CASE NO. 196 OF In the matter of

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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 No Website: CASE NO. 196 OF 2017 In the matter of Petition of Maharashtra State Power Generation Company Ltd. for approval of final true-up for FY and FY , provisional true-up for FY and revised Tariff for FY and FY Coram Shri. Anand B. Kulkarni, Chairperson Shri. I. M. Bohari, Member ORDER Dated: 12 September, 2018 The Maharashtra State Power Generation Company Ltd. (MSPGCL) filed a Petition on 21 December, 2017 for approval of final true-up for FY and FY , provisional true-up for FY and revised Tariff for FY and FY under Sections 61 and 62 of the Electricity Act (EA), 2003, MERC (Multi Year Tariff) Regulations, 2011 (MYT Regulations, 2011) and MERC (Multi Year Tariff) Regulations, 2015 (MYT Regulations, 2015). Subsequently, MSPGCL submitted the Revised Consolidated Petition on 20 June, In exercise of the powers vested in it under Sections 61 and 62 of the EA, 2003 and all other powers enabling it in this behalf, and after taking into consideration the submissions made by MSPGCL and the public, and all other relevant material, the Commission issues the following.

2 TABLE OF CONTENTS 1 BACKGROUND AND BRIEF HISTORY INTRODUCTION MYT REGULATIONS MID-TERM PERFORMANCE REVIEW ORDER FOR 2 ND MYT CONTROL PERIOD REVIEW PETITION ON MTPR ORDER FOR 2 ND CONTROL PERIOD MYT ORDER FOR 3 RD CONTROL PERIOD REVIEW PETITION ON MYT ORDER FOR 3 RD CONTROL PERIOD CAPITAL COST ORDER FOR KORADI UNITS 8, 9 & 10, CHANDRAPUR UNITS 8 & 9 AND PARLI UNIT COMMISSION S ORDER IN CASE NO. 151 OF REVIEW PETITION ON COMMISSION S ORDER IN CASE NO. 59 OF MID-TERM REVIEW FOR THE 3 RD MYT CONTROL PERIOD ADMISSION OF THE PETITION AND PUBLIC CONSULTATION PROCESS ORGANISATION OF THE ORDER SUGGESTIONS/OBJECTIONS RECEIVED, RESPONSE OF MSPGCL AND COMMISSION S VIEWS FILING OF PETITION FUEL AVAILABILITY WATER AVAILABILITY ACHIEVEMENT OF PROJECTED GENERATION ADDITIONAL CAPITALISATION RETURN ON EQUITY AFC REDUCTION FOR NOT ACHIEVING TARGET AVAILABILITY DELAYED PAYMENT SURCHARGE THIRD PARTY SALE OF SURPLUS ENERGY COMPLIANCE WITH REVISED EMISSION NORMS FINANCIAL MANAGEMENT AND CONTROL SOLAR POWER FOR INTERNAL ELECTRICITY CONSUMPTION HOSTING OF REGULATORY INFORMATION ON THE COMPANY S WEBSITE IMPACT OF COMMISSION S ORDER IN CASE NO. 28 OF 2013 FOR FY AND FY MERC in Case No. 196 of 2017 Page 2 of 250

3 3.1 BACKGROUND MSPGCL S SUBMISSIONS COMMISSION S ANALYSIS AND RULING FINAL TRUE-UP FOR FY INSTALLED CAPACITY RELEVANT ORDERS NORMS OF OPERATION AVAILABILITY PLANT LOAD FACTOR (PLF) AUXILIARY ENERGY CONSUMPTION (AEC) GROSS GENERATION AND NET GENERATION GROSS STATION HEAT RATE (GSHR) SECONDARY FUEL OIL CONSUMPTION (SFOC) TRANSIT AND HANDLING LOSS GROSS CALORIFIC VALUE (GCV) OF FUELS LANDED PRICES OF FUELS OTHER GENERATION-RELATED COSTS ENERGY CHARGES ADDITIONAL CAPITALISATION MEANS OF FINANCE OF ADDITIONAL CAPITALISATION ANNUAL FIXED CHARGES (AFC) RETURN ON EQUITY (ROE) INTEREST ON LOAN DEPRECIATION OPERATION AND MAINTENANCE (O&M) EXPENSES INTEREST ON WORKING CAPITAL (IOWC) NON-TARIFF INCOME (NTI) ANNUAL FIXED CHARGES (AFC) REDUCTION IN AFC DUE TO SHORTFALL AGAINST TARGET AVAILABILITY LEASE RENT FOR HYDRO STATIONS INCOME TAX IDLE CAPACITY CHARGES...92 MERC in Case No. 196 of 2017 Page 3 of 250

4 4.29 PRIOR PERIOD EXPENSES/(INCOME) REVENUE FROM SALE OF POWER SHARING OF GAIN/LOSS DUE TO VARIATION IN AUXILIARY ENERGY CONSUMPTION SUMMARY OF TRUE-UP FOR FY FINAL TRUE-UP FOR FY INSTALLED CAPACITY RELEVANT ORDERS NORMS OF OPERATION AVAILABILITY PLANT LOAD FACTOR (PLF) AUXILIARY ENERGY CONSUMPTION (AEC) GROSS GENERATION AND NET GENERATION GROSS STATION HEAT RATE (GSHR) SECONDARY FUEL OIL CONSUMPTION (SFOC) TRANSIT AND HANDLING LOSS GROSS CALORIFIC VALUE (GCV) OF FUELS LANDED PRICES OF FUELS OTHER GENERATION-RELATED COSTS ENERGY CHARGES ADDITIONAL CAPITALISATION MEANS OF FINANCE OF ADDITIONAL CAPITALISATION ANNUAL FIXED CHARGES (AFC) OPERATION AND MAINTENANCE (O&M) EXPENSES DEPRECIATION INTEREST ON LOAN INTEREST ON WORKING CAPITAL (IOWC) RETURN ON EQUITY (ROE) INCOME TAX NON-TARIFF INCOME (NTI) ANNUAL FIXED CHARGES (AFC) REDUCTION IN AFC DUE TO SHORTFALL AGAINST TARGET AVAILABILITY MERC in Case No. 196 of 2017 Page 4 of 250

5 5.27 LEASE RENT FOR HYDRO STATIONS RESERVE SHUTDOWN (RSD) CHARGES PRIOR PERIOD EXPENSES REVENUE FROM SALE OF POWER SHARING OF GAIN/LOSS DUE TO VARIATION IN AUXILIARY ENERGY CONSUMPTION SUMMARY OF TRUE-UP FOR FY PROVISIONAL TRUE-UP FOR FY INSTALLED CAPACITY RELEVANT ORDERS NORMS OF OPERATION AVAILABILITY PLANT LOAD FACTOR (PLF) AUXILIARY ENERGY CONSUMPTION (AEC) GROSS GENERATION AND NET GENERATION GROSS STATION HEAT RATE (GSHR) SECONDARY FUEL OIL CONSUMPTION (SFOC) TRANSIT AND HANDLING LOSS GROSS CALORIFIC VALUE (GCV) OF FUELS LANDED PRICES OF FUELS OTHER GENERATION-RELATED COSTS ENERGY CHARGES ADDITIONAL CAPITALISATION MEANS OF FINANCE OF ADDITIONAL CAPITALISATION ANNUAL FIXED CHARGES (AFC) OPERATION AND MAINTENANCE (O&M) EXPENSES DEPRECIATION INTEREST ON LOAN INTEREST ON WORKING CAPITAL (IOWC) RETURN ON EQUITY (ROE) INCOME TAX NON-TARIFF INCOME (NTI) ANNUAL FIXED CHARGES (AFC) MERC in Case No. 196 of 2017 Page 5 of 250

6 6.26 LEASE RENT FOR HYDRO STATIONS RESERVE SHUTDOWN (RSD) CHARGES REDUCTION IN AFC DUE TO SHORTFALL AGAINST TARGET AVAILABILITY REVENUE FROM SALE OF POWER SUMMARY OF TRUE-UP FOR FY IMPACT OF FINAL TRUE-UP FOR FY , FY AND PROVISIONAL TRUE-UP FOR FY REVISED TARIFF FOR FY AND FY INSTALLED CAPACITY RELEVANT ORDERS NORMS OF OPERATION AVAILABILITY PLANT LOAD FACTOR (PLF) AUXILIARY ENERGY CONSUMPTION (AEC) GROSS GENERATION AND NET GENERATION GROSS STATION HEAT RATE (GSHR) SECONDARY FUEL OIL CONSUMPTION (SFOC) TRANSIT AND HANDLING LOSS GROSS CALORIFIC VALUE (GCV) OF FUELS LANDED PRICES OF FUELS ENERGY CHARGE RATE (ECR) ADDITIONAL CAPITALISATION MEANS OF FINANCE OF ADDITIONAL CAPITALISATION ANNUAL FIXED CHARGES (AFC) OPERATION AND MAINTENANCE (O&M) EXPENSES DEPRECIATION INTEREST ON LOAN INTEREST ON WORKING CAPITAL (IOWC) RETURN ON EQUITY (ROE) INCOME TAX NON-TARIFF INCOME (NTI) ANNUAL FIXED CHARGES (AFC) MERC in Case No. 196 of 2017 Page 6 of 250

7 8.25 TARIFF FOR THERMAL GENERATING STATIONS RESERVE SHUTDOWN (RSD) CHARGES FOR PARLI LEASE RENT FOR HYDRO STATIONS TARIFF FOR HYDRO STATIONS COMMISSION S DIRECTIVES DIRECTIVES IN ORDER DATED 30 AUGUST, 2016 IN CASE NO. 46 OF FRESH DIRECTIVE APPLICABILITY OF ORDER MERC in Case No. 196 of 2017 Page 7 of 250

8 LIST OF TABLES TABLE 1-1: PUBLICATION OF NOTICE OF PUBLIC HEARING TABLE 2-1: FGD INSTALLATION PROGRAM AS SUBMITTED BY MSPGCL TABLE 3-1: IMPACT OF COMMISSION S ORDER IN CASE NO. 28 OF 2013 FOR FY AND FY TABLE 3-2: SUMMARY OF INCREMENTAL AFC (RS. CRORE) TABLE 4-1: INSTALLED CAPACITY OF MSPGCL DURING FY TABLE 4-2: ACTUAL AVAILABILITY FOR FY SUBMITTED BY MSPGCL TABLE 4-3: AVAILABILITY FOR FY TABLE 4-4: ACTUAL PLF FOR FY AS CLAIMED BY MSPGCL TABLE 4-5: PLF FOR FY TABLE 4-6: ACTUAL AEC FOR FY TABLE 4-7: AEC FOR FY TABLE 4-8: GROSS GENERATION AND NET GENERATION FOR FY (MU) TABLE 4-9: ACTUAL GSHR FOR FY AS CLAIMED BY MSPGCL (KCAL/KWH) TABLE 4-10: GSHR FOR FY (KCAL/KWH) TABLE 4-11: ACTUAL SFOC FOR FY AS CLAIMED BY MSPGCL (ML/KWH) TABLE 4-12: SFOC FOR FY (ML/KWH) TABLE 4-13: ACTUAL TRANSIT AND HANDLING LOSS FOR FY AS CLAIMED BY MSPGCL 62 TABLE 4-14: TRANSIT AND HANDLING LOSS FOR FY TABLE 4-15: GCV OF FUELS FOR FY AS SUBMITTED BY MSPGCL TABLE 4-16: ACTUAL PRICES OF FUELS AS SUBMITTED BY MSPGCL TABLE 4-17: LANDED PRICES OF FUELS CONSIDERED BY COMMISSION IN FINAL TRUE-UP FOR FY TABLE 4-18: ACTUAL OTHER GENERATION-RELATED COSTS FOR FY TO FY (RS. CRORE) TABLE 4-19: OTHER GENERATION-RELATED COSTS FOR FY (RS. CRORE) TABLE 4-20: REC AND ENERGY CHARGES FOR FY TABLE 4-21: ACTUAL ADDITIONAL CAPITALISATION FOR FY (RS. CRORE) TABLE 4-22: ADDITIONAL CAPITALISATION FOR FY (RS. CRORE) TABLE 4-23: DEBT AND EQUITY OF KORADI UNIT 8 AS ON COD TABLE 4-24: ROE FOR FY (RS. CRORE) TABLE 4-25: INTEREST AND FINANCE CHARGES FOR FY (RS. CRORE) TABLE 4-26: DEPRECIATION FOR FY (RS. CRORE) TABLE 4-27: O&M EXPENSES CLAIMED BY MSPGCL FOR FY (RS. CRORE) TABLE 4-28: NORMATIVE O&M EXPENSES APPROVED BY THE COMMISSION FOR FY (RS. CRORE) TABLE 4-29: ACTUAL O&M EXPENSES FOR FY (RS. CRORE) TABLE 4-30: IOWC FOR FY (RS. CRORE) TABLE 4-31: NTI CLAIMED BY MSPGCL IN FINAL TRUE-UP FOR FY TABLE 4-32: NTI FOR FY (RS. CRORE) TABLE 4-33: AFC CLAIMED BY MSPGCL AND APPROVED BY COMMISSION IN FINAL TRUE-UP FOR FY RECOVERABLE AT NORMATIVE AVAILABILITY (RS. CRORE) TABLE 4-34: AFC DISALLOWANCE APPROVED BY THE COMMISSION IN THE FINAL TRUE-UP FOR FY MERC in Case No. 196 of 2017 Page 8 of 250

