CASE No. 151 of 2017 CORAM. Shri Anand Kulkarni, Chairperson Shri Mukesh Khullar, Member. Maharashtra State Power Generation Co.

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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: / www. merc.gov.in CASE No. 151 of 2017 In the matter of Petition of Maharashtra State Power Generation Co. Ltd for removal of difficulties in the matter of coal shortage and its adverse impact on MSPGCL's Stations CORAM Shri Anand Kulkarni, Chairperson Shri Mukesh Khullar, Member Maharashtra State Power Generation Co. Ltd (MSPGCL) Maharashtra State Electricity Distribution Co. Ltd (MSEDCL) Petitioner Impleaded Respondent Appearance For MSPGCL For MSEDCL For Authorised Consumer Representatives Shri S.B. Soni.Shri Satish Chavan.Ms Ashwini Chitnis (PEG) Date: 19 June, 2018 Order The Maharashtra State Power Generation Co. Ltd. (MSPGCL), Plot No. G-9, Prakashgad, Bandra (E), Mumbai filed a Petition on 24 October, 2017 for removal of difficulties in the matter of coal shortage and its adverse impact on its Stations under Section 86 (1) clause (a) and (b) of the Electricity Act, 2003 (EA), 2003 and Section 102 of the MERC (Multi Year Tariff) Regulations, Order in Case No. 151 of 2017 Page 1 of 33

2 2. MSPGCL s prayers are as follows: a) Admit this Petition; b) Grant an expeditious hearing of this petition; c) Consider the submission made in context of coal shortages at MSPGCL s stations and consider the normative availability of MSPGCL s station to be same as actual availability of MSPGCL s stations for the purpose of recovery of Fixed Costs for the coal shortage period or till the amendment to MERC (MYT) Regulations,2015 as prayed under (d) below comes into force ; d) Consider amending the MERC (MYT) Regulations, 2015 in line with the Amendment to Regulation 49.2 of the MERC (MYT) Regulations, 2011 & e) Condone any shortcomings/deficiencies in the petition and allow MSPGCL to submit additional information/data at a later stage as may be required. 3. MSPGCL in its Petition stated as follows: 3.1. MSPGCL has a coal based thermal power generation capacity of MW spread over seven Power Stations across Maharashtra, including the 3230 MW capacity commissioned in last two years The old units have Fuel Supply Agreements (FSA) with different subsidiaries of Coal India Limited (CIL) for supply of coal to the seven thermal Power Plants of MSPGCL to the extent of the contracted capacity. In case of the new units which are replacing older thermal units, MSPGCL has bridge linkage arrangement for supply of coal. It has decommissioned coal based thermal generation capacity of 1050 MW (5 x 210 MW) in FY and FY Approximately 4.5 Million Metric Tonne (MMT) of coal is required per month for the thermal Power Generation at the rated capacity 9340 MW (considering that Unit 6 of Koradi TPS and Units 4 & 5 of Parli TPS are under shutdown) at normative Availability for respective Units It is seen that the quantity of coal received from CIL fell significantly short of the ordered quantities in the months of July, August and September, 2017, thereby affecting the Availability of Units MSPGCL has observed a significant drop in the materialization of its Purchase Orders (POs) issued to CIL and Singareni Collieries Company Ltd (SCCL) towards supply of adequate quantity of coal for generation of power. This drop is predominantly observed from July, 2017 and has reached its lowest level during September, When compared to previous years for the same period, it is observed that while Order in Case No. 151 of 2017 Page 2 of 33

3 Order Booking Order Booking % Materialization Order Booking % Materialization Order Booking % Materialization Order Booking % Materialization Order Booking % Materialization Import materialization of POs for the period from June to September in 2016 was 85.8% and that in 2015 was 83.65%, materialization for 2017 was a dismal 57.7% In the Table 1 below, it is observed that the materialization for 2013 and 2014 for the POs issued to CIL, when the coal scarcity was high, was still higher than the current level of its materialization. The fall in materialization has been felt at all the seven thermal Power Stations of MSPGCL and is observed from all the subsidiaries of CIL supplying coal to the Generating Units of MSPGCL. The following table succinctly highlights the fall in materialization from all the subsidiaries: Table No 1: Subsidiary-wise mapping of materialization WCL SCCL MCL Total CIL Total Import Apr May Jun Jul Aug Sept The drop in the materialization of POs issued to CIL across the MSPGCL Stations is observed by the individual materialization. On account of this fall, the coal stock as on 30 September, 2017 has fallen substantially to 0.56 MMT across MSPGCL Power Generating Stations as against coal stock of 1.26 MMT as on 30 th July, This is despite the fact that its coal based thermal Generation capacity of 1050 MW ( 5 x 210 MW at various locations namely Parli, Chandrapur, Bhusawal, Koradi) has been Order in Case No. 151 of 2017 Page 3 of 33

4 decommissioned in the year FY and FY , allowing MSPGCL to raise Order bookings for quantity of coal for its actual requirement. And yet, the coal received by MSPGCL is insufficient towards meeting the need of the existing capacity The table 2 below provides the coal stock at various Power Generating Stations of MSPGCL and the corresponding number of days for which the plants can run at a normative PLF of 85% on 30 September, 2017 for the current year and the previous year/s: Table 2: Coal Stock and corresponding number of days worth of stock Sr. No. Location Coal Stock (In,000 MT) No. of days Coal Stock (In,000 MT) No. of days Coal Stock (In,000 MT) No. of days 1 BTPS CSTPS Khaperkheda Koradi Nashik Parli Paras Total From the above table, it can be observed that the MSPGCL Stations are currently facing acute coal shortage owing to which the Stations are required to declare lower Availability to the extent of its technical minimum. The details of the units facing shut down / reduced Availability are as follows: Table 3: Average Generating capacity curtailment during Sept Sr. No Location Installed Capacity Currently available units MW Currently declared capacity MW Units kept closed due to coal shortage Units kept in service at partial load Total Capacity curtailed due to coal shortage (MW) 1 BTPS (1X X 500) Unit 3 (210 MW) Units 4 & Order in Case No. 151 of 2017 Page 4 of 33

