M.P. Power Transmission Company Ltd., Jabalpur Blok No. 2, Shakti Bhawan, Rampur, Jabalpur Petitioner. V/s

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1 MADHYA PRADESH ELECTRICITY REGULATORY COMMISSION BHOPAL Sub: In the matter of application for approval of Capital Investment Plan for Transmission ORDER (Date of Order: 02 nd May 2018) Petition No. 33/2017 M.P. Power Transmission Company Ltd., Jabalpur Blok No. 2, Shakti Bhawan, Rampur, Jabalpur Petitioner V/s 1. M.P. Poorv Kshetra Vidyut Vitaran Co. Ltd., Block No. 7, Shakti Bhawan, Rampur, Jabalpur M.P. Madhya Kshetra Vidyut Vitaran Co. Ltd., Nishtha Parisar, Govindpura, Bhopal M.P. Paschim Kshetra Vidyut Vitaran Co. Ltd., GPH Compound, Pologround, Indore - Respondents 4. M.P. Audyogik Kendra Vikas Nigam, Indore (SEZ), Free Press House, 1st Floor, 3/54, Press Complex, A.B. Road, Indore Indian Railways through West Central Railways, Jabalpur General Manager s Office, Electrical Department, Jabalpur Shri Ashish Bernard Dy. Advocate General, Shri Anand Tiwari SE and Shri Vincent D Souza SE (CRA) appeared on behalf of the petitioner. Shri Rajiv Kumar Gupta Sr.General manager and Shri A.S. Raghuwanshi Dy. General Manager appeared on behalf of MPPMCL. None appeared on behalf of other Respondents. M.P. Power Transmission Co. Ltd., Jabalpur (MPPTCL) has filed the subject petition for approval of its Capital Investment Plan for Transmission works during FY to FY in terms of Guidelines for capital expenditure by licensees in Madhya Pradesh issued by the Commission. 2. The petition was admitted on 26 th September 2017 and the petitioner was directed to serve copies of petition on all Respondents in the matter and report its compliance to the 1

2 Commission. The Respondents were directed to file their response on the petition by 23 rd October MPPTCL has broadly submitted the following in its subject petition: (i) Background: The Commission issued MYT order for the control period FY to FY on The first year of the control period, i.e. FY was covered under the 12 th Five Year Plan period and the remaining two years fall under the ambit of the forthcoming 13 th Five Year Plan. The works envisaged to be completed in the MYT Control Period FY to FY and incorporated in the MYT petition for the said Control Period, have been included in the 13 th Five-Year Plan, also. (ii) The 12 th Plan had to be suitably downsized after yearly reviews, and finally the achievements are estimated as Rs Crores at the end of 12 th Plan period i.e The main reasons for this are; (a) (b) (c) (d) The power evacuation works for evacuating the power from the proposed Dada Dhuniwale Thermal Power Project(2x800 MW) and NHDC s Reva TPS(2x660 MW) had to be deleted on account of cancellation of these two generation projects. This was necessary to avert the idling of transmission assets and associated costs. Cancellation of major turn-key contracts due to delays/performance default by turnkey contractor(s) Deferment of downstream works due to deferment commissioning of generating stations. Payments for turn-key contracts are released only after 100 % completion of the turnkey contracts, thus lesser expenditure get reflected in the account statements. The resources utilized during 12 th Plan are indicated, as follows: 1 ADB Financed Works (ADB-II) Rs Crs. 2 ADB Financed Works (ADB-III) Rs Crs. 3 PFC Financed Works (IInd Scheme) Rs Crs. 4 PFC Financed Works (IIIrd Scheme) Rs Crs. 5 JICA Financed Works Rs Crs. 6 ADB-III SAVING Financed Works Rs Crs. 7 REC Financed Works (REC-I Scheme) Rs Crs. 8 Government / Equity support Rs Crs. 9 Transmission Works under PPP Mode Rs Crs. 10 TOTAL - Rs Crs. 2

3 (iii) Process for development of proposed Capital Investment Plan for 13 th Plan Period: MPPTCL has submitted that the 13 th Plan under proposal has been developed under the following process: (a) To develop a need based Plan, system studies are carried out to identify the need of system strengthening, keeping in view the scenario of availability of additional power and load growth. (b) (c) (d) For formulation of Transmission Plan for FY to FY , in-house studies have been carried out by the petitioner MPPTCL. The work of system studies for reduction in transmission losses to match with MPERC targets was entrusted to the Electrical Research & Development Association (ERDA), Vadodara (Guj.). The system studies for loss reduction have been conducted by M/s ERDA in scenario years , , and to (e) The study mainly comprises of : (i) Data of existing and proposed Generating Units & power allocation from outside the State Generators. (ii) EHV Sub-station details, present loading of active & reactive power. (iii) Reactive compensation devices in the system. (iv) Voltage conditions. (v) Fault level considerations. Studies are conducted in contingency conditions for transient analysis, temporary over voltage. (f) Based on the results of the studies, new works are identified i.e.; (i) The new 400 KV, 220 KV and 132 KV lines required. (ii) Second circuiting of existing S.C. lines. (iii) LILO arrangements for interconnection to EHV Sub-stations. (iv) 400 KV, 220 KV and 132 KV new Sub-stations required. (v) Additional transformers required in Sub-stations. (vi) Augmentation of existing transformers. 3

