CASE No. 121 of and. M. A. No. 11 of 2015

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1 Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai Tel /65/69 Fax Website: CASE No. 121 of 2015 and M. A. No. 11 of 2015 In the matter of Petition of Maharashtra State Electricity Distribution Co. Ltd. for review and clarifications of Multi-Year Tariff Order dated 26 June, 2015 in Case No. 121 of 2014 Coram Shri. Azeez M. Khan, Member Shri. Deepak Lad, Member Maharashtra State Electricity Distribution Co. Ltd. Petitioner Maharashtra Veej Grahak Sanghatana Intervener Appearance For Petitioner : For Intervener: Consumer Representative: Shri. S.V. Bapat, CE (TRC) Shri. Pratap Hogade Shri. Ashok Pendse, TBIA ORDER Dated:29 January, The Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) has filed a Petition on 21 August, 2015 under Section 94 (1) (f) of the Electricity Act (EA), 2003 read with Order in Case No. 121 of 2015 Page 1 of 20

2 Regulation 85 of the MERC (Conduct of Business) Regulations, 2004 for review of certain aspects of the Multi-Year Tariff (MYT) Order dated 26 June, 2015 in Case No.121 of 2014 ( the impugned Order ). 2. MSEDCL s prayers are as follows: a) To admit the Petition under Section 94(1)(f) of the Electricity Act, 2003 read with Regulation 85(a) of MERC (Conduct of Business) Regulations 2004; b) To allow the Petitioner the entire power purchase cost for FY as per the provisional submission; c) To provide more clarity regarding scheduling of power and procurement from the Units which are not considered in MOD and if required restate the power quantum available under MOD principle considering minimum technical capacity requirement and availability during the year as well during the peak and off peak time of the day; d) To allow entire interest expenses without deducting the IDC component from the interest expenses; e) To allow provision for bad debts considering total receivables without deducting provision for debts and unbilled revenue as submitted by the Petitioner in this Petition; f) To create a separate category for High Tension Agriculture Others consumers; g) To provide clarification on consumer categorization as sought by the Petitioner; h) To provide the clarifications on power purchase rates and relevant information as sought by the Petitioner; i) To provide clarification on other issues as sought by the Petitioner; j) To pass any other order as the Commission may deem fit and appropriate under the circumstances of the case and in the interest of justice; k) To condone any error/omission and to give opportunity to rectify the same; l) To permit the Petitioner to make further submissions, addition and alteration to this Petition as may be necessary from time to time. 3. MSEDCL has submitted the following background to the present Review Petition: 3.1. The Commission issued the impugned Order on 26 June, 2015 for approval of MYT for the Second Control Period FY to FY On 24 July, 2015, MSEDCL filed a Review Petition before the Commission (in Case No. 94 of 2015) on the issue of revenue loss due to consumers exercising choice between continuous and non-continuous supply. MSEDCL had mentioned that it would file a substantive submission on certain other issues relating to the impugned Order Accordingly, on 7 August, 2015, MSEDCL submitted an Addendum to the Review Petition in Case No. 94 of 2015 covering certain other issues. Order in Case No. 121 of 2015 Page 2 of 20

3 3.3. However, at the hearing held on 12 August, 2015 in Case No. 94 of 2015, MSEDCL sought to withdraw the Addendum with liberty to file it separately, which was allowed by the Commission. Accordingly, MSEDCL has submitted the present Petition seeking review of additional issues relating to the impugned Order. 4. The Maharashtra Veej Grahak Sanghatana (MVGS), 3/456/4, Kestij Hotel Building, Mahasatta Chowk, Sangli Road, Ichalkaranji, Distt. Kolhapur, through its President Shri. Pratap Ganpatrao Hogade, has filed an Intervention Application on 14 November, 2015, essentially opposing MSEDCL s Review Petition and raising certain related issues. The intervention sought is granted by the Commission, and is being considered as Miscellaneous Application (M.A.) No. 11 of 2015 in these proceedings. 5. At the hearing on 18 November, 2015, MSEDCL made a presentation on the issues sought for review, highlighting (i) Disallowance of Power Purchase in FY , (ii) Power Purchase through Merit Order Despatch (MOD) Principles, (iii) Deduction of Interest during Construction (IDC) from Interest Expenses, (iv) Provision for Bad Debts on Trade Receivables, etc. and on the clarifications sought on some aspects of the impugned Order. As regards disallowance of power purchase relating to the substantial increase in Agriculture category sales, MSEDCL suggested that the Commission should await the results of the third-party study referred to in the impugned Order (and which MSEDCL proposes to commission), particularly since the amount on power purchase has actually been spent. The MOD principles mandate non-purchase from some Units, but such Units may have to be run at technical minimum. Moreover, some Units were commissioned only later in the year. Hence, the costs may increase. The Commission wondered if it was MSEDCL s contention that all Units should run at least to the extent of technical minimum. With regard to IDC, MSEDCL submitted that the Commission may refer to its original MYT Petition, and the approach adopted in the Mid-Term Review (MTR) Order for the Maharashtra State Electricity Transmission Co. Ltd. (MSETCL). Regarding the provision for bad debts, the changes in the new Companies Act, 2013 need to be considered. The total Receivables shown in the Order is a net figure. Moreover, unbilled revenue has not been considered in the Receivables. 6. At the hearing, Dr. Ashok Pendse, on behalf of the Thane-Belapur Industries Association (TBIA), an authorized Consumer Representative, submitted that, in the previous year, a higher power purchase had been allowed considering a higher projection for Agriculture category sales. Instead, MSEDCL had to sell some of this power in the market at a lower rate since it turned out to be surplus. In effect, MSEDCL is seeking to do this for the Order in Case No. 121 of 2015 Page 3 of 20