5 Sr. No Location Installed Capacity Currently available units MW Currently declared capacity MW Units kept closed due to coal shortage Units kept in service at partial load Total Capacity curtailed due to coal shortage (MW) 2 CSTPS (2X X500) 3 Khaperkheda(4 X210+ 1X500) 4 Koradi(1X210 +3X660) Units 3,4 (2X Units 5,7, MW) & Units 1,3,4 & 5 Unit Units 7 & 9 Units 8 & Nashik(3X210) Unit 3 Units 4 & Parli (3X210) Unit 8 Units 6 & Paras (2X250) Units 3 & Total The loss of Availability would adversely affect complete recovery of its Annual Fixed Cost (AFC) as considered by the Commission for computation of recovery of (AFC) in accordance with the MERC MYT Regulations, The total quantified loss borne by MSPGCL owing to the shortage of coal amounts to MUs for the period from 1 April, 2017 to 30 September, It is approximately equivalent to 8.25% Availability over six months. However, this is observed to be as high as 11.21% over the period from 1 June, 2017 to 30 September, 2017 which highlights the effect of the scarcity of coal on the total Availability of Generating capacity MSPGCL has already highlighted this fall in materialization to CIL and its subsidiaries through various letters during the period July 2017 till date. MSPGCL has also apprised the Government of Maharashtra as well as Government of India / Ministry of Coal that drastic fall in materialization was seriously affecting its Power Generation. Despite these efforts, there was no increase in materialization and therefore, the current coal stock across the plants continue to remain at critical level Similar scarcity of coal is also observed by Generating Companies of other States like Karnataka, Rajasthan, Uttar Pradesh and Tamil Nadu, etc. As per Daily Coal Stock Report published by Central Electricity Authority (CEA) dated 15 th September 2017, Order in Case No. 151 of 2017 Page 5 of 33

6 18 units had coal stock enough for less than 7 days while 8 units had coal stock not enough even for 4 days In its correspondence, CIL has acknowledged the fall in materialization. CIL has also taken steps in the direction of alleviating the difficulty faced by MSPGCL. CIL is in the process of taking steps in order to control the impact of fall in materialization of its purchase orders issued to CIL by MSPGC. However, MSPGCL is yet to see its impact on the actual materialization of the above mentioned purchase orders As regards the option of mitigating the shortfall in coal receipt by imported coal, the import process is a time consuming and a well deliberated process between multiple entities including MSEDCL owing to the impact on cost of power produced, and therefore Tariff. This process for import of coal cannot be carried out on a short notice and so, no immediate relief is possible by decision to import coal Further, unilateral purchase of imported coal is not viable owing to concerns of different stakeholders. The normative Variable Charges will increase with imported coal, resulting in increased FAC. From the past experience, difficulties have been faced by MSPGCL for recovery of such increased FAC bills. Therefore, use of imported coal is not an immediate and viable option in present circumstances In this context as the reasons for such fall in coal stock are beyond MSPGCL s control which resulted in lower Availability of MSPGCL s stations, it is an uncontrollable parameter for MSPGCL. MSPGCL has therefore requested to consider unavailability of coal in these circumstances as an uncontrolled and unforeseen circumstance, and a Force Majeure, and to consider the Availability of such plants as deemed available to the extent of non-availability of coal across the plants of MSPGCL, i.e. whenever the thermal Generating Unit / plant had to back down owing to the lack of Availability of coal In the previous Regulations i.e. MERC (MYT) Regulations, 2011 Second Amendment, the Commission had provided for differential declaration of capacity so as to safeguard the consumer s interest while incentivizing the Generating Company for Generating more Power during peak hours when it is experiencing shortfall in the Availability of coal. The relevant amended proviso to Regulation 49.2 of the amendment is as follows: The 2 nd Amendment to MERC (MYT) Regulations, 2011 added following proviso to Regulation 49.2 Order in Case No. 151 of 2017 Page 6 of 33

7 Provided that in case of fuel shortage in a thermal generating station, the generating company may propose to deliver a higher MW during peak-load hours by saving fuel during off-peak hours after consultation with the Distribution Licensee procuring power from it. The Maharashtra State Load Despatch Centre shall specify a pragmatic dayahead schedule for the generating station / unit to optimally utilise its MW and energy capability. The declared capacity (DCi) for the purpose of computation of availability as per Regulation 2.1 (7) in such an event shall be considered equal to the maximum peak hour ex-power plant MW schedule specified by the Maharashtra State Load Despatch Centre for that day. Provided that to avail the above provision, the generating station / unit shall declare such higher capacity in peak hours for at least 12 time blocks in a day. For the above purpose, fuel shortage shall be considered only when the fuel stock at the power plant is less than that required for operating the generating station / unit for seven days considering normative gross station heat rate and target availability. Further, the generating station / unit utilising the above provision should submit such information, as may be sought by the Commission for conducting the scrutiny related to the utilisation of the provision It is however observed that the above mentioned provision is not provided in the MERC (MYT) Regulations, 2015 which are applicable for the current financial year. In case the above mentioned provisions were continued, the same could have helped MSPGCL to optimize the declared capacity in the current coal shortage scenario. In absence of such enabling provision, MSPGCL has no option but to reduce the declared capacity and face disallowance on account of reduced Availability factor Even at the time of consultation process undertaken by the Commission for drafting MERC MYT Regulations, 2015, MSPGCL had highlighted this concern. It has submitted relevant pages of the suggestions and objections given during the consultation process on the draft MYT Regulations, Therefore it requests the Commission to reinstate the aforementioned proviso by amending the MYT Regulations, 2015 or as may be deemed fit by it in order to alleviate the power deficit during the peak period for the benefit of the consumers and the Generating Companies. Order in Case No. 151 of 2017 Page 7 of 33

8 4. At the hearing held on 3 January, MSPGCL made a presentation wherein it essentially reiterated its issues as made out in its Petition and stated that: i. There is substantial reduction in the quantity of coal supplied by the Coal India Limited since June, 2017 thereby affecting the availability of its Generating Units. ii. The coal stock position at its Generating plants for December, 2017 was critical as compared to that in December, 2016 and December, iii. On account of coal shortage, MSPGCL has not been able to declare the availability of its Generating Units close to the normative Availability. There is a loss of Availability of 11.31% and loss of generation of MUs for the period from 1 April, 2017 to 30 September, Such loss of Availability should be treated as deemed Availability for the purpose of recovery of AFC as coal supply by the CIL is beyond MSPGCL s control. iv. Follow-up was made with the authorities such as Coal India Ltd., Ministry of Coal, Central Electricity Authority, Railways etc. However, MSPGCL is yet to see its impact on the actual materialization. v. To mitigate the coal shortage issue, MSPGCL has signed the MoUs with Coal India Ltd to procure coal even on the cost plus basis from the designated coal mines. vi. Similar coal shortage was faced by other Independent Power Producers (IPPs) and by the Generating Companies in other states. vii. There was a provision in the MERC (Multi Year Tariff) Regulations, 2011 whereby the Generating Company could declare different Availability during peak and offpeak hours which incentivized the Generating Company to generate more power during the peak hours. There is no such provision in new MERC (Multi Year Tariff) Regulations, The Commission is requested to reinstate the above provision in MYT Regulations, To a query of the Commission regarding present coal availability, MSPGCL stated that the coal stock level at its Generating Stations has improved, but the demand is likely to increase in near future and therefore the coal availability will be an issue for near future as well Ms Ashwini Chitnis, on behalf of Prayas Energy Group, an Institutional Consumer Representative stated that: i. The context under which the provision of differential Availability declaration was made in the MYT Regulations, 2011 was different. Now, coal production by Coal Order in Case No. 151 of 2017 Page 8 of 33

