Tariff Revision: REL Seeks Clarificatory Order From MERC

Mumbai, Sept 20 | Updated: Sep 21 2004, 05:30am hrs
Reliance Energy Limited (REL) has sought clarificatory order from the Maharashtra Electricity Regulatory Commission (MERC) that it was not required to submit copies of the Central Electricity Authority (CEA) clearances for its various capital expenditure schemes during 1997-98 and 2002-03.

REL pleaded that it may be allowed to submit detailed project report (DPR) and cost benefit analysis in due course for capital expenditure incurred for 2003-04 (including expenditure incurred to the extent of Rs 43.07 crore and not allowed by the Commission) and the proposed capital expenditure of Rs 722.20 crore for 2004-05.

During 2003-04, REL had already incurred capex of Rs 137.31 crore to meet its obligation as a licensee, in absence of any guidelines for the same fiscal. REL in its petition seeking review of MERCs order on its annual revenue requirement (AAR) and tariff determination said that its various items evisaged under the capex for 2004-05 be reviewed under the MERCs regulation 85. The Commission had allowed an investment of Rs 92 crore in 2003-04 and Rs 102 crore in 2004-05. It has applied a normative debt equity ratio of 70:30 on the new investments and allowed interest on the normative debt component 10% per annum, with repayment over 10 years.

However, REL argued that the normative debt equity ratio of 70:30 is grossly unfair to its shareholders. In the past the entire capex was funded through equity. Assuming without admitting, 100% through equity was not proper, REL should be permitted 50% through equity and 50% through debt. It is submitted that the Commission ought not to have computed interest expenditure on normative debt equity ratio of 70:30. The proposed ratio of 70:30 can, at the highest, be made applicable for 2005-06 prospectively from the next fiscal from the date of the order, REL said.

It submitted that its estimated employee cost for 2004-05 would be Rs 157 crore. It said that the allowing employee costs of Rs 136.2 crore is not adequate and needs reconsideration by the Commission.

According to REL, the actual wage arrears was only to the extent of Rs 30 crore out of Rs 168.3 crore and the balance Rs 138.3 crore was towards actual employee cost outgo for 2003-04. Employee cost estimated of Rs 136.2 crore by the Commission for 2004-05 would be less by Rs 2 crore than the actual employee cost for 2003-04. Further, REL pleaded that the Commission should redefine the low tension -II category applicable to it with Tata Power Companys (TPC) low tension-II category. By making two separate definitions for the consumers in the same category, REL is put to great disadvantage and is contrary to the tariff philosophy of this Commission, REL said.