus power till the end of 2012-13 was Rs 806.88 crore for BRPL, Rs 1,062.34 crore for BYPL and Rs 1,098.65 crore for TDDPL, the audit states.
DISCOMS MADE MONEY FROM METERS: CAG
Electricity meters in Delhi homes could well capture the reality of the national capital's privatization of power distribution with the CAG audit pointing to an array of anomalies and exaggerations around these humble meters.
Following complaints from consumers, Delhi Electricity Regulatory Commission (DERC) had formed a committee in 2003 to examine the quality of meters. Based on the committee's report, DERC directed discoms that meters manufactured by TTL and Elymer should be replaced on priority . “However, discoms could fully replace these meters only by 2010-11,“the audit report said.
The report also said government schools, hospitals and other institutions were overcharged by discoms.
However, it is in the business of electricity meters that several bizarre twists were seen. Only meters put to use and installed at the consumers' premises should be included as fixed
assets (capitalized) on which discoms are allowed returns. The CAG audit found tha as on March 31, 2013, BRPL had capitalized 22.10 lakh meters while there were only 18.49 lakh consumers. The number of consumers intimated by the company to DERC differed widely from the number of consumers as per the billing data furnished to the audit.
Meters removed from consumers' premises are auctioned as scrap. In the list of discarded assets produced to the audit by BRPL, it showed 9.96 lakh meters to have been discarded between 2005-06 and 2011-12. However, from the meter utilization data, the audit found that 14.41 lakh meters were actually removed from the consumers' premises. Therefore, 4.45 lakh meters valued at around Rs 58.39 crore remained unaccounted for.
In BYPL, 16.94 lakh meters were capitalized while the number of consumers was only 12.89 lakh.
TPDDL showed that 11.93 lakh new meters were installed during between 200809 and 2012-13 while only 3.83 lakh new consumers were added during this period.
The audit said in BYPL, an unwarranted burden of Rs 65.24 crore was placed on consumers because of the discrepancy in meters. In BRPL, the unwanted burden on consumers because of meters was Rs 63.06 crore.
The audit found that the cost of replacing meters within the warranty period was borne by the discoms and capitalized. For example, Rs 19.33 crore was borne by BRPL, instead of the manufacturers, and passed on to the consumers. Similarly, BYPL replaced 1.12 lakh defective meters and the cost of Rs 12.09 crore was not recovered from the manufacturer but passed on to consumers. Similarly, TPDDL placed a burden of Rs 27.54 crore on consumers.
The audit found that the discoms delayed installation of KVA meters which were meant to improve consumption efficiency.
There was also widespread issuance of bill before the notified billing period.“in 2011-12 and 2012-13, it was found that the discoms issued 27% of their bills in violation of the notified billing cycle, causing inconvenience to the consumer,” the audit said.