9 India Limited has improved as compared to coal production prevailing at that time. The Generating Companies have been given flexibility in utilization of domestic coal. Considering the MSPGCL s capacity of around 4500 MW under economic and/or reserve shut down, MSPGCL could have diverted the coal allocated for the backed down plants to its operating stations to mitigate the coal shortage issue. ii. In view of above, there is no need to amend the MERC (MYT) Regulations, 2015 which will unnecessarily put additional burden on the consumers Dr. Ashok Pendse, on behalf of Thane Belapur Industries Association (TBIA), an Institutional Consumer Representative, made a presentation highlighting the generation from the Koradi, Chandrapur and Khaperkheda plants against the coal purchased by MSPGCL for these plants. Dr. Ashok Pendse stated that: i. In January and February, 2017, no coal was purchased by MSPGCL and still MSPGCL managed to generate required generation, possibly because it had ensured sufficient coal stock. Till September, 2017, the generation from these plants was in line with the coal purchased by MSPGCL. However, thereafter there is reduction in generation from these plants. ii. If the present Petition is allowed, the identical treatment would require to be given to other IPPs which have power purchase agreements with MSEDCL and there will be an additional burden on the consumers Representative of MSEDCL requested its impleadment in the matter stating that it is an affected party. The Commission accepted the impleadment request of MSEDCL MSPGCL was directed to serve copy of the Petition to MSEDCL as asked MSDECL to file its reply on the Petition within a week. MSPGCL was also asked to file its rejoinder, if any, within a week thereafter. 5. Vide its submission dated 20 January, 2018, Prayas (Energy Group) (PEG) stated that: 5.1. At the hearing on 3 rd January 2018, PEG made oral submission, further this submission captures the same and elaborates on a few points that were briefly stated during the hearing Through this Petition MSPGCL is seeking to loosen the accountability provisions regarding coal procurement and reduction in generation availability arising on that account. The coal shortage scenario painted by MSPGCL is at also at odds with the central government's claims regarding coal production and supply. Further, given the ambitious plans of the central government to curb coal imports and to raise annual coal Order in Case No. 151 of 2017 Page 9 of 33

10 production to 1 billion tonnes by 2020, the reasons for coal shortage assumed by MSPGCL are not apparent The Petition seeks to re-introduce the second amendment to the MERC (MYT) Regulations, 2011 dated 17 th February 2014 in the present MYT Regulations. However, the context in which the said amendment was brought in was entirely different. At that time there was a deficit in coal production and coal supply was significantly short of demand. Plus, the demand for electricity was also high. In contrast to that situation, there are three key differences in the present context: a. Coal production has been steadily increasing since 2014 and the central government has claimed that soon there would be no need to import any coal. b. Since May 2016, all the large generating companies such as MSPGCL have been granted flexibility in managing their coal procurement, Under this policy change, instead of the FSA being tied to a particular plant or unit, all the FSAs signed by a generating company or PSU are to be aggregated to enable efficient coal utilization amongst end use generating stations of that company. c. Overall demand for power has been low and especially in case of MSPGCL, more than one-third of its installed thermal capacity is under reserve or economic shut down, backing down of significant capacity coupled with the flexibility in managing FSAs allows generating companies enough room for efficiently managing their coal supply In light of these distinguishing factors listed above, it would not be appropriate to accept the petitioner's claims regarding an impending coal shortage without undertaking a detailed data based scrutiny of such claims Further, as per a news report dated 15 th October 2017, the Secretary, Ministry of Coal, had given a public statements on the Coal stocks, the matter necessitates urgent enquiry by the Commission in terms of whether there is indeed any shortage in coal production and supply or are there any lapses in coal procurement and management practices of the generating company that are responsible for the loss of generation on this account The clause 31.1 of the MERC MYT Regulations, 2015, allows the generating companies interest on working capital which should be sufficient to help them stock at least 30 days of coal. Order in Case No. 151 of 2017 Page 10 of 33

11 5.7. In order to ensure reliable supply availability, the consumers are already paying a tariff that enables generating companies to stock adequate amount of coal. In spite of this, if the situation of coal shortage has been brought about by acts of omission or commission on the part of the generating company in managing its coal procurement, or otherwise on account of negligent acts, there can be no justification of asking the consumer at large to bear the consequences of such failures on part of the generating company. PEG has filed a Petition under Case No 152 of 2017, which inter alia raises these questions. That Petition details out these issues based on data regarding coal production and supply available in public domain. For the sake of brevity, the arguments raised in the said petition are not repeated here, but we urge the Commission to consider and evaluate the issues raised in the Petition under Case No. 152 of 2017 on an urgent basis Hence, the Commission should establish the reasons for the coal shortage and whether any lapses in planning on part of the Petitioner are responsible for it. This is not just important from the point of view of analysing what led to the crisis like situation in September 2017, but also to understand how such issues can be prevented in future Tariff Regulations are subordinate legislature, which are brought into effect after due public process. One of the key objectives of the MYT Regulations is to ensure tariff certainty for consumers and revenue certainty for licensees. Therefore, unless there are very strong and compelling reasons, such regulations should not be amended or revised. In the present case, given the contradictory statements made by the central government regarding coal production and supply, and the possibility of the coal shortage being a transient phenomenon arising out of coal procurement and sourcing related issues, it would not be appropriate to relax the availability related requirements for the generating companies based on such vague reasons. 6. Vide its submission dated 9 February, 2018, MSEDCL stated that: 6.1. Background MSPGCL has entered into long term Power Purchase Agreement (PPA) under MoU route on 1 April, 2009 for supply of power from its various thermal, gas and hydro Power Stations Presently, MSPGCL s thermal Generating installed capacity is MW out of that 9540 MW capacity is supplying power to MSEDCL. The Commission, vide its order dated 30 August, 2017 in Case No. 46 of 2016 has issued tariff Order for the 3 rd Control Period i.e. FY to FY Further, the Order in Case No. 151 of 2017 Page 11 of 33

12 Commission, vide its order dated 14 December, 2017 in Case No. 59 of 2017 has issued tariff Order for the MSPGCL s newly commissioned thermal Generating Units i.e. Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 for the 3 rd Control Period i.e. FY to FY The Commission has approved the actual Availability and the target Availability to recover AFC till November 2017 is as under: Table No.4 Actual Availability and Target Availability approved by the Commission Station MERC AVF/PLF Normative Khaperkheda Units 1,2 3 and Bhusawal Unit Nashik Units 3, 4 and Koradi Units 6 & Chandrapur Units 3, 4, 5. 6 & Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit MSPGCL (Thermal ) Actual AVF (%) The Commission in its MYT Regulations, 2015 at para 48 has issued the methodology for Computation and Payment of AFC for Thermal Generating Stations. The relevant para is reproduced below: Annual Fixed Charges 48.1 The total Annual Fixed Charges shall be computed based on the norms specified under these Regulations and recovered on monthly basis The full Annual Fixed Charges shall be recoverable at target availability specified in Regulation 44.1 and 44.2, and recovery of Annual Fixed Charges below the level of Target Availability shall be on pro-rata basis: Provided that at zero availability, no Annual Fixed Charges shall be payable Order in Case No. 151 of 2017 Page 12 of 33