9 TABLE 4-35: IDLE CAPACITY CHARGES CLAIMED BY MSPGCL IN FINAL TRUE-UP FOR FY (RS. CRORE) TABLE 4-36: IDLE CAPACITY CHARGES APPROVED BY THE COMMISSION IN THE FINAL TRUE-UP FOR FY (RS. CRORE) TABLE 4-37: ACTUAL OPERATING REVENUE AS PER THE AUDITED ACCOUNTS FOR FY (RS. CRORE) TABLE 4-38: REVENUE FROM SALE OF POWER CONSIDERED BY MSPGCL IN THE FINAL TRUE-UP FOR FY (RS. CRORE) TABLE 4-39: REVENUE FROM SALE OF POWER CONSIDERED BY COMMISSION FOR FY (RS. CRORE) TABLE 4-40: REVENUE LOSS DUE TO VARIATION IN AEC APPROVED BY THE COMMISSION IN THE FINAL TRUE-UP FOR FY TABLE 4-41: SUMMARY OF TRUE-UP FOR FY CLAIMED BY MSPGCL (RS. CRORE) TABLE 4-42: SUMMARY OF TRUE-UP FOR FY AS APPROVED BY THE COMMISSION (RS. CRORE) TABLE 5-1: INSTALLED CAPACITY OF MSPGCL DURING FY TABLE 5-2: ACTUAL AVAILABILITY FOR FY SUBMITTED BY MSPGCL TABLE 5-3: AVAILABILITY FOR FY TABLE 5-4: ACTUAL PLF FOR FY AS CLAIMED BY MSPGCL TABLE 5-5: PLF FOR FY TABLE 5-6: ACTUAL AEC FOR FY TABLE 5-7: AEC FOR FY TABLE 5-8: GROSS GENERATION AND NET GENERATION FOR FY (MU) TABLE 5-9: ACTUAL GSHR FOR FY AS CLAIMED BY MSPGCL (KCAL/KWH) TABLE 5-10: GSHR FOR FY (KCAL/KWH) TABLE 5-11: ACTUAL SFOC FOR FY AS CLAIMED BY MSPGCL (ML/KWH) TABLE 5-12: SFOC FOR FY (ML/KWH) TABLE 5-13: ACTUAL TRANSIT AND HANDLING LOSS FOR FY AS CLAIMED BY MSPGCL TABLE 5-14: TRANSIT AND HANDLING LOSS FOR FY TABLE 5-15: GCV OF FUELS FOR FY AS SUBMITTED BY MSPGCL TABLE 5-16: GCV OF FUELS FOR FY AS CONSIDERED BY THE COMMISSION TABLE 5-17: ACTUAL PRICES OF FUELS FOR FY AS SUBMITTED BY MSPGCL TABLE 5-18: LANDED PRICES OF FUELS CONSIDERED BY COMMISSION IN FINAL TRUE-UP FOR FY TABLE 5-19: OTHER GENERATION-RELATED COSTS FOR FY (RS. CRORE) TABLE 5-20: REC AND ENERGY CHARGES FOR FY TABLE 5-21: ACTUAL ADDITIONAL CAPITALISATION FOR FY CLAIMED BY MSPGCL (RS. CRORE) TABLE 5-22: ADDITIONAL CAPITALISATION FOR FY (RS. CRORE) TABLE 5-23: NORMATIVE O&M EXPENSES APPROVED BY THE COMMISSION IN FINAL TRUE-UP FOR FY (RS. CRORE) TABLE 5-24: ACTUAL O&M EXPENSES CONSIDERED BY THE COMMISSION IN THE FINAL TRUE- UP FOR FY TABLE 5-25: DEPRECIATION FOR FY (RS. CRORE) MERC in Case No. 196 of 2017 Page 9 of 250

10 TABLE 5-26: KEY FEATURES OF REFINANCING OF OUTSTANDING DEBT OF KHAPERKHEDA UNIT TABLE 5-27: REFINANCING CHARGES OF KHAPERKHEDA UNIT TABLE 5-28: ASSUMPTIONS FOR WACC COMPUTATIONS AS SUBMITTED BY MSPGCL TABLE 5-29: DEBT AND EQUITY OF KORADI UNITS 9 & 10 AS ON COD TABLE 5-30: DEBT AND EQUITY OF CHANDRAPUR UNITS 8 & TABLE 5-31: DEBT AND EQUITY OF PARLI UNIT TABLE 5-32: INTEREST AND FINANCE CHARGES FOR FY (RS. CRORE) TABLE 5-33: IOWC FOR FY (RS. CRORE) TABLE 5-34: ACTUAL IOWC CONSIDERED BY THE COMMISSION FOR FY TABLE 5-35: ROE FOR FY (RS. CRORE) TABLE 5-36: NTI CLAIMED BY MSPGCL IN FINAL TRUE-UP FOR FY TABLE 5-37: NTI FOR FY (RS. CRORE) TABLE 5-38: AFC CLAIMED BY MSPGCL AND APPROVED BY COMMISSION IN FINAL TRUE-UP FOR FY RECOVERABLE AT NORMATIVE AVAILABILITY (RS. CRORE) TABLE 5-39: AFC DISALLOWANCE APPROVED BY THE COMMISSION IN THE FINAL TRUE-UP FOR FY TABLE 5-40: RSD CHARGES CLAIMED BY MSPGCL FOR FY (RS. CRORE) TABLE 5-41: RSD CHARGES FOR PARLI FOR FY (RS. CRORE) TABLE 5-42: ACTUAL OPERATING REVENUE AS PER THE AUDITED ACCOUNTS FOR FY (RS. CRORE) TABLE 5-43: REVENUE CONSIDERED BY MSPGCL IN THE FINAL TRUE-UP FOR FY (RS. CRORE) TABLE 5-44: REVENUE LOSS DUE TO VARIATION IN AUXILIARY ENERGY CONSUMPTION APPROVED BY THE COMMISSION IN THE FINAL TRUE-UP FOR FY TABLE 5-45: SUMMARY OF TRUE-UP FOR FY CLAIMED BY MSPGCL (RS. CRORE) TABLE 5-46: SUMMARY OF TRUE-UP FOR FY AS APPROVED BY THE COMMISSION (RS. CRORE) TABLE 6-1: INSTALLED CAPACITY DURING FY TABLE 6-2: ACTUAL AVAILABILITY FOR FY AS SUBMITTED BY MSPGCL TABLE 6-3: COAL MATERIALISATION DURING FY AS SUBMITTED BY MSPGCL TABLE 6-4: CAPACITY KEPT UNDER SHUTDOWN DUE TO WATER SHORTAGE DURING FY TABLE 6-5: AVAILABILITY FOR FY TABLE 6-6: ACTUAL PLF FOR FY AS CLAIMED BY MSPGCL TABLE 6-7: PLF FOR FY TABLE 6-8: ACTUAL AEC FOR FY AS CLAIMED BY MSPGCL TABLE 6-9: AUXILIARY ENERGY CONSUMPTION FOR FY TABLE 6-10: GROSS GENERATION AND NET GENERATION FOR FY (MU) TABLE 6-11: ACTUAL GSHR FOR FY AS CLAIMED BY MSPGCL (KCAL/KWH) TABLE 6-12: GSHR FOR FY (KCAL/KWH) TABLE 6-13: ACTUAL SFOC FOR FY AS SUBMITTED BY MSPGCL (ML/KWH) TABLE 6-14: SFOC FOR FY (ML/KWH) TABLE 6-15: ACTUAL TRANSIT AND HANDLING LOSS FOR FY AS CLAIMED BY MSPGCL TABLE 6-16: TRANSIT AND HANDLING LOSS FOR FY MERC in Case No. 196 of 2017 Page 10 of 250

11 TABLE 6-17: GCV OF FUELS FOR FY AS SUBMITTED BY MSPGCL TABLE 6-18: GCV OF FUELS FOR FY AS CONSIDERED BY THE COMMISSION TABLE 6-19: ACTUAL PRICES OF FUELS AS SUBMITTED BY MSPGCL TABLE 6-20: LANDED PRICES OF FUELS AS CONSIDERED BY COMMISSION IN PROVISIONAL TRUE-UP FOR FY TABLE 6-21: OTHER GENERATION-RELATED COSTS FOR FY (RS. CRORE) TABLE 6-22: ACTUAL REC AND ENERGY CHARGES FOR FY AS SUBMITTED BY MSPGCL TABLE 6-23: REC AND ENERGY CHARGES APPROVED BY THE COMMISSION FOR FY TABLE 6-24: ADDITIONAL CAPITALISATION FOR FY CLAIMED BY MSPGCL (RS. CRORE) TABLE 6-25: ADDITIONAL CAPITALISATION FOR FY TABLE 6-26: O&M EXPENSES FOR FY (RS. CRORE) TABLE 6-27: DEPRECIATION FOR FY (RS. CRORE) TABLE 6-28: INTEREST AND FINANCE CHARGES FOR FY (RS. CRORE) TABLE 6-29: IOWC FOR FY (RS. CRORE) TABLE 6-30: ROE FOR FY (RS. CRORE) TABLE 6-31: NTI FOR FY (RS. CRORE) TABLE 6-32: AFC CLAIMED BY MSPGCL AND APPROVED BY COMMISSION IN PROVISIONAL TRUE-UP FOR FY RECOVERABLE AT NORMATIVE AVAILABILITY (RS. CRORE) TABLE 6-33: RSD CHARGES CLAIMED BY MSPGCL FOR FY (RS. CRORE) TABLE 6-34: RSD CHARGES FOR PARLI FOR FY (RS. CRORE) TABLE 6-35: AFC DISALLOWANCE APPROVED BY THE COMMISSION IN THE PROVISIONAL TRUE- UP FOR FY TABLE 6-36: SUMMARY OF PROVISIONAL TRUE-UP FOR FY AS CLAIMED BY MSPGCL TABLE 6-37: SUMMARY OF PROVISIONAL TRUE-UP FOR FY APPROVED BY THE COMMISSION TABLE 7-1: TOTAL IMPACT OF FINAL TRUE-UP FOR FY , FY AND PROVISIONAL TRUE-UP FOR FY AS CLAIMED BY MSPGCL TABLE 7-2: IMPACT OF FINAL TRUE-UP FOR FY , FY AND PROVISIONAL TRUE-UP FOR FY AS APPROVED BY THE COMMISSION TABLE 8-1: INSTALLED CAPACITY OF MSPGCL AS ON 1 APRIL, TABLE 8-2: REVISED TENTATIVE MILESTONE SCHEDULE OF EE R&M OF KORADI UNIT 6 AS SUBMITTED BY MSPGCL TABLE 8-3: AVAILABILITY FOR FY AND FY TABLE 8-4: PLF FOR FY AND FY TABLE 8-5: AEC FOR FY AND FY TABLE 8-6: GROSS GENERATION AND NET GENERATION FOR FY (MU) TABLE 8-7: GROSS GENERATION AND NET GENERATION FOR FY (MU) TABLE 8-8: GSHR FOR FY AND FY (KCAL/KWH) TABLE 8-9: SFOC FOR FY AND FY (ML/KWH) TABLE 8-10: GCV OF FUELS PROJECTED BY MSPGCL FOR FY AND FY TABLE 8-11: GCV OF FUELS CONSIDERED BY THE COMMISSION FOR FY AND FY TABLE 8-12: PRICES OF FUELS CONSIDERED BY MSPGCL FOR FY AND FY MERC in Case No. 196 of 2017 Page 11 of 250