4 The final system study reports have been submitted by the Consultants, M/s ERDA, Vadodara. (g) (h) In compliance of the Guidelines for Capital Expenditure circulated by the Commission vide No. MPERC/2005/DD(TR)/1722 dated , the details in Annexure-2 of the guidelines have been prepared for each and every work to be taken up during FY to FY The discounted cash flow is projected for next 25 years and it is ensured that the payback falls within this period. The work-wise details of financial analysis, containing Annexure-2 of guidelines for all new works to be taken up with value above 5.00 Crores, are filed with this Petition as Annexure-A. Based on the studies and financial analysis as mentioned in preceding paras, need based plan has been chalked out by MPPTCL for the next 5 years. (iv) Physical and Financial plan proposed for FY to FY : S. No MPPTCL has submitted the Physical & Financial Plan for FY to FY The proposed plan includes Normal Plan for MPPTCL & Green Energy Corridor Project also as given below: Physical works proposed under 13 th Plan Period: Particulars 13 th Plan (17-22) YEARWISE PHYSICAL PROGRAMME (Need (Need (Need Based) Based) Based) (Anticip ated) (Need Based) TOTAL 13 th PLAN ( ) (Need Based) A EHV LINES (CIRCUIT KMS) 1 400KV Lines KV Lines KV Lines TOTAL CKT KMS B EHV SUB-STATIONS (MVA) 1 400KV Substations KV Substations KV Substations TOTAL MVA

5 EHV SUB-STATIONS (Nos) 1 400KV Substations KV Substations KV Substations TOTAL (Nos) S. No Financial Investment proposed under 13 th Plan Period: Particulars YEARWISE INVESTMENT IN THIRTEENTH PLAN ( ) (Rs in Lakhs) (Need (Need 20 (Need (Need based) based) (Need based) based) TOTAL 13 th PLAN ( ) (Need Based) based) 1 400KV Lines KV Lines KV Lines TOTAL (LINES) KV Substations 5 220KV Substations 6 132KV Substations 7 Misc. Works TOTAL (SUBSTATIONS) G. TOTAL (i+ii) (v) Financial resources to execute the Plan: After finalizing the works to be taken up during the plan period and assessment of financial need, efforts are made to find out the financial resources which may be available and agencies to execute the works. The process of getting the financial linkage is a continuous one, and at the time of formulation of 5 year plan, the financial linkage for later years, say 4 th & 5 th years, may not be frozen, beforehand. Financial linkage for these works may be firmed up in subsequent years. 5

6 (vi) Sub: In the matter of application for approval of Capital Investment Plan for Transmission S. No. The works are proposed to be taken up under the following modes; Particulars Financial Resources Plan Expenditure (Rs. In Lacs) (i). ADB financed works (Ongoing ADB-III Scheme) taken up by (ii). PFC financed works (Ongoing PFC-II/Saving Works to be MPPTCL for which financial linkage is done 3. Other Works to be taken up by MPPTCL which are yet to be tied up with financial institutions 4. Total Plan (Normal Dev.) Scheme) (iii).pfc financed works (Ongoing PFC-III Scheme) (iv). JICA financed works(ongoing JICA Scheme) (v). ADB financed works (Ongoing ADB-III Saving ) (vi). REC financed works (Ongoing REC I) (vii). JICA financed works (JICA-II Scheme) (viii). PSDF Grant (ix).unfunded works Priority -I (x). Unfunded Works Priority-II TOTAL (xii) Probable institutions are Banks, and other financial institutions with equity support and internal resources (xiii). KfW financed works (Green Energy Corridor GEC-I Scheme) Grand Total (vii) Financial Institutions and resources to fund the Plan: The following are the major institutions from where loan assistance and equity support is available or expected for the 13 th Five -year Plan. (a) Asian Development bank(adb) - The Asian Development Bank (ADB) had sanctioned a loan (ADB-III loan) of Rs Crs. for M. P. Transmission system strengthening project(estt. project cost Rs Crs.) for implementation during the 12 th and 13 th Plans. The major works to be carried out under this project include 2155 Ckt. Kms. of transmission lines and 39 nos. new EHV S/s. The total estimated investment required for these works during the 13 th Plan will be Rs Crs., which includes works to be executed under the cost savings from the ADB-III project loan. 6

7 (b) Japan International Cooperation Agency (JICA): (c) (d) (e) The Japan International Cooperation Agency (JICA), formerly known as Japan Bank of International Cooperation (JBIC), is funding power projects in underdeveloped and developing countries for upliftment of the society in these countries. JICA has sanctioned two loans of Rs Crs. (JICA-I) and Rs. 840 Crs.(JICA-II) for M.P. transmission system projects having project costs of Rs Crs. and 1200 Crs., respectively. The total estimated fund requirement for execution of works under the two JICA-assisted projects during the 13 th Plan is Rs Crs. The salient transmission works to be carried out under the two JICA assisted projects during the 13 th Plan are JICA-I Loan- EHV lines 667 Ckt. Kms.; new EHV sub-stations- 1 no. JICA-II Loan- EHV lines-1125 CKt. Kms.; new EHV sub-stations 17 nos. Power Finance Corporation (PFC): Power Finance Corporation, established by Government of India in 1986 as a developmental Financial Institution for the power sector had sanctioned loans PFC-II (Saving) (Rs Crs.) and PFC-III(Rs Crs.). Under these two PFC loans, the ongoing spill-over works include 493 Ckt. Kms of transmission lines and 4 nos. new EHV S/s. The total estimated fund requirement for these PFC-assisted transmission projects during the 13 th Plan will be Rs Crs. R.E.C. Ltd.- The Rural Electrification Corporation (R.E.C.) Ltd., New Delhi has also sanctioned loans for strengthening of transmission infrastructure in M.P. The loan assistance from REC is for an amount of Rs. 411 Crs. out of a total project cost of Rs. 587 Crs.. The salient works to be executed under the ongoing REC-assisted project during the 13 th Plan are 56 Ckt.-Kms of transmission lines, 2 nos. new EHV sub-stations and 10 nos. additional transformers at EHV sub-stations. The estimated fund requirement for completion of the ongoing works during the 13 th Plan is Rs Crs. KfW Bank, Germany: MPPTCL has undertaken Green Energy Corridor Project(GEC Project-Phase I) for setting up evacuation system required to integrate Renewable Energy sources coming up in M.P., having an aggregate capacity of 4100 MW, with the intra-state & inter-state transmission systems. The total project cost is Rs Crs.. The KfW Bank, Germany has sanctioned a loan of Rs. 840 Crs. and Govt. of India has sanctioned a grant of Rs. 840 Crs. for implementation of this project, while balance amount of Rs. 420 Crs. shall be provided by Govt. M.P. The major works envisaged under this project are construction of 2842 Ckt. Kms. of transmission lines and 7