13 48.3 Computation and billing of Annual Fixed Charges shall be on monthly basis in proportion to Contracted Capacity and based on the cumulative Availability achieved with respect to the Target Availability, till the respective month in the Year, subject to adjustment at the end of the year Accordingly, MSPGCL is issuing monthly fixed charges bills to MSEDCL based on the Cumulative Availability achieved with respect to the Target Availability as per above MYT Regulations, 2015 from January 2017 onwards Non-Receipt of Coal -Not a Force Majeure As per Article 11 Force Majeure of MoU between MSEDCL and MSPGCL dated 1 April, 2009 describes as under : Article 11: Force Majeure 11.1 A force majeure means any event or circumstance or combination of both including those stated below and on which the Affected Party has no control, that wholly or partly prevents or incapacitates the Affected Party in performing its obligations under this Agreement, even after the affecting party having taken all reasonable care or it having complied with prudent utility practices: (a) (b) act of God, including, but not limited to lighting, drought, fire and explosion, accident, terrorist activities like sabotage, explosion or criminal damage, strike at National or State level, earthquake, volcanic eruption, landslide, flood, cyclone, typhoon, tornado; any act of war (whether declared or undeclared), invasion, armed conflict or act of foreign enemy, Blockade, embargo It is amply clear from the above clause provisions that the act of God like natural calamities or act like war etc. is considered as force majeure events. Hence, the issue of non receipt of the coal shall not be considered as Force Majeure as it is not beyond the control of MSPGCL. There are other available options like procurement of imported coal, swapping of coal to the efficient thermal Generating plant vide Ministry of Power, GoI Notification dated 10 June, 2016 where MSPGCL itself is the nodal agency. Order in Case No. 151 of 2017 Page 13 of 33

14 6.3. Non-receipt of coal-compensation thereof under FSA: MSPGCL has signed FSA with CIL and SCCL to supply of coal to its thermal Generating Units MSPGCL has also entered a FSA with WCL on 21 November, 2009 for supply of Million Ton/Annum. Hence the issue of non-supply of coal should be dealt with CIL /SCCL under the provision of the FSA signed between the CIL and MSPGCL Further, as per the provision in the FSA, there is a compensation clause (clause no. 3.6) for short delivery of coal to the MSPGCL which is reproduced as under: Compensation for short delivery/lifting If for a Year, the Level of Delivery by the Seller, or the Level of Lifting by the Purchaser falls below ACQ with respect to that Year, the defaulting Party shall be liable to pay compensation to the other Party for such shortfall in Level of Delivery or Level of Lifting, as the case may be ( Failed Quantity ) in terms of the following: Sr. No 1 Level Delivery/Lifting Coal in a Year of of Less than 100% but upto 90% of ACQ Rate of compensation for the Failed Qty (at the rate of Wt. avg. of Base Prices of Grades of Coal received excluding Cost Plus Project, as shown in Schedule II) Nil Formula for calculation of compensation Nil 2 Below 85% but upto 90% of ACQ 10% 0.1 x P x [((100-LD or LL)-10)/100] x ACQ) 3 Below 85% but upto 80% of ACQ 20% 0.1x P x [((100-85)-10)/100] x ACQ)+ 0.2 x P x [(85-LD or LL)/100) x ACQ) 4 Below 80% of ACQ 40% Where, P=Weighted average Base Price of Grades of coal received 0.1 x P x [((100-85) -10)/100] x ACQ)+ 0.2 x P x [(85-80/100] x ACQ)+ 0.4 x P x [(80-LD or LL)/100] x ACQ) Order in Case No. 151 of 2017 Page 14 of 33

15 Order Booking Order Booking % Materialization Order Booking % Materialization Order Booking % Materialization Order Booking % Materialization Order Booking % Materialization Import Hence, MSPGCL under this provision of the FSA, may raise the issue with the CIL and claim for compensation for non-availability of coal as per the provision of the FSA Coal procurement plan-need for Proper Management: MSPGCL has submitted its order booking and actual materialization of coal which is reproduced as under: WCL SECL MCL Total CIL Total Import Apr May Jun Jul Aug Sept As per clause of the FSA dated between WCL and MSPGCL, there is provision for procurement of imported coal which is reproduced as below: In the event of shortfall of coal supplies from own sources, the Seller may consider supply of Imported Coal for which Seller Order in Case No. 151 of 2017 Page 15 of 33

16 shall inform the Purchaser three months in advance of such likely supplies shall be made based on mutual consultation MSPGCL was procuring imported coal from FY onwards. However, in spite of experiencing the short supply of the coal and having awareness of shortfall in coal supply in future, MSPGCL has not exercised the option of purchase of imported coal in FY either from CIL or directly Further, from August 2017 onwards MSEDCL is conducting monthly review meeting with all long term generators including MSPGCL to review coal stock position and coal procurement planning & Generation Availability of long term generators for the next month for power planning. However, MSPGCL has not submitted any option of imported coal procurement plan to improve the Availability of Generation plants Hence the submission of the MSPGCL that the coal import process is time consuming and a well deliberated process between multiple entities including MSEDCL is not correct Based on the data submitted by MSPGCL it is also seen that, MSPGCL has not given any order to Mahanadi Coal Limited (MCL) in the month of April Even though the reduction in the Availability in the coal and depletion of coal stock was well known from April 2017 onwards, it seems that no additional efforts are taken by MSPGCL to improve the coal Availability. Hence, the submission of the MSPGCL, this sudden fall in Availability of coal is beyond its control is not acceptable and baseless Availability of Central Sector Generating Companies V/s MSPGCL: During April to November 2017, the Availability of the NTPC- Central Sector thermal Power Generating Units was more than 85% i.e. Normative Availability to recover full AFC during the FY The station wise Availability is as follows: Generating Unit Cumulative Availability during FY till November 2017 Korba Stage I & II Vindhyachal Stage I Order in Case No. 151 of 2017 Page 16 of 33

17 Generating Unit Cumulative Availability during FY till November 2017 Vindhyachal Stage II Vindhyachal Stage III Vindhyachal Stage IV Sipat Stage II Sipat Stage I Korba Stage III Mouda Stage I Vindhyachal Stage V Mouda Stage II Hence, the submission MSPGCL that non-availability of the coal is beyond its control is baseless and misleading Therefore, the non-availability of coal cannot be only due to the failure from the CIL/SCCL, there may be certain failure in the procurement plan of coal from MSPGCL side Interest of Working Capital for thermal generating units The Commission vide its MYT Regulation 2015 has approved norms for interest of working capital for thermal Generating Station which are reproduced as under: Interest on Working Capital 31.1 Generation; (a) In case of coal based/lignite-fired Generating Stations, working capital shall cover: (i) Cost of coal or lignite and limestone towards stock, if applicable, for fifteen days for pit-head Generating Stations and thirty days for non-pit-head Generating Stations, for generation corresponding to target availability, or the maximum coal/lignite stock storage capacity, whichever is lower ; Order in Case No. 151 of 2017 Page 17 of 33