12 TABLE 8-13: PRICES OF FUELS CONSIDERED BY THE COMMISSION FOR FY AND FY TABLE 8-14: ENERGY CHARGE RATES FOR FY AND FY (RS./KWH) TABLE 8-15: CAPITAL EXPENDITURE OF EE R&M OF KORADI UNIT 6 AS SUBMITTED BY MSPGCL TABLE 8-16: ADDITIONAL CAPITALISATION FOR FY AND FY (RS. CRORE) TABLE 8-17: O&M EXPENSES FOR FY (RS. CRORE) TABLE 8-18: O&M EXPENSES FOR FY (RS. CRORE) TABLE 8-19: DEPRECIATION FOR FY AND FY (RS. CRORE) TABLE 8-20: INTEREST AND FINANCE CHARGES FOR FY AND FY (RS. CRORE) TABLE 8-21: IOWC FOR FY AND FY (RS. CRORE) TABLE 8-22: ROE FOR FY AND FY (RS. CRORE) TABLE 8-23: NTI FOR FY AND FY (RS. CRORE) TABLE 8-24: TARGET AVAILABILITY FOR FY (RS. CRORE) TABLE 8-25: TARGET AVAILABILITY FOR FY (RS. CRORE) TABLE 8-26: AFC DISALLOWED FOR FY (RS. CRORE) TABLE 8-27: AFC DISALLOWED FOR FY (RS. CRORE) TABLE 8-28: APPROVED TARIFF FOR THERMAL GENERATING STATIONS FOR FY TABLE 8-29: APPROVED TARIFF FOR THERMAL GENERATING STATIONS FOR FY TABLE 8-30: RSD CHARGES FOR PARLI FOR FY AND FY (RS. CRORE) TABLE 8-31: TARIFF FOR PARLI FOR FY AND FY (RS. CRORE) TABLE 8-32: DESIGN ENERGY IN ACCORDANCE WITH REGULATION 49.7(II) TABLE 8-33: CAPACITY CHARGE AND ENERGY CHARGE RATE APPROVED BY COMMISSION FOR HYDRO STATIONS FOR FY AND FY TABLE 8-35: AFC FOR HYDRO STATIONS OTHER THAN KOYNA, BHIRA TR AND TILLARI FOR FY AND FY TABLE 9-1: DETAILS OF IMPACT OF PAY REVISION FOR FY TO FY AS SUBMITTED BY MSPGCL (RS. CRORE) MERC in Case No. 196 of 2017 Page 12 of 250

13 LIST OF ABBREVIATIONS AFC Annual Fixed Charges AEC Auxiliary Energy Consumption APM Administered Price Mechanism APTEL Appellate Tribunal for Electricity ARR Aggregate Revenue Requirement CEPL Coastal Energy Private Limited CIL Coal India Limited COD Commercial Operation Date CPRI Central Power Research Institute DNQ Daily Nominated Quantity DPR Detailed Project Report EA, 2003 Electricity Act, 2003 EE R&M Energy Efficient Renovation & Modernisation FO Furnace Oil FSA Fuel Supply Agreement GAIL Gas Authority of India Limited GCV Gross Calorific Value GFA Gross Fixed Assets GoI Government of India GoM Government of Maharashtra GSHR Gross Station Heat Rate GTPS Gas Thermal Power Station IoWC Interest on Working Capital kcal kilo calories kcal/kwh kilo calories per kilowatt hour kg kilogram kl kilolitre kw kilo Watt LDO Light Diesel Oil MCL Mahanadi Coalfields Limited MCR Maximum Continuous Rating MERC / Maharashtra Electricity Regulatory Commission Commission MMT Million Metric Tonne MoEF & CC Ministry of Environment, Forests and Climate Change MPCB Maharashtra Pollution Control Board MSEDCL Maharashtra State Electricity Distribution Company Limited MSLDC Maharashtra State Load Dispatch Centre MSPGCL Maharashtra State Power Generation Company Limited MTPR Mid-Term Performance Review MTR Mid-Term Review MYT Multi Year Tariff NPV Net Present Value NTI Non-Tariff Income OEM Original Equipment Manufacturer O&M Operation & Maintenance OGL Open General License MERC in Case No. 196 of 2017 Page 13 of 250

14 PFC PLF PPA REC RoE RSD SBI SCCL SCM SECL SFOC STPS TPS WCL Power Finance Corporation Plant Load Factor Power Purchase Agreement Rate of Energy Charge Return on Equity Reserve Shutdown State Bank of India Singareni Collieries Company Limited Standard Cubic Meter South Eastern Coalfields Limited Secondary Fuel Oil Consumption Super Thermal Power Station Thermal Power Station Western Coalfields Limited MERC in Case No. 196 of 2017 Page 14 of 250

15 1 BACKGROUND AND BRIEF HISTORY 1.1 INTRODUCTION MSPGCL is a Government Company formed under Government of Maharashtra (GoM) Resolution No. ELA-1003/P.K.8588/Bhag-2/Urja-5 dated 24 January, 2005 with effect from 6 June, 2005, in accordance with the provisions of Part XIII of the EA, MSPGCL is a Company registered under the Companies Act, MSPGCL owns and operates seven coal-based thermal generating stations and one gas-based thermal generating station with total current installed capacity of 10,842 MW, situated in different parts of Maharashtra. MSPGCL also operates hydel generating stations owned by the Water Resources Department, GoM on lease basis, with total current installed capacity of 2585 MW. Therefore, the total current installed capacity of MSPGCL is MW. 1.2 MYT REGULATIONS The Commission notified the MYT Regulations, 2011 on 4 February, 2011, which are applicable for the 2 nd Control Period from FY to FY and were amended in October, Subsequently, the Commission notified the MYT Regulations, 2015 on 8 December, 2015 and first amended on 29 November, These Regulations are applicable for the 3 rd Control Period from FY to FY MID-TERM PERFORMANCE REVIEW ORDER FOR 2 ND MYT CONTROL PERIOD Vide its dated 26 June, 2015 in Case No. 15 of 2015, the Commission had approved the Mid-Term Performance Review (MTPR) of 2 nd MYT Control Period from FY to FY and had approved the Tariff for FY REVIEW PETITION ON MTPR ORDER FOR 2 ND CONTROL PERIOD MSPGCL filed a Petition for review of the Commission s MTPR in Case No. 15 of Vide its dated 19 January, 2016 in Case No. 108 of 2015, the Commission disposed of the Review Petition and granted partial MERC in Case No. 196 of 2017 Page 15 of 250

16 relief by allowing MSPGCL s request to extend the economic shutdown of Bhusawal Unit 2, Chandrapur Unit 1, Koradi Units 5 & 6 and Parli Unit 3 for the period from 1 April, 2015 to 30 June, MSPGCL filed an Appeal before the Hon ble Appellate Tribunal for Electricity (APTEL) against the Commission s MTPR in Case No. 15 of 2015, on the issue of considering late payment surcharge as non-tariff income. APTEL, in its Judgment dated 18 April, 2017 in Appeal No. 199 of 2015, upheld the Commission s. Aggrieved by the same, MSPGCL filed Civil Appeal No of 2017 before the Supreme Court and the matter is sub-judice. 1.5 MYT ORDER FOR 3 RD CONTROL PERIOD Vide its dated 30 August, 2016 in Case No. 46 of 2016, the Commission approved the Tariff for the 3 rd MYT Control Period from FY to FY In the said, the Commission had also approved the final true-up for FY and provisional true-up for FY REVIEW PETITION ON MYT ORDER FOR 3 RD CONTROL PERIOD MSPGCL filed a Petition for review of the Commission s MYT in Case No. 46 of Vide its dated 3 July, 2017 in Case No. 138 of 2016, the Commission disposed of the Review Petition as devoid of merits. Aggrieved by the same, MSPGCL filed Appeal No. 281 of 2017 before the APTEL and the matter is sub-judice. 1.7 CAPITAL COST ORDER FOR KORADI UNITS 8, 9 & 10, CHANDRAPUR UNITS 8 & 9 AND PARLI UNIT To increase its generating capacity in Maharashtra, MSPGCL has installed three super-critical Units of 660 MW each at Koradi Thermal Power Station (TPS), two sub-critical Units of 500 MW each at Chandrapur Super Thermal Power Station (STPS), and one sub-critical Unit of 250 MW at Parli TPS. The Commercial Operation Date (COD) of Koradi Unit 8 was declared during the 2 nd MYT Control Period (in FY ). The COD of Koradi Units 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 were declared during the 3 rd MYT Control Period (in FY ) Vide its dated 14 December, 2017 in Case No. 59 of 2017, the Commission had approved the final capital cost and tariff for Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 from their respective COD MERC in Case No. 196 of 2017 Page 16 of 250

17 till FY (i.e., the end of 3 rd MYT Control Period). 1.8 COMMISSION S ORDER IN CASE NO. 151 OF MSPGCL filed a Petition for removal of difficulties in the matter of coal shortages and its adverse impact on MSPGCL s stations. Vide its dated 19 June, 2018 in Case No. 151 of 2017, the Commission disposed of this Petition, wherein the relief sought by MSPGCL was not granted. 1.9 REVIEW PETITION ON COMMISSION S ORDER IN CASE NO. 59 OF MSPGCL filed a Petition for review of the Commission s in Case No. 59 of Vide its dated 8 August, 2018 in Case No. 77 of 2018, the Commission disposed of the Review Petition granting the relief sought by MSPGCL which has been subsequently discussed in this at appropriate places MID-TERM REVIEW FOR THE 3 RD MYT CONTROL PERIOD In accordance with Regulation 5.1(b) of the MYT Regulations, 2015, the Mid-Term Review (MTR) Petition for 3 rd MYT Control Period was to be filed by 30 November, 2017 comprising: (i) Final true-up for FY to be carried out in accordance with the MYT Regulations, 2011; (ii) Final true-up for FY to be carried out in accordance with the MYT Regulations, 2015; (iii) Provisional true-up for FY to be carried out in accordance with MYT Regulations, 2015; (iv) Revised ARR and Tariff for FY and FY Vide its Removal of Difficulty dated 30 November, 2017, the Commission extended the date of filing of MTR Petition for 3 rd MYT Control Period, to 21 December, Accordingly, MSPGCL submitted its MTR Petition for the 3 rd MYT Control Period on 21 December, 2017 and subsequently, the Revised Consolidated Petition on 20 June, Further, MSPGCL made additional submissions on 18 July, 2017 in which the prayers have been amended and the main prayers are reproduced below: i.. ii. iii. Consider the submissions made in context of following issues in MERC in Case No. 196 of 2017 Page 17 of 250

18 FY and approve the ARR & truing up for the year a. Relaxation in target availability factor of Uran GTPS on account of Gas supply shortages; iv. Consider the submissions made in context of following issues in FY and approve the ARR & truing up for the year a. Relaxation in target availability factor for Uran GTPS on account of Gas supply shortages, b. Approval of performance parameters namely Station Heat Rate & Auxiliary Consumption of Koradi Units # 5 & 7 as per CPRI report, c. Relaxation in target availability factor for Parli 6-7 and Parli 8 on account of water supply shortages, d. Provisioning of expenses needed as per International Financial Reporting Standards; e. To carry out truing up of costs for Bhusawal Unit # 2 as elaborated in section of the petition. v. Consider the submission made in context of relaxation of performance parameters for FY , FY & FY a. Approval of performance parameters namely Station Heat Rate & Auxiliary Consumption of Koradi Units # 7 as per MERC (MYT) Regulations, 2015, b. Target availability for Uran GTPS on account of gas supply shortage, c. Target availability for Chandrapur TPS & Paras TPS for FY & for Chandrapur TPS for FY on account of water supply shortage, d. Target availability for coal based thermal stations for FY on account of coal supply shortage; vi. Consider the submission made in context of payment terms for purchases of coal and secondary oil along with freight charges thereof and accordingly approve the normative Interest on Working capital for the coal based station for the 3 rd Control period i.e. from FY up to FY and accordingly approve the entitlement of Interest on Working Capital as well as true up gap/ (surplus) for the relevant years (i.e. For final true up of FY 16-17, for provisional true up for FY and for revised ARR for FY & FY 19-20); vii. Condone the inadvertent omission in previous petitions and MERC in Case No. 196 of 2017 Page 18 of 250

19 approve the additional true up amount for FY and FY along with carrying cost for Paras 3-4 and Parli 6-7 as a result of in Case No. 28 of viii. Approve the regulatory treatment of Rs crore towards deviation in fuel and other coal related costs for Khaperkheda unit 5 over the years FY and FY as proposed by MSPGCL. ix. Approve the segregation of other generation related costs into variable and fixed components as submitted for FY & FY and approve the fixed component of other generation related costs as part of O & M costs over and above the normative O & M costs; x. In reference to the submissions made regarding new units at Koradi, Chandrapur and Parli a. to approve funding as on COD considering the actual equity infusion amount in case of Koradi, Chandrapur and Parli new units, b. to allow the relaxed auxiliary consumption norms to the Koradi Units # 8,9,10 and Chandrapur units # 8,9 by invoking the powers available to Hon ble Commission under Regulation 101 of MERC MYT Regulations, 2015, to vary from any provisions of these Regulations; xi. Approve the revised ARR and revised tariff for FY to FY in accordance with the submissions and rationale provided in this petition; xii. Allow MSPGCL to recover the true up amount of FY , FY & provisional true up for FY through monthly billing during FY along with carrying cost and issue appropriate directives to MSEDCL for the payment of the same; xiii... xiv ADMISSION OF THE PETITION AND PUBLIC CONSULTATION PROCESS A meeting was convened with MSPGCL, in the presence of the authorised consumer representatives, on 26 March, 2018 for discussion on the salient features of the Petition and the additional information requirement. The list of persons who attended the said meeting is at Annexure I. MERC in Case No. 196 of 2017 Page 19 of 250

