Section 36 in Bihar Electricity Regulatory Commission (Multi Year Distribution Tariff) Regulations, 2015
36. Cross Subsidy, Allocation of Cost to Serve and Tariff Design.
(a)The Commission shall notify a road map for reduction of cross subsidies within control period. The road map shall also have intermediate milestones, based on the approach of a gradual reduction in cross subsidy.(b)The Distribution Licensee shall compute the consumer category-wise cost of supply as per the methodology elaborated below.(c)Allocation of Cost: The Cost to serve shall be allocated to the consumer categories in the following manner:Step 1: Functionalization of Cost. - Total cost shall be divided on the basis of functions performed such as power purchase, distribution etc.Step 2: Classification of Cost. - Each of the functionalized costs shall be further classified, based on its intrinsic nature into Demand related cost, Energy related cost and Customer related cost. Demand related costs shall generally be of fixed nature, related to capacity creation and shall include interest on capital borrowing, depreciation etc. Energy cost shall be related to quantum of electricity consumption of consumer, such as fuel cost, interest on working capital, etc. Consumer related cost shall include operating expenses associated with meter reading, billing and accounting.Step 3: Allocation of Cost. - i. Allocation of Demand Costs: Demand costs of all three functions shall be allocated among consumer categories on the basis of average coincident peak demand of the tariff categories (average of past 12 months). To facilitate determination of average coincident peak demand for the various tariff categories, load research shall be made an integral part of the operations of the DISCOMs and systematic load research exercises shall be initiated.ii. Allocation of Energy Costs: Energy related costs of Distribution functions shall be allocated to consumer categories on the basis of ratio of electricity consumption of each consumer category to the total electricity consumption under the purview of the Distribution Licensee. Energy related costs of Power purchase shall be allocated to various tariff categories on the basis of block approach on merit order dispatch and incremental principle, where each tariff category shall be allocated the incremental (energy related) power purchase cost on the basis of their respective share in the incremental power purchase. For the purpose of operationalising the block approach and incremental principle, the Commission shall identify and notify a suitable year as the "base year".iii. Allocation of Customer Costs: Customer related costs shall be allocated to consumer categories on the basis of the ratio of number of consumers in each category to total number of consumers under the purview of the Distribution Licensee.(d)Summation of allocated Demand cost, Energy cost and Customer cost across functions shall be total Cost to serve for respective consumer categories. Cost to serve reduced by revenue from a consumer category shall give total subsidy for that category. Total subsidy for a consumer category reduced by Government subsidy, if any, shall be cross-subsidy for that consumer category.(e)The consumers below poverty line who consume power below a specified level, say 30 units per month, shall receive a special support through cross subsidy.(f)Cross-subsidy surcharge and additional surcharge in Open Access - (1) The amount received or to be received by the licensee on account of cross-subsidy surcharge and additional surcharge, as approved by the Commission from time to time in accordance with the Regulations specified by the Commission, shall be shown separately against the consumer category that is permitted open access as per the phasing plan.(2)Cross-subsidy surcharge and additional surcharge shall be shown as revenue from the tariff from the consumer categories who have been permitted open access and such amount shall be utilized to meet the cross-subsidy requirements of subsidized categories and fixed costs of the Distribution Licensee arising out of his obligation to supply.Provided that the licensee shall provide such details in its annual filings.(g)Tariff Design - (1) The Commission shall be guided by the objective that the tariff progressively reflects the efficient and prudent cost of supply of electricity.(2)After the costs have been allocated based on the method specified in clauses (c) and (d) above, tariffs for different consumer categories shall be designed with due regard to factors provided under section 62(3) of the Act.(3)The time of day tariff would be structured across three time slabs to denote normal, peak and off-peak periods. The time-periods would vary according to different seasons of the year i.e. summer, winter and the monsoon season. The peak tariff would be 20%-30% higher than the normal tariff and the off-peak tariff would be priced 15%-20% lower than the normal tariff.(4)The peak and off-peak hours during seasons shall be as notified by the State Load Dispatch Centers in advance.(5)Time of Day tariff shall be introduced in a phased manner, wherein in phase 1 it would be compulsory for HT Consumers, in phase 2 - compulsory for LT consumers consuming more than 25 KW and in phase 3 compulsory for LT consumers consuming more than 10 KW.Part - IX Miscellaneous