18 (ii) (iii) Cost of coal or lignite and limestone for thirty days for generation corresponding to target availability; Cost of secondary fuel oil for two months corresponding to target availability; As per the MYT Regulation 2015, the thermal Generating Units of MSPGCL must have coal stock of 15 days for pit head station and 30 days for non-pit station. Accordingly, the Commission has defined AFC for different MSPGCL thermal Generating Units The Central Electricity Regulatory Commission (CERC) by its order dated 10 November, 2017 (Case No.292/MP/2015) has directed that the sole responsibility for maintenance of less coal stock and the consequent failure on the part of the Generating Station to declare Availability upto 85% rests with Generators. Therefore, the responsibility for arranging fuel or keeping the requisite stock of fuel to declare capacity upto 85% on a day to day basis lies with the generator. Accordingly, the Commission under the 2009 and the 2014 Tariff Regulations has provided a reasonable coal stock to facilitate the generator to declare upto 85% normative availability. The sole responsibility for maintenance of less coal stock and the consequent failure on the part of the generating station to declare availability upto 85% rest with the generator and the risk for such less coal stock maintained has to be borne by the generator, whereby the generator is penalized by way of loss of annual fixed charges, to the extent of the shortfall. In view of above it is very clear that the sole responsibility to procure adequate coal to recover fix charges is with MSPGCL The Commission has also allowed the Interest on Working Capital (IoWC) for the coal stock of 15 days for pit head and 30 days for non-pit head Generating Stations. The coal stock position of the Thermal Generating Stations of MSPGCL is much below to the determined norms by the CEA i.e. 15 days for pit head and 30 days for the non-pit head Generating Stations. Hence the Commission may reduce the IoWC for MSPGCL s Generating Stations considering the actual coal stock (i.e days on average) vis- a-vis 30 days and 15 days on normative basis. Order in Case No. 151 of 2017 Page 18 of 33

19 6.7. Consideration of Normative Availability as Actual Availability during Coal Shortage Period- Unlawful: There is no provision either in any Regulation of the Commission or in MoU signed with MSPGCL with MSEDCL to consider the normative Availability of MSPGCL s Station to be same as the actual Availability of MSPGCL s Station for the purpose of recovery of AFC for the coal shortage period In case the Commission considers such event as a Force Majeure event and allows to recover such fix charges to MSPGCL, the other Generating Companies are having long term PPA with MSEDCL under Section 62 and 63 of EA, 2003 may approach to the Commission to seek such relief on account of AFC on the same basis which will be unlawful and will set wrong precedent as well. Therefore, the Commission may reject the prayers of MSPGCL in totality Double Burden on the consumers: Due to the unavailability of the Generating Units of MSPGCL, MSEDCL is compelled to procure costly power from the open market /power exchange to meet out the demand of the consumer Allowing the AFC to MSPGCL against the unavailable capacity will be the additional burden on the consumers without availing such contracted Power of MSPGCL. Hence the prayers of MSPGCL may not be considered. 7. Vide its submission dated 20 March, 2018, MSPGCL stated that: 7.1. MSEDCL in its reply dated 9 February, has raised objections on MSPGCL s Petition mainly on following grounds and has prayed for dismissal of its Petition. 1. Provisions regarding pro-rata reduction in Fixed charges in case of Actual availability being lower than the Target Availability; 2. Non-receipt of coal is not a Force Majeure issue; 3. Compensation provisions under FSA for non-receipt of coal; 4. Need for proper management of coal procurement; 5. Comparison of availability factor for Central Sector generating stations vs MSPGCL s generating stations; 6. Provisions regarding interest on working capital allowed to thermal generating units; Order in Case No. 151 of 2017 Page 19 of 33

20 7. Consideration of Normative availability as Actual Availability during coal shortage period is unlawful in nature 7.2. Point wise replies from MSPGCL on the issues raised by MSEDCL are as below: Pro-rata reduction in fixed charges : As far as the provision regarding pro-rata reduction in fixed charges as per actual availability vs target availability is concerned, it is carrying out reduction in fixed charges on monthly basis as per Regulation 48.3 of MERC MYT Regulations, 2015, irrespective of the reason for achieving availability lower than the target availability. Thus in the present case, MSPGCL has billed fixed charges for the coal based stations at lower level as the actual availability is lower than target even though the lower availability during April-2017 till now is mainly due to non-availability of coal, which is an uncontrollable / force majeure as per MSPGCL Non-receipt of coal is not a Force Majeure issue: Even though there is no specific mention of coal shortage as a force majeure event, MSPGCL has approached the Commission for consideration of the same under Removal of difficulty clause as MSPGCL is not in a position to achieve the target availability due to the difficulty in sourcing the fuel despite making all efforts. The domestic coal market is monopolistic in nature as most of the business is governed by a single company i.e. CIL. In case of procurement of imported coal there is need for approval from Central Ministry and as per policy adopted by Government of India, use of imported coal is to be avoided as far as possible. So in case of non-availability of coal from the CIL subsidiaries, the generating companies have no option but to run the units at lower availability / PLF. So for MSPGCL, this is an uncontrollable situation and hence MSPGCL has requested the Commission for consideration of the same as force majeure Compensation provisions under Fuel Supply Agreement for non-receipt of coal: i. FSA provides for compensation to Generation Company in case of shortfall in coal supply. ii. While the provision quoted by MSEDCL is as per FSA dated , the revised provision as per the Model Supplementary Agreement (MSA) Order in Case No. 151 of 2017 Page 20 of 33

21 signed by MSPGCL on with M/s WCL, M/s MCL, M/s SECL (as coal supplying companies) & M/s CIL as coordinator, the compensation for short delivery is calculated on the basis of Annual Aggregated Coal Quantity (AACQ) & cut-off level of delivery (CLD). The CLD is computed on the basis of weighted level of the pooled Annual Contracted Quantity (ACQ) & AACQ as given below CLD = {((ACQ of Pre-2009 CSAs X 0.90) + (ACQ of Post-2009 CSAs X 0.80)) / AACQ} X 100 iii. Accordingly the Coal Company wise & TPS wise trigger level of compensation for short delivery, are as below: TPS (Qty. in MMT) WCL MCL SECL ACQ CLD ACQ CLD ACQ CLD Bhusawal % % Chandrapur % % Khaperkheda % % % Koradi % % % Nasik % % Paras % Parli % Total % % % iv. The compensation for short delivery is to be claimed on annual basis. Hence, MSPGCL can claim compensation if the coal delivery from Coal Company over the financial year is less than the trigger value at the end of the financial year i.e. for the current year, the same can be claimed after , on the basis of actual coal delivery during the FY v. It is further to submit that firstly the amount of compensation that might be received is very meager as compared to the fixed charges disallowed on account of lower availability during coal shortage period and secondly any such compensation gets adjusted in coal bills and reflects in coal cost. As all the fuel cost gets passed on to the consumers at normative level either through energy billing & FAC or during the final true up, any compensation from Coal companies also gets passed on to consumers. So any such compensation receivable by MSPGCL is not retained by MSPGCL and hence do not compensate the reduction in fixed charges on account of lower availability owing to non-availability of coal. Order in Case No. 151 of 2017 Page 21 of 33