20 The Commission sought additional information from MSPGCL vide s dated 29 December, 2017, 9 January, 9 April, 4 July, 11 July, and 26 July, MSPGCL submitted the additional information sought by the Commission vide its letters dated 8 January, 12 January, 19 January, 20 January, 14 May, 21 July, 2 August, and 7 August, After analysing MSPGCL s replies, the Commission admitted the Revised Consolidated Petition for approval of final true-up for FY and FY , provisional true-up for FY and revised Tariff for FY and FY on 25 June, In accordance with Section 64 of the EA, 2003, MSPGCL was directed to publish its Petition in an abridged form. The Public Notice was published in the following daily newspapers inviting suggestions/objections and intimating the date of Public Hearing: Table 1-1: Publication of Notice of Public Hearing Newspaper Date Times of India Indian Express 26 June, 2018 Lokmat Punyanagari MSPGCL s Petition and its Executive Summary in English and Marathi were made available at its offices and on its website ( The Public Notice and Executive Summary were also made available on the websites of the Commission ( in downloadable format The Commission received three (3) written objections/ suggestions/ comments on the Petition. A Public Hearing was held on 26 July, 2018 at the Commission s office. The list of persons who attended the Public Hearing is at Annexure - II The Commission has ensured that the due process as contemplated under the law to ensure transparency and public participation was followed at every stage and adequate opportunity was given to all concerned to file their say ORGANISATION OF THE ORDER This is organised in the following Chapters: MERC in Case No. 196 of 2017 Page 20 of 250

21 Chapter 1 provides a brief history and sets out the quasi-judicial regulatory process undertaken by the Commission. A list of abbreviations with their expanded forms is included. Chapter 2 sets out the suggestions and objections raised in writing as well as during the Public Hearing. These have been summarized issuewise, followed by the responses of MSPGCL and the rulings of the Commission. Chapter 3 deals with the impact of the Commission s in Case No. 28 of 2013, for FY and FY Chapter 4 deals with the approval of final true-up for FY Chapter 5 deals with the approval of final true-up for FY Chapter 6 deals with the approval of provisional true-up for FY Chapter 7 deals with the impact of final true-up for FY , FY and provisional true-up for FY Chapter 8 deals with the approval of Tariff for FY and FY Chapter 9 summarises the Commission s Directives. Chapter 10 deals with the applicability of the. MERC in Case No. 196 of 2017 Page 21 of 250

22 2 SUGGESTIONS/OBJECTIONS RECEIVED, RESPONSE OF MSPGCL AND COMMISSION S VIEWS 2.1 FILING OF PETITION Suggestions/Objections Shri Mahaveer Kumar Jain sought the certified copy of Board Resolution authorising the signatory of the instant Petition to represent MSPGCL before the Commission. MSPGCL s replies MSPGCL submitted that the instant Petition has been filed under Affidavit as per the MERC (Conduct of Business) Regulations, The signatory of the Petition is an employee of MSPGCL and is authorised by the Chairman & Managing Director (CMD) to file the instant Petition. Commission s views MSPGCL s instant Petition, having been filed in accordance with the MERC (Conduct of Business) Regulations, 2004, was admitted for further processing after checking the compliance with respect to various provisions of the MERC (Conduct of Business) Regulations, FUEL AVAILABILITY Suggestions/Objections Dr. Ashok Pendse, representing Thane Belapur Industries Association (TBIA), submitted that on perusal of the actual coal despatch data for FY , furnished on the website of Coal India Limited (CIL), it can be observed that the committed supply levels had not been achieved in any month. The lowest was to the tune of 59% of committed supply in the month of August, This shortfall in supply could be either due to CIL or Railways. Managing coal is the responsibility of the generator and hence, force majeure sought by MSPGCL on account of coal shortage is not admissible. Dr. Pendse also submitted that the gas shortage also needs to be treated on similar lines Ms. Ashwini Chitnis, representing Prayas (Energy Group) (PEG), submitted that because of economic shutdown of Units, MSPGCL would have had excess coal. Ms. Chitnis sought the details of utilisation of such excess coal available with MSPGCL and the details of payments made, if any, on account MERC in Case No. 196 of 2017 Page 22 of 250

23 of not lifting the coal Ms. Chitnis sought the month-wise and station-wise details of coal entitlement as per the FSA, indents issued by MSPGCL to the Coal Companies and the actual coal supplied by the Coal Companies during FY , FY and FY Ms. Chitnis also sought the details of coal imports planned for the following two years Ms. Chitnis sought the month-wise and station-wise details of coal swapping and/or flexible utilisation of coal undertaken by MSPGCL during FY , FY and FY Ms. Chitnis sought the status of development of Gare Palma Sector II coal block allocated to MSPGCL Ms. Chitnis sought station-wise and month-wise details of savings on account of change in coal quality due to independent third-party sampling. Ms. Chitnis also sought the copy of contract executed for third-party sampling. MSPGCL s replies MSPGCL submitted that although APTEL had remarked that managing coal is the generator s responsibility, in the present conditions, the coal supply is really uncontrollable factor for generating companies as the monopolistic situation still prevails in the domestic coal market. MSPGCL has to manage with whatever supplies are provided by the Coal Companies. As regards imported coal, the Government of India (GoI) has not approved any imported coal purchase targets for generating companies. Even if the generating company opts for imported coal purchase, the increase in energy charge rate reduces the chances of such power getting scheduled regularly. Also, with increase in energy charges and effective tariff to consumers, the recovery of Distribution Company may reduce further, which will further add to the already severe issue of receivables for generating companies In case of railway network issues, the much-needed railway network capacity augmentation is beyond the scope of MSPGCL and thus, at some places it has to suffer on account of inadequacy of railway infrastructure even when coal may be available with the Coal Companies. Hence, considering the abovementioned difficulties, MSPGCL has submitted that the non-availability of coal at its thermal stations is beyond its control and hence, requested to MERC in Case No. 196 of 2017 Page 23 of 250

24 consider it as Force Majeure event Due to lower gas supply, the actual Availability of Uran GTPS was lower. The shortage of gas is beyond the control of MSPGCL and making alternate arrangements is not feasible, thus, it is a Force Majeure event The materialisation of coal at MSPGCL s stations has been consistently poor, which hardly meets the requirement. Hence, the coal was never surplus to be diverted to other stations. There were no instances of non-lifting of coal by MSPGCL and hence, no penalty was levied on this account MSPGCL submitted the details of coal availability for its stations for FY , FY and FY as sought. MSPGCL had procured imported coal till FY in line with the targets assigned by Central Electricity Authority (CEA), to bridge the gap between quantity and quality of domestic coal in order to improve loadability and achieve the approved norms of operation. However, due to surplus scenario of domestic coal, CEA has not assigned the imported coal targets from FY onwards. For FY , due to less materialisation of domestic coal resulting in critical stock position and as per the directives of GoM, MSPGCL has published the tender for procurement of 1.0 MMT non-coking (steam) coal of foreign origin for Koradi Units 8, 9 & 10. To concur with import coal policy of GoI and as directed by GoM, the award of contract under ongoing tender is subject to permission from GoI to import coal MSPGCL submitted the details of coal swapping undertaken in FY and FY as follows: The domestic coal procured from MCL was of high ash content (more than 34%), and was to be transported for long distance from MCL mines. In accordance with the guidelines of Inter-Ministerial Task Force, MSPGCL transferred MCL coal linkages of MMT for Bhusawal (2.312 MMT), Khaperkheda (1.5 MMT), and Parli (1.204 MMT) permanently to WCL and SECL in the year This resulted in savings of Rs Crore in FY due to reduction in transportation costs. Further, MSPGCL transferred MCL coal linkages of MMT for Bhusawal (2.312 MMT), Chandrapur (1.525 MMT) and Paras (1.525 MMT) to WCL. Considering the parity in grades and higher cost of WCL coal, the effective saving, including transportation cost, for this swapping is expected to be Rs. 425 MERC in Case No. 196 of 2017 Page 24 of 250

25 Crore in FY Accordingly, FSA was signed on 14 March, 2017 for the shifting for Mahanadi Coalfields Limited (MCL) coal allocation to WCL In compliance with the Commission s direction in its dated 14 December, 2017 in Case No. 59 of 2017, MSPGCL is in the process of preparation and filing the Petition for approval of appointment of Mine Developer-cum-Operator (MDO) and proceeding with the coal block development of Gare Palma Sector II coal block allocated to MSPGCL MSPGCL submitted the information sought regarding independent third-party sampling of coal. Commission s views MSPGCL has submitted that the fuel shortage is a Force Majeure event, which was beyond its control. Non-availability of sufficient fuel due to reasons mentioned by MSPGCL does not fall under the purview of the Force Majeure event. As per the Power Purchase Agreement (PPA), the Force Majeure event is defined as war, armed conflict, Act of God, etc. The nonavailability of fuel not on account of any of these factors cannot be placed under the ambit of the Force Majeure event saying that it is beyond the control of MSPGCL. Hence, the Commission does not find it prudent to relax the norms of operation on account of coal shortage The Commission had sought the details of month-wise coal availability during FY and FY in the specified format to ascertain whether the coal shortage was due to lower requisition by MSPGCL or unavailability of coal at the Coal Company end or unavailability of rakes or diversion of coal from one station to other station. MSPGCL did not submit the complete details in the prescribed format. From the information submitted by MSPGCL, it is observed that the actual coal quantum supplied by the Coal Companies, viz., WCL, MCL and SECL was generally on lower side in comparison to the requisition placed by MSPGCL It is observed that during FY , the actual coal materialization was around 57.08% of the total linkage coal and hence no surplus coal was available. MERC in Case No. 196 of 2017 Page 25 of 250

26 The quantity of coal to be imported was fixed on a country-wide basis by Ministry of Power (MoP) on the basis of domestic coal availability and generation level for the year as assessed by the Central Electricity Authority (CEA). A target for import of coal was given to each generating utility. Due to inadequate availability of domestic coal, power utilities were advised to import coal for blending. Under the guidance of Ministry of Coal, CIL has taken the initiative for substitution of imported with domestic coal since the year CIL, in this pursuit, has devised various measures for substitution of imported coal with domestic coal which resulted in enhanced production by CIL, increase in coal dispatch etc As regards coal imports, as per the import policy of GoI, coal is kept under Open General License (OGL) and consumers are free to import coal from the source of their choice as per their contractual prices on payment of applicable duty. Hence, the submission of MSPGCL that GoI had not approved any imported coal purchase targets, cannot be accepted In light of the above, the Commission does not find it prudent to relax the norms of operation on account of coal shortage As regards the gas shortage, although the non-availability of sufficient gas does not fall under the purview of Force Majeure event, the Commission finds that the same needs to be treated as uncontrollable factor, as there are no alternate sources from where MSPGCL can arrange natural gas. Hence, in line with the approach adopted by the Commission in previous s, the Commission has approved the recovery of full Annual Fixed Charges (AFC) at actual Availability for Uran GTPS for FY , FY and FY Regarding development of Gare Palma Sector II coal block allocated to MSPGCL, MSPGCL has filed the Petition before the Commission for approval of appointment of Mine Developer-cum-Operator (MDO) and proceeding with the coal block development which is under process The Commission has taken note of transfer of coal linkages in accordance with the guidelines of Inter-Ministerial Task Force. Based on the analysis of fuel prices and energy charges it is observed that the energy charges for some of the MSPGCL stations have reduced in FY as compared to FY which is partly due to transfer of coal linkages. MERC in Case No. 196 of 2017 Page 26 of 250