8 creation of 12 nos. new EHV sub-stations. The estimated fund requirement for this project during the 13 th Plan will be Rs Crs. (f) Equity support by State Government: Equity support will be provided by the State Government to supplement loan assistance. A few works may also be taken up purely with the State Government support (i.e. 100 %), on the basis of priorities. Apart from equity support from the GOMP, certain grants are also given by Govt. of India as per their policies and initiatives (e.g. Rs. 840 Crs. grant under Green Energy Corridor project). (g) Funds yet to be tied up : The remaining works, with an aggregate estimated cost of Rs Crores for strengthening, upgrading and modernizing MP transmission system are still to be tied-up for firm financial assistance. Efforts are being made to get financial assistance from Banks and other institutions. The required fund provisions indicated include a small quantum (Rs. 150 Crs.) attributable to unforeseen miscellaneous works which are not identifiable beforehand. These works, in due course, may include a small number of new EHV sub-stations, works for sub-station capacity enhancement through additional transformers or replacement of existing ones, feeder bay works at sub-stations, small interlinking works through loop-in-loopout(lilo) or tapping of transmission lines, some modification/ up-gradation / renovation/ modernization works etc.. These works will be executed, in due course as the needs arise, after freezing the requisite financial linkage/resources. (h) Internal Resources : It is expected that MPPTCL will start earning surplus in this Plan period which may be utilized to supplement the available Plan funds to some extent. 4. MPPTCL has submitted the following documents with the subject petition. (i) Financial Analysis for Transmission projects under Plan- Annexure A. (ii) Work-wise and Year-wise details of works under Plan.- Annexure B (iii) Copy of System Study Report by M/s ERDA, Vadodara. 5. MPPTCL has submitted that the Transmission Plan is linked to the generating capacity addition. The Plan is subject to change in case of slippage of commissioning schedule of the 8

9 Generating Stations and RE generators, and availability of financial resources. MPPTCL has further submitted that such changes shall be brought to the notice of Commission during subsequent annual reviews of the Plan, which Commission may kindly consider, in due course. 6. With the above submission, MPPTCL has prayed the following: (a) Accord approval to the Transmission Investment Plan amounting to Rs (b) (c) Crores for the 13 th Plan period, FY to FY , as per details submitted in the instant petition. Condone any inadvertent omissions / errors / short comings and permit the Petitioner to add/ change/ modify/ alter this filing and make further submission as may be required at a later stage. Pass such order as Hon ble Commission may deem fit and proper and necessary in the facts and circumstances of the case to grant relief to the petitioner. 7. The Capital Investment Plan for Transmission works under previous 12 th Plan period during FY to FY was approved vide Commission s order dated 10 th July 2012 in Petition No. 67/2011. The subject petition has been filed for approval of CAPEX plan for next plan period i.e. 13 th Plan in terms of Guidelines for capital expenditure by licensees in Madhya Pradesh issued by this Commission. Therefore, the following provisions under Guidelines for capital expenditure by licensees in Madhya Pradesh notified by the Commission are referred for examination of the proposal under subject petition: (a) Clauses 1.5,1.6, and 1.22 of the above mentioned guidelines provides that: 1.5 The Commission shall hold the public hearing on the petition on Capital Investment Plan and related issues such as past achievements and cost overruns in any, cost estimation, technical feasibility, financial benefits and its analyses etc. 1.6 Along with the petition for approval of investment, the following documents need to be filed: (a) Brief outline of the project, its salient features (including whether this is a new/ augmentation/ renovation and modernisation project) such as scope and objectives of this investment, technical reports, design criteria, project financing avenues, contractor/supplier quotations, etc., (b) Details and cost estimates of components amenable to physical verification along with the provision of price escalation, if any. 9

10 (c) Detailed justification of the investment in light of existing operating conditions such as the equipment is operating close to or above their rated capacity, to facilitate the back up system in conditions of exigency or during maintenance, to cater the normal load growth, the equipment has outlived its life, introduction of new and advance technology, etc. 1.7 The licensee shall satisfy the Commission that it has examined the economic, technical, financial and environmental aspects of all available reasonable options to meet the energy requirements of the consumers in its area of supply. This should be supported by a comprehensive cost benefit analysis The Commission s approval shall be only in principle on the financing package and the change in terms and conditions as approved by the Commission shall be allowed only when the licensee justifies the financing costs in the licensee s revenue requirement in future years against Commission s in principle approval of capital expenditure program. (Emphasis Supplied) 1.22 MPPTCL shall carry out annual planning process corresponding to a 5 year forward term for identification of major works and capital expenditure required for the State Transmission System which shall be consistent with the National Power plan formulated by Central Government, any long term plan developed by CEA and the 5 year plan prepared by Central Transmission Utility. 8. On preliminary scrutiny of the subject petition, the observations of the Commission were communicated to the petitioner vide Commission s letter No dated 29 th September 2017 seeking its reply/ clarification by 16 th October 2017 and the case was fixed for hearing on 24 th October Vide letter No dated 11 th October 2017, MPPTCL confirmed the service of the copy of petition to all the respondents in the matter. MPPTCL had sought two weeks additional time to file its reply to the observations raised by the commission. Vide daily order dated 24 th October 2017, MPPTCL was directed to file its reply by 15 th November