22 Need for proper management of coal procurement: i. MSPGCL has already submitted the correspondence done with Ministry of Coal, Government of India / Government of Maharashtra, indicating the all out efforts taken by MSPGCL for improved coal supplies. To cite an example, it is to submit that even the Chief Minister, Maharashtra has written a letter to the Prime Minister, India to call his attention to the alarming situation and to request for intervention in the matter. ii. Apart from these formal communications at higher management & Ministry levels, various efforts are also taken at middle-management level for improvement in actual materialization, such as 1. Signing of MoU with coal companies for supply of coal at cost-plus rate, apart from the FSA coal. ( WCL - 20 lakh MT & SCCL 30 lakh MT) 2. Transportation of coal within radius of 60 km by road mode from WCL mines / coal sidings to TPS, as per directives of CEA. iii. iv. Regarding procurement of imported coal, even though the FSA provides for alternative arrangement from Coal companies for supply of imported coal supply in case of shortfall in domestic coal supply, the option for such imported coal supply is to be offered by Coal companies and not by insistence by Generation companies. At present no coal company has offered option of imported coal supply against the shortfall in domestic coal supply. Had any coal company offered so, MSPGCL could have opted for same. So it will be wrong to say that MSPGCL has not exercised the option of purchase of imported coal for FY from CIL. v. As elaborated earlier, decision of procurement of imported coal directly is not the sole discretion of MSPGCL but it needs approval from State Government as well as Central Government. Also the impact of tariff, Merit order despatch position & recovery issues cannot be overlooked while taking decision on imported coal procurement. vi. In view of the current coal shortages, MSPGCL has made correspondence with CEA & Ministry of Power, GoI through GoM for obtaining permission to import coal. However Member (Planning), CEA, MoP has Order in Case No. 151 of 2017 Page 22 of 33

23 conveyed that as the domestic coal availability in the country has improved, import coal targets are not being given by CEA since As the permission is yet to be granted, MSPGCL could not undertake direct procurement of imported coal. Thus it will be wrong to say that proper steps were not taken to plan the coal procurement Comparison of availability factor for Central Sector generating stations vs MSPGCL s generating stations : i. MSEDCL has cited data for some of the Central Sector generating stations indicating that the availability factor for most of these stations was above normative level & thus tried to show that the coal shortage issue is not uncontrollable as demanded by MSPGCL. Of the given data, the Mouda Station of NTPC has achieved AVF of % & % for Stage I & II respectively. ii. While most of these NTPC stations are pit-head stations with dedicated mines allocated to each station, all MSPGCL stations are non-pit head stations. Mouda TPS of NTPC is non-pit head station having coal arrangement from CIL similar to MSPGCL stations and in case of Mouda TPS the AVF is lower than the normative. Thus the data given by MSEDCL itself indicates that in case of non-pit-head units there are coal supply issues being faced during Provisions regarding interest on working capital allowed to thermal generating units: i. As per Regulation 31.1 of MERC MYT Regulations, 2015, the Interest on Working Capital (IoWC) allowed for coal based generating station at the time of truing up shall be computed based on the actual generation or target availability of the generating Station, whichever is lower. {emphasis added} ii. MSPGCL itself has submitted in the present Petition that currently the actual generation from its coal based thermal units has dropped due to inadequate coal stock and non-availability of adequate coal supply. So in such case it is obvious that actual generation being lower than normative on Order in Case No. 151 of 2017 Page 23 of 33

24 account of coal shortages, the IoWC allowed at the time of truing up will be lower than the normative IoWC approved in the tariff. Moreover, in case of gain on actual IoWC w.r.t. normative IoWC computed for true up, 2/3 rd of such gain is shared with the consumers during true-up. So there will not be any undue enrichment of MSPGCL on account of IoWC, when actual stock is on lower side. iii. MSPGCL would like to submit further that even though the provision cited by MSEDCL is correct and working capital requirement considered for normative IoWC computation is 30 days, factually the working capital requirement for MSPGCL for coal purchases is equal to approximately 80 days coal cost. This is so because MSPGCL is required to make advance payment to Coal companies against the coal requisitioned for a month. The coal companies are to be paid the advance installments on 1 st, 11 th & 21 st of every month for coal quantity requisitioned for the month. So on an average MSPGCL pays 20 days coal cost as advance payment. The credit period allowed to MSEDCL for the energy bill is presently 30 days as per MERC MYT Regulations. Thus for maintaining coal stock of 30 days, the working capital requirement for MSPGCL is of approximately 80 days coal cost. Thus if the actual coal stock goes below 30 days, the working capital requirement gets reduced to that much level from 80 days coal cost. So even if the actual coal stock continuously lowers than normative, say only 3 days, the actual working capital requirement will get reduced to approximately 53 days coal cost, which is still higher than the normative working capital requirement considered by the Commission Consideration of Normative availability as Actual Availability during coal shortage period is unlawful in nature : i. As explained in point 2 above, as per MSPGCL the situation of shortage of coal supply is of uncontrollable in nature and hence is force majeure. ii. iii. In case of a similar situation for Gas based power projects, where domestic gas availability is less and importing gas is costly, the Commission has considered it as an uncontrollable situation for generating companies and has approved the actual availability factor as normative. As this situation of coal supply shortage is similar to gas supply shortage, MSPGCL has approached the Commission for consideration of this Order in Case No. 151 of 2017 Page 24 of 33

