Torrent Power Limited - Generation Ahmedabad

Transcription

1 GUJARAT ELECTRICITY REGULATORY COMMISSION Tariff Order Truing up for FY , Approval of Provisional ARR for FY and Determination of Tariff for FY For Torrent Power Limited - Generation Ahmedabad Case No of st March, th Floor, GIFT ONE, Road 5C, GIFT CITY Gandhinagar (Gujarat), INDIA Phone: Fax: /55 gerc@gercin.org : Website

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3 GUJARAT ELECTRICITY REGULATORY COMMISSION (GERC) GANDHINAGAR Tariff Order Truing up for FY , Approval of Provisional ARR for FY and Determination of Tariff for FY For Torrent Power Limited - Generation Ahmedabad Case No of st March, 2016

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5 CONTENTS 1. Background and Brief History Background Torrent Power Limited (TPL) Commission s Order for the Second Control Period Commission s Orders for Mid-term Review of Business plan for TPL-G (APP) Background for the present petition Admission of the Current Petition and Public Hearing Process Contents of this Order Approach of this Order A Summary of TPL s Petition Actuals for FY submitted by TPL-G (APP) ARR for FY TPL s request to the Commission: Brief outline of Objections raised, Response from TPL-G and the Commission s View Stakeholders suggestions / objections, Petitioner s Response and Commission s Observation Truing up for FY Generating Stations of TPL-G (APP) Operating Performance Parameters Plant Availability Factor (PAF) Plant Load Factor (PLF) Auxiliary Consumption Station Heat Rate (SHR) Secondary Fuel Oil Consumption (SFC) Transit Loss Summary of Performance Parameters Approved for truing up for FY Gross and Net generation Cost Parameters Mix of Coal Wt. Av. Gross Calorific Value (GCV) of fuel Gujarat Electricity Regulatory Commission Page v

6 4.4.3 Wt. Av Prices of Fuel Fuel Costs Approved fuel cost Gains/losses in fuel costs due to controllable factors of TPL-G (APP) Fixed Charges Operations and Maintenance (O&M) expenses Water Charges Capital expenditure, Capitalisation and Sources of Funding Interest Expenses Interest on Working Capital Depreciation Return on Equity Income Tax Non-Tariff income Incentive Revised ARR for FY Sharing of Gains/Losses for FY Additional capacity charge due to better PAF Determination of Generation Charges for FY Introduction Approved ARR for FY Determination of Variable Charges for FY Compliance of Directives Fresh Directives COMMISSION S ORDER Gujarat Electricity Regulatory Commission Page vi

7 LIST OF TABLES Table 2.1: Actuals Claimed by TPL for FY Table 2.2: Provisional ARR of TPL-G (APP) for FY Table 4.1: Capacity, COD and age of TPL-G (APP) Stations, as on 1 st April, Table 4.2: Plant Availability Factor of TPL-G (APP) for FY Table 4.3: Plant Availability Factor of TPL-G (APP) Considered for truing up for FY Table 4.4: Plant Load Factor of TPL-G (APP) for FY Table 4.5: Plant Load Factor of TPL-G (APP) Considered for truing up for FY Table 4.6: Auxiliary Consumption of TPL-G (APP) for FY Table 4.7: Auxiliary Consumption of TPL-G (APP) Approved for truing up for FY Table 4.8: Station Heat Rate of TPL-G (APP) Claimed for FY Table 4.9: Station Heat Rate Approved for truing up for FY Table 4.10: Secondary Fuel Oil Consumption of TPL-G (APP) for FY Table 4.11: Secondary Fuel Oil Consumption Approved for truing up for FY Table 4.12: Transit Loss of TPL-G (APP) for FY Table 4.13: Transit loss approved for truing up for FY Table 4.14: Performance Parameters for TPL-G (APP) Stations Approved/Considered for truing up for the FY Table 4.15: The Gross and Net Generation of Power for truing up for FY Table 4.16: The Mix of Different Types of Coal for FY * Table 4.17: Actual Wt. Av. Gross Calorific value (GCV) of Different Fuels for Coal- based Stations for FY Table 4.18: Wt. Av. Calorific Value (CV) of Fuels for Different Stations for FY Table 4.19: Wt. Av. Price / Unit of Fuels for FY (Actuals) Table 4.20: Av. Price / Unit of Fuels for FY (Actuals) for Different Stations Table 4.21: Fuel Cost of TPL-G (APP) for truing up for FY Table 4.22: Fuel Cost Approved for truing up for FY Table 4.23: Approved Gains / (Losses) from Fuel Expenses (due to Controllable Factors) for FY Table 4.24: O&M Expenses of TPL-G (APP) Claimed for FY Table 4.25: O&M Expenses and Gains / (Losses) Approved in truing up for FY Table 4.26: Water Charges Claimed in the truing up by TPL-G APP for FY Table 4.27: Gains / (Losses) Approved in the truing up for FY Table 4.28: Capital Expenditure Claimed by TPL-G (APP) For FY Table 4.29: Capitalisation and Sources of Funding Claimed in truing up for FY Table 4.30: Approved Capitalisation and Sources of Funding in truing up for FY Table 4.31: Total Interest Expenses Claimed in truing up for TPL-G (APP) for FY Table 4.32: Interest Claimed in the truing up for FY Gujarat Electricity Regulatory Commission Page vii