27 2.3 WATER AVAILABILITY Suggestions/Objections Dr. Pendse submitted that the water shortage for Parli TPS started 4 years back and in the current year, Chandrapur TPS is also facing water shortage. The concept of idle capacity charges could be continued further and the Force Majeure sought by MSPGCL should be rejected. MSPGCL s replies The prolonged drought situation in Marathwada region during the period from FY to FY was a natural calamity over which MSPGCL had no control and hence, it has requested to consider the same as Force Majeure event. Further, making any alternate arrangements for water on immediate basis to run the thermal stations of significant capacities like Parli, Chandrapur and Paras is not feasible with scanty rainfall and drought condition in the whole geographical region. Although the Commission, in the past, had not accepted MSPGCL s prayer regarding the water shortage stating that MSPGCL should have taken efforts to make alternative arrangement for water, MSPGCL is reiterating the same because any such scheme for water arrangement will require substantial planning and time for successful execution. Hence, the water shortage needs to be considered as Force Majeure. Commission s views The Commission in its dated 30 August, 2016 in Case No. 46 of 2016, in approval of final true-up for FY and provisional true up for FY , had not relaxed the norms of operation for Parli TPS on account of water shortage. MSPGCL has filed Appeal No. 281 of 2017 before APTEL challenging the Commission s approach in this regard and the matter is subjudice. As the matter is sub-judice, the Commission deems it fit to continue with its earlier approach and has accordingly not relaxed the norms of operation on account of water shortage. 2.4 ACHIEVEMENT OF PROJECTED GENERATION Suggestions/Objections Dr. Pendse submitted that the actual generation achieved in FY , FY and FY was to the tune of 99%, 78% and 66%, respectively, of the projected generation levels. In light of the same, the projected generation levels for FY and FY seems to be difficult to MERC in Case No. 196 of 2017 Page 27 of 250

28 achieve and hence, should be toned down. MSPGCL s replies The major reasons for non-achievement of projected generation levels was non-availability of critical resources, i.e., coal, water and gas. Due to stabilisation of newly commissioned Units, the actual generation was lower. Apart from these, the other reasons like reduction in demand during peak monsoon and winter, increase in frequency of backing down / zero schedules have contributed to loss in generation. With adequate availability of key resources, mainly coal, MSPGCL Units can deliver generation during the balance period at normative level. Commission s views Based on analysis of actual generation and backing down data submitted by MSPGCL, it is observed that even after considering the backing down, the actual generation in FY and FY was lower than the net generation approved by the Commission in MYT. The Commission does not deem it fit to approve the projected generation at normative levels, without considering the actual past performance as it would adversely affect the power purchase cost estimation of Maharashtra State Electricity Distribution Company Limited (MSEDCL). In line with the approach of the Commission in its earlier s, the generation projections for FY and FY have been approved taking into consideration the actual past performance of MSPGCL s stations for FY , FY and FY ADDITIONAL CAPITALISATION Suggestions/Objections Dr. Pendse submitted that the actual additional capitalisation for FY , FY and FY was Rs. 170 Crore, Rs. 91 Crore and Rs. 232 Crore, respectively, which is much lower than the approved additional capitalisation of Rs. 249 Crore, Rs. 540 Crore and Rs. 482 Crore, respectively. Hence, the proposed additional capitalisation of Rs Crore and Rs Crore for FY and FY , respectively, needs scrutiny. MSPGCL s replies The schemes approved by the Commission are generally undertaken as per the initially envisaged implementation schedule. However, on account of MERC in Case No. 196 of 2017 Page 28 of 250

29 lead-time in supply of equipment by the manufacturers, need for providing adequate timeline to facilitate participation in tendering process, due diligence on the prices quoted by the bidders and timely availability of outage needed for implementation of some schemes, the implementation process may deviate from the initially envisaged schedule. As a result of this, the planned capitalisation would increase in the subsequent years The proposed additional capitalisation for FY and FY appears to be on higher side on account of the additional capitalisation claimed for (i) newly commissioned Units at Koradi, Chandrapur and Parli, (ii) Renovation & Modernisation of Koradi Unit 6, (iii) coal pipe conveyors at Chandrapur and Khaperkheda, and (iv) Flue Gas Desulphuriser (FGD) at Koradi Unit 10. Most of the schemes proposed to be capitalised during FY and FY have been accorded in-principle approval by the Commission. Commission s views The Commission had carried out the prudence check of the actual additional capitalisation claimed for FY , FY and FY and proposed additional capitalisation for FY and FY Based on the same, the Commission has approved the additional capitalisation for the respective years as detailed in the approval of true-up/tariff for the respective years. 2.6 RETURN ON EQUITY Suggestions/Objections Dr. Pendse submitted that MSPGCL has claimed the Return on Equity (RoE) at the rate of 7.5% for FY and FY and at the rate of 15.5% for FY and FY The Commission may correspond with GoM regarding the reduction of rate of RoE to 7.5% for FY and FY also. MSPGCL s replies In pursuance of the policy of reducing the overall power tariff in Maharashtra, the MSEB Holding Company, being the 100% equity shareholder of MSPGCL, had directed MSPGCL to claim RoE at a reduced rate of 7.5%, in place of 15.5%, for FY and FY with the expectation that the overall recovery for MSEDCL will improve and it would make timely payments of dues, from FY onwards. However, the recovery issues MERC in Case No. 196 of 2017 Page 29 of 250

30 still persist and hence, MSPGCL does not intend to give away the legitimate claim of RoE for FY and FY Commission s views As regards the suggestion of Dr. Pendse to correspond with GoM regarding the reduction of rate of RoE for FY and FY , it is the prerogative of the Utility to claim lower component of tariff, as the norms specified in the Regulations are ceiling norms. The Commission cannot direct any Utility to lower the RoE or for deviating from any other provision in the Regulations. In accordance with the Commission s dated 30 August, 2016 in Case No. 46 of 2016 and MSPGCL s submissions in the instant Petition, the Commission has approved RoE considering the rate of 7.5% for FY and FY and 15.5% for FY and FY AFC REDUCTION FOR NOT ACHIEVING TARGET AVAILABILITY Suggestions/Objections Dr. Pendse submitted that the AFC reduction for not achieving target Availability levels in FY , FY and FY is to the tune of Rs. 567 Crore, Rs Crore and Rs Crore, respectively, which appears to be alarming. MSPGCL s replies MSPGCL has submitted the reasons for reduction of AFC for not achieving target Availability in compliance to the provisions of the MYT Regulations. Commission s views The recovery of full AFC is linked to achievement of target Availability. The actual Availability for some of the stations in FY , FY and FY was lower than the target Availability and hence, the Commission has carried out the reduction of AFC on pro-rata basis, except for Uran GTPS due to gas shortage. 2.8 DELAYED PAYMENT SURCHARGE Suggestions/Objections Dr. Pendse submitted that the delayed payment surcharge in FY and FY was to the tune of Rs Crore and Rs Crore, respectively, which appears to be alarming. MERC in Case No. 196 of 2017 Page 30 of 250

31 MSPGCL s replies MSPGCL undertakes bill generation activities in a timely manner and endeavours to ensure revenue recovery in a timely manner. Despite frequent follow-up, the receivables from MSEDCL are arising, which necessitates levy of delayed payment surcharge as per the provisions of the PPA. Commission s views In accordance with Clause 9.3 of the PPA, MSPGCL is entitled to claim late payment surcharge on delayed payments. In accordance with Regulation 43 of the MYT Regulations, 2011, the interest on delayed payments is to be considered as Non-Tariff Income. Accordingly, the Commission has considered the late payment surcharge for FY as Non-Tariff Income for the year. The MYT Regulations, 2015 do not specify the late payment surcharge to be treated as Non-Tariff Income and hence, the Commission has not considered the late payment surcharge for FY as a component of Non-Tariff Income for the year while carrying out the truing up. As regards the issue of increase in receivables raised by MSGPCL, the Commission is of the view that the MSPGCL can take up this matter with MSEB Holding Company Limited and Govt. of Maharashtra for appropriate resolution of the matter. 2.9 THIRD PARTY SALE OF SURPLUS ENERGY Suggestions/Objections Dr. Pendse submitted that on the basis of the Merit Stack for July, 2018, it appears that many of the stations of MSPGCL are not likely to get scheduled. MSPGCL may explore the options for third party sale of surplus energy. MSPGCL s replies MSPGCL has registered as a bidder with MSTC Ltd. s National e-bidding portal, developed for short-term power sale/ procurement. As MSPGCL s entire generation capacity is contracted with MSEDCL, it is pre-requisite for MSPGCL to avail MSEDCL s consent for third party sale by MSPGCL. Despite repeated follow up for the same, MSEDCL has not provided any consent for third party sale by MSPGCL. In the context of non-receipt of consent from MSEDCL, MSPGCL has not registered with Indian Energy Exchange (IEX) for sale of un-requisitioned power, as the registration charges are high. MERC in Case No. 196 of 2017 Page 31 of 250

32 Commission s views Clauses 4.2 and 4.3 of the approved PPA between MSPGCL and MSEDCL deals with the third-party sale of surplus energy. In accordance with the same, MSPGCL has the right to sell its unavailed capacity, on which MSEDCL does not exercise its right to sell / trade, on short-term basis to third-parties. The exercise of option of third-party sale of surplus energy should be governed by the provisions of the PPA COMPLIANCE WITH REVISED EMISSION NORMS Suggestions/Objections Ms. Chitnis sought information regarding MSPGCL s compliance with the revised emission norms stipulated by Ministry of Environment, Forests & Climate Change (MOEF & CC) and the impact of the same on the availability of its Units. MSPGCL s replies MSPGCL s stations commissioned up to 31 December, 2016 are noncompliant with the revised SOx emission norms as specified by MOEF & CC. MSPGCL s stations commissioned after 31 December, 2013 and up to 31 December, 2016 are compliant with the revised NOx emission norms and Mercury (Hg) parameters as specified by MOEF & CC. Bhusawal Units 2 & 3, Chandrapur Units 3 to 9, Khaperkheda Units 3, 4 & 5, Koradi Units 8, 9 & 10, Nashik Unit 3 and Parli Unit 8 are compliant with the revised Suspended Particulate Matter (SPM) parameters specified by MOEF & CC and the remaining Units may become compliant after installation of FGD. MSPGCL s Board had accorded in-principle approval for implementation of the actual plan for installation and commissioning of FGD for Units having capacity of 250 MW and above and partial installation of FGD for older Units. S. No. Table 2-1: FGD installation program as submitted by MSPGCL Station Unit Capacity FGD installation Estimated Expected No. (MW) (Complete/ Partial) cost completion (Rs. Crore) 1 Chandrapur Complete December Complete March Koradi Complete September Complete March Complete September Khaperkheda Complete March 2021 MERC in Case No. 196 of 2017 Page 32 of 250

33 S. No. Station Unit No. Capacity (MW) FGD installation (Complete/ Partial) Estimated cost Expected completion (Rs. Crore) 4 Bhusawal Complete March Complete 5 Chandrapur Complete March Complete Complete 6 Paras Complete March Complete 7 Parli Complete March Complete Complete 8 Nashik % Partial FGD March Multi boilers FGD Bhusawal % Partial FGD March 2021 Multi boilers FGD 10 Koradi Under R&M - October ESP Modification - March 2020 recommended, low sulphur coal recommended 11 Parli Low sulphur coal recommended 12 Chandrapur % Partial FGD March Multi Boilers FGD 13 Khaperkheda % partial FGD March Multi Boilers FGD Total MSPGCL has floated open tender for installation of FGD system for Koradi Unit 10 of 660 MW. Techno-commercial scrutiny of the tender is under progress through Project & Planning Section. A consultant has been appointed for the FGD at Koradi Unit 10. Floating of open tender for appointment of consultant for Koradi Units 8 & 9 installation work on EPC basis as well as debt financing/ annuity-based model is in progress. Approval for floating of open tender for appointment of consultant for installation of FGD for other Units of capacity 250 MW and above is in process The Commission vide its in-principle approval dated 4 December, 2017 had approved the capital expenditure of FGD for Koradi Unit 10. The capital MERC in Case No. 196 of 2017 Page 33 of 250