4 subsequent year also, and questioned how the disallowance in the impugned Order constitutes an error for review. The issue of MOD does not qualify for review, since it is couched in terms of seeking clarification. No clarification is required, the MOD principles being of long standing in Maharashtra. At times when load is fluctuating, the implementation of MOD principles is a matter of judgment to be exercised from time to time so as to procure power from the cheapest sources. 7. During the hearing, MVGS submitted that MSEDCL s claim for review is misplaced, and that such review of disallowed power purchase and of the MOD principles would severely affect consumers, including through Fuel Adjustment Charges (FAC). In fact, the Commission had allowed a higher rate than proposed in the initial MYT Petition. Moreover, MVGS intervention has also been prompted by the calculations provided to him by MSEDCL of the FAC of July and projections for the months of October to December, The Tables at pages 5 and 6 of the Intervention Application may be seen. MSEDCL has not obtained the Commission s approval for charging FAC on such projected basis. This is also linked to MOD issues. 8. In its response at the hearing, MSEDCL submitted that purchase from all non-mod Units was included in the entry regarding purchase of trader power in the FAC calculations. MSEDCL would submit its Reply to the Intervention Application. The Commission also directed MSEDCL to submit its say on the MOD issue along with the specific relief sought. (Accordingly, vide affidavit dated 7 December, 2015, filed its submission on these issues). 9. MSEDCL s contentions and the Commission s rulings on each issue are set out below, considering the provisions of Regulation 85(a) of the MERC (Conduct of Business) Regulation, 2004 which governs review, and which reads as follows: 85.(a) any person aggrieved by a direction, decision or order of the Commission, from which (i) no appeal has been preferred or (ii) from which no appeal is allowed, may, upon the discovery of new and important matter or evidence which, after the exercise of due diligence, was not within his knowledge or could not be produced by him at the time when the direction, decision or order was passed or on account of some mistake or error apparent from the face of the record or for any other sufficient reasons, may apply for a review of such order, within forty five (45) days of the date of the direction, decision or order, as the case may be, to the Commission. Issue A: Power Purchase disallowed in FY MSEDCL s Submission 10. The Commission has disallowed Rs crore towards alleged excess power purchase of 7535 MU. Order in Case No. 121 of 2015 Page 4 of 20

5 11. As FY was over, the Commission had sought the actual month-wise and sourcewise power purchase quantum, cost and rate for FY In response, MSEDCL had submitted the provisional details of power purchase made from various sources on a monthly basis up to March, It is a well settled principle that the actual power purchase cost needs to be approved. 12. Sales and power purchase cost are independent of each other. Even though the impugned Order states that the power purchase cost of FY would be scrutinized further during truing up at the end of the Control Period, subject to prudence check, the resultant delay will have its own cost implication. Expenditure on power purchase has already been incurred, and depriving MSEDCL of it in the Aggregate Revenue Requirement (ARR) will create a vicious cycle as it will result in under-recovery of costs. This would also lead to delay in payment to Generators and increase in Delayed Payment Charges (DPC) which have been disallowed by the Commission for inclusion in the ARR as expenses. 13. Therefore, the Commission may allow the total power purchase cost as submitted by MSEDCL. The sales to Agriculture consumers and corresponding Distribution Loss may be decided after prudence check of Agriculture consumption by a third-party agency. 14. In its submission dated 7 December, 2015, MSEDCL re-iterated these contentions. MVGS Submission 15. The impugned Order clearly states that power purchase of 7535 MU and corresponding expenses of Rs crore have been disallowed on a provisional basis. This is also mentioned by MSEDCL in its review Petition. An assessment which is stated by the Commission to be provisional cannot be objected to without any valid grounds, reasons and evidences. 16. Detailed analysis of the Energy Sales, approvals, disallowance and its reasons are given in paras to of the impugned Order. An analysis was made showing a reduction of 1% in total sales, excluding Agriculture category sales. However, an increase of 26.56% in Agriculture sales was shown by MSEDCL. Hence this excess sale of 5728 MU has been provisionally disallowed by the Commission. 17. On the basis of the approved sales, the Commission has decided the power purchase quantum and cost at para 3.7 of the impugned Order. On that basis, excess power purchase of 7535 MU and corresponding amount of Rs crore have been disallowed on provisional basis. Order in Case No. 121 of 2015 Page 5 of 20