8 Table 4.33: Interest Approved by the Commission in the truing up for FY Table 4.34: Gains / (Losses) Approved in the truing up for FY Table 4.35: Interest on Working Capital of TPL-G (APP) Claimed for FY Table 4.36: Interest on Working Capital Approved in the truing up for FY Table 4.37: Gains / (Losses) in Interest on Working Capital Approved in the truing up for FY Table 4.38: Depreciation of TPL-G (APP) Claimed for FY Table 4.39: Gains / (Losses) due to Depreciation Approved in the truing up for FY Table 4.40: Return on Equity of TPL-G (APP) Claimed for FY Table 4.41: Return on Equity approved in the truing up for FY Table 4.42: Return on Equity and Gains / (Losses) Approved in the truing up for FY Table 4.43: Income Tax Claimed for TPL-G (APP) for FY Table 4.44: Income Tax and Gains / (Losses) due to Income Tax Approved in the truing up for FY Table 4.45: Non-Tariff Income for TPL-G (APP) Claimed for FY Table 4.46: Non-Tariff Income and Gains / (Losses) Approved in the truing up for FY Table 4.47: Incentive claimed for TPL-G (APP) in FY Table 4.48: ARR Approved in truing up for FY Table 4.49: Revised ARR projected for TPL-G (APP) for FY Table 4.50: Revised ARR approved for TPL-G (APP) for FY Table 4.51: Additional capacity charges for TPL-G (APP) for FY Table 5.1: Approved Fixed Charges for FY Table 5.2: Approved Variable Charges for TPL-G (APP) for FY Table 5.3: Approved ARR for TPL-G (APP) for FY Gujarat Electricity Regulatory Commission Page viii

9 LIST OF ANNEXURES 4.1 Approved Fuel costs for FY for True-up for C-Station Approved Fuel costs for FY for True-up for D-Station Approved Fuel costs for FY for True-up for E-Station Approved Fuel costs for FY for True-up for F-Station. 60 Gujarat Electricity Regulatory Commission Page ix

10 ABBREVIATIONS A&G Administration and General Expenses ARR Aggregate Revenue Requirement CAPEX Capital Expenditure CERC Central Electricity Regulatory Commission Control Period FY to FY DGVCL Dakshin Gujarat Vij Company Limited DISCOM Distribution Company EA Electricity Act, 2003 EHV Extra High Voltage FPPPA Fuel and Power Purchase Price Adjustment FY Financial Year GEB Gujarat Electricity Board GERC Gujarat Electricity Regulatory Commission GETCO Gujarat Energy Transmission Corporation Limited GFA Gross Fixed Assets GoG Government of Gujarat GSECL Gujarat State Electricity Corporation Limited GUVNL Gujarat Urja Vikas Nigam Limited HT High Tension JGY Jyoti Gram Yojna kv Kilo Volt kva Kilo Volt Ampere kvah Kilo Volt Ampere Hour kwh Kilo Watt Hour LT Low Tension Power MGVCL Madhya Gujarat Vij Company Limited MUs Million Units (Million kwh) MW Mega Watt MYT Multi-Year Tariff O&M Operations and Maintenance p.a. Per Annum PF Power Factor PGCIL Power Grid Corporation of India Limited PGVCL Paschim Gujarat Vij Company Limited PPA Power Purchase Agreement R&M Repairs and Maintenance RLDC Regional Load Despatch Centre SBI State Bank of India SLDC State Load Despatch Centre UGVCL Uttar Gujarat Vij Company Limited WRLDC Western Regional Load Despatch Centre Gujarat Electricity Regulatory Commission Page x

11 Before the Gujarat Electricity Regulatory Commission at Gandhinagar Case No of 2015 Date of the Order: 31/03/2016 CORAM Shri K. M. Shringarpure, Member Shri P.J. Thakkar, Member ORDER 1. Background and Brief History 1.1 Background Torrent Power Limited (hereinafter referred to as TPL or the petitioner) has filed petition under Section 62 of the Electricity Act, 2003, read in conjunction with Gujarat Electricity Regulatory Commission (Multi-Year Tariff) Regulations, 2011, for the True-up of FY , and for determination of tariff for its generation business at Ahmedabad for the FY on 23 rd December, The Commission admitted the Petition on 28 th December, Gujarat Electricity Regulatory Commission Page 1

12 1.2 Torrent Power Limited (TPL) Torrent Power Limited (TPL) is a company incorporated under the Companies Act, 1956 is carrying on the business of Generation and Distribution of Electricity in the cities of Ahmedabad, Gandhinagar and Surat. The present petition has been filed by TPL-Generation (Ahmedabad) for its generation business in Ahmedabad. TPL had assumed the business, consequent upon the amalgamation of Torrent Power Ahmedabad Limited (TPAL), Torrent Power Surat Limited (TPSL) and Torrent Power Generation Limited (TPGL) with Torrent Power Limited. Besides, TPL is also engaged in other businesses, which do not come under the regulatory purview of the Commission. TPL has existing generation facilities, with a total installed capacity of 422 MW, at Ahmedabad and has a Combined Cycle Power Plant (CCPP) of MW (SUGEN) capacity near Surat out of which a share of 835 MW. The generation facilities at Ahmedabad consist of a 422 MW coal based Thermal Power Plant at Sabarmati and a 100 MW gas based CCPP at Vatva which has since been retired from Commission s Order for the Second Control Period TPL filed its petition under the Multi-Year Tariff Framework for the control period from FY to FY on 24 th February, 2011, in accordance with Gujarat Electricity Regulatory Commission (Multi-Year Tariff Framework) Regulations, 2007, notified by the Commission. The Commission issued the new MYT Regulations, notified as GERC (Multi-Year Tariff) Regulations, 2011, on March 22, Regulation 1.4 (a) of GERC (Multi-Year Tariff) Regulations, 2011 reads as under: These Regulations shall be applicable for determination of tariff in all cases covered under these Regulations from 1 st April, 2011 and onwards. The Commission, in exercise of the powers vested in it under Sections 61, 62 and 64 of the Electricity Act, 2003, and all other powers enabling it in this behalf, and after taking into consideration the submissions made by TPL, the objections by various stakeholders, response of TPL, issues raised during the public hearing Gujarat Electricity Regulatory Commission Page 2