25 situation as uncontrollable in similar manner as done in case of gas based stations. Thus allowing a situation as force majeure / uncontrollable is within discretionary power of the Commission and there is nothing unlawful in MSPGCL s request MSPGCL s Rejoinder to the submission made by PEG PEG vide its submission dated 20 January, 2018 has stated that Coal production has been steadily increasing since 2014 and the Central Government has claimed that soon there would be no need to import any coal MSPGCL states that CEA used to assign per annum tentative target for import of coal to various generation utilities till However, due to surplus scenario of domestic coal in FY , CEA has not assigned the imported coal targets from onwards. In view of critical coal stock position at the TPS since September, 2017 & in view of expected increase in power demand, MSPGCL has explored the possibility of bridging the coal supply and demand gap by import of coal. Accordingly, as a procedure and to concur with the coal policy of Govt. of India, MSPGCL has sought the permission from CEA, MoP vide letter dated , through the Chief Secretary, Govt. of Maharashtra. In reply to the letter, Member (Planning), CEA, MoP conveyed that as the domestic coal availability in the country has improved, import coal targets are not being given by CEA since Prayas submission that since May 2016, all the large generating companies such as MSPGCL have been granted flexibility in managing their coal procurement. Under this policy change, in-stead of the FSA being tied to a particular plant or unit, all the FSAs signed by a generation company or PSU are to be aggregated to enable efficient coal utilization amongst end use generation stations of that company. Overall demand for power has been low and especially in case of MSPGCL, more than one-third of its installed thermal capacity is under reserve or economic shut down. Backing down of significant capacity coupled with the flexibility in managing FSAs allows generating companies enough room for efficiently managing their coal supply MSPGCL s reply on the contention raised: i. To enable efficient coal utilization among end use generating station, Mahagenco signed Tri-Party Agreement on dtd with WCL, MCL, SECL & CIL as a co-ordinator, aggregating all FSA linkage. Order in Case No. 151 of 2017 Page 25 of 33

26 ii. The policy allows flexibility in utilization of domestic coal amongst power generating stations to reduce the cost of power generation. The coal materialization since April-17 to December-17 is about 58% from all coal companies, hence, the coal stocks were at critical level at all TPS. Coal companies were unable to supply allotted linkages that resulted into insufficient coal stock at all TPS. Unless sufficient coal stock builds up at TPS for running units, the linkages of reserve shut down units cannot be transferred to other TPS under the flexibility policy and the benefits of the policy cannot be extracted. Monthly materialization & coal stock are as below For the period April-17 to Dec-17 In Th MT MSPGCL April May June July Aug Sept Oct Nov Dec Total Linkage Receipt % Mat Stocks iii. Currently only Parli Units 4 & 5 are under Reserve Shutdown and during FY , there is no zero schedule outage. Also the incidences of long duration backing down have also reduced. So there is less scope for optimization of coal available from backed down units through flexible utilization. The coal shortages are so severe that MSPGCL has no option but to reduce loadability of units to mitigate shortages Prayas submission that as per news dated 15 th October 2017, the Secretary, Ministry of coal, has stated that the Power plants are to be squarely blamed for the current coal stock crisis. A quarter of the country s coal-based plants, including state-run generation companies and firms like Damodar Valley Corporation, Lanco Infratech and GMR Group, are operating with critical coal stock. The coal ministry had warned power plants in June of the critical coal stock position but power companies preferred to save money rather than build up stocks MSPGCL s reply on the contention raised are as below: i. The yearly coal production of CIL is projected to be increased by 15% from MMT to MMT from FY to FY , but actual CAGR from FY to FY was 5.51% as shown in CIL Corporate presentation dtd 5 th & 6 th December Hence, as seen Order in Case No. 151 of 2017 Page 26 of 33

27 from current production trend, yearly coal production may not rise more than 7-8%.(CIL coal production scenario sheet attached herewith) ii. iii. Since , MSPGCL has increased its thermal capacity by addition of Koradi 3 x 660 MW, Chandrapur 2 x 500 MW & Parli 1 x 250MW units, the overall coal requirement to run the units on full load has increased by MMT. The bridge linkage allocated to these units by MoC is only MMT on best effort basis, hence no liability is fixed on the coal companies to supply coal against it. Presently, these high efficient/supercritical units are being run by using the coal linkage of other TPS of MSPGCL under flexibility policy issued by MoC, GoI. MSPGCL s coal linkages are predominantly from M/s WCL (@ 67% of MSPGCL s total coal linkage). As seen from the WCL coal production scenario, WCL s coal production in FY is 50 MMT & its total FSA commitment linkage is MMT, so obviously there is shortfall of MMT i.e. shortfall of 36% of commitment. For FY , there is predicted coal shortfall of MMT. Likewise, WCL has shown continuous coal shortfall till FY (WCL production sheet attached herewith). The average materialization from coal companies during the period from April, 2017 to December, 2017 is only 58%. Linkage and Materialization since April-2017 to December, 2017 is as below: In Th MT Coal Co. April May June July Aug Sept Oct Nov Dec Total Linkage WCL MCL SECL SCCL MSPGCL Receipt % Mat % Linkage Receipt % Mat Linkage Receipt % Mat Linkage Receipt % Mat Linkage Receipt % Mat Order in Case No. 151 of 2017 Page 27 of 33

28 iv. To mitigate the coal crunch situation and to increase materialization from the coal companies, various meetings were carried out with MoC, CEA, CIL & WCL etc. & directives issued therein are as below: Sr. No. 1 CIL Chairman 2 Meeting with Date Directives Member, Traffic along with CMD Mahagenco, Dir (Mkt) WCL & CIL 30/11/2016, 19/04/2017, 25/05/2017 CIL committed 19 Rakes from WCL and 3 to 4 rakes from SECL over and above existing 3 rakes. 15/05/2017 CIL assured supply of 29 Rakes /day 3 Secretary MoC 30/06/2017 Secretary MoC directed to built up Coal stock of minimum 22 Days at TPS level 4 Addl Secretary MoC 04/09/2017 CIL assured supply of 20 Rakes /day 5 CEA Sub-group committee meeting 15/09/2017 CIL assured supply of 22 Rakes/day 6 Secretary MoC 21/09/2017 CIL assured 20 Rakes + Road / Road cum Rail mode 7 Officers of MoC, CIL, CEA, WCL, Railways under the Chief Minister GoM. 07/10/2017 CIL Committed coal supply from WCL- 72 Th.MT per day by rail + 24 Th.MT by Rope/Road/RcR SECL- 3 Th.MT/day, MCL- 8 Th.MT/day SCCL- 12 Th.MT/day 8 Secretary coal, MoC, GoI at Pune 12/01/2018 WCL Committed to supply minimum 120ThMT/day by all mode to mitigate high electricity demand after March-2018 & for coal stock build up of at least 15 days. v. It is further to submit that apart from the correspondences, MSPGCL has taken following various efforts to increase the coal materialization. 1. Due to poor materialization from coal subsidiaries & faster coal stock depletion, MSPGCL has signed MoUs other than FSA on cost plus rate with Order in Case No. 151 of 2017 Page 28 of 33

29 WCL of quantity 20 lakh MT & with SCCL of quantity 30 lakh MT in FY CEA has intimated regarding availability of coal within radius of 60 Km from mines, to be transported by road mode/road cum Rail mode, for augmentation of coal supply. Accordingly, MSPGCL has started transportation of coal by road mode from WCL mines/ CHP to TPS. 3. MSPGCL has also explored the possibility of bridging the coal supply and demand gap by procurement of import coal. MSPGCL has made correspondence to CEA, MoP, GoI for obtaining permission to import coal. In reply vide letter dated , Member (Planning), CEA, MoP conveyed that the domestic coal availability in the country has improved, hence import targets are not being given by CEA since Even after taking every effort by MSPGCL, through various meetings with MoC, CEA, CIL, Railway, WCL and continuous follow up with coal companies, Coal companies have not raised the coal supply beyond 58% against linkage/order booking program. Hence, coal stocks at TPS are not improved to the required level. Therefore, MSPGCL is compelled to regulate its daily generation from coal based units 5000 to 5500 MW against available installed capacity of MW, so as to increase coal stocks for mitigating the power demand in forthcoming summer season. MSPGCL expects that these measures will result in increased coal stock level at TPS. The current coal stocks position on dtd is as below: TPS Koradi Nasik Bhusawal Parli Paras CSTPS KhTPS Total Stocks MT 97,879 30,944 1,36,216 73,079 86,650 4,95,781 77,818 9,98,367 No. of Days MSPGCL reply to the Dr. Pendse submission on Coal Shortage issue Dr Pendse had shown following table at the hearing held on 3 January, 2018 for month wise generation and coal receipts at Koradi, Chandrapur & Khaperkheda TPS as below: Order in Case No. 151 of 2017 Page 29 of 33

30 Dr Pendse stated that in the months of Jan-17, Feb-17, there is no coal receipt at Koradi, Chandrapur & Khaperkheda stations, however there was 5503 MUs generation, indicating that MSPGCL has not lifted the coal during these months and had utilized the coal stocks during this period, which has lead to coal stock depletion and further coal shortages added to the problems MSPGCL stated that the data given by TBIA is not correct. In the actual coal related data for Koradi, Chandrapur & Khaperkheda stations for Jan-17 & Feb-17 is tabulated below: Jan-17 Feb-17 In Th MT Particulars Koradi Chandrapur Khaperkheda Linkage Receipt % materialization 41.25% 76.56% 87.35% Closing stock Linkage Receipt % materialization 36.85% 68.18% 93.02% Closing stock MSPGCL has received coal at these stations and thus the conclusion by Dr. Pendse is this regard is not correct. The details for month wise, station wise coal data for all stations for the period Jan-17 to Oct-17 is attached herewith. Order in Case No. 151 of 2017 Page 30 of 33

31 8. The matter was scheduled for rehearing on 12 June, Parties requested the Commission to take on record all their earlier submissions and gave their consent to hear and decide this matter in continuance of the earlier proceedings. 9. At the hearing held on 12 June, MSPGCL made a presentation wherein it essentially reiterated its issues as made out in its Petition. MSPGCL stated that: i. Since June 2017, coal supply realization has reduced considerably affecting availability of MSPGCL s Generating Units. ii. Follow-up was made with the authorities such as Coal India Ltd., Ministry of Coal, Central Electricity Authority, Railways etc. However, MSPGCL is yet to see its impact on the actual materialization. iii. Similar coal shortage was faced by other Independent Power Producers (IPPs) and by the Generating Companies in other states. iv. Such loss of availability of generation units should be treated as deemed availability for the purpose of recovery of Annual Fixed Charges as coal supply by the Coal India Limited was beyond MSPGCL s control. v. There was a provision in the MERC (Multi Year Tariff) Regulations, 2011 whereby the Generating Company could declare different availability during peak and off-peak hours which incentivized the Generating Company to generate more power during the peak hours. This provision was utilized by MSEDCL for Chandrapur Generating Station. There is no such provision in new MERC (Multi Year Tariff) Regulations, The Commission is requested to reinstate the above provision in MYT Regulations, vi. Coal India Ltd. with its subsidiaries is the only source for domestic coal and therefore it is a force majeure situation for MSPGCL Ms. Ashwini Chitnis, on behalf of Prayas Energy Group, an Institutional Consumer Representative stated that: i. It opposes the amendment in MYT Regulations as the coal supply scenario has changed. Order in Case No. 151 of 2017 Page 31 of 33

32 ii. Such amendment would take away accountability of the Generating Companies to ensure adequate coal supply and it would not be in interest of the consumers To a query of the Commission, MSPGCL stated that it was availing legal remedies against Coal India Limited on account of failure of Coal India Ltd. to supply coal as per the FSA Representative of MSEDCL stated:- i. If such dispensation is allowed, other Generating Companies may also approach the Commission with similar prayer. ii. iii. iv. CERC, in its Order dated 10 November, 2017 has directed that the sole responsibility for maintenance of adequate coal stock lies with the generating stations. As per the FSA, there is compensation clause for shortfall in coal quantity and MSPGCL is entitled for such compensation. Reduction in availability was observed in case of IPPs as well due to coal shortage. However, NTPC was able to generate the power by optimizing its plant availability to arrive at normative availability. Commission Analysis and Ruling 10. MSPGCL has contended that normative Availability of its generating stations should be treated as actual Availability for the purpose of recovery of AFC for the coal shortage period and that the MERC (MYT) Regulations, 2015 should be amended to bring it in line with the Regulation 49.2 of the MERC (MYT) Regulations, As regards consideration of normative availability as actual availability during the coal shortage period, it is observed that the declaration of Availability depends upon various factors such as availability of fuel, water and capability of machine factoring the annual overhaul etc. Considering all the above facts the Commission has kept the full recovery of AFC at normative availability of 85%. 12. Also, it is well settled principle that the responsibility for arranging fuel or keeping the requisite stock of fuel to declare capacity on a day to day basis to maintain annual average availability on 85% basis lies with the generator. Therefore, further relaxing the same due to short term shortage of coal will Order in Case No. 151 of 2017 Page 32 of 33

33 dilute the sole purpose of keeping the normative Availability at 85% and the sanctity of specifying the norms for performance parameters. 13. As regards the amendment to MYT Regulations, 2015, it is observed that pursuant to Second amendment to the MYT Regulations, 2011 on 17 February, 2014, neither MSPGCL nor any other Generating Companies have invoked the provisions contained in amendment to the Regulations, Similar amendment was made in CERC Tariff Regulations, 2009 but the same was not continued in CERC Tariff Regulations, 2014, considering the power situation and improved coal realization. 14. MYT Regulations, 2015 do not recognise shortage of coal as uncontrollable factor. Upon consideration of all the factors, the Commission is of the view that the lower than normative availability of thermal stations of MSPGCL due to fuel shortage is part of its business risk for which appropriate contingency plan should have been in place and so executed in time. In order to deepen accountability of the generating companies for arranging supply of fuel to run their plant and in this regard to honor the sanctity of the norms fixed for availability, Commission does not find it appropriate to amend the MERC MYT Regulations, It would not be proper to consider the normative Availability same as actual Availability for the purpose of recovery of AFC during the coal shortage period when the responsibility of arranging coal supply squarely rests with the generating company. MSPGCL can pursue the matter of coal shortage and the associated business losses with coal supplier as per the provisions of Fuel Supply Agreement. The Petition of MSPGCL in Case No. 151 of 2017 is disposed of accordingly. Sd/- Mukesh Khullar (Member) Sd/- Anand B. Kulkarni (Chairperson) Order in Case No. 151 of 2017 Page 33 of 33