34 expenditure for other Units of MSPGCL shall be submitted to the Commission after preparation of DPR. There is no adverse impact of availability of the generating Units as the implementation works of emission control system mainly FGD installation shall be carried out during the annual overhaul of the Unit. The approximate period of commissioning of FGD is about 3 weeks. Commission s views The Commission has taken note of MSPGCL s submissions in this regard FINANCIAL MANAGEMENT AND CONTROL Suggestions/Objections Shri Jain sought the details of Balance Sheet, Profit and Loss Account and Cash Flow Statement from FY to FY in the given format, for analysis and exploring the potential for improvement Shri Jain submitted that MSPGCL was having closing Balance, in its Current Account Bank, of Rs Crore, Rs Crore, Rs Crore, Rs Crore, Rs Crore and Rs Crore for FY , FY , FY , FY , FY and FY , respectively. If the funds are transferred to credit facility from current account, there will be reduction in the cost of credit facility. Though there is improvement in yearend balance, this could be due to window dressing. MSPGCL may be directed to not keep funds of more than Rs. 2-5 lakh in Current Account for operational expenses and make all payments above Rs. 1 lakh from Head Office using Cash Credit/Demand Draft. This would reduce the cost of credit facility and consequently will benefit the consumers by way of reduction in cost of power generation Shri Jain submitted that from Annexure III of the Auditors Report dated 3 September, 2016 issued on the financial statement for FY , it can be observed that there is failure on part of the Company to have internal control system. The Commission may fix the responsibility for the same with necessary action and direct MSPGCL to make sure that this violation is cleared without qualification in the audit for FY without failure Shri Jain submitted that MSPGCL has failed to book the revenue from sale of power appropriately due to which the remark of the Statutory Auditor on revenue recognition is being repeated year-on-year. The amount of Rs MERC in Case No. 196 of 2017 Page 34 of 250

35 Crore is indicated as due from MSEDCL, which has affected the financial status of MSPGCL. This has cascading effect as there is outflow of tax by way of income tax payment. In the past, there had been instances wherein MSEDCL had not booked expenses which MSPGCL had booked as income, which is violation of accounting principles. MSPGCL had paid income tax on income booked. If the amount debited to MSEDCL is written off by MSPGCL in the future years, same will be allowed as permitted expense and the income tax reversal will take place. However, till the write-off is done, there is interest expense incurred by MSPGCL. The Commission may issue appropriate direction in this regard Shri Jain submitted that from the audited financial statement, it is noticed that there are very high amount of loans and advances pending for recovery for long time. During the last 3 financial years, the unbilled revenue has gone up from Rs Crore to Rs Crore, which is 400% increase whereas the gross turnover has reduced by 5% during the corresponding period. It appears that there is delay in bill generation, which is causing delay in receipt of revenue. The billing has to be sped up so that there is no unbilled revenue or such amounts are reduced to minimum possible Shri Jain submitted that delay is observed in getting refund from VAT department and the amount of such refunds are increasing every year. The amount was Rs. 372 Crore in FY , which has increased to Rs Crore in FY This delay is causing loss by way of increased utilisation of credit facility, which in turn is increasing the interest cost of MSPGCL Shri Jain submitted that MSPGCL has not been able to carry out accounts reconciliation with fellow subsidiaries due to several pending issues. Despite repeated qualification in the auditor s report, MSPGCL has not completed the task and even on ongoing basis, there are several items of expenses, which are not booked. If the expenses are not booked in the corresponding year, the same will not be permitted as eligible expenses by the income tax authorities and due to this there is tax liability on such amount of expenses incurred, which is avoidable if the accounting is done on time. The Commission may direct MSPGCL to reconcile its accounts with MSEDCL, in the audit being carried out for FY Shri Jain submitted that the statutory auditors report and the CAG report of MERC in Case No. 196 of 2017 Page 35 of 250

36 MSPGCL have many comments. However, no action is being taken and these comments are carried forward year-on-year. The major issues pending in the auditors report are (i) information required to ascertain the accounting of shortfall/ excess in providing of contribution to CPF Trust and (ii) violation of fundamental accounting requirement of accrual system of accounting due to wilful non-accounting of all transactions matching with corresponding vendors, banks, lenders, debtors, loans and advances, CPF trust and others Shri Jain submitted that the cost of long-term and short-term loans has increased from 4.15% in FY to 6.24% in FY while the ratio of finance cost to gross revenue has increased from 5.28% to 10.35% during the corresponding period. This shows that there has been rapid increase in loan capital and the interest cost has also been increasing. This means that the borrowings (both long-term and short-term) have not yielded due turnover or capacity of MSPGCL has not been fully utilised and probability of having much higher capacity addition, without taking care of requisite infrastructure or input at right time and at right cost. The average rate of borrowing cost has increased as the working capital is increasing continuously, implying inefficient working capital management by MSPGCL Shri Jain submitted that the ratio of turnover to fixed assets for capital intensive industry remains below 1. However, in case of MSPGCL, it has come down from 0.57 in FY to 0.43 in FY This shows that revenue is not commensurate with the capitalisation, which is also clear from the ratio of turnover to net tangible fixed assets which has declined from 1.41 in FY to 0.70 in FY This means that the capitalisation of recent past is not generating due turnover and therefore, there is possibility of much higher capital expenditure without commensurate electricity generation/ revenue or reduction in capacity utilisation of capital expenditure as compared to FY Therefore, the profitability will improve if the asset utilisation is increased Shri Jain submitted that the ratios of debtors and inventory as days of sales is a very important indicator of financial health of the organisation. For MSPGCL, the inventory as days of sales is almost constant during the period from FY to FY However, the debtors as days of sales increased from 68 days in FY to 213 days in FY , of annual sales which has increased by 3.13 times. This has resulted in financial stress MERC in Case No. 196 of 2017 Page 36 of 250

37 for MSPGCL, which is indicated by way of increased borrowing cost. This needs to be arrested to avoid the increase in the borrowing cost for future years Shri Jain submitted that the ratio of tax payment to profit before tax is varying drastically year-on-year during the period from FY to FY This shows that there is possibility of tax payment other than that as per income tax rate of 33.9% or change in the tax benefits availed during the year. This also shows possibility of loss of MAT Credit. During the period from FY to FY , the total tax payment is more than tax expense to the tune of Rs Crore. This could be due to disputed tax liabilities Shri Jain submitted that the ratio of operating profit before working capital changes to gross sales has increased from 15.17% in FY to 26.67% in FY However, when the working capital changes are incorporated in this and ratio of net cash from operating activity to gross sales is observed, it has decreased from 10.86% in FY to 1.53% in FY This indicates that there is financial pressure on MSPGCL. MSPGCL s replies MSPGCL is a company established under Companies Act, MSPGCL s financial statements are prepared as per the accounting standards published by Institute of Chartered Accountants of India (ICAI) and prescribed under relevant Sections of the Companies Act, 1956 and Companies Act, While preparing the financial statements in accordance with Accounting Standards, a true and fair view of the state of affairs, profit/ loss and other comprehensive income, changes in equity and cash flows pf the Company are maintained. MSPGCL has submitted all the relevant documents in accordance with Regulations 5.1 and 8.1 of the MYT Regulations, The information sought by the stakeholder shall be submitted if the Commission directs so The generation capacity of MW of MSPGCL is geographically dispersed in the State of Maharashtra. The decentralised payment system has been adopted to effectively operate the geographically dispersed business. Currently, the funds are transferred from Mumbai Head Office to various field offices for onward payment to employees and local vendors. The periodicity of such fund transfers and its utilisation is as follows: (i) Employee expenses: the funds are remitted from head office to field offices MERC in Case No. 196 of 2017 Page 37 of 250

38 towards salary only once in a month on the last day of the month. Salary is immediately disbursed to employees on the same day. Funds towards other employee claims such as leave encashment, LTC, computer advance, etc., is disbursed as and when required by field offices and such funds are immediately utilised; (ii) Vendor payments: funds are remitted from head office to field offices towards supply and work bills only once in a month and field offices are advised to utilise the funds immediately. It is evident from the above that the funds are not kept idle for the entire 365 days as understood by the stakeholder The requirement of reporting on Internal Financial Controls by statutory auditors started from FY During this year, various internal controls operating in the company were explained to the auditors. However, the statutory auditors desired that a formal document on the lines of guidelines issued by ICAI should be prepared. The company accepted their suggestion and a formal document on Internal Financial controls was prepared for FY However, for FY , the auditors have given disclaimer of opinion but with the statement that the said disclaimer, subject to the matters modified in their main audit report, does not affect their modified opinion on the standalone financial statements of the company. Hence, the company has complied with the requirement and further improvement in Internal Financial Controls is an on-going process based upon the Internal Reviews and observations of various auditors, viz., internal, statutory, Comptroller and Auditor General (CAG) Bill generation activities are conducted in a timely manner and to ensure revenue recovery in a timely manner. MSPGCL raises Late Payment Surcharge (LPS) bills as per modalities agreed in the PPA. The status of steps taken by MSPGCL for implementation of Payment Security Mechanism and the Escrow provision are as follows: As per the terms of PPA there are three provisions for payment security mechanism (i) Irrevocable revolving Letter of Credit (IRLC) (for all Units), (ii) Escrow Account (for Paras Unit 3 and Parli Unit 6), and (iii) Third Party Sale (for all Units). MSPGCL has regularly requested MSEDCL regarding establishment of IRLC. However, MSEDCL has established the IRLC only during FY , however, despite repeated follow up by MSPGCL, MSEDCL never renewed the same. Rather, MERC in Case No. 196 of 2017 Page 38 of 250

39 MSEDCL has requested MSPGCL not to insist for establishing the IRLC, considering precarious financial position of MSEDCL. As per terms and conditions of PPA, MSPGCL has requested MSEDCL for establishing Escrow account in favour of Paras Unit 4 and Parli Unit 6. In reply MSEDCL had stated that MSPGCL and MSEDCL are working under the control of MSEB Holding Company Ltd, therefore, not to insist upon opening of Escrow account in favour of Paras Unit 4 and Parli Unit 6. Although MSPGCL has been making efforts in search of the avenues for third party sale, however, till date this option has not been utilised. Notwithstanding, MSPGCL regularly requests MSEDCL to establish payment security mechanism in favour of MSPGCL. This issue is also taken up by MSPGCL before the MSEB Holding Company Any impact arising on receivables, due to issuance of revenue bills pertaining to current year but issued subsequent to year end, i.e., 31 March, is recognised as unbilled receivables as on 31 March and gets adjusted against respective receivables in the subsequent year MVAT Refunds are approved by the tax authorities after completion of the assessments. MSPGCL always follows up with the tax authorities for getting refund as early as possible to obtain refund of partial amount in advance before completion of assessment. Assessments up to FY have been completed and refund of MVAT amount is received by MSPGCL up to FY and refund for FY is expected to be received soon. For FY and FY , MSPGCL has received partial refund amount in advance and balance amount shall be received after completion of assessment. For late refund, MSPGCL has also received interest as per the provisions of MVAT Act The power generated by MSPGCL is sold to MSEDCL. The company has been conducting the reconciliation with MSEDCL at each year end and the same is shared with the auditors (i) The remarks of statutory auditor regarding the accounts of CPF Trust is under Emphasis of Matter in which the auditors are drawing attention to the disclosure made by the Company itself in Note No. 29(B). Hence, separate reply by the Company is not required. Moreover, auditors have expressly stated that their opinion is not qualified in respect of the subject matter. (ii) MERC in Case No. 196 of 2017 Page 39 of 250

40 Company has adopted SAP environment wherein the vendor-wise, customerwise, employee-wise balances payable and receivables, etc., are available. Due to its large scale of operations, the Company enters into huge volume of transactions with numerous vendors. Reconciliation with the vendors is an on-going process. However, due to various reasons not attributable to the Company alone, viz., delay in receiving invoices from vendors, no response against the balance confirmation requests, wrong details given by vendor, claims/counter claims, etc., reconciliation or adjustment takes more time in case of some vendors. Matching of old unidentified vendor balances is always a continuous process in large-sized companies like MSPGCL. During FY also, many entries from unidentified vendors balances have been matched and linked to the identified vendors MSEDCL is the sole consumer of MSPGCL. Due to critical cash flow position, MSEDCL has been irregular in making payments to MSPGCL resulting in accumulation of dues during last few years. However, MSPGCL has been relentlessly requesting MSEDCL to effect payment of energy bills in a timely manner. Apart from this, the overdues issue has been taken up repeatedly at the level of Holding Company for suitable directives to MSEDCL for clearance of dues. Also, MSPGCL has filed Petition with the Commission for recovery of substantial overdues from MSEDCL. As a result of substantial receivables from MSEDCL, MSPGCL was forced to resort to additional working capital borrowings to meet its payment obligations towards debt servicing, fuel bills, etc The interest rates on working capital borrowings have been brought down gradually though working capital borrowings have increased substantially. Also, the interest rates of long-term loans have been reduced from 12.50% to 10.22% pursuant to negotiations with PFC and REC. Debt refinancing has been done in case of costlier loan availed from PFC for Khaperkheda Unit 5 at the interest rate of 12.25%, which is replaced with re-financing loan availed from State Bank of India at the interest rate of 9.40%. The loans availed from Canara Bank and Bank of India at the rate of 10.70% for Koradi Units 8, 9 & 10 have been re-financed from REC having interest rate of 9.75%. An additional loan for Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 has been availed from PFC and REC having rate of interest of 10.15% and 9.45%, respectively. Existing rate of interest on term loans availed from Banks for capital expenditure has been reduced from 11.75% to 10.00% pursuant to negotiation. MSPGCL has availed two foreign currency loans, MERC in Case No. 196 of 2017 Page 40 of 250