6 18. The MSEB Holding Company has appointed a fact-finding Committee to assess the real agricultural consumption. In these circumstances, there is no justification for the demand of MSEDCL for review. Commission s Analysis and Ruling 19. The impugned Order deals with the provisional disallowance of power purchase cost for FY as follows: However, there is a significant increase in estimation of agriculture sales, i.e., 27,293 MU (as against 21,565 MU) in the additional submission (based on 11- months actuals) for metered as well as un-metered agriculture category. The increase in revised agriculture sales is 26.56%, as compared to reduction (-1.01%) in total sales, excluding Agriculture sales Thus, there is a significant difference in Agricultural sales for FY as reported by MSEDCL in its MYT Petition vis-à-visits additional submission. Upon enquiry regarding the reasons for the increase, MSEDCL has not substantiated it with any detailed reasoning, except that it is based on actual sales. The Commission is of the view that this requires detailed scrutiny of the assessment of agricultural sales. No significant increase in conversion of un-metered agriculture connections to metered connections and/or release of new agriculture connections has been reported during the second half of FY which could justify such a substantial increase Hence, the Commission has not accepted the agriculture sales reported by MSEDCL in its additional submission for FY Therefore, while approving sales for FY , the Commission has worked out total sales based on the actual sales for 11 months for all categories, except agriculture. For agriculture sales, the Commission has considered the projections of MSEDCL in its Petition. The Commission directs MSEDCL to submit in its next tariff Petition, the reasons for such increase in agriculture consumption along with the Circle-wise number of agriculture consumers (metered/un-metered), connected load (metered/un-metered), assessment of agriculture consumption Index, and agriculture sales (metered/un-metered) for FY and FY Accordingly, the category-wise Sales approved by the Commission for FY on a provisional basis are as summarised below As FY was over, the Commission sought the actual month-wise and source-wise power purchase quantum, cost and rate for FY In response, MSEDCL submitted the provisional details of power purchase made from various sources on a monthly basis up to March The actual quantum of power purchase (i.e., 113,480 MU) is higher by 7,535 MU as compared to that which was necessary (i.e., 105,945 MU) as per the energy input requirement and Energy Balance approved in the earlier section of this Order, based on the approved sales for FY Order in Case No. 121 of 2015 Page 6 of 20

7 Thus, in line with the principles and methodology for estimation of energy input requirement, elaborated in earlier paragraphs approving the Energy Balance for FY , the Commission provisionally disallows the excess power purchase (i.e. 7,535 MU) submitted by MSEDCL. Further, as discussed in under para above, the Commission has also not considered the revised agriculture sales estimation, which is higher by 5728 MU during FY and excess surplus traded power as projected by MSEDCL in its additional submissions. Accordingly, the cost corresponding to the excess power purchase has been disallowed provisionally at an average rate of Rs. 3.75/kWh. It would be scrutinized further when truing up at the end of the Control Period, subject to prudence check. 20. Thus, the Commission took a considered decision to provisionally disallow the power purchase cost for reasons which have been set out in the impugned Order, more particularly in para quoted above. Those reasons have not been addressed, except for MSEDCL s bland statement that the sales figures set out in its additional submission in the earlier proceedings were based on actuals, a claim which the Commission had already recorded in the impugned Order. Moreover, the disallowance is provisional and would be reconsidered, as stated in the Order, during the truing up at the end of the Control Period. The Commission notes that MSEDCL is expected to file its next MYT Petition shortly, when such truing up would also be undertaken. As such, the claim for review of the impugned Order on this count does not meet the requirements of the Regulations. Issue B: Power Purchase through Merit Order Despatch Principles: MSEDCL s Submission 21. At the hearing on 18 November, 2015, the Commission directed MSEDCL to submit its detailed say on issues regarding Merit Order Despatch (MOD) issues along with the specific reliefs sought. Accordingly, MSEDCL filed its submission as follows on 7 December, As per section 32 of the EA, 2003, the Maharashtra State Load Despatch Centre (MSLDC) is responsible for optimum scheduling and despatch of electricity within a State, in accordance with the contracts entered into between the Licensees or the Generating Companies operating in that State. Further, the Commission s Intra-State Availability-based Tariff (ABT) Order authorizes MSLDC to take all decisions with regard to the despatching of Generating Stations after evaluating all possible network parameters/ constraints/ congestions in the transmission network. Thus, MSEDCL does not have any direct role in the preparation of the MOD Stack and the scheduling and despatch of electricity as per the MOD. Order in Case No. 121 of 2015 Page 7 of 20