13 and all other relevant material, issued the Multi-Year Tariff order on 6 th September, 2011 for the control period from FY to FY , based on the GERC (MYT) Regulations, The Commission issued the following Orders on the dates shown against each: For truing up for FY and Tariff determination for FY on 2 nd June, For truing up for FY and Tariff determination for FY on 16 th April, Commission s Orders for Mid-term Review of Business plan for TPL-G (APP) TPL filed its Petition for Mid-term Review of Business Plan and revision of ARR for balance years for FY and FY of the control period in terms of Regulation 16.2(i) of GERC (MYT) Regulations, The Commission in exercise of the powers vested in it under Sections 61, 62 and 64 of the Electricity Act, 2003 and all other powers enabling it in this behalf and after taking into consideration the submission made by TPL, the objections by various stakeholders, response of TPL, issues raised during public hearing and all other relevant material, approved the revised ARR for FY and FY in the Mid-term Review of Business Plan for TPL on 29 th April, The Commission issued the order for truing up for FY and determination of Tariff for FY on 29 th April, The Commission issued the order for truing up for FY and determination of Tariff for FY on 31 st March, Background for the present petition The Commission in its order dated 2 nd December, 2015, in the Suo Motu Petition No. 1534/2015 decided that the approved ARR of FY of the licensees / generating companies concerned be considered as provisional ARR of the licensees / generating companies for FY The Commission also decided that the licensees / generating companies shall file the ARR for FY based on the MYT Regulations for FY to FY Gujarat Electricity Regulatory Commission Page 3

14 and the true-up for the same shall also be governed as per the new MYT Regulations. It is also decided that the licensees / generating companies shall file the petition for determination of ARR and tariff for FY and true-up for FY within 3 weeks from the date of issuance of this order for Commission s consideration and decision. TPL has accordingly filed the Petition for True-Up for FY and Approval of provisional Tariff for FY with the Commission for approval. 1.6 Admission of the Current Petition and Public Hearing Process TPL has submitted the current Petition for truing up of FY and determination of tariff for FY on 23 rd December, The Commission admitted the Petition (Case No. 1551/2015) on 28 th December, In accordance with Section 64 of the Electricity Act, 2003, the Commission directed TPL to publish its application in an abridged form to ensure public participation. The Public Notice, inviting objections / suggestions from its stakeholders on the petition filed by it, was published in the following newspapers on 29 th December, SI. No. Name of Newspaper Language Date of Publication 1 The Indian Express (Ahmedabad Edition) English 29/12/ Sandesh (Ahmedabad & Surat Editions) Gujarati 29/12/ Gujarat Samachar (Ahd. & Surat Editions) Gujarati 29/12/ Divya Bhaskar (Ahd. & Surat Editions) Gujarati 29/12/ NavGujarat Samay (Ahmedabad Edition) Gujarati 29/12/ Gujarat Mitra (Surat Edition) Gujarati 29/12/ Gujarat Guardian (Surat Edition) Gujarati 29/12/2015 The Petitioner also placed the public notice and the petition on its website ( for inviting objections and suggestions on the petition. The interested parties / stakeholders were asked to file their objections / suggestions on the petition on or before 28 th January, The Commission received objections / suggestions from 5 consumers / consumer organizations. The Commission examined the objections / suggestions received and scheduled a public hearing on 17 th February, 2016 at the Commission s Office at Gandhinagar and subsequently a communication was sent to the objectors to take part in the public hearing process for presenting Gujarat Electricity Regulatory Commission Page 4

15 their views in person before the Commission. The public hearing was conducted in Commission s Office in Gandhinagar on the above date. The names of the stakeholders who filed their objections and the objectors who participated in the public hearing for presenting their objections are given below: SI. No. Name of Stakeholders Participated in the Public Hearing 1. Akhil Gujarat Grahak Sewa Kendra No 2. Consumer Education and Research Society (CERS) Yes 3. Laghu Udyog Bharati - Gujarat Yes 4. Bharatiya Samyawadi Paksh (Markswadi) Yes 5. Utility Users' Welfare Association (UUWA) Yes Apart from above, Shri R. G. Tillan was also present during the hearing and made his representation. A note on the main issues raised by the objectors in the submissions with respect to the petition along with the response of TPL-G (APP) and the Commission s views on the response are given in Chapter Contents of this Order The order is divided into six chapters as under: 1. The first chapter provides a brief background regarding the Petitioner, the petition on hand and details of the public hearing process and approach adopted in this Order. 2. The second chapter outlines the summary of TPL s Petition. 3. The third chapter deals with the public hearing process, including the objections raised by various stakeholders, TPL s response and Commission s views on the response. 4. The fourth chapter focuses on the details of truing up for FY The fifth chapter deals with the determination of tariff for FY The sixth chapter deals with compliance of directives and issue of fresh directives. 1.8 Approach of this Order The GERC (MYT) Regulations, 2011, provide for truing up of the previous year, and determination of tariff for the ensuing year. The Commission has approved the Gujarat Electricity Regulatory Commission Page 5

