NEW DELHI: 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 has said in its report on the discoms and claimed that there is scope for reducing tariffs in the city.
The 212-page 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.
The 212-page 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.
READ ALSO: CAG points out conflict of interest in deals The companies have, however, denied the report and claimed that it is both incomplete and subjudice.
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 7956.91 crore," the report says.
Implementation of the audit findings could lead to a dramatic reduction in the financial liabilities of the discoms, resulting in a significant reduction in the burden on consumers.
The report also raises questions over the conduct of Delhi Electricity Regulatory Commission (DERC) and government nominees on the board of the three discoms.
The CAG audit endorses the claims of the Aam Aadmi 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.
READ ALSO: Discoms made money from meters, says CAG
"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.
READ ALSO: CAG's discom audit over, but suspense remains
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 gas-based 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.
READ ALSO: CAG audit of Delhi discoms may come up with 'irregularities', say sources
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 made a profit in selling off the surplus power but later they incurred loss in the sale. Thus, 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 burden on 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 1062.34 crore for BYPL and Rs 1098.65 crore for TDDPL, the audit says.
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 7956.91 crore," the report says.
Implementation of the audit findings could lead to a dramatic reduction in the financial liabilities of the discoms, resulting in a significant reduction in the burden on consumers.
The report also raises questions over the conduct of Delhi Electricity Regulatory Commission (DERC) and government nominees on the board of the three discoms.
The CAG audit endorses the claims of the Aam Aadmi 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.
READ ALSO: Discoms made money from meters, says CAG
"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.
READ ALSO: CAG's discom audit over, but suspense remains
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 gas-based 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.
READ ALSO: CAG audit of Delhi discoms may come up with 'irregularities', say sources
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 made a profit in selling off the surplus power but later they incurred loss in the sale. Thus, 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 burden on 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 1062.34 crore for BYPL and Rs 1098.65 crore for TDDPL, the audit says.
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