8 23. MSEDCL has been following the MOD Principles as per the various provisions of the EA, 2003, Rules, Regulations and Policies. It has sought review of the requirement of power purchase through MOD principles because the Commission has not considered the following important parameters while approving the power purchase quantum and cost for FY 15-16: a. As per the ABT Order, all the Generating Stations in the State are required to be operated up to the technical minimum level so as to maintain the operational efficiency of the Plants. In the background of seasonal variation and difference in base and peak load, the Commission has not considered the technical minimum operating load for running a thermal power plant: in the light-load periods, the thermal Units can be backed down only up to their respective technical minimum. b. The Commission has given the same treatment to Units which are currently running and those which are likely to be commissioned during FY While preparing the MOD Stack, generation from upcoming Units is considered as if the same is available from April,2015.Till their actual commissioning, MSEDCL needs to procure power from sources which are not considered in the MOD Stack, and this would result in increase in power purchase cost. c. The Commission has not considered the demand projection on MW basis and the time differentiation demand which may result in base load, peak load and off-peak load. This has resulted in zero scheduling of power from many generating Units which may not be considered in the peak load period. d. The Commission has not considered transmission constraints. Despite its higher cost in the MOD Stack, MSEDCL has to procure costly power due to the requirement of technical minimum load, transmission constraints, etc. and thus the actual power purchase cost will be more than approved. 24. By not considering these critical parameters, the Commission has erred in finalizing the MOD Stack. The Commission may clarify whether the power from the Units which are not considered in MOD may be scheduled depending on the availability or rate from such sources which need to be compared with the rates of power available from the short-term market before scheduling, and whether the cost of the same will be allowed or otherwise. The Commission may provide more clarity regarding the procurement and scheduling of power from Units which are not considered in MOD. MVGS Submission 25. All consumers in the State have faced a serious impact in their bills of October received in November, Average FAC of paise per unit is charged on the basis of Order in Case No. 121 of 2015 Page 8 of 20

9 power purchase cost of July, This FAC is declared for 3 future months, i.e. from October to December, 2015 vide General Commercial Circular No. 222 dated 31 October, This is basically the effect of violation of the MOD principles. 26. On analysis of FAC calculations provided by MSEDCL, it is observed that the computation is based on power purchase undertaken in July, In that month, MSEDCL has not purchased power from the Power Exchanges even though it was available from the Indian Energy Exchange (IEX) at Rs per unit. Instead, power was purchased from Traders at Rs per unit and Units of the Maharashtra State Power Generation Co. Ltd. (MSPGCL) which are not covered in MOD. 27. The power purchased from non-mod Generating Stations should be disallowed, or else it should be treated as over-injection and be allowed at the average allowed variable cost of Rs per unit. The consumers are not at fault and hence should not be burdened with the additional power purchase cost. The difference in cost should be recovered from MSPGCL or through deduction in Return on Equity (RoE) of MSEDCL. 28. MOD principles are laid down since the first Tariff Order of May, 2000 on the basis of various provisions in the Act, Rules, Regulations and Policies. Hence any objection or demand against the MOD principles cannot be treated as a matter for review at this stage as there is nothing new in the MOD directions. MSEDCL s Response regarding computation of FAC 29. Generally, in the first month after the Tariff Order, FAC is marginal. It gradually increases as the power purchase cost increases. However, due to non-availability of power from upcoming Stations, transmission constraints, minimum technical operation levels, etc., it was not technically and practically feasible to purchase power strictly as per the sources approved by the Commission on MOD principles. Hence, the variable cost of power purchase for the month of July, 2015 increased by 57 paise per unit over that approved by the Commission, and consequently the FAC in the first month increased. As prior vetting of the June,2015 FAC would take time which would have adversely affected its cash flow, MSEDCL has levied FAC to consumers considering the average rate of FAC worked out based on the April to June, 2015 computation. The provisional billing of FAC is subject to the Commission s approval and adjustment. MSEDCL has calculated the FAC for June, 2015, the first month after the Tariff Order, and submitted it to the Commission for vetting in November, During July, 2015 MSEDCL has purchased power from the Power Exchanges (IEX and PXIL) on day-ahead basis for to the extent of 150 MW to 300 MW depending on the demand in different time slots. The average rate of such power purchase is 2.70 per unit. The rate in the Power Exchanges is determined by demand and supply. Thus, if demand Order in Case No. 121 of 2015 Page 9 of 20