16 ARR for the five years of the second control period from FY to FY , in the MYT order dated 6 th September, In the Mid-term Review of Business Plan, the Commission has revised the approved revised ARR for FY and FY TPL has approached the Commission with the present petition for truing up for the FY and determination of Tariff for FY , under GERC (MYT) Regulations, The Commission has undertaken truing up for the FY , including computation of gains and losses for the FY , based on the submissions of the petitioner and the annual accounts made available by the petitioner. While truing up for , the Commission has been primarily guided by the following principles: 1. Controllable parameters have been considered at the level approved under the MYT Order, unless the Commission considers that there are valid reasons for revision of the same. 2. Un-controllable parameters have been revised, based on the actual performance observed. The truing up for the FY has been considered, based on the GERC (MYT) Regulations, For the determination of the ARR for FY , the Commission has considered the ARR approved for FY , as approved in the Mid-term Review order dated 29 th April, 2014, as provisional ARR for FY , in line with the Commission s Order dated 2 nd December 2015 in the Suo Motu Petition No. 1534/2015. Gujarat Electricity Regulatory Commission Page 6

17 2. A Summary of TPL s Petition 2.1 Actuals for FY submitted by TPL-G (APP) Torrent Power Limited (TPL) submitted the current petition seeking approval of True-up for ARR of FY The details of expenses under various heads of ARR are given in Table below: Table 2.1: Actuals Claimed by TPL for FY (Rs. Crore) SI. Actuals Particulars MTR Order No. FY Fuel Cost (Variable Cost) O&M Expense Water Charges Depreciation Interest Cost on Long-Term Capital Loans Interest on Working Capital Return on Equity Income Tax Incentive Less: Non-Tariff Income Annual Revenue Requirement ARR for FY TPL, in its petition, has also furnished the Provisional ARR for the FY which is same as that approved for FY in the MTR order dated 29 th April, Table 2.2: Provisional ARR of TPL-G (APP) for FY (Rs. Crore) Sl. No. ARR Provisional ARR for FY Variable Cost O&M Expense Water Charges Depreciation Interest on Loan - 6 Interest on Working Capital Return on Equity Income Tax Less: Non-Tariff Income Total Gujarat Electricity Regulatory Commission Page 7

18 2.3 TPL s request to the Commission: a) Admit the petition for truing up of FY and determination of tariff for FY b) Approve the trued-up ARR of FY c) Approve the sharing of gains/losses as proposed for FY d) Approve the ARR for FY e) Approve the cumulative Gap / (Surplus). f) Cumulative Gap / (Surplus). g) Allow recovery of the costs as per the Judgments of the Hon ble Tribunal on the Appeals filed by the Petitioner. h) Allow additions / alterations / changes / modifications to the application at a future date. i) Permit the Petitioner to file all necessary pleading and documents in the proceeding and documents from time to time for effective consideration of the proceeding. j) Allow any other relief, order or direction which the Commission deems fit to be issued. k) Condone any inadvertent omissions / errors / rounding off difference / shortcomings. Gujarat Electricity Regulatory Commission Page 8

19 3. Brief outline of Objections raised, Response from TPL-G and the Commission s View 3.0 Stakeholders suggestions / objections, Petitioner s Response and Commission s Observation In response to the public notice inviting objections / suggestions from stakeholders on the Petition filed by TPL-G for Truing up of FY and determination of Tariff for FY under GERC (MYT) Regulations, 2011, a number of Consumers / organisations filed their objections / suggestions in writing. Some of these objectors participated in the public hearing also. The Commission has addressed the objections / suggestions by the consumer / consumers organisations, the response from the Petitioner and the view of the Commission as given below: 3.1 Tariff Increase Objection M/s. Akhil Gujarat Seva Kendra has stated that; i. the Petitioner has skilfully asked for tariff increase which is illegal; and ii. TPL is making profit and still asking for increase of Tariff and burdening the consumers. Response of TPL The Petitioner has stated that; i. The allegations of the objector are refuted. The Petitioner has filed the Petition in line with the provisions of the Act and National Tariff Policy and GERC Regulations. The Petitioner has not proposed any change in Tariff rates for existing Tariff categories but proposed to recover the cumulative gap through Regulatory Charge effective from 1 st April 2016 to ensure a minimum reduction of at least 5 paise / unit to consumers of Ahmedabad licensed area. The proposal of the Petitioner is in the interest of the stakeholders. ii. The objector is referring to Annual Reports of TPL. It is to be stated that existing petition and profits shown in Annual Reports are different under different statutes. The Annual Report is prepared as per provisions of Gujarat Electricity Regulatory Commission Page 9

20 Companies Act 1956 and Accounting Standards duly audited by Statutory Auditors of the Company. Whereas the tariff petition is prepared under various regulations specified by the Commission from time to time. It is not correct to compare financials as per Annual Report of the Company and the data submitted in the petition. Commission s Observation The recovery of cumulative gap through Regulatory Charge has been examined and appropriate decision has been taken. 3.2 True-up for FY Objection M/s. Consumer Education and Research Society has stated as under: a. Recovery of Revenue Gap The Petitioner has demanded recovery of Rs Crore even though he has operated the plants efficiently and achieved PLF of 80.69% in FY The Commission is requested to direct the Petitioner for recovery of this gap through economical and efficient means. b. Performance of Sabarmati Plant Due to poor PLF of C and D stations, the Petitioner purchased costly power from other sources. c. Coal Transit Loss The Petitioner has incurred coal transit loss at 1.60% as against approved value of 0.90%. The demand of the Petitioner to calculate transit loss as uncontrollable parameter should be rejected. The higher transit loss of 0.7% should be transferred to the account of Petitioner. d. High Fuel Cost for FY The proposed increase of Rs. 780 Crore in case of indigenous coal is objectionable and the Commission shall direct the Petitioner to furnish details of grades of coal used at C, D, E & F stations at Sabarmati. e. Revenue gap for The Commission is requested not to grant any relief to the Petitioner as revenue gap for FY is very small and can be recovered through efficient and economical measures. The cumulative gap for FY is Gujarat Electricity Regulatory Commission Page 10