41 one for Solar projects and other for EE R&M of Koradi Unit 6 from KfW Germany and World Bank, respectively, with interest rates of 1.96% and 1.15%, respectively Deferred Tax is not required under Income Tax Laws. Consideration of Deferred Tax component is not logical, while calculating Tax Payment Ratio, as this component only records item of income and expenses where time difference exists between chargeability in Profit and Loss and allowability under Income Tax. Further, the tax payment is compared with the rate of Income Tax under Normal Income Tax provision though the Company pays tax under MAT provisions. Commission s views The preamble of EA, 2003 emphasises the object of taking measures conducive to the development of the electricity industry, promote competition therein, protecting the interest of consumers and supply of electricity to all areas, etc. MSPGCL is a company established under the Companies Act, 1956 and is required to comply with the mandate made thereunder regarding its internal financial management and control. At the same time, MSPGCL is undertaking power generation business, which falls under the regulatory purview of the Commission. The Commission while determining the tariff for MSPGCL is guided by the provisions of EA, 2003, Rules and Regulations made thereunder. The EA, 2003 does not envisage interference or micromanagement of the day-to-day affairs of the Generating Company by the Commission. MSPGCL may adopt the legally mandated best practices as suggested by the stakeholder depending on its operational requirements SOLAR POWER FOR INTERNAL ELECTRICITY CONSUMPTION Suggestions/Objections Shri Jain submitted that the cost of solar power has reduced and the payback for a new solar project is around 3 years. Solar projects can be implemented at the offices / staff quarters of MSPGCL, MSETCL and MSEDCL at centralised level so that the capital expenditure and the operational expenditure are optimised. Further, there would be tax benefit by way of depreciation and the benefits of Clean Development Mechanism (CDM). This will help MSPGCL to reduce the cost for fairly long time and entire cost is to be ultimately borne by public at large by way of power cost plus profit arrangements in place. MERC in Case No. 196 of 2017 Page 41 of 250

42 MSPGCL s replies MSPGCL has noted the suggestion of the stakeholder and would endeavour to meet the internal electricity consumption at its offices as suggested, subject to feasibility. Commission s views The Commission has taken note of the stakeholder s suggestion and MSPGCL reply. The Commission clarifies that the power sale arrangement between MSPGCL and MSEDCL shall be governed by the provisions of the approved PPA wherein the details of the generating stations are given and the Regulations notified by the Commission from time to time. Any expenditures unrelated to the approved generating stations in the PPA are not allowed to be passed on to the beneficiary HOSTING OF REGULATORY INFORMATION ON THE COMPANY S WEBSITE Suggestions/Objections Shri Jain submitted that the regulatory information hosted on the Company s website is withdrawn after the Commission s is issued. MSPGCL may be directed to host the regulatory information on its website even after the Commission s is issued for public access. The analysis presented by this stakeholder are based on the information availed through Right To Information (RTI). MSPGCL s replies MSPGCL follows all the regulatory provisions and directives of the Commission regarding hosting of regulatory information on the company s website. Commission s views The Commission, while determining tariff, ensures that the due process as contemplated under EA, 2003 to ensure transparency and public participation is followed and adequate opportunity is given to all concerned to file their say. Accordingly, the Commission directs MSPGCL to host its Petition along with other related information on its website for public access so that any interested person can file his/her suggestions/ objections within the stipulated date. All the submissions made by the Petitioners are available with the office of the Commission and can be obtained after following due process. However, Generating Company may retain the data on the various section archived on the website for future reference. MERC in Case No. 196 of 2017 Page 42 of 250

43 3 IMPACT OF COMMISSION S ORDER IN CASE NO. 28 OF 2013 FOR FY AND FY BACKGROUND In exercise of powers conferred under Sections 61 and 62 of EA, 2003 and in accordance with the Maharashtra Electricity Regulatory Commission (Terms & Conditions of Tariff) Regulations, 2005, the Commission issued the in Case No. 69 of 2011 on 22 December, 2011 in the matter of MSPGCL s Petition for determination of tariff for FY and FY for Paras Unit 4 and Parli Unit 7. In the stated, the Commission had approved the Capital Cost and determined the tariff for Paras Unit 4 and Parli Unit 7 for FY Aggrieved by the same, MSPGCL preferred Appeal No. 34 of 2012 before the APTEL. The APTEL having heard the Appeal issued the Judgment on 30 January, 2013 and allowed MSPGCL to approach the Commission for seeking relief on some of the issues MSPGCL accordingly filed a Petition (Case No. 28 of 2013), before the Commission for implementation of the above-said APTEL Judgment. The Commission vide its dated 3 September, 2013 disposed of MSPGCL s Petition in Case No. 28 of 2013, approving the revised Capital Cost of Paras Unit 4 and Parli Unit 7 and the impact of the same on the AFC for FY to FY MSPGCL S SUBMISSIONS The Commission disposed of MSPGCL s Petitions in Case No. 15 of 2015 and Case No. 46 of 2016 vide its s dated 26 June, 2015 and 30 August, 2016, respectively, in which the Commission had approved the final true-up for FY and FY , respectively MSPGCL had inadvertently not considered the revised Capital Cost for Paras Unit 4 and Parli Unit 7 approved by the Commission vide its dated 3 September, 2013 in Case No. 28 of 2013 while claiming the final true-up for FY and FY MSPGCL requested the Commission to condone the inadvertent error and approve the additional true-up amount for FY and FY along with carrying cost. Accordingly, MSPGCL has claimed Rs Crore on account of impact of Commission s in Case No. 28 of 2013 for FY and FY MERC in Case No. 196 of 2017 Page 43 of 250

44 3.3 COMMISSION S ANALYSIS AND RULING The Commission has perused its s in Case No. 28 of 2013, Case No. 15 of 2015 and Case No. 46 of 2016 and MSPGCL s submissions in the instant Petition. On perusal of the same, the Commission finds merit in MSPGCL s submissions for revision of true-up for FY and FY The Commission vide its dated 3 September, 2013 in Case No. 28 of 2013 had approved the incremental capital cost of Rs Crore and Rs Crore for Paras Unit 4 and Parli Unit 7, respectively. In the same, the Commission had computed the impact of the approved incremental capital cost on AFC, upto FY The Commission, in this has computed the impact of approved incremental capital cost for FY and FY The Commission had been determining the tariff combined for Paras Units 3 & 4 and Parli Units 6 & 7 since FY The impact of incremental capital cost approved for Paras Unit 4 and Parli Unit 7 approved by the Commission vis-à-vis MSPGCL s claim is as shown in the Table below: Table 3-1: Impact of Commission s in Case No. 28 of 2013 for FY and FY Paras Units 3 & 4 Parli Units 6 & 7 Particulars Units Claimed Approved Claimed Approved by in this by in this MSPGCL MSPGCL Incremental capital cost approved Rs. Crore Debt component of incremental capital cost Rs. Crore Equity component of incremental capital Rs. Crore cost Components of Annual Fixed Charges corresponding to incremental capital cost FY Return on Equity Rs. Crore Interest on Loan Rs. Crore Depreciation Rs. Crore Interest on working capital Rs. Crore Total incremental AFC Rs. Crore Actual Availability % % % Target Availability % % % Incremental AFC allowable Rs. Crore FY Return on Equity Rs. Crore Interest on Loan Rs. Crore Depreciation Rs. Crore Interest on working capital Rs. Crore MERC in Case No. 196 of 2017 Page 44 of 250

45 Particulars Units Paras Units 3 & 4 Parli Units 6 & 7 Claimed by MSPGCL Approved in this Claimed by MSPGCL Approved in this Total incremental AFC Rs. Crore Actual Availability % % % Target Availability % % % Incremental AFC allowable Rs. Crore The Commission in its dated 3 September, 2013 in Case No. 28 of 2013 had considered the entire funding of increase in Capital Cost of Paras Unit 4 through equity as the same resulted in the debt: equity ratio of 72.76:27.24 which is within the norm of debt: equity ratio of 70:30. Further, the Commission in the same had considered the funding of increase in Capital Cost as well as additional capitalisation as proposed by MSPGCL as the same resulted in the normative debt: equity ratio of 70:30 as on cut-off date The summary of incremental AFC claimed by MSPGCL and approved by the Commission for FY and FY is as shown in the Table below: Year Table 3-2: Summary of incremental AFC (Rs. Crore) Paras Units 3 & 4 Parli Units 6 & 7 Total Claimed Approved Claimed Approved Claimed by in this by in this by MSPGCL MSPGCL MSPGCL Approved in this FY FY Total As against MSPGCL s claim of Rs Crore, the Commission has approved the amount of Rs Crore. The Commission approves the recovery of the same within one month after the issue of this MSPGCL has prayed for allowing carrying cost on its claim of incremental AFC. The Commission does not find it prudent to allow carrying cost on the incremental AFC determined in this, as the same is necessitated on account of error on the part of MSPGCL itself. MERC in Case No. 196 of 2017 Page 45 of 250

46 4 FINAL TRUE-UP FOR FY INSTALLED CAPACITY The installed capacity of MSPGCL as on 1 April, 2015 was 11,237 MW. One Unit of 660 MW capacity at Koradi TPS was commissioned and older Units of 630 MW total installed capacity were retired during the year. Station Bhusawal TPS Chandrapur STPS Khaperkheda TPS Koradi TPS Nashik TPS Parli TPS Table 4-1: Installed capacity of MSPGCL during FY Installed Capacity Retired Unit Capacity (MW) Addition Capacity No. as on 1 April, (MW) (MW) 2015 Installed Capacity (MW) as on 31 March, Total Total Total Total Total MERC in Case No. 196 of 2017 Page 46 of 250

47 Station Unit No. Installed Capacity (MW) as on 1 April, 2015 Capacity Addition (MW) Retired Capacity (MW) Installed Capacity (MW) as on 31 March, Total Paras TPS Total Uran GTPS Total Hydro Total Grand Total Koradi Unit 8 of 660 MW capacity was commissioned on 16 December Chandrapur Units 1 & 2 of 210 MW each were retired w.e.f. 1 September, 2015 and 21 January, 2016 onwards. Parli Unit 3 was retired w.e.f. 1 April, 2016 i.e., Parli Unit 3 was in operation for full year of FY and retired on the last day of the year Although the new Units (Units commissioned after incorporation of MSPGCL) were commissioned in the premises of the existing stations, the Commission had been determining the tariff for such new Units separately. Accordingly, for tariff purposes, the following Units are treated as separate stations in addition to the existing old Units at the respective stations: i. Paras Units 3 & 4 ii. Parli Units 6 & 7 iii. Khaperkheda Unit 5 iv. Bhusawal Units 4 & 5 v. Koradi Unit RELEVANT ORDERS The Commission vide its dated 20 April, 2015 in Case No. 201 of 2014 had approved the final capital cost and tariff for Bhusawal Units 4 & 5 from COD up to FY (i.e., end of 2 nd MYT Control Period). The Commission vide its dated 26 June, 2015 in Case No. 15 of 2015 had approved MTPR of 2 nd MYT Control Period in which the tariff (excluding Bhusawal Units 4 & 5) was approved for FY Further, the Commission vide its dated 19 January, 2016 in Case No. 108 of 2015 MERC in Case No. 196 of 2017 Page 47 of 250

48 had extended the economic shutdown for Bhusawal Unit 2, Chandrapur Unit 1, Koradi Units 5 & 6 and Parli Unit 3 for the period from 1 April, 2015 to 30 June, Although the Commission had approved the economic shutdown of Koradi Units 5 & 6, only Koradi Unit 6 was kept under economic shutdown. The Idle Capacity Charges comprising of (i) depreciation, (ii) interest on loan and (iii) employee expenses (equivalent to 50% of Operation and Maintenance (O&M) expenses) are payable for the capacity under economic shutdown for the corresponding period of economic shutdown The Commission vide its MYT dated 30 August, 2016 in Case No. 46 of 2016 had approved the provisional true-up for FY The new Unit 8 at Koradi, commissioned on 16 December, 2015, was not covered in the said. The Commission vide its dated 14 December, 2017 in Case No. 59 of 2017 had approved the final capital cost and tariff for Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 from COD of the respective Units up to FY (i.e., end of the 3 rd MYT Control Period). Further, the Commission vide its Review dated 8 August, 2018 in Case No. 77 of 2018 disposed of the Petition filed by MSPGCL on the Commission s in Case No. 59 of 2017 and the impact of same has been considered in this MSPGCL, in the instant Petition, has sought the final true-up for FY based on the actual expenditure and revenue as per the Audited Accounts for FY under the MYT Regulations, It has stated the reasons for the differences between the actual expenses and those approved in the Tariff. The analysis of the true-up undertaken by the Commission is provided below. 4.3 NORMS OF OPERATION The norms of operation specified under the MYT Regulations, 2011 for thermal generating stations are as follows: (i) (ii) (iii) (iv) (v) (vi) Availability Plant Load Factor (PLF) Auxiliary Energy Consumption (AEC) Gross Station Heat Rate (GSHR) Secondary fuel oil consumption (SFOC) Transit and handling loss MERC in Case No. 196 of 2017 Page 48 of 250