10 increases the price of power also increases, so it may not be appropriate to assume that MSEDCL would have got more power at the same rate. MSEDCL has purchased power from IEX to the extent possible. 31. MSEDCL clarified that the amount shown against Traders and the rate of 3.27 per unit is not of the actual power purchase from Traders but the total of the components shown in the Group, i.e. the sources of power which are not considered in MOD Stack by the Commission. 32. MSEDCL is liable to pay to the Generators as per provisions of the PPAs and the rates approved by the Commission from time to time. Hence, the proposal of MVGS that the power purchases from non-mod Generating Stations should be disallowed or be treated as over-injection, at the rate of average allowed variable cost of Rs per unit, is not advisable. Commission s Analysis and Ruling 33. In its submission dated 7 December, 2015, MSEDCL has restricted the relief sought on this issue to clarification regarding the scheduling of power from Units which are not covered in MOD, and whether or not such power purchase cost will be allowed. 34. The Commission notes that the MOD principles have been in operation for a long time, and their implementation has been dealt with even in the first Tariff Order for MSEDCL in It is well settled that issues such as transmission constraints, technical minimum of Thermal Generating Stations etc. need to be considered while operating MOD. The power purchase cost approved for subsequent years in the Tariff Orders is an estimation based on various ex ante inputs. During the operating period of the Tariff Order, actual power purchase cost may vary on account of various factors. Power purchase cost is treated as an uncontrollable element for pass-through in the Tariff, provided the procurement meets the test of prudence. Variation in power purchase cost is passed on to consumers by MSEDCL through the FAC mechanism, which is subject to vetting. In this background, the Commission is of the view that no need for any further clarification as far as MOD is concerned. 35. Regarding the computation of FAC, the Commission notes that, vide Circular No. 222 dated 31 October, 2015, MSEDCL has declared FAC for the three months of October to December, 2015 ex ante on the basis of variation in the power purchase cost in July, 2015.The basic principle behind the FAC mechanism is to allow passthrough of only the actual variations in power purchase cost. Determining the FAC to be levied based on such expected future variation is against this basic principle and the provisions of the MYT Regulations. MSEDCL shall take corrective steps to Order in Case No. 121 of 2015 Page 10 of 20

11 levy FAC to its consumers as computed post facto considering the actual variations in power purchase cost and in accordance with the Regulations. Issue C: Deduction of Interest during Construction from Interest Expenses MSEDCL s Submission 36. In its MYT Petition, MSEDCL had computed the interest on long-term loan based on the actual capital expenditure and loan drawal for FY and the projected capital expenditure and loan drawals for FY and FY Since the interest has been calculated based on the loan drawal considering the actual / projected capital expenditure, only revenue expenditure is required to be considered since cost and interest amounts relating to assets which are capitalized are deducted from the total interest cost. In its MYT Petition, MSEDCL had accordingly deducted the interest capitalized from the total interest amount, and only net interest was claimed in the ARR. 38. While calculating the interest cost in the impugned MYT Order, the Commission has considered the debt percentage as 70%, 81% and 74% for FY , FY and FY , respectively, in line with MSEDCL s submission. The interest expense has been calculated on the amount capitalized during the year less capitalized interest. 39. Such deduction of capitalized interest should not be done while computing the interest expense for FY to FY as the base for calculation of interest expense was the capitalized amount and not the capital expenditure incurred during the year. Also, in past Tariff Orders, the Commission has always calculated interest on loan based on the amount capitalized during the year without deducting the interest capitalized from the total interest amount. 40. In the Mid-Term Review (MTR) Order in respect of the Maharashtra State Electricity Transmission Co. Ltd. (MSETCL) dated 26 June, 2015 in Case No. 207 of 2014, the Commission has ruled that interest capitalized is not deducted from the interest expenses, since addition in loans is considered only on account of capitalised assets. This approach of the Commission for calculation of interest on long term loan is the correct method. The application of two contradictory approaches by the Commission for MSETCL and MSEDCL constitutes an error apparent. Hence, the Commission should not deduct the capitalised interest (IDC component) from the interest expenses. Order in Case No. 121 of 2015 Page 11 of 20

12 Commission s Analysis and Ruling 41. The Commission notes that two distinct approaches have been adopted for computing interest on long-term loan in its impugned Order in respect of MSEDCL on the one hand, and in its MTR Order in Case No. 207 of 2014, also dated 26 June, 2015, pertaining to MSETCL on the other. The Commission is of the view that its ruling in the MSETCL Order that interest capitalized is not to be deducted from the interest expenses since addition in loans is considered only on account of capitalised assets is the correct approach for determining the interest on long-term loan. 42. Accordingly, the review is allowed on this issue. MSEDCL may claim the impact on this account in its next Tariff Petition, which is expected to be filed shortly. Issue D: Provision for Bad Debts on Trade Receivables MSEDCL s Submission 43. At present, the new Companies Act, 2013 prevails, and has replaced the old Companies Act, However, the Financial Statements of a Company are required to be prepared as per the provisions of the Companies Act, 1956 till the financial year ending on 31 March, Schedule VI to the Companies Act, 1956 provides the manner in which a Company shall prepare its Balance Sheet, Statement of Profit and Loss and notes thereto. 44. The Ministry of Corporate Affairs has issued a revised form of Schedule VI on 28 February, 2011 vide Notification No. S.O.447 (E) dated and amended by Notification No. 2/6/2008-CL-V dated and made it applicable to all Companies for the Financial Statements to be prepared for the financial year commencing on or after April 1, Part-I of the Revised Schedule VI has prescribed the Form of Balance Sheet. As per that format, Trade Receivables are required to be disclosed under three different heads: a. Trade Receivables under Current Assets broad head for its current portion, with its detailed break up to be given in Note No.15; b. Long-term Trade Receivables under the head Other Non-current Assets under the Non-Current Assets broad head for its non-current portion to be shown as a part of detailed break-up in Note No.17 ; and c. Unbilled Revenue under the head Other Current Assets under the Current Assets broad head as a part of detailed break-up in Note No Since no definition has been provided in the MYT Regulations, 2011, MSEDCL has referred to the general definition of receivables and the Indian Accounting Standards, Order in Case No. 121 of 2015 Page 12 of 20