11 10. Vide No /C.E.(P&D)/Pet 33 of 2017-MPERC/2891dated 16 th November 2017, MPPTCL filed its reply to the observations communicated to it by the Commission. The petitioner i.e. MPPTCL broadly submitted the following response on the observations of the Commission: (i) Issue: How the various provisions of Guidelines Capital Expenditure by the Licensees in Madhya Pradesh are fulfilled in the proposed Capital Investment Plan. Response: The petitioner, MPPTCL has taken cognizance of the Guidelines for Capital Expenditure by the Licensees in Madhya Pradesh issued by Hon ble Commission. Although, Hon ble Commission has not sought reply regarding compliance of any specific provisions in the Guidelines, it is to confirm, that, MPPTCL has not deviated from any of the provisions made therein. However, observance of salient aspects of the Guidelines is outlined, hereunder: (a) Need for investment in Transmission: Investment in Transmission is primarily needed to create the evacuation system on the upstream side for conventional and renewable energy sources anticipated to come up during the Plan period and beyond, apart from the anticipated growth in load and demand of power/energy in the downstream networks feeding the ultimate consumers of the distribution companies. The anticipated growth is forecast on the basis of historical data and the relevant projections in the All India 18 th and 19 th Electric Power surveys conducted by C.E.A. The need for investment in Transmission has been detailed in the System Study Reports( to ) of consultants M/s ERDA, Vadodara and summarized in the Executive Summary. Copies of the Executive Summary and System Study Reports have been furnished along with the petition. (b) Outline of Projects: The projects/works, envisaged to be implemented under the Capital Investment Plan, are listed out in the Annexure-B submitted with the petition, including the estimated cost of the individual works, main financing source, year-wise phasing of expenditure envisaged etc. The specifications, design and construction of the assets are as per the relevant IS/IEC codes of standard, C.E.A. s guidelines/ criteria for transmission planning, statutory requirements, codes and regulations. (c) Works worth Rs Crs. or more to be covered: All the transmission works of capital nature envisaged during the 13 th Plan period have been included in the petition without any ceiling for seeking approval of Hon ble Commission. 11

12 (d) Financial Analysis(Annexure-2): Financial Analysis for all the individual works included in the Capital Investment Plan has been furnished along with the petition as per the Annexure-2 prescribed in the Guidelines. The Financial analysis has been carried out for a normative time horizon of 35 years (i.e. useful service life), taking into account the interest & depreciation, principal loan repayment, interest on working capital, normative O&M charges, Return on Equity(RoE), discounting factor etc., and, using the discounted cash flow method to demonstrate the financial viability and net positive returns. Annexure-I is required to be furnished during the annual reviews, hence, is not filed with the instant petition. (e) Upstream and downstream arrangements: The transmission plan, in principle, is envisaged to be formulated and implemented according to the upstream and downstream arrangements and requirements. The justifications in this regard, line diagrams and connectivity with the upstream and downstream systems are included in the respective year-wise system Study Reports prepared by consultants M/s ERDA, Vadodara. (f) Least Cost Analysis: In general, the transmission works under the Capital Investment Plan are envisaged with the objectives of meeting the requirements of power evacuation and load growth for a given time horizon, under the rigorous constraints of transmission planning criteria prescribed by C.E.A., mandatory codes & regulations, applicable standards apart from technical feasibility, RoW/space constraints and conditions in the field. The feasible alternatives available for cost comparison are very few because various constraints and limiting factors narrow down the choices and mostly leave a single feasible alternative in the end. Therefore, in the already extensively developed transmission system of M.P., scope for least cost-analysis related to capital investment seems insignificant. (g) Planned/Scheduled commissioning: The schedule of physical execution envisaged and the phased requirement of funds is indicated for each work included in the Investment Plan, in the Annexure-B submitted with the petition. (h) Observance of Grid Code : The Load Flow Simulation/Study for various scenarios envisaged during the 13 th Plan period, take into account all the relevant stipulations and requirements of the Grid Code and other Regulations. (i) Load Flow Studies : As already mentioned in the petition and in the instant reply before, Load Flow Studies have been carried out by consultants M/s ERDA, Vadodara. Hard and soft copies of the Executive Summary and year-wise reports for FY through FY have been furnished along with the petition. The salient analyses carried out by the consultants M/s ERDA, include: 12