21 Rs Crore which is meagre and economical measures should be taken to wipe off of the gap. Response of TPL On the above mentioned issues, the Petitioner has submitted as under; a. The Petitioner has made all efforts to ensure reduction in overall cost by optimizing its resources and incurring expenditure on need basis. The gap of Rs Crore has resulted after all efforts have been made by the Petitioner. The Commission may approve the gap of FY subject to prudent check to ensure speedy recovery as any delay would result in incurring carrying cost which is a burden on consumers. b. The lower PLF of C station is on account of lower off-take; which is beyond the control of the Petitioner. Further, due to lower PLF, it is a wellestablished fact that it reflects higher auxiliary consumption percentage and higher SHR. Regarding D station, it is submitted that the variation is on account of extension of planned maintenance schedule due to onsite teething problems faced during Boiler 2nd pass renovation work. c. The Petitioner is making continuous efforts to contain the Transit Losses. However, it is pertinent to note that there are certain uncontrollable factors such as moisture loss, windage, and slippage losses taking place during long distance of transportation which results in higher transit loss. Further reduction is beyond its control. The Petitioner has considered the transit loss as controllable parameter in its calculation as per MYT Regulations and requested the Commission to consider the transit loss as uncontrollable due to the factors beyond its control. d. The Petitioner has signed the fuel supply agreement (FSA) with SECL (a subsidiary of CIL) which is a standard agreement across the sector. The cost of domestic coal increased during FY due to increase in prices of Coal of SECL and increase in Railway Freight. Regarding details of coal used at various stations including grade, quality and calorific value of coal, the Petitioner has furnished the information on the Gujarat Electricity Regulatory Commission Page 11

22 grade, quality and calorific value of coal in the petition in line with the provisions of the GERC (MYT) Regulations, e. Regarding cumulative gap for FY , the petitioner has submitted that the ARR of FY has been submitted on provisional basis as per the approved ARR of FY Upon the notification of the GERC (MYT) Regulations, 2011 for the new control period, the Petitioner shall submit the revised estimated ARR of FY and requested the Commission to approve the provisional ARR of FY Commission s view The cost of generation of TPL-G stations is approved after carrying out prudence check and detailed scrutiny of performance. Transit loss of coal is limited to the percentage approved by the Commission. 3.3 Depreciated valuation of assets Objection M/s. Laghu Udyog Bharati, Gujarat has stated that in the absence of depreciated valuation record of Torrent G till the Commission approvers this amount by a separate entry this amount in the annual report shall not be considered. The amount received shall be actually be construed as revenue and value of assets and depreciation amount shall be recalculated. There are no details of the money received either in ARR or in Annual Accounts FY The reduction in assets as per balance sheet is Rs Crore. It is yet to be confirmed that this amount is commensurate to sale value of retired 100 MW combined gas cycle plant. As such it is proposed to cover this amount along with Rs Crore and interest for one year is to be treated as surplus amount. Response of TPL The Objector has referred to the trued up gap of FY of Rs Crore and compared the same with the figures reflected in the Statement of Accounts. In this regard, the Petitioner submitted that the Statement of Accounts cannot be directly compared with the present petition since the petition and the Statement of Accounts are prepared under the different Statutes. Gujarat Electricity Regulatory Commission Page 12

23 Further the Objector has referred to the loss figures mentioned as exceptional item in the P&L Statement and submitted that the same has not been included in the ARR and that this item should not be considered separately till the same is approved by the Commission. The Objector has proposed to consider net reduction in assets along with this loss figure as surplus amount. The Petitioner has submitted that it has not requested the Commission to approve this loss to pass on in ARR. The Petitioner would like to further submit that Vatva CCPP has been retired and accordingly, no effect of the same has been factored in the ARR calculation. The present petition is prepared in accordance the prevailing regulatory framework. The figures mentioned in the Statement of Accounts are certified by the Statutory Auditors of the Company. Commission s Observation The response of TPL G (APP) explains the issue raised by the objector. The ARR filed by the Petitioner has been scrutinized and the generation costs of each station are approved by the Commission. 3.4 Maintainability of the Petition Objection M/s. Utility Users Welfare Association has stated that i. TPL-Generation is a separate legal entity and TPL-D is a separate legal entity and is Distribution Licensee for Ahmedabad / Gandhinagar and Surat area. As per Electricity Act, 2003 the generation is delicensed and TPL G (APP) is free to sell the generated electricity to anyone. ii. The petition format is not suitable as it does not reflect the real facts and figures as the Petitioner is involved in other multiple businesses at multiple locations Response of TPL The Petitioner has stated that; i. TPL-G (APP) is the separate division of same legal entity. The present petition for truing up of FY is filed in line with the provisions of GERC (MYT) Regulations, ii. All the requisite information for the present proceedings are already provided in the Petition as required under the GERC (MYT) Regulations, The Gujarat Electricity Regulatory Commission Page 13

24 allegations are therefore emphatically denied. The Petitioner further submits that it prepares and maintains the accounts as per the Accounting Standards specified by the Institute of Chartered Accountants of India in accordance with the Companies Act. The segregated Accounting Statements for the FY , duly certified by the Statutory Auditors of the Company, have also been made available along with the Petition. Commission s Observation Though the generation business is de-licensed, the generation tariff is determined by the Commission as the power is supplied to a distribution licensee. As mentioned earlier, the tariff is approved by the Commission after detailed scrutiny. 3.5 Agreement to procure power Objection M/s. Utility Users Welfare Association has stated that there is no Power Purchase agreement between TPL-G (APP) and TPL-D and hence; i. there is no obligation in the part of TPL-D to procure power from its own generating division which is in fact a separate legal entity as per provision of Electricity Act, 2003 ii. As there is no PPA of TPL G with TPL D the Tariff under cost plus basis under Section 62 of Electricity Act, 2003 of generating station of TPL is totally illegal and is in violation of various provisions of Section 61 and 86 of Electricity Act, 2003, Clause 5.1 of NTP, NEC and MYT Regulations and its principle and preamble of Electricity Act, 2003 iii. The generating cost of TPL-G (APP) is Rs. 4.11/kWh i.e. Rs Crore for MUs generation. Whereas TPL-D is procuring the power from the rate of Rs. 3.69/kWh that too on short term basis. Not only that TPL-D has procured power from power Rs. 4.23/Unit. SUGEN power cost is Rs. 9.34/Unit which is the highest cost of power procurement in India by a Distribution Licensee. Response of TPL On the above objections, TPL-G (APP) has submitted that; i. The TPL-G (APP) is the embedded generation and is the approved source of power purchase as per the Commission s MTR order. The increase in the Gujarat Electricity Regulatory Commission Page 14

25 power purchase cost from TPL-G (APP) is mainly on account of uncontrollable factors such as fuel and transportation cost. Further the GERC (MYT) Regulations, 2011 specify power purchase cost as legitimate item of expenditure and hence it should be approved as per actuals. ii. & iii Section 63 of Electricity Act, 2003 gives an option to procure electricity at the Tariff determined in accordance with the competitive bidding guidelines issued by the Central Government. In such a case, the appropriate Commission shall adopt the Tariff instead of determining the Tariff in accordance with Section 62 on cost plus basis. It is clear that procurement of power is permissible either at Tariff determined under Section 62 or Tariff determined under Section 63. Commission s Observation TPL-G (APP) is an approved source for power purchase and the tariff for generation is approved by the Commission after detailed scrutiny as stated earlier. 3.6 ARR Gap M/s. Utility Users Welfare Association has stated that the first MYT control Period from to has already been over and second MYT control period is about to be over and the benefits of MYT are not achieved as TPL has asked for the huge gap in spite of the fact that the uncontrollable cost like fuel and power purchase cost has already been recovered through the mechanism of FPPPA. Response of TPL The Petitioner submits that it has filed the petition in accordance with the provisions of Section 62 and 64 of the Electricity Act, 2003 read with GERC (MYT) Regulations, The Petitioner refuted the allegations made by the Objector and further submitted that the erstwhile FPPPA formula allowed the partial recovery of cost incurred and did not allow the recovery of total incremental cost. Therefore, such unrecovered cost is reflected as gap during truing up exercise. Commission s Observation TPL-G (APP) has filed the Petition as per the GERC (MYT) Regulations, 2011 and the costs are approved by the Commission after detailed scrutiny as stated earlier. Gujarat Electricity Regulatory Commission Page 15

26 3.7 Equity M/s. Utility Users Welfare Association has made several observations regarding equity of the Petitioner. Response of TPL The Petitioner strongly refutes all the allegations and submit that it has calculated return on the equity as per the provisions of the GERC (MYT) Regulations, The question of considering the service line contributions received from the consumers as part of its equity does not arise in respect of the generation business. Commission s Observation The equity and the return on equity are approved as per GERC (MYT) Regulations, Accounting Statements M/s Utility Users Welfare Association has stated that the Accounting Statement submitted by TPL is not the Accounting Statement as mandated in the GERC (MYT) Regulations, TPL has failed to segregate its accounts as per Regulations and by not doing it within year as mandated in the Regulation, TPL has availed undue, illegal, undesired, unjust enrichment by hiding the financial data and has made the physical investment in other franchisee areas of Bhiwandi, Agra and Kanpur and booked in the licensed area of Ahmedabad / Gandhinagar and Surat. Response of TPL The Petitioner denies and refutes the allegations made by the Objector. The Petitioner submits that it prepares and maintains the accounts as per the Accounting Standards specified by the Institute of Chartered Accountants of India in accordance with the provisions of the Companies Act. The Petitioner has furnished the separate Accounting Statements, duly certified by the Statutory Auditors of the Company for FY in accordance with the statutory provisions. The Petitioner also clarified that separate accounts are being maintained for Regulated business and the same have been furnished duly verified by the Statutory Auditors of the Company. Gujarat Electricity Regulatory Commission Page 16