13 and concluded that the following conditions are required to be satisfied for amounts to be termed as receivables : a. Trade Receivables, i.e. amount to be received against supply of goods or rendering services; b. The amount reflected in the Receivables needs to be from the normal course of business; c. Receivables include all debts owed to the Company, including the debts which are not due. 47. Considering the above, the Commission may reconsider the amounts relating to receivables. Due to differences in the Receivables amount allowed by the Commission and as submitted by MSEDCL, the actual expenditure allowed as provision for bad and doubtful debts for Wires and Supply business in the MTR Order is lower than the amount submitted in the Petition, as shown below: (Rs. Crore) Particulars Reference* MSEDCL Commission Difference Long-term Trade Note 15 Receivables 4,006 3, Balance with fellow Note 15 subsidiaries Trade Receivables Note 17 10,330 10, Receivable from GoM Note 17 towards subsidy 1,448 1,448 Unbilled Revenue Note 20 6,883 6,883 Income accrued and due Note Total 23,503 13,983 9,520 *From the Annual Accounts of FY As will be seen from the above, there is an error apparent in the calculation of receivables on which the provision for bad debts is allowed. The following Receivables were not considered by the Commission: - long-term Trade Receivables (Note 15) of Rs. 176 crore due to deduction of total provision of bad and doubtful debts; - Trade Receivables (Note 17) of Rs. 177 crore due to deduction of total provision of bad and doubtful debts; - unbilled revenue (Note 20) of Rs crore. 49. In the accounts, for simplification purpose and to assess the amount recoverable from debtors, the provision is deducted from total Receivables and cannot be considered as a part of Receivables. Any deduction in the provision for doubtful debts and computation of Order in Case No. 121 of 2015 Page 13 of 20

14 the provision on the net Receivables will result in a cascading effect wherein the provision is not allowed on the Receivables against which such provision is made. 50. The Commission has disallowed the entire unbilled revenue amount for consideration as receivable but it has been considered as revenue for FY 13-14, which is an error apparent. If the revenue has been treated as per the accounts for FY 13-14, the corresponding provision of unbilled revenue also needs to be considered in the Receivables. Therefore, the amount of Rs crore consisting of unbilled revenue is in the nature and form of Receivables and is eligible for provisioning for bad debts. Commission s Analysis and Ruling 51. The Commission notes that Regulations 78.6 and 92.9 of the MYT Regulations, 2011 are only enabling provisions for allowing a provision towards bad and doubtful debts in the ARR upto 1.5% of the Receivables. Such enabling provisions cannot be used to add particular expenses in the ARR as a matter of right. 52. MSEDCL has not contested the Commission s decision not to include the amount of Rs crore of GoM subsidy, which was to be received, in the total Receivables for computation of the provision for bad and doubtful debts. MSEDCL has also not sought consideration of Rs. 818 crore (balance with fellow subsidiaries) and Rs. 18 crore (income accrued and due) in total Receivables. 53. As regards MSEDCL s claim of error in considering the Trade Receivables in Note- 17 and Long-term Trade Receivables in Note-15, the Commission finds the amount of net Receivables after deducting provision for bad debts has been inadvertently considered instead of the gross amount of Rs. 10,333 crore for Trade Receivables in Note-17 and Rs. 4,006 crore for Long-term Trade Receivables in Note-15. MSEDCL may claim the impact in its next Tariff Petition, which it is expected to file shortly. 54. The main intent of the relevant provisions of the MYT Regulations is to allow inclusion of expenses towards provision for bad and doubtful debts in the ARR. Such provisioning is utilized for written-off bad debts. Unbilled revenue, though included in other Current Assets, cannot be treated as bad or doubtful debt for write-off. Incidentally, in Note-20 of its accounts, where unbilled revenue has been listed along with other Current Assets, MSEDCL has not made any provision for doubtful debt, whereas it has been made in Note-15 for Long-term Trade Receivables and Note-17 for Trade Receivables. Thus, there is no merit in MSEDCL s claim for inclusion of unbilled revenue in total Receivables for computation of the provision for bad and doubtful debt. Order in Case No. 121 of 2015 Page 14 of 20