49 4.3.2 The Commission has approved the norms of operation for FY based on the norms specified in the MYT Regulations, 2011 and considering other aspects as detailed out in respective s. MSPGCL has submitted the actual performance in FY , which is in variation to the norms approved by the Commission. The performance was better than the norms in some of the cases and inferior in some of the cases. MSPGCL submitted the reasons for the actual performance that is inferior to the norms. MSPGCL s submissions on the actual performance in FY and the Commission s analysis is detailed hereunder. 4.4 AVAILABILITY MSPGCL s Submission MSPGCL submitted that its continued efforts to improve the performance of stations have resulted in achieving Target Availability for some of its Stations. The actual Availability achieved for FY is as shown in the Table below: Table 4-2: Actual Availability for FY submitted by MSPGCL Station/Unit Target Approved in Actual claimed by MTPR/ Tariff MSPGCL Bhusawal 80.00% 66.51% Chandrapur 80.00% 77.51% Khaperkheda 85.00% 81.84% Koradi 72.00% 64.39% Nashik 80.00% 92.96% Parli 80.00% 11.18% Uran 85.00% 52.42% Paras Units 3 & % 91.64% Parli Units 6 & % 23.92% Khaperkheda Unit % 88.11% Bhusawal Units 4 & % 89.09% Koradi Unit % 58.63% MSPGCL submitted the Maharashtra State Load Dispatch Centre (MSLDC) Certificate for actual Availability for FY MSPGCL submitted that the following factors have adversely affected the Availability of its stations in FY Bhusawal TPS: The actual Availability of Bhusawal was lower than target Availability on account of economic shutdown. The economic shut-down of MERC in Case No. 196 of 2017 Page 49 of 250

50 Bhusawal Unit 2 was approved by the Commission for period 1 April, 2015 to 30 June, However, Bhusawal Unit 2 was kept under economic shutdown till 31 October, Chandrapur STPS: The actual Availability of Chandrapur was lower than target Availability on account of economic shut-down. The economic shutdown of Chandrapur Unit 1 was approved by the Commission for the period 1 April, 2015 to 30 June, However, Chandrapur Unit 1 was kept under economic shut-down till 31 August, Subsequently, Chandrapur Unit 1 was declared withdrawn from capacity w.e.f. 1 September, 2015 as there was no consent to operate from Maharashtra Pollution Control Board (MPCB). Chandrapur Unit 2 was declared withdrawn from capacity w.e.f. 12 January, 2016 as there was no consent to operate from MPCB Khaperkheda TPS: The actual Availability of Khaperkheda was lower than target Availability on account of poor coal quality. The average bunkered coal calorific value was 2973 kcal/kg against design calorific value of 4400 kcal/kg and 3500 kcal/kg for Units 1 & 2 and Unit 3 & 4, respectively Koradi TPS: The actual Availability of Koradi was lower than target Availability on account of economic shut-down. The economic shut-down of Koradi Unit 6 was approved by the Commission for period 1 April, 2015 to 30 June, However, Koradi Unit 6 was kept under economic shut-down till 24 August, Parli TPS (including Units 6 & 7): In FY , MSPGCL was forced to withdraw all the Units at Parli TPS due to scarcity of water as a result of scanty rainfall. Parli Units 3 & 4 were completely shut-down during the year. Parli Units 6 & 7 were shut-down from 25 June, 2015 and 8 July, 2015, respectively, for the entire remaining part of the year. MSPGCL submitted that making any alternate arrangement for water on immediate basis to run the thermal station of capacity of 1130 MW is not feasible with scanty rainfall and drought. Any such scheme will require substantial planning and time for successful execution The drought situation in the Marathwada region was a natural calamity over which MSPGCL had no control and hence, a force majeure event. The Commission in its Review dated 3 July, 2017 in Case No. 138 of 2016 had rejected MSPGCL s request to consider the situation of water shortage at MERC in Case No. 196 of 2017 Page 50 of 250

51 Parli as force majeure and allow full fixed cost recovery considering the target Availability as equal to the actual Availability achieved, in the provisional true-up for FY MSPGCL has filed Appeal No. 281 of 2017 before the APTEL against the same and the matter is sub-judice Uran GTPS: The actual Availability of Uran was lower than the target Availability on account of lower receipt of gas. The actual availability of Uran in FY was 52.42%. With the given quantum of gas available at the station, the possible generation was around MU whereas the actual generation was which is 98.15% of the possible generation. The gas availability is beyond the control of MSPGCL. Further, the gas quantity allocated by M/s GAIL (Daily Nominated Quantity (DNQ)) is not always adequate to operate the entire capacity. Hence, 2 or sometimes 3 GTs are being run with available gas quantity. This creates difference in allocated DNQ and actual gas consumption. Also, number of starts/ stops of Units are more as well as condition of partial loading is created because of lesser gas availability Koradi TPS Unit 8: The actual Availability of Koradi Unit 8 was lower than target Availability on account of commissioning and stabilisation activities MSPGCL, in its claim of final true-up for FY , has carried out the pro-rata AFC reduction for all the stations that have not achieved target Availability. However, MSPGCL has requested the Commission to relax the target Availability for Uran on account of gas shortages and allow the full AFC at actual Availability. Commission s Analysis and Ruling As per the MYT Regulations, 2011, full AFC can be recovered only if the actual Availability is equal to or higher than the target. The target Availability for recovery of full AFC for FY was approved in the earlier MTR. The actual Availability is higher than the target Availability only at Nashik, Paras Units 3 & 4, Khaperkheda Unit 5 and Bhusawal Units 4 & 5. The actual Availability as claimed by MSPGCL is same as certified by MSLDC. The Commission has gone through the submissions of the MSPGCL regarding the actual Availability of some of the stations being lower than the target Availability The Commission asked MSPGCL regarding the efforts made to secure MERC in Case No. 196 of 2017 Page 51 of 250

52 adequate water for power generation at Parli TPS (including Units 6 & 7). In reply, MSPGCL submitted the following: (i) Parli TPS is situated in the Marathwada region of Maharashtra, which has been affected on account of severe drought due to scanty rainfall during monsoon of year to (up to July 2017). Consequently, there were restrictions imposed by GoM on water usage for industrial purpose including thermal power generation. This forced MSPGCL to shut-down the Units at Parli TPS for longer duration. Hence, the actual Availability for Parli was lower than the target Availability. (ii) Making any alternate arrangement for water on immediate basis to run the thermal generating station of capacity of 1130 MW is not feasible with scanty rainfall and drought. Any such scheme will require substantial time. (iii)regarding arranging water from alternate sources, MSPGCL has already initiated two projects for making alternate arrangement of water for Parli TPS. One is by way of Lift Irrigation Scheme for lifting floodwater from Loni Sawangi barrage to Majalgaon dam during monsoon, for further usage of the same at Parli TPS. The Loni Sawangi scheme is useful only if there is sufficient rainfall. In addition to this scheme, one more scheme is under consideration for recycling the waste water at Nanded Municipal Corporation and bringing it to Parli TPS through pipelines. (iv) Godavari Marathwada Irrigation Development Corporation, vide its letter dated 29 June, 2015 had denied water for power generation at Parli TPS From the MSLDC Certificate, the Commission observed that the capacity approved by the Commission for economic shutdown for the approved period of economic shutdown was not considered in the certification of actual Availability. Further, the Commission observed that the retired capacity was not declared w.e.f. the date of retirement and the actual Availability has been certified by MSLDC considering as declared capacity of MSPGCL In the final true-up for FY and FY , the Commission had MERC in Case No. 196 of 2017 Page 52 of 250

53 approved the recovery of full AFC and actual performance parameters for Parli (including Units 6 & 7) considering the water shortage as uncontrollable factor. However, in the final true-up for FY and provisional true-up for FY , the Commission had not approved the recovery of full AFC for Parli. MSPGCL has challenged the same before the APTEL and the matter is sub-judice. Hence, the Commission deems it fit to continue with its approach in the provisional true-up for FY and has accordingly reduced the recovery of AFC proportionately for Parli (including Units 6 & 7) at actual Availability, in the final true-up for FY The Commission asked MSPGCL to submit the supporting documents for substantiating the actual gas receipt in FY MSPGCL submitted the copies of actual gas receipts for FY From MSPGCL s submissions and the material furnished, the Commission finds merit in MSPGCL s contention regarding the shortage of gas, set out above. The Commission had allowed the recovery of full AFC for Uran GTPS in the final true-up for FY , FY and FY considering the shortage of gas as uncontrollable. In continuation of that approach, the recovery of full AFC, as trued-up in this, has been allowed for Uran GTPS at actual Availability for FY In the MYT for the 3 rd Control Period, the Commission had directed MSPGCL to explore the possibilities of procuring gas from alternate sources, along with efforts to obtain more from existing sources. However, the efforts of MSPGCL have not resulted in an increase in the gas available for Uran GTPS. MSPGCL should continue to explore the possibilities of procuring gas from alternative sources so as to optimise the generation and corresponding cost at Uran GTPS, along with efforts to obtain more gas from existing sources and report these efforts and their outcome in its next MYT Petition. Station/Unit Table 4-3: Availability for FY Provisional true-up Target Approved in MTPR/ Tariff Target Approved by Commission Actual claimed by MSPGCL Final true-up Actual certified by MSLDC MERC in Case No. 196 of 2017 Page 53 of 250 Approved in this for full AFC Recovery Bhusawal 80.00% 80.00% 66.51% 66.51% 80.00% Chandrapur 80.00% 80.00% 77.51% 77.51% 80.00% Khaperkheda 85.00% 85.00% 81.84% 81.84% 85.00% Koradi 72.00% 72.00% 64.39% 64.39% 72.00%

54 Station/Unit Target Approved in MTPR/ Tariff Provisional true-up Target Approved by Commission Actual claimed by MSPGCL Final true-up Actual certified by MSLDC Approved in this for full AFC Recovery Nashik 80.00% 80.00% 92.96% 92.96% 80.00% Parli 80.00% 80.00% 11.18% 11.18% 80.00% Uran 85.00% 52.27% 52.42% 52.42% 52.42% Paras Units 3 & % 85.00% 91.64% 91.64% 85.00% Parli Units 6 & % 85.00% 23.92% 23.92% 85.00% Khaperkheda Unit % 85.00% 88.11% 88.11% 85.00% Bhusawal Units 4 & % 85.00% 89.09% 89.09% 85.00% Koradi Unit % % 58.63% 85.00% The recovery of full AFC is allowable at target Availability. As the actual Availability is lower than the target Availability for many of the stations, the Commission has approved the recovery of trued-up AFC for FY on pro-rata basis, for those stations, except for Uran GTPS. For Uran GTPS, the Commission has approved the recovery of full trued-up AFC for FY at actual Availability. 4.5 PLANT LOAD FACTOR (PLF) MSPGCL s Submission The Table below shows the PLF projections approved by the Commission in the tariff determination for FY and actual PLF as claimed by MSPGCL: Table 4-4: Actual PLF for FY as claimed by MSPGCL Station/Unit MTPR/ Actual claimed Tariff by MSPGCL Bhusawal 49.20% 65.87% Chandrapur 64.78% 74.95% Khaperkheda 71.47% 74.73% Koradi 53.68% 62.27% Nashik 79.55% 89.83% Parli 25.66% 9.20% Uran 58.57% 49.16% Paras Units 3 & % 86.62% Parli Units 6 & % 20.55% Khaperkheda Unit % 83.47% Bhusawal Units 4 & % 88.28% Koradi Unit % 48.09% MERC in Case No. 196 of 2017 Page 54 of 250

55 4.5.2 MSPGCL submitted the MSLDC Certificate for the actual PLF for FY MSPGCL submitted that on account of various reasons like improvement in power supply situation, reduction in demand during peak monsoon period and winter season, the frequency of backing down instructions / zero schedule instructions to MSPGCL Units has increased during FY The loss of generation on account of such backing down was 1595 MU during FY , which has increased to 5610 MU during FY Commission s Analysis and Ruling MSPGCL has claimed the actual PLF for Chandrapