KERC rejects Bescom's demand for higher capex for FY15

Bescom had proposed to spend Rs 2,199 crore in FY15 as against Rs 763 crore approved by the Commission earlier

The Karnataka Electricity Regulatory Commission (KERC) has rejected the proposed upward revision in capital expenditure by the Bangalore Electricity Supply Company (Bescom) for the year 2014-15.

Bescom, the largest of the five electricity supply companies in the state, had projected a 2.8 times increase in its capex to Rs 2,199 crore for FY15 as against the original projection of Rs 763 crore. KERC, which approved the tariff hike and capex plans of all five Escoms for the year on Monday, said it would consider the capex of Rs 763 crore for the purpose of annual revenue requirement for FY15 subject to a prudence check to be conducted by the commission during APR (annual performance review).

“If Bescom has any additional proposal as indicated in its revised capex programme during FY15, approval for the same shall be sought separately. The commission would look into the merits of such investments and decide on its allowance. Also, the commission will not allow any capex investments over and above the approved capex without prior approval of the commission,” KERC said in its order.

The KERC had approved the Rs 763 crore capex plan of Bescom  on May 6, 2013.

As against this plan, the Bescom in its revised submission stated that it would spend Rs 2,199 crore for major capital works. Bescom stated that a higher capital expenditure would help the company meet some of its goals including reduction in distribution losses, reduction in the LT/HT Ratio, cutting down transformer failures, segregate the loads in the feeders, increase the penetration of HVDS, reduce power theft among others.

Bescom further added that the proposed capex enables it to augment its distribution network to provide reliable and quality power supply. To fund the above capital works, it planned to  approach the Rural Electrification Corporation, Power Finance Corporation and other lending agencies for financial assistance.

In its replies to the preliminary observations, Bescom stated that the detailed project reports (DPRs) for major works costing Rs 1,170 crore were yet to be finalised and hence the same were not considered while projecting the capital expenditure, gross assets, net assets, depreciation and interest on loans. The projections were based on a capex of Rs 763 crore approved by the commission earlier.

“Bescom’s achievement in capital expenditure has considerably improved in the last two years. The commission is of the view that the capital expenditure proposed on projects such as replacing the existing IP set motors with energy-efficient motors along with regular improvement works, providing additional TCs, regularisation of unauthorised IP sets, Ganga Kalyana and drinking water supply schemes should not only enable better services for consumers in terms of quality and reliability but also are likely to reduce the distribution losses,” KERC said.

As Bescom is yet to prepare DPRs for the additional capex proposals, the commission did not approve the revised capex plan.