13 Load flow simulation - Peak / off-peak load scenarios Contingency Analysis Short Circuit studies (for fault level) Transient stability studies Transient/switching over-voltage studies (ii) Issue- The implications of the proposed plan on various tariff related issues like Interest and Finance cost, depreciation, O&M, RoE on the ARR during the plan period was sought from MPPTCL. Response : With regard to the observations made by Hon ble Commission regarding implications of the proposed Plan on various Tariff related issues, a statement in tabular form covering the various factors/heads under the ambit of a Cost Plus Tariff Model, for the 13th Five Year Plan period has been prepared and submitted as Annexure-I, appended to this reply. On perusal of Annexure-I, it may kindly be perceived from the projections, that, while there is around 9% to 12% growth in ARR amount over the period of Plan, simultaneously, there is also 8% to 14% growth in projected Transmission capacity (vis-a-vis the Generation capacity anticipated, and proposed to be added, by MPPMCL at MP periphery). The average of year-onyear % growth rates in per MW per Day Transmission charges over the plan period comes out to be a mere 1.6%. At the same time, the CAGR for per MW/Day Transmission charges for the plan period comes to be around 1.87% only. Thus, on the whole, it may be safely inferred that the impact of expenses arising out of Capital Investment Plan in question is quite reasonable and limited. (iii) Issue: The details of technical feasibility studies carried out (if any) by the petitioner along with the required cost-benefit analysis and pay-back period of the proposed plan was sought from MPPTCL. Response : The investment plan is formulated, primarily, on the basis of need-based requirements to cater to the prospective generation projects on the upstream side and forecast of load growth on the downstream side. Creation of evacuation links on the upstream side, strengthening and capacity addition on the downstream side are statutory obligations and 13

14 inevitable for the petitioner as a Transmission Licensee. However, appropriate simulation studies for various realistic scenarios envisaged are carried out to meet the constraints mentioned in the reply to the foregoing observation (ii) under the sub-heading Least Cost Analysis. All the works/projects are proposed only after carrying out prudent on-field assessments and preliminary surveys. The implementation plan is prepared with an optimistic perspective to overcome the unforeseen hurdles as they come along during the implementation process. As per the accepted prudent cost plus business model for a transmission licensee, the cost-benefit analysis has been carried out using the discounted cash-flow method for a time horizon of 35 years for all the works envisaged in the Investment Plan to show the financial viability and revenue surplus generated. The cost-benefit analysis is shown in the Annexure-A submitted with the petition. (iv) Issue: Details/documents regarding environmental and other necessary approvals, if any, from all the statutory bodies for all these schemes were sought from MPPTCL. Response:- The necessary approval from competent authorities of Statutory bodies are obtained (in due course) prior to start of execution of the works. Therefore, such approvals, which may be quite voluminous in content, shall be submitted before the Hon ble Commission as and when the same are obtained. (v) Issue: Works of Rs. 480 Crs. are planned to be taken up under Public Private Partnership (PPP Mode). The modalities, if any framed by the petitioner so far for this work in light of legal provisions under the Act or any documents guidelines issued by CEA/MoP was sought from MPPTCL. Response: There is no work of Rs. 480 Crs. through Public Private Partnership (PPP) mode included in the proposed Investment Plan for the 13 th plan period. Instead, work of 400 KV double-ckt. transmission link (Ckt. Length- 480 Ckt.-kms) from Sarni to Ashta for evacuation of power from the 2x250 MW Satpura Thermal Power(Extn.) Project, Sarni has been shown as completed during the 12 th plan period. M/s Kalptaru had been selected, through bidding, as the concessionaire for this PPP-mode project. The matters regarding granting of licence to M/s Kalptaru and determination of Tariff(unitary charges) and other modalities connected to this PPP project had been dealt with and disposed of by the Hon ble Commission through its the orders on petitions no. 32 of 2013 and no. 45 of

15 (vi) Issue: In the Load flow studies carried out for each year, load growth of 7 % and capacity factor of 60 % of installed capacity for Wind, Solar and Biomass is considered by MPPTCL. Therefore, the basis of aforesaid assumptions was sought from MPPTCL. Response: The load growth of 7% per year has been considered in the studies as per the demand indicated by the State Planning Cell under MP Power Management Co. Ltd. based on the 18 th Electric Power Survey carried out by CEA. In the 19 th Electric Power Survey carried out by CEA also, the CAGR of demand growth in the state has been envisaged to be around 7% for the 13 th Plan period and beyond. The capacity factor of 60% for the renewal energy projects has been considered in accordance with the Annexure-III (Generation & Load Factors) of Table-II (Page-30) of CEA Transmission Planning Criteria-2013 for State as a whole.( Copy appended to this reply as Annexure-II) (vii) Issue: While calculating pay-back period for reduction of losses in each year against the proposed Capex Plan, MPPTCL has considered Rs as per unit charge of cost of supply from ARR & Retail Supply Order for FY only. Therefore, the basis of aforesaid assumption was asked from MPPTCL. Response:- The pay back period in the study has been computed based on the latest tariff available at the time of finalization of the study which was Rs.4.84 per unit i.e. average cost of supply in Retail supply tariff for The current average cost of supply as per the Retail Supply Tariff order for the year FY is Rs.6.25 per unit. (viii) Issue: Documents in support of GoMP s approval necessary for funding as mentioned in the petition were sought from MPPTCL. Response: Approval of GoMP is required for funding from External funding Agencies only. The relevant documents containing GoMP s approvals are being arranged and compiled. The same shall be produced before Hon ble Commission, separately. (ix) Issue: It was submitted by MPPTCL that loss derived from the studies are the peak power losses corresponding to peak load of MW for base year of the Plan. It was contended, that, the present loss level of 2.71 % as reported in the MPPTCL s RoC report is annual energy loss for FY