15 Issue E: Clarification - Tariff for Agriculture Metered Others category MSEDCL s Submission 55. In the impugned MYT Order, the Commission has created a Agriculture Metered Others Tariff category for power supplied at Low (LT) / Medium Voltage for Precooling plants and cold storage units for Agriculture Products; Poultries; High-Tech Agriculture; Floriculture, Horticulture, Nurseries, Plantations, stand-alone Aquaculture, Sericulture, Cattle Breeding Farms, Cane crusher and/or fodder cutter, etc. 56. Within the LT Agriculture Metered Others category, the Commission has kept a difference of around Rs per unit between Agriculture Metered Pumpsets and Agriculture Metered Others. However, the Commission has not applied a similar principle in respect of High Tension (HT) Agriculture consumers, and has not decided a separate Tariff for Pumpsets and other activities. As in the case of LT Agriculture, the Commission may determine a separate Tariff category of HT Agriculture Others. Commission s Analysis and Ruling 57. MSEDCL s suggestion to create a separate Tariff category of HT Agriculture- Others requires a public consultation process and cannot be considered within the limited scope of such review proceedings. MSEDCL is free to make such a proposal in its next Tariff Petition, which is expected to be filed shortly. Issue F: Clarification relating to Tariff categorisation MSEDCL s Submission 58. In the impugned Order, separate Tariff categorization in respect of certain types of consumers is limited to either HT or LT levels and has not been done for both voltage levels. Clarification is accordingly sought regarding the Tariff applicable to the following activities: Sr. No. Activity 1 Warehouses / Godowns 2 Construction purposes not covered under HT VII category 3 Independent R&D Unit Tariff Category HT II Commercial HT II Commercial LT II Commercial HT Level Available However, HT VII Category does not exist Not Available LT Level Not Available Available Order in Case No. 121 of 2015 Page 15 of 20

16 Sr. No Activity Electricity used for the external illumination of monumental/ historical /heritage buildings Transport Workshop operated by Local Authority Govt. Offices shifted from Commercial category to Public Services-Others Tariff Category LTII Commercial LT X Public Service- Others LT X Public Service- Others HT Level Not Available Not Available Not Available LT Level Available Available Available Commission s Analysis and Ruling 59. In order to rectify the inadvertent anomalies in the listing of activities as between the corresponding LT and HT Tariff categories pointed out by MSEDCL, the Commission is making, through the present Order, the following corrections in the Approved Tariff Schedule at Appendix II of the impugned MYT Order: The following activity is added to the illustrative list regarding the applicability of LT II: LT- Non-Residential category Tariff set out in the Approved Tariff Schedule at Annexure II of the impugned Order: q) Warehouses / Godowns o) of the illustrative list regarding the applicability of HT II: HT Commercial category Tariff includes construction purposes not covered in the HT VII category. Since no HT VII category exists, the typographical error is to be corrected to reflect the relevant category, which is HT VIII. Moreover, as pointed out by MSEDCL, there is an inadvertent omission of independent R&D units not covered under any other category, and external illumination of historical monuments, heritage buildings, etc. at the HT voltage level, though these have been listed under the LT II Commercial Tariff. Consequently, o) of the list is being corrected, and items p) and q) added to the list as follows: o) Construction purposes not covered under HT VIII category; p) Independent Research and Development units, not covered under any other category; q) Electricity used for the external illumination of monumental/historical/heritage buildings approved by Maharashtra Tourism Development Corporation (MTDC). Order in Case No. 121 of 2015 Page 16 of 20

17 59.3. Similarly, the following are added to the list of activities to which the HT IX (B): Public Services Others Tariff category is applicable: Transport Workshops operated by Local Authority, all offices of Government / Municipal Bodies, Local Authority, local self-government, Zilla Parishad and Gram Panchayat 60. Although it has not been pointed out by MSEDCL, the Commission finds a similar and unintended discrepancy between another entry in the Tariff applicability of HT V: HT- Agriculture category and the corresponding LT category in the Approved Tariff Schedule regarding pre-cooling and cold storage units. Para of the impugned Order states that the Commission has decided to broaden the existing tariff treatment of cold storages and to consider them in two categories, namely (a) Cold Storages for Agriculture Products; processed or otherwise and (b) Cold Storages for other purposes. While the tariff of Agriculture Others (Metered) category shall be applicable for Cold Storages for Agriculture Products, the latter would be covered under the Industry instead of the Commercial category as at present. This is correctly reflected in the applicability of the LT IV (C): LT Agriculture Metered Others category in the Approved Schedule, but not in the corresponding HT category. The relevant entry in the HT V: HT-Agriculture category is accordingly corrected to read as follows: i) For pre-cooling plants & cold storage units for Agriculture Products processed or otherwise; Issue G: Clarification regarding Power Purchase rates MSEDCL s Submission 61. The Commission is requested to provide the following clarifications or information regarding power purchase rates considered by the Commission which would help MSEDCL in computation of FAC: a. relevant data of the approved Fixed Costs for upcoming stations of MSPGCL with commissioning date considered by the Commission while approving the Tariff of MSEDCL for FY b. Source-wise details of Fixed and Variable Costs of MSPGCL so as to match the details with total approved costs. c. norms considered for calculation of rate of SSP and Pench Hydro Stations. Order in Case No. 121 of 2015 Page 17 of 20

18 d. source-wise rate calculation including, the Central Electricity Regulatory Commission index considered by the Commission for Independent Power Producers (JSW, CGPL, Rattan India Ltd., Adani Power and EMCO). Commission s Analysis and Ruling 62. MSEDCL s request for providing the above details will be dealt with separately under the provisions of the Commission s Conduct of Business Regulations. Issue H: Clarification relating to other issues MSEDCL s Submission 63. MSEDCL has also sought clarifications in respect of Tariff categorization, charges and incentives as tabulated below: Tariff Category Reference in Tariff Order Clarification required Additional Fixed Charges for LT Residential Three Phase Slab for LT-II Commercial 0-20 kw Load Factor Incentive Page $$: Additional Fixed Charge of Rs. 100 per 10 kw load or part thereof above 10 kw load shall be payable. Page: 324 a) $$Additional Fixed Charge of Rs. 150 per 10 kw load or part thereof above 10 kw load shall be payable. Page 267 LT II (A): 0-20 kw units per month Above 500 units per month Page 326 (A) 0-20 kw 0 to 200 units per month Above 200 units per month (only balance consumption) At Page 269, it is mentioned that the Additional Fixed Charge of Rs. 100 per 10 kw load or part thereof above 10 kw load shall be payable to the 3-Phase Residential Consumers. However, at page 324, it is mentioned that the Additional Fixed Charge of Rs. 150 per 10 kw load or part thereof above 10 kw load shall be payable to the 3-Phase Residential Consumers. Thus, there is ambiguity in the Additional Fixed Charges, which may be clarified. At Page 267, the sub-slabs of LT II (A) 0-20 kw Slab are mentioned as units and above 500 units. However, at Page 326, in the Tariff Schedule, the sub-slabs of LT II (A) 0-20 kw Slab are mentioned as units and above 200 units, resulting in ambiguity in the Tariff slabs. Therefore, clarity is needed on the sub-slabs. Para 6.53 LF Incentive, Page In para 6.53 of the MYT Order, Order in Case No. 121 of 2015 Page 18 of 20

19 Tariff Category Reference in Tariff Order Clarification required 294 Commission s Analysis and Ruling This incentive is limited to HT I, HT II, HT IX, and HT X categories only. Detailed Tariff Schedule: Page 353 This incentive is limited to HT I Industry, HT II Commercial categories only it is stated that LF incentive is limited to HT I, HT II, HT IX, and HT X categories, whereas the Detailed Tariff Schedule mentions that the LF incentive is limited to HT I & HT II categories only. The categories of consumers to whom the LF Incentives will be applicable may be clarified. 64. As suggested by MSEDCL, the Commission finds that certain corrections to the impugned MYT Order are necessary in respect of typographical errors and omissions or anomalies between the main body of the impugned Order and the Approved Tariff Schedule at Annexure II, where the provisions of the Approved Tariff Schedule are correct. Accordingly, through the present Order, the Commission rectifies the errors and gaps in the main body of the Order as follows: Table 126 of the Order, hereby stands corrected (as underlined) to the extent shown below: Table 126: Summary of LT Tariffs effective from 1 June, 2015 Approved Tariff Rate Consumer Category and Consumption Slab Fixed / Demand Energy Charge Charge (Rs. / kwh) LT II: LT Non-Residential LT II (A): 0-20 kw units per month Above 200 units per month (only balance consumption). Notes: $$: Additional Fixed Charge of Rs. 150 per 10 kw load or part thereof above 10 kw load shall be payable... Order in Case No. 121 of 2015 Page 19 of 20

20 64.2. With regard to the Load Factor Incentive, the relevant sentence of para of the impugned Order which requires correction states that This incentive is limited to HT I, HT II, HT IX, and HT X categories only whereas, in the Approved Tariff Schedule, the Incentive is applicable only to HT I and and HT II categories. In line with the Approved Tariff Schedule, the relevant sentence in para (underlined in the quotation above) should read as follows: This incentive is limited to HT I and HT II categories only The Petition of Maharashtra State Electricity Distribution Co. Ltd. in Case No. 121 of 2015 stands disposed of accordingly. Sd/- (Deepak Lad) Member Sd/- (Azeez M. Khan) Member Order in Case No. 121 of 2015 Page 20 of 20