27 Commission s Observation The Commission regulates only the regulated business of TPL and not other businesses and accordingly the Commission has examined the petition filed for the regulated business. 3.9 Transfer Cost for FY M/s. Utility Users Welfare Association has stated that it is proposed by TPL-G (APP) that Rs Crore is the total transfer cost for However, no projection of net as well as gross generation in MUs is given. The Commission is requested to direct TPL-G to provide the details of each of the components of variable as well as fixed cost for enabling the stakeholders to give their comments. Response of TPL The Petitioner has considered the ARR of FY approved in Order dated 29 th April, 2014 in Case No of 2013, as provisional ARR for FY as per the Commission s order dated 2nd December, 2015 in Petition No. 1534/2015. The details of approved ARR are available in the above referred order of the Commission. The Petitioner has considered the approved ARR for FY in line with the GERC (MYT) Regulations, Commission s Observation The Petition for FY is based on the approved ARR for FY as per the Commission s Order in Suo Motu Petition as explained by the Petitioner Power Purchase M/s. Utility Users Welfare Association has stated that the APTEL has held that the State Commission should direct the Distribution Licensee to procure power through competitive bidding process in cases where the rates under negotiated agreements are high. The Commission is requested to examine this issue and direct TPL D to procure power by competitive bidding process under Section 63 of Electricity Act, 2003 Gujarat Electricity Regulatory Commission Page 17

28 instead of procuring power from its own group on cost plus basis which is not in the interests of the consumers. Response of TPL Section 63 of the Electricity Act, 2003 gives an option to procure electricity at tariff determined in accordance with the competitive bidding guidelines issued by the Central Government. In that case, the Appropriate Commission shall adopt the tariff instead of determining the tariff in accordance with Section 62 on cost plus basis. It is clear that procurement of power is permissible either at tariff determined under Section 62 or tariff determined under Section 63. Commission s Observation This is a Petition filed by the TPL-G for determination of generation cost of TPL-G stations, which is approved by the Commission after detailed scrutiny as stated earlier Trajectory for Controllable Items M/s. Utility Users Welfare Association has stated that Commission has not specified the trajectory for controllable item like PLF, AT&C losses, transit loss, SHR, Aux. Consumption etc. Response of TPL The Commission has specified the trajectories for various performance parameters in the accordance with the provisions of GERC (MYT) Regulations, Commission s Observation The Commission has fixed trajectory for various operational parameters Incentive for achieving targeted PAF, PLF and Transit loss Objection M/s. Utility Users Welfare Association has stated that no incentive should be granted to TPL as it failed to achieve targeted PAF and PLF of MYT order. But disincentives should be imposed by adjusting incentive awarded in FY and Gujarat Electricity Regulatory Commission Page 18

29 Response of TPL The Commission allows incentive/disincentive as per the provision of GERC (MYT) Regulations, Commission s Observation Incentives are allowed wherever the Petitioner is eligible for such incentives as per GERC Regulations Transit Loss Details of Imported Coal Objection M/s Utility Users Welfare Association has stated that Commission should call for the details of transit loss of imported coal because TPL may be trying to legitimate higher transit loss to compensate the loss of imported coal by claiming it on domestic. There is no Regulation which permits transit loss on imported coal. UUWA requested the Commission to amend the Regulations and should allow transit loss on imported coal because there are more possibilities of transit loss than the domestic one. This will not inspire the generating companies to do wrong to adjust transit loss on imported coal to some other account head. Response of TPL The Commission allows treatment to various parameters in accordance with the provision of GERC (MYT) Regulations, Commission s Observation The Commission will examine to amend the Regulations for transit loss of imported coal Income Tax as Expenditure Objection M/s. Utility Users Welfare Association suggested for allowing income tax as expenditure which is really paid by TPL and should be apportioned proportionately, if paid on consolidated profit. Gujarat Electricity Regulatory Commission Page 19

30 Response of TPL The Petitioner has claimed income tax for FY by apportioning the actual amount of tax paid in respect of PBT as per audited accounts. Commission s Observation The Commission approves the Income Tax based on the actual tax paid by the utility Determination of generation Tariff on cost plus basis Objection M/s. Utility Users Welfare Association has requested the Commission not to determine the generation tariff on cost plus basis as it is becoming costlier year on year. Response of TPL The determination of Tariff on cost plus basis is in accordance with GERC (MYT) Regulations, 2011 framed under the provisions of Electricity Act, Commission s Observation The Commission approves the generation tariff as per the provisions of GERC (MYT) Regulations, Power Purchase Agreement Objection M/s. Utility Users Welfare Association has stated that the Objector has observed that there is no power purchase agreement between TPL-G (APP) and the Petitioner and objected to the power purchase cost incurred by the Petitioner from TPL-G (APP). Response of Petitioner TPL-G (APP) is the embedded generation and is the approved source of power purchase. Further, it may kindly be noted that the GERC (MYT) Regulations, 2011 specifies power purchase cost as legitimate item of expenditure. Gujarat Electricity Regulatory Commission Page 20

31 Commission s Observation TPL-G is an approved source of power for TPL-D and the power purchase cost is approved after detailed verification Treatment of Reserve and Surplus Objection M/s. Laghu Udyog Bharati has stated that The details have not been received for reserve and surplus of Rs Crore in the current year and the reserve and surplus H.O. adjustment in any note in Annual Accounts of last year has not been shown anywhere and also the details of surplus of previous years also not reflected. Response of TPL It is stated that all information for arriving at ARR and corresponding gap/surplus has been provided in the petition in accordance with GERC (MYT) Regulations, Commission s Observation The petition is filed by TPL-G as per GERC (MYT) Regulations, 2011 and the generation costs are approved after detailed verification as stated earlier Reduction of Interest on Working Capital by way of advance payment of generation charges Objection M/s. Laghu Udyog Bharati has stated that; a. no interest on Working Capital is to be allowed as the distribution companies have collected security deposit of 1.5 to 2 months from consumers who are required to pay advance of one-month energy charges. In view of this Rs Crore is not admissible. b. Further depreciation sum available is Rs Crore and hence finance cost of Rs Crore is not admissible (Note 17) c. Table of ARR shows Rs. 26 Crore as interest expenses whereas Table 19 of ARR shown Rs Crore as interest on working capital. d. current loans and advances of Rs Crore is not shown in ARR (note 8 of annual accounts) Gujarat Electricity Regulatory Commission Page 21