16 MPPTCL was asked to submit peak power loss recorded by it during the past period of three to five years, so that, the comparison of the past period peak power loss can be made with the peak power loss envisaged by MPPTCL in the proposed Plan Response: The peak power losses are the instantaneous values computed for the load generation scenario and network configuration, with the simulation model incorporating quantum and dispersal of generating sources and loads which are interlinked through the network elements including lines and transformers at voltage-interfaces. The whole network, as modelled, is assumed to be frozen at the peak load or off-peak load, as the study-scenario may be, and the instantaneous active as well as reactive losses are computed for that particular scenario using the line parameters, transformer loss data etc.. The annual energy losses are a cumulative resultant of such instantaneous losses in the extremely large number of scenarios which the system goes through during the course of one year. In short, the energy losses depict the average power losses over a year and can be easily measured using the energy meter readings at appropriate locations/interfaces. However, measurement of peak power losses in the network will involve very precise synchronization of MW measurement at all the appropriate locations at a particular time as well as communication & continuous data processing facilities to measure the instantaneous (or short-period) power losses in the network. Such a highly sophisticated and comprehensive loss measurement system for the entire transmission network of the state, covering all the elements, with matching communication and data-handling facilities is not become technically feasible, at present. Therefore, simulation is the only workable methodology for reasonably accurate and realistic estimation of instantaneous peak or off-peak power losses in any extensive and complex network. Simulation, incidentally, has the inherent advantages of being much faster, cheaper and susceptible to considerable refinement in accuracy with gradual accumulation of correlated information/data. (x) Issue: The actual Financial and Physical achievements against the approved 12 th Plan have been 71 % and 54 % (for transmission lines only ) respectively. Further, for the actual financial plan of Crs., in the proposal, an amount of Rs Crs. only is shown as tied up with various financial institutions. The basis for proposing the balance 12 % investment plan without linkage with any financial institution was sought from MPPTCL. 16

17 Response: The petitioner has prepared a need-based plan, which includes projects under ongoing schemes from the previous 5-year plan, newly sanctioned schemes (e.g. KfW financed GEC project) as well as residual part of the plan without firm financial arrangement at present. The petitioner is in the process of obtaining financial assistance for the balance investment plan shown as without financial arrangement at present. The investment plan is always prepared with an optimistic perspective to cover all the need-based works, as far as possible, so that, timely implementation, involving interdependent steps like detailed surveying, statutory clearances, financial closure and tendering process, would be possible in due course when funding source is finally selected and frozen. Moreover, phased investments for works which are envisaged to be started during current plan period and completed during the next plan period are also included in this Investment Plan. (xi) Issue: Clause 1.22 of the guidelines provides as under: MPPTCL shall carry out annual planning process corresponding to a 5 year forward term for identification of major works and capital expenditure required for the State Transmission System which shall be consistent with the National Power plan formulated by Central Government, any long-term plan developed by CEA and the 5-year plan prepared by Central Transmission Utility. Therefore, the petitioner was asked to demonstrate that how the proposed five year Capex Plan is complying with the above clause. Response: All the transmission works(mainly 400 KV works) required for interlinking the Inter-state/inter-regional transmission system with the MPPTCL s network and works related to evacuation of power from upcoming central sector and joint sector power stations/ipps/re generators have been included in the MPPTCL s Investment Plan envisaged for the 13 th Plan period. The phasing and implementation schedule envisaged for these priority works/projects is in consonance with the targets of central sector generation projects and transmission plan of Central Transmission Utility and the connected State Transmission Utilities under the Western Region. The status of implementation of such works is being closely monitored and appraised by the Ministry of Power(GoI), C.E.A., Western Region Power Committee (WRPC), POSOCO(CTU), PGCIL etc. at various meetings/forums. These works(mainly 400 KV works) are included in the detailed year-wise list of works filed as Annexure-B with the instant petition. 17

18 (xii) Issue: MPPTCL submitted that, the proposed plan is linked with the generating capacities to be added in the Plan period and the load growth in the system. However, the requirement of the network proposed in the Plan on account of load growth in the network was not discussed in the petition. Response: The objectives of the transmission plan are composite in nature, as the growth in generation, more or less, tends to coincide with the anticipated growth in demand of power/energy. As most of the major generating stations shall be connected with CTU network, all the works/projects needed for strengthening & capacity enhancement of the downstream transmission system, i.e. 220 KV network and 132 KV network are primarily required to cater to the anticipated load growth in the further downstream sub-transmission and distribution networks of the Discoms, apart from the Discoms EHV consumers directly connected to MPPTCL s system. The only exceptions in this regard are power evacuation links from upcoming Renewable Energy generation sources needed at 220 KV and 132 KV level, apart from the interfacing arrangements(e.g. 33 KV & 11 KV bays at EHV S/s) needed at injection points for Open Access customers. However, it is pertinent to be mentioned here, that, assets created through Customer/Consumer contribution do not form a part of the Transmission Capex Plan. 11. Vide No.MD/CZ/Comml-III/1565 dated 15 th December 2017, Madhya Pradesh Madhya Kshetra Vidyut Vitran Company Limited (MPMKVVCL), Bhopal informed that it has no objection/comments on the subject petition. 12. Vide No. 814 dated 18 th January 2018, MPPMCL submitted its response to the petition. Vide Commissions letter dated 100 dated 24 th January 2018, the petitioner was asked to file its point-wise reply to the aforesaid response filed by MPPMCL. 13. Vide its letter No 262 dated 02 nd February 2018, the petitioner (MPPTCL) filed its pointwise reply to the MPPMCL s comments. The petitioner had endorsed a copy of its aforesaid reply to MPPMCL also. Issue-wise response of MPPTCL on the comments of MPPMCL is enclosed with this order as Annexure-A. 14. Besides above, the comments on the petition was received in the office of the Commission from one stakeholder. Vide Commission s letter No. 01 dated 01 st January 2018, the copy of aforesaid comments was sent to MPPTCL seeking their point-wise reply to the same. Vide its letter No 142 dated 17 th January 2017 (received in the office of the Commission on 23 rd January 2017) MPPTCL submitted its reply to each comment. The petitioner (MPPTCL) had endorsed a copy of its aforesaid reply to objector also. Issue-wise response of MPPTCL on the comments/objections of stakeholder is enclosed with this order as Annexure-B. 18

