CASE No. 2 of Coram. Shri. Azeez M. Khan, Member Shri. Deepak Lad, Member. Maharashtra Veej Grahak Sanghatana

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1 Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai Tel /65/69 Fax Website: CASE No. 2 of 2017 In the matter of Petition of Maharashtra Veej Grahak Sanghatana for review of Multi-Year Tariff Order for Maharashtra State Electricity Distribution Co. Ltd. in Case No. 48 of 2016 regarding power purchase expenses, delayed payment charges, sharing of efficiency losses, and clarification on Consumer Security Deposit Coram Shri. Azeez M. Khan, Member Shri. Deepak Lad, Member Maharashtra Veej Grahak Sanghatana Petitioner V/s Maharashtra State Electricity Distribution Co. Ltd....Respondent Appearance For Petitioner : For Respondent : Shri. Pratap Hogade Shri. Satish Chavan ORDER Dated: 5 January, Maharashtra Veej Grahak Sanghatana (MVGS), 3/456/4, Kestij Hotel Building, Mahasatta Chowk, Sangli Road, Ichalkaranji, Distt. Kolhapur, through its President, Shri Pratap Ganpatrao Hogade, has filed a Petition on 19 December, 2016 under Regulation 85 of the MERC (Conduct of Business) Regulations, 2004 for review of certain provisions of the Multi-Year Tariff (MYT) Order dated 3 November, 2016 in Case No.48 of 2016 in respect of Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL), and for certain clarifications. Order in Case No. 2 of 2017 Page 1 of 15

2 2. The prayers of MVGS are as follows: 1. Correct Calculation errors in Energy Balance by deducting NTPC Mauda supplied 1,080 MU from Inter State Power Purchases and add them in Intra State Power Purchases. 2. Deduct Delay payment charges liable to be made by MSEDCL to Power Generators as pointed out by Auditors in their Audited report for FY from Power Purchases by reducing ARR for FY Examine and scrutinize whether MSEDCL is paid/payable Delay Payment Charges to Inter and Intra State Transmission Companies and deduct if any from ARR for FY Correct Calculations and deduct Rs 396 crore from ARR of FY on account of sharing of Gains/Losses retained by MSEDCL. 5. The deducted ARR amount should be accounted while consideration of MTR Petition or while next ruing up. 6. Clarify on security deposits to be collected by MSEDCL as explained in this petition 3. The issues on which review are claimed are set out in the Petition as follows: 3.1. NTPC Mauda as an Intra-State Generator MSEDCL had included the power purchase from the National Thermal Power Corporation (NTPC) s Generation Plant at Mauda, Distt. Nagpur in Maharashtra in the total power procurement of 24,452 MU from NTPC in FY Procurement from NTPC Stations is considered as Inter-State power purchase NTPC Mauda is an Intra-State Generator. Hence, power purchase of 1080 MU from NTPC Mauda should be deducted from Inter-State sources and be added to Intra-State sources. Accordingly, power purchase from NTPC (Inter-State Power Purchase) would be 23,372 MU, after deducting 1080 from NTPC Mauda Hence the following corrections may be made in the Energy Balance for FY Details Power Purchase from outside Maharashtra FY (MU) Order in Case No. 2 of 2017 Page 2 of 15

3 From NTPC, after deducting NTPC Mauda purchase of 23,372 1,080 MU, Maharashtra From Nuclear Power Corporation (NPCIL) and others 6,793 Total 30,165 Power Purchased within Maharashtra From NTPC Mauda 1,080 From others 81,333 Input for Open Access Consumption 4,159 Total 86, In Table 3-13 of the impugned MYT Order, the Commission approved Energy Balance for FY allowing Inter-State Losses of 3.79%. On 1,080 MU of NTPC Mauda, the Commission deducted 41 MU as Inter-State Losses. This has led to a higher allowance in the Aggregate Revenue Requirement (ARR) of MSEDCL for FY Power Purchase Expenses - Delayed Payment Charges to be deducted Usually Auditors do not make comments on Delayed Payment Charges (DPC) paid/payable by MSEDCL on power purchase, but there is a dispute between MSEDCL and private Generators with regard to DPC. Hence, in the Annual Accounts for FY , the Auditors made the following comments: The company had made a short provision of delayed payment charges payable to various power supply companies on account of delay in payment of power purchase bills. The details are as under: (Rs. in lacs) Vendor name DPC as per Vendor DPC as per Company JSW Energy 6,091 5, Adani ,660 5,538 1,122 Adani ,476 9,009 3,467 Rattan India 2,668 2, Total 27,895 22,349 5,546 Short Provision Therefore MSEDCL has to pay DPC on power purchases made during FY These DPC amounts have not been deducted by the Commission while Truing-up the ARR for FY Likewise, MSEDCL might have paid or is required to pay certain DPC amounts to Inter- and Intra-State Power Transmission Companies which have to be deducted from the power purchase expenses. Order in Case No. 2 of 2017 Page 3 of 15

4 3.3. Error in calculation of Efficiency Gains / Losses There is a mistake in the impugned MYT Order in the calculation of efficiency gains / losses for FY /3 rd of Efficiency Gain/Loss retained by MSEDCL for FY (Rs. crore) Particulars As per MSEDCL Approved by Commission Table 3-89 in Table 3-90 and Table 3-91 O&M Expenses (134) (119) Interest on Working Capital (188) (145) Sharing of revenue due to higher (180) (1,115) Distribution Loss Total (502) (1,379) In Table 3-95 of the MYT Order relating to FY , the Commission has given effect to the sharing of Gains/Losses as Rs.983 crore instead of Rs.1,379 crore. Hence, the Commission allowed an additional ARR of Rs.396 crore during FY , which needs to be corrected Clarification regarding Consumer Security Deposit MSEDCL has to collect Consumer Security Deposit on the average amount paid by consumers in a year divided by 12 months, including incentives availed on Power Factor, Load Factor, Prompt Payment Discount, etc. However, MSEDCL is collecting a higher Security Deposit by excluding Power Factor, Load Factor and Prompt Payment Discount, etc. from the monthly consumer bills When asked, MSEDCL officers replied that there is no guarantee that a consumer will avail any incentives in the subsequent year. Hence, as security, MSEDCL is assuming that a consumer will not be availing any incentives in the next year and according collect a higher Security Deposit However, if a consumer does not avail Load Factor Incentive, etc., the consumption will be reduced to that extent in the next year and the energy bill will also be reduced to that extent. Hence, there is no risk to MSEDCL Moreover, the Fuel Adjustment Charge (FAC), Additional Supply Charge (ASC), etc. will differ from year to year, but MSEDCL is collecting Security Deposit on FAC and ASC, etc. also. Government of Maharashtra (GoM) is providing incentives to Agriculture consumers, Powerlooms, and consumers in Order in Case No. 2 of 2017 Page 4 of 15

5 backward regions of Vidarbha, Marathwada, Northern Maharashtra and D, D+ Zones, etc. MSEDCL is collecting Security Deposit excluding these amounts also Therefore clarification is necessary in this context on the collection of Security Deposits by MSEDCL. 4. In its Reply dated 21 March, 2017, MSEDCL has stated that: 4.1. Power Purchase from NTPC Mauda The Mauda Super Thermal Power Station (STPS) is an Inter-State Power Plant owned by NTPC. The beneficiary States of Mauda STPS are Madhya Pradesh, Maharashtra, Gujarat, Chhattisgarh, Goa and the Union Territories of Daman and Diu. The Mauda STPS is connected to the Central Transmission Utility (CTU) via Mauda STPS Wardha 400 kv D/C (Quad) line Bifurcation of Intra-State and Inter-State sources has been done for the purpose of Energy Balance so as to assess the Inter-State / Intra-State Transmission Losses and Distribution Losses. The Mauda STPS is connected to the CTU, and hence it is subject to Inter-State as well as Intra-State Transmission Loss. Considering this, MSEDCL has put power purchase from the Mauda STPS in the Inter-State category, and the Commission has correctly approved it as such in the impugned MYT Order. There is no error in considering Mauda STPS as an Inter-State source Power Purchase Expenses Power purchase expenses shown in Form 2 of the Regulatory Formats for FY of the MYT Petition do not include any DPC to Generators. DPC has been shown in Note 28 Finance Costs of the Audited Accounts for FY As per Note 28, the Interest to Supplier/Contractors (O&M) is Rs crore. This includes DPC of Rs crore and interest given to collection agencies on their security deposits. However, in its MYT Petition, MSEDCL had claimed only Rs crore towards Interest to Suppliers / Contractors (O&M) under Other Expenses, and has not claimed the DPC amount of Rs crore. Accordingly, the Commission has allowed Rs crore under Other Expenses in Table 3-61 of the MYT Order. Order in Case No. 2 of 2017 Page 5 of 15

6 The Commission had directed MSEDCL to submit the nature of claims under Interest to Suppliers/Contractor (O&M) claimed under Other Expenses. Vide its reply dated 20 September, 2016, MSEDCL had submitted the details. Accordingly, the Commission has correctly approved only Rs crore towards Interest to Supplier/Contractors (O&M) There is no error in calculation of power purchase expenses for FY Consumer Security Deposit MSEDCL has been collecting the Consumer Security Deposit as per the provisions of Regulation 11 of the MERC (Electricity Supply Code and Other Conditions of Supply) Regulations, 2005 ( Supply Code ) The issue of clarification on collection of Security Deposit is beyond the purview of review of the impugned MYT Order. MVGS may approach the Commission under the relevant provisions of the Supply Code and not by way of review of the MYT Order Admissibility of Petition There is no discovery of new and important matter or evidence or any mistake or error apparent from the face of the record. There is also no other sufficient reason to admit the claim of MVGS for review of the MYT Order Therefore, the Review Petition is not maintainable and should be dismissed. 5. At the hearing held on 23 March, 2017: 5.1. MVGS stated that: i. With reference to MVGS contention that NTPC Mauda STPS is to be treated as an Intra-State Generator, MSEDCL has replied that it is connected to the transmission network of the CTU and hence it is an Inter-State Generator. This submission of MSEDCL may be verified by the Commission. ii. Regarding MVGS contention that DPC paid to Generators and Transmission Licensees should not be allowed as expenses in the ARR, MSEDCL has stated that DPC was not claimed in the MYT Petition, and hence the issue of allowing it in the ARR does not arise. The Commission may verify this submission of MSEDCL also. Order in Case No. 2 of 2017 Page 6 of 15

7 iii. Regarding the clarification sought on the Consumer Security Deposit, MSEDCL has objected to such clarification being sought as a part of review of the impugned MYT Order. MVGS accepts this contention. iv. MSEDCL has not responded on the issue of the error pointed out by MVGS in calculating the sharing of efficiency loss. In the impugned MYT Order, the Commission has calculated the efficiency loss to be borne by MSEDCL on account of Operation and Maintenance (O&M) Expenses (Rs. 119 crore), interest on working capital (IoWC) (Rs. 145 crore) and higher Distribution Loss (Rs.1115 crore). Thus, the total efficiency loss to be borne by MSEDCL for FY is Rs crore. However, in Table 3-95 of the MYT Order, the efficiency loss has been shown as Rs.983 crore. Thus, there is an error apparent on the face of the record which needs to be corrected MSEDCL stated that the Commission has correctly calculated the sharing of efficiency loss for FY in the MYT Order. MVGS has failed to show any error in the Order, and hence the Review Petition may be rejected as not maintainable. 6. In its Rejoinder dated 1 April, 2017, MVGS stated as follows: 6.1. Power Purchase from NTPC Mauda STPS Inter-State Transmission Losses are for power procured from outside Maharashtra to Maharashtra State Electricity Transmission Co. Ltd. (MSETCL) sub-stations. In the case of NTPC Mauda, power is transmitted through the CTU grid to other States, including to MSEDCL in Maharashtra. Power is transmitted through Mauda STPS Wardha 400 kv D/C (Quad) line to MSETCL. Hence, the power is transmitted in the State of Maharashtra only The approved Inter-State Transmission Loss for FY is 5.30%, and 3.66% for FY to FY The Commission is allowing Inter-State and Intra-State Transmission Losses on power purchase made from outside Maharashtra MSEDCL is undertaking Inter-State power purchase from the following 11 Generating Stations: Generating Stations NTPC: KSTPS SIPAT Location Dist.: Korba, Chhattisgarh Dist. Bilaspur, Chhattisgarh Order in Case No. 2 of 2017 Page 7 of 15

8 VSTP Kh TPS-II Mauda Kawas Gandhar NPCIL (Nuclear Power) KAPD CGPL UMPP Sardar Sarovar Hydro Project Pench Dist. Singrauli, Madhya Pradesh Kahalgaon, Dist. Bhagalpur, Bihar Dist. Nagpur, Maharashtra Dist. Surat, Gujarat (Near the border) Dist. Bharuch, Gujarat Kakarpur, Surat, Gujarat (near Maharashtra border) Mundra, Dist. Kutch, Gujarat Gujarat Border of Maharashtra and Madhya Pradesh Kawas Station, Kakrapur Atomic Power Station and Pench Station are on the border of Maharashtra, within about 100 km. The other seven Generating Stations are in neighboring States. Only Kahalgaon Thermal Power Station (TPS) is in Bihar. These Generating Stations are connected to HVDC and EHV Transmission lines of above 220 kv. Hence, Transmission Losses are negligible. Inter-State Transmission Losses of 3.66% that have been allowed are unjustifiably high MSEDCL has stated that Inter-State Loss is a derived number. Transmission Losses are the difference between units transferred from Generating Stations to MSETCL sub-stations. From the submission of MSEDCL, it is clear that there is no mechanism for determining the extent of losses incurred in transmitting power from a Generating Station to the MSETCL sub-stations. Such mechanism can be developed with the help of an expert agency like the Indian Institute of Technology (IIT), Mumbai Therefore, the Commission may direct MSEDCL to appoint an independent expert agency to develop a mechanism to arrive at the Transmission Losses incurred for transmitting power from a Generating Station to MSETCL substations. Unless a scientific method is developed, allowing Transmission Losses on the basis of a derived figure is incorrect Power Purchase Expenses - DPC to be deducted Note 28 of the Audited Accounts for FY relates to Finance Cost, in which Interest to Suppliers/Contracts (O&M) has been stated as Rs crore. The Commission may check and clarify that MSEDCL has not claimed this amount under the head of O&M Expenses In its earlier Mid-Term Review (MTR) Order dated 26 June, 2015 in Case No. 15 of 2015 for Maharashtra State Power Generation Co. Ltd. (MSPGCL), the Order in Case No. 2 of 2017 Page 8 of 15

9 Commission had set out the DPC as submitted by MSPGCL for the period FY to FY (upto January, 2015) as follows: Table 4-3: Late Payment Surcharge as submitted by MSPGCL Year Late Payment Surcharge (Rs. crore) FY FY FY FY FY (Upto January, 2015) Total The Commission may check whether the above amounts have been deducted from the ARR for FY in the truing up in the MSEDCL Tariff Orders In its earlier MYT Order dated 26 June, 2015 in Case No. 121 of 2014 for MSEDCL, the Commission had set out the break-up of DPC for FY as submitted by MSEDCL: Table 63: Break-up of DPC in FY submitted by MSEDCL (Rs. in crores) Supplier FY MSPGCL 750 Adani Power 160 India Bulls Power 33 JSW Energy 51 Emco energy Ltd. 2 MSETCL - STU 535 Total 1, Note 28 of the Audited Accounts of MSEDCL for FY does not include DPC of Rs. 535 crore paid to MSETCL/ State Transmission Utility (STU). Also, deduction of this amount of Rs. 535 crore from the ARR of FY while truing-up cannot be found. Therefore, the Commission may check whether Rs. 535 crore was deducted in the truing up for FY Clarification regarding Consumer Security Deposit MSEDCL has objected to MVGS seeking clarification on the Security Deposit. The Commission has elaborated on the Security Deposit in the impugned MYT Order. The Commission has the power to clarify the issues raised by MVGS on Order in Case No. 2 of 2017 Page 9 of 15

10 collection of Security Deposit under Regulations 91, 92, 93, 94, 95 and 96 of the MERC (Conduct of Business) Regulations, MSEDCL is suggesting that a separate Petition be filed for such clarification. MVGS has paid Rs. 25,000 as fees for filing this Review Petition. Filing of another Miscellaneous Petition by paying Rs. 1,000 and coming for hearing to Mumbai is a tedious process, and would be a waste of time for MVGS and the Commission MVGS is only seeking clarification and not any amendment in Regulation 11 of the Supply Code. Therefore, the Commission may provide clarification on the issue of collection of Security Deposit raised in the Review Petition. Commission s Analysis and Ruling 7. Regulation 85(a) of the Commission s Conduct of Business Regulations, 2004 specifies as follows with regard to review: Review of decisions, directions, and orders: 85. (a) Any person aggrieved by a direction, decision or order of the Commission, from which (i) no appeal has been preferred or (ii) from which no appeal is allowed, may, upon the discovery of new and important matter or evidence which, after the exercise of due diligence, was not within his knowledge or could not be produced by him at the time when the direction, decision or order was passed or on account of some mistake or error apparent from the face of the record, or for any other sufficient reasons, may apply for a review of such order, within forty-five (45) days of the date of the direction, decision or order, as the case may be, to the Commission. Thus, the ambit of review is limited, and the issues raised by MVGS are to be evaluated accordingly. 8. Issue A: Power Purchase from Mauda STPS 8.1 MVGS contends that the NTPC Mauda STPS should be treated as an Intra-State Generating Station, being located in Nagpur District of Maharashtra; and that, consequently, the Inter-State Transmission Losses allowed on power purchase from Mauda STPS should be deducted. 8.2 MSEDCL has responded that NTPC Mauda STPS is an Inter-State Generating Station supplying power to more than one State through the Mauda STPS Wardha 400 kv D/C (Quad) transmission line of the CTU. Order in Case No. 2 of 2017 Page 10 of 15

11 8.3 In view of this factual position, the Commission in its impugned MYT Order has correctly considered NTPC Mauda STPS as an Inter-State Generating Station connected to the CTU and allowed the Inter-State Transmission Loss on the power purchase from this Station. Thus, there is no merit in the contention of MVGS. 8.4 In its Rejoinder, MVGS has also objected to the derivation of Inter-State Transmission Losses and suggested a scientific study to determine them. The Commission notes that the purpose of determining Inter-State Losses in the ARR of MSEDCL is to arrive at the quantum of energy purchased / to be purchased from Inter-State Generation Stations. At the time of True-up, details such as actual energy purchased (MU) from Inter-State as well as Intra-State Generators at G-T periphery, actual energy input (MU) to the Distribution Licensee at T-D periphery and the actual energy sales (MU) to consumers are available. Inter-State Losses are the difference between the energy purchased at the G-T periphery from Inter-State Generating Stations and the energy received at the Intra-State Transmission periphery of Maharashtra. As the actual energy received during the year at these two levels becomes available at the time of true-up, it is used to calculate the Inter- State Losses. The Inter-State Transmission Loss so determined for the trued-up year is taken into account while projecting the Losses for the subsequent years. Hence, the Commission does not consider an independent study on the methodology for calculating Inter-State Losses to be necessary. 9. Issue B: Power Purchase Expenses - Delayed Payment Charges to be deducted 9.1 MVGS has referred to the Auditor s comments in the Annual Accounts regarding the DPC paid/payable by MSEDCL to the Generators and Transmission Licensees to contend that the DPC payable by MSEDCL in FY may not have been deducted by the Commission in the truing-up of the ARR. MVGS has requested the Commission to verify whether the DPC of Rs. 535 crore payable to MSETCL has been deducted while truing up the ARR for FY In the process of truing-up, the Commission verifies the prudence of expenditure incurred by the Licensee or Generating Company. In the course of the MYT proceedings, the Commission had sought the following details from MSEDCL regarding DPC: 49. Late/ Delayed payment surcharge a) Petitioner to submit the details of the Late/Delayed payment surcharge and year wise outstanding, if any. b) Petitioner should submit whether Petitioner has paid such Late/Delayed payment Surcharge to MSPGCL. c) Petitioner should indicate the specific head of audited account Order in Case No. 2 of 2017 Page 11 of 15

12 of respective years under which such expenses have been booked. In its response dated 2 April, 2016, MSEDCL submitted as follows: a) MSEDCL submits that the details of party wise LPS is provided herewith as Annexure 17. Annexure 17: Delayed Payment Charges summary upto January, 2016 PPA DPS already booked & Balance DPS Total DPS up processed for payment up payable up to to Jan'16 to March'15 Jan'2016 APML 1320 MW APML 1200 MW APML 125 MW RattanIndia 450MW RattanIndia 750MW JSW LTPP Emco Energy MSPGCL MSETCL Total DPS a) MSEDCL has not yet paid any LPS to MSPGCL. b) These expenses have been booked under the head Interest to Supplier / Contractor (O&M) in the Audited Account 9.3 Thus, as per MSEDCL s reply, out of the total DPC of Rs crore as on January, 2016, Rs crore had been booked and processed for payment till March, 2015 and the remaining Rs crore was pending for payment. MSEDCL also clarified that it had not paid any DPC due to MSPGCL. Thus, in FY , after deducting Rs crore due to MSPGCL, MSEDCL had paid only the remaining DPC amount of Rs crore. 9.4 As stated by MSEDCL, the DPC amount was booked under the accounting head of Interest to Supplier / Contractor (O&M) in Note 28 of the Annual Accounts for FY It was observed that a total of Rs crore was booked under this head as against the DPC of Rs due to MSPGCL, i.e. the remaining amount of Rs crore consisted of expenses other than DPC. 9.5 In its MYT Petition, MSEDCL has claimed only Rs. 2 crore towards Interest to Supplier / Contractor (O&M), as follows: Order in Case No. 2 of 2017 Page 12 of 15

13 Table 3-61: Other Expenses for FY as approved by Commission (Rs. crore) Particulars Previous MYT Order MSEDCL Petition Approved in this Order Compensation for injuries, death to staff Compensation for injuries, death to others Loss on obsolescence of Fixed Assets Loss on sale of scrap Intangible assets written-off Interest on Staff Welfare Fund 6 - Non Moving Items 2 2 Refund refund of additional supply charges - - Regular concession in tariff to Powerloom - - consumers Interest to Suppliers/Contractors (O&M) 2 2 Small and Low value written- off items Others 1 1 TOTAL Thus, it will be seen that, although MSEDCL had booked Rs crore as DPC paid to Generators in its Annual Accounts for FY , it did not claim it in its ARR for FY Hence, the question of the MYT Order having allowed the DPC paid in FY does not arise. 9.7 Also, as shown in Annexure 17 reproduced above, as on January, 2016 MSEDCL had not paid or booked in its Annual Accounts any DPC payable to MSETCL and had also not claimed it in the MYT Petition. Hence, in this case also, there was no question of allowing the DPC payable to the Transmission Licensee either. 9.8 Thus, the contention of MVGS with regard to the treatment of DPC in the impugned MYT Order is not correct. 10. Issue C: Error in calculation of Efficiency Gains / Losses: 10.1 According to MVGS, there is mistake in the computation of efficiency gains / losses for FY , as a result of which an additional amount of Rs. 396 crore has been allowed in the ARR for FY to MSEDCL However, that is not the case, and MVGS may have misunderstood the computation of efficiency gains /losses. The computation of gains /losses on account of O&M expenses and IoWC in the impugned MYT Order is reproduced below: Order in Case No. 2 of 2017 Page 13 of 15

14 Particulars Table 3-90: Sharing of Gains/Loss on O&M and IoWC Expenses, approved by Commission (Rs. crore) FY Approved in this Order FY Actual Gain/ (Loss) 2/3 of Efficiency Gains/ Losses retained by MSEDCL 1/3 of Efficiency Gains/Losses passed on to consumer Net Entitlement after sharing O&M Expenses (179) (119) IoWC (217) (145) From the above it will be seen that, although MSEDCL had incurred Rs crore (on O&M) and Rs. 471 crore (on IoWC), the Commission allowed only Rs crore and Rs. 326 crore, respectively, i.e. MSEDCL has had to bear the efficiency loss of Rs. 119 crore (on O&M) and Rs. 145 crore (on IoWC) This position could be represented in the ARR Table in two different ways, viz.: a. Show the actual expenses on O&M and IoWC as approved, and then reduce the 2/3 rd efficiency loss to be borne by MSEDCL; or b. Show the expenses allowed on O&M and IoWC as approved after prudence check, and add 1/3 rd efficiency loss which is to be passed on to consumers through the ARR. The Commission has taken the second approach in the MYT Order. Thus, the efficiency losses of Rs. 60 crore (on O&M) and Rs. 72 crore (on IoWC) expenses are shown as added to the ARR Similarly, as the Commission has allowed the actual power purchase expenses and revenue in the ARR, the efficiency loss on account of higher Distribution Loss has to be deducted and borne by MSEDCL. The Commission has determined Rs crore as the efficiency loss on account of higher Distribution Loss, 2/3 rd of which, i.e. Rs crore, is deducted from the ARR Thus, the net efficiency loss to be added to the ARR is as follows: Particular Amount (Rs. crore) 1/3 rd efficiency loss to be passed on to consumers (O&M) 60 1/3 rd efficiency loss to be passed on to consumers (IoWC) 72 2/3 rd efficiency loss to be borne by MSEDCL (Dist. Loss) Total -983 Order in Case No. 2 of 2017 Page 14 of 15

15 Accordingly, the Commission has reduced the ARR for FY by Rs. 983 crore, and there is no error on this count in the impugned MYT Order. 11. Issue D: Clarification regarding amount of Consumer Security Deposit 11.1 MVGS has stated that MSEDCL is excluding Power Factor and Load Factor Incentives, Prompt Payment Discount, etc. earned by a consumer when calculating the average billing amount on the basis of which his Security Deposit is determined. By excluding such discounts, MSEDCL is recovering higher Security Deposit from consumers than is due. MSEDCL contends that its method is correct, and that it is computing the due Security Deposit in accordance with the Supply Code. Since this general issue has been raised, albeit along with issues for review of the MYT Order, it is worthwhile clarifying the position Regulation 11 of the Supply Code requires consumers to provide Security Deposit amounting to the average of three months billing or of the billing cycle period, whichever is less, to the Distribution Licensee. The billing amount to be considered for determining the quantum of Security Deposit has not been specified separately from the billing details relating to a consumer s periodic electricity consumption referred to in Regulation of the Supply Code. Moreover, the amount has to be understood with reference to the context of requiring a Security Deposit, which is an amount available to the Licensee upon a consumer s failure to discharge its electricity bills. Other than Demand and Energy Charges (including Fuel Adjustment Charge), the periodic electricity bill also includes incentives, penalties, discounts, taxes and duties, etc. Hence, the average billing amount for the purpose of Security Deposit would include the Load Factor and Power Factor incentives or penalties and discounts, if any, referred to by MVGS. The Petition of Maharashtra Veej Grahak Sanghatana in Case No. 2 of 2017 stands disposed of accordingly. Sd/- (Deepak Lad) Member Sd/- (Azeez M. Khan) Member Order in Case No. 2 of 2017 Page 15 of 15