32 Response of TPL The Petitioner has considered the interest charges as expenses per GERC (MYT) Regulations, The Petitioner has calculated the interest expenses by applying the opening weighted average rate of interest on actual loan portfolio at the beginning of year (i.e. on ) while repayment has been considered equal to the depreciation of the assets for the year. Commission s Observation The Commission has approved the interest on working capital as per norms specified in the GERC (MYT) Regulations, Showing incentive as expense Objection M/s. Laghu Udyog Bharati has stated that incentive of Rs Crore is a disputed amount as it is included in expenses (Table 24 of ARR). Further it is not reflected in Annual Accounts and incentive for savings and efficiency improvements cannot be added to expenses. Response of TPL As per the GERC (MYT) Regulations, 2011, the incentive payable to a thermal generating station shall be calculated in accordance with the plant availability factor achieved against the normative plant availability factor of 85%. Accordingly, the incentive for the FY is Rs Crore. Therefore, the incentive claimed by the Petitioner is a legitimate item of ARR as per the Regulatory Framework. Commission s Observation The incentive is claimed by the Petitioner as per Regulations and is allowed by the Commission after detailed scrutiny as stated earlier Surplus and Tariff proposals for FY Objection M/s. Laghu Udyog Bharati stated that surplus amount of Rs Crore is required to be credited to past FY ARR. Gujarat Electricity Regulatory Commission Page 22

33 Response of TPL The figures considered by M/s. Laghu Udyog Bharati is not in accordance with GERC (MYT) Regulations, The Petitioner has computed ARR and arrived at the gap as per provisions of GERC (MYT) Regulations, Commission s Observation The ARR filed by the Petitioner is examined as per GERC (MYT) Regulations, 2011 and approved after detailed scrutiny as stated earlier Details of Non-Tariff Income Objection M/s. Laghu Udyog Bharati stated that details of Non-Tariff income are not shown in ARR as per GERC (MYT) Regulations, Hence ARR is to be revised. Response of TPL All required information has been provided as per GERC (MYT) Regulations, Commission s Observation The Petitioner has provided all the required information as per GERC (MYT) Regulations, Power Purchase Cost Objection M/s. Utility Users Welfare Association has stated that the power purchase cost of TPL-G (APP) is shown as Rs Crore in Petition No. 1551/2015 whereas it is shown as Rs Crore in Petition No. 1552/53 of TPL-D (APP) Response of TPL The cost of power purchase depends upon various factors including quantum, period and market conditions. It may be noted that the power purchase cost is the legitimate item of expenditure incurred by the Petitioner to cater to the demand of its consumers. Gujarat Electricity Regulatory Commission Page 23

34 Commission s Observation The Power Purchase cost is approved by the Commission after detailed scrutiny as per the Regulations as stated earlier Truing up from FY to M/s. Utility Users Welfare Association has stated that TPL should be directed to submit truing up from FY to because TPL has fudged the generation figures in FY showing more generation to make the base year of MYT framework application expensive to extort generation cost from the consumers. TPL should also be directed to submit truing up for the FY as per the directives of the Hon ble APTEL. Response of TPL The proposal of the objector is not the subject matter of the current petition and the orders have attained finality. Commission s Observation The Commission at the relevant time had decided the Orders as per the Regulations prevailing at that time. Gujarat Electricity Regulatory Commission Page 24

35 4. Truing up for FY This chapter of the Order deals with the truing up for FY for TPL- Generation, Ahmadabad. The Commission has studied and analysed each component of the ARR for FY in the succeeding paragraphs. 4.1 Generating Stations of TPL-G (APP) TPL has existing power generation facilities, with total installed capacity of 500 MW, at Ahmedabad TPL-G (APP) that consists of a 422 MW coal-based thermal power plant at Sabarmati Ahmedabad TPL-G (APP). TPL has also commissioned a combined cycle power plant (CCPP) of MW (SUGEN) at Akhakhol village near Surat in FY For its distribution business, TPL sourced power from its own generation facilities in Ahmedabad, SUGEN (to the extent of 835 MW) and the balance from other sources. The generation cost of the SUGEN Plant has been decided by CERC and shall be taken as the power purchase cost for any purchase from SUGEN by TPL for its Distribution Companies at Ahmedabad, Gandhinagar and Surat. The Commission is required to determine the generation cost for TPL-G (APP) stations. The generation costs of these stations are discussed below: TPL-G (APP) owns and operates the following generating stations: Four coal-based thermal stations at Sabarmati, namely, Sabarmati C Station, Sabarmati D Station, Sabarmati E Station and Sabarmati F Station. One Combined Cycle gas based power plant at Vatva (since retired) The details of the stations existing as on 1 st April, 2014, along with their capacities and dates of commissioning, are given in the Table below: Table 4.1: Capacity, COD and age of TPL-G (APP) Stations, as on 1 st April, 2014 Name of the Station Capacity in MW Year of COD Age / Years Sabarmati Thermal Power Plant (Coal based) C Station 2 X 30 MW 1961/1997* *(year of turbine retrofitting) 55 D Station 1 X 120 MW 1978/2004* 37 Gujarat Electricity Regulatory Commission Page 25