19 15. The public hearing in the subject matter was held in the Court room of the Commission on 23 rd January On examination of the subject petition, it has been observed that the five-year Capital Investment Plan proposed and filed by MPPTCL in the subject petition is in accordance with the Guidelines for capital expenditure by licensees in Madhya Pradesh issued by the Commission. It is further observed that the aforesaid investment plan has been developed/ formulated by MPPTCL after carrying out system studies considering expected availability of power and load growth during the plan period. The system studies have been conducted by a third party i.e. M/s. Electrical Research & Development Association (ERDA), Vadodara for the period in proposed investment plan. The works which are proposed in the Capex Plan have been identified on the basis of system studies carried out by MPPTCL through consultant. All the works identified after system studies and proposed in the Capital Investment Plan have been tabulated and submitted as Annexure with the petition mentioning requisite details. The financial analysis on the aforesaid capital expenditure plan is also submitted with the petition. The petitioner has also stated various financial institutions/sources to fund the proposed capital investment. 17. Considering all above and the response of petitioner on the comments offered by the respondent and stakeholders, the Commission under clause 1.15 of the Guidelines for Capital expenditure by licensees in Madhya Pradesh hereby accords in principle approval to the following investment plan filed by MPPTCL: (A) FINANCIAL PLAN: S. No (Amount Rs. in Lacs) Particulars YEARWISE INVESTMENT ( ) (Rs in Lakhs) TOTAL FY FY FY FY FY (Need (Need (Need (Need (Need based) based) based) based) based) (FY ) (Need based) 1 400KV Lines KV Lines KV Lines A TOTAL (LINES) KV Substations 5 220KV Substations 6 132KV Substations 7 Misc. Works B TOTAL (SUBSTATIONS) G. TOTAL (A+B)

20 (B) PHYSICAL PLAN: S. No. Particulars YEARWISE PHYSICAL PROGRAMME (FY to FY FY FY FY FY FY (Anticipa (Need (Need (Need (Need ted) Based) Based) Based) Based) TOTAL (FY ) (Need Based) A EHV LINES (CIRCUIT KMS) 1 400KV Lines KV Lines KV Lines B TOTAL CKT KMS EHV SUB-STATIONS (MVA) 1 400KV Substations 2 220KV Substations 3 132KV Substations TOTAL MVA EHV SUB-STATIONS (Nos) 1 400KV Substations 2 220KV Substations 3 132KV Substations TOTAL (Nos) Details of works proposed under the above investment plan as filed by the petitioner are enclosed as Annexure C with this order. The in-principle approval of the Commission to above Capital Investment Plan is subject to the following terms and conditions: Terms and Conditions: (i) The Respondent (MPPMCL) in its comments has mentioned about certain directions issued to the petitioner (MPPTCL) from Energy Department, Govt. of MP. Being State Transmission Utility, the petitioner (MPPTCL) shall ensure compliance with the directions issued by Energy Department, Govt. of MP before implementation of works under proposed Capital Investment Plan. 20

21 (ii) (iii) (iv) (v) (vi) (vii) As stated in its reply to comments at Para 7 offered by (MPPMCL) Respondent, the petitioner (MPPTCL) shall always ensure that most efficient use of financial resources should be made by MPPTCL while implementing the proposed plan so that the cost burden on the beneficiaries/users of the transmission system be least. MPPTCL shall examine the economic, technical system and environmental aspects of all viable alternatives before execution of the proposals and investing in or acquiring new transmission system, assets. The schemes which have been tied up either through an agreement with the funding agency or with due sanction of the funding agency and certified as completed & capitalized by the MPPTCL, will be considered for the purpose of allowing depreciation, interest cost and return on equity etc., while determining the Annual Revenue Requirement/Truing-up of ARR for MPPTCL. The works under schemes like Power System Development Fund (PSDF) shown as funded through grant should be approved by the competent authority and the tariff for all such works shall be considered appropriately by the Commission in accordance with the terms and conditions under each scheme. The cost incurred by MPPTCL on capital works shall be considered by the Commission for tariff purpose after exercising prudent check in accordance with the provisions under applicable MPERC (Terms and Conditions for determination of Transmission Tariff) Regulations. The cost of items, instruments, spares, installation and commissioning charges, freight, etc. quoted/ charged by the suppliers/ vendors should be properly analyzed and verified by MPPTCL to ensure that the cost incurred by it, is in line with the lowest possible prevailing market price for desired quality work. (viii) MPPTCL shall be required to file the updated physical and financial progress of all works completed during each financial year as an annexure with each true-up petition filed by the MPPTCL with the Commission. The MPPTCL shall also provide the details of completion cost, details of capitalization including debt and equity as on project completion date along with the true up petition 21

22 (ix) (x) (xi) (xii) MPPTCL is advised to ensure timely utilization of material being procured against base cost in the proposal to avoid any extra financial liability. MPPTCL shall ensure that cost escalations are consistent with market conditions. Any unjustified escalated cost shall not be considered for the purpose of tariff determination. MPPTCL shall ensure timely completion of the projects so that MPPTCL gets due benefits in terms of reduction of losses and also in capacity building, system strengthening, voltage improvement, and for improving the reliability of services. The beneficiaries should also get timely benefits from these projects. MPPTCL has to give top priority on the timely completion of the projects in the best possible manner within the approved financial resources. MPPTCL shall comply with the Guide-lines for capital expenditure issued by the Commission and the various Regulations/codes issued from time to time. (xiii) MPPTCL shall obtain the in-principle approval of the Commission in case of any change in the present Capital Investment Plan filed with the subject petition. With the above directions, the subject petition stands disposed of. (Anil Kumar Jha) (Mukul Dhariwal) (Dr. Dev Raj Birdi) Member Member Chairman 22

23 Annexure-A Comments raised by MPPMCL and response submitted by MPPTCL in Petition No 33/2017. (i) Comments of MPPMCL Para 1 to 4 : That, the petitioner MP Power Transmission Company Limited, (hereinafter mentioned as MPPTCL)is a Company with GoMP having 100% ownership, registered under Companies act 1956 and is undertaking the Intra-State transmission activity in the State of Madhya Pradesh. That, Government of Madhya Pradesh (hereinafter referred as GoMP), vide order 2491/13/64 Bhopal has declared MPPTCL as State transmission utility w.e.f Henceforth, it discharges the function of planning and coordination relating to Intra-State Transmission System for the benefits of end users of State of M.P. in order to extend them all benefits as planned by GoMP. That, the petitioner has filed the instant petition for approval of comprehensive five years capital investment plan for the period FY to FY amounting Rs Crores. That, at the outset it is to reiterate that MPPTCL is fully owned by GoMP and as such GoMP has full control over working and planning of MPPTCL. In other words, MPPTCL does its planning in accordance with policies of GoMP and GoMP, Energy Deptt. has full authority to supervise/amend/alter the planning made by MPPTCL. Response of MPPTCL: In paragraphs no. 1 to 4 of the submission, the Respondent no. 1(MPPMCL) has stated facts related to the status of the petitioner as a Company having 100 % ownership of GOMP and regarding the instant petition filed before the Hon ble Commission. (ii) Comments of MPPMCL Para 5: That, during the pendency of instant petition, a high level meeting has taken place on at Energy Deptt. Bhopal in the matter of review of MP Transco and Minutes of Meeting (MoM) of the same has been circulated vide Dy.Secy. Energy Deptt. letter no. 79/2018/13 dated Response of MPPTCL: In the para 5 of the submission, the respondent no. 1 has mentioned about a high level meeting held in Energy Deptt. GOMP, on in the matter of review of MPPTCL, wherein Energy Deptt., GOMP had directed regarding submission of proposals for new Sub-stations through Managing Director, MPPMCL. The petition in question was filed on , i.e. well before the meeting held on , with preparation for a considerable period of several months before submission. Although there is no explicit direction of Energy Deptt., GOMP regarding formulation of 5-Year Capital Investment Plan, MPPTCL had followed the conventional practice without intention to overlook any direction of the Energy Deptt., GOMP. As the proceedings in respect of the instant 23

24 petition have advanced to the last stage and public hearing has been held, it may not be prudent now to revert back to the original status and begin afresh. However, it is quite pertinent to mention here, that, continuous interaction and exchange of information between MPPTCL and MPPMCL/Discoms for finalizing the proposals received from Discoms for new 132 KV S/s is the adopted practice since beginning. Meetings are also held between the various stakeholders for this purpose. (iii) Comments of MPPMCL Para 6: That, a bare perusal of MoM reveals that following directions have been given by GoMP Energy Deptt. to MP Transco in this meeting. (a) The proposal for new Sub-stations shall be submitted through MD, MPPMCL, as already instructed (item no. 9) (b) (c) In order to resolve the right of way (ROW) issues, higher capacity conductor may be used in such identified lines to improve the transmission capacity of line (item no. 10) Possibility of reconditioning shall be explored in 25% of transformers that are in service for more than 25 years in cases of proposed replacement of transformers is FY This will increase life span by 10years (item no. 17) It is humbly submitted that the above directions issued by GoMP need compliance as the petition does not incorporates the actions taken on above issues. Response of MPPTCL: The response of the petitioner to the directions given by the Energy Deptt., GOMP, mentioned at para 6 of the submission made by the Respondent no.1(mppmcl), is as follows. (a) The procedure for submitting all the proposals for new EHV sub-stations through MD, MPPMCL(Respondent no.1) has already been initiated for finalizing the proposals of new EHV sub-stations. However, it is pertinent to mention here, that, as per the general practice adopted, the proposals for new 132 KV S/s received from the Discoms are thoroughly examined by the petitioner MPPTCL, from the point of view of being the technically feasible least cost alternative under existing and anticipated constraints and compulsions. If the proposal is not found to meet this requirement, then, the proposal is not considered for inclusion in the investment plan and Discoms are advised to consider alternative remedies like strengthening or modifying their downstream sub-transmission(33 KV) networks. (b) To enhance the capacity of transmission corridors/lines having Right-of-Way(RoW) issues, several works which are listed below, have already been included in the Capital Investment Plan for the 13 th Plan period :- (i) Uprating capacity of Indore 400 KV S/s - Indore S/Z 220 KV S/s, 220 KV DCDS line by re-conductoring with Zebra equivalent STACIR conductor (4 Km) (ii) Uprating capacity of Bhopal 400 KV S/s-Bhopal 220 KV S/s, 220 KV DCDS line by reconductoring with Zebra equivalent STACIR conductor (12.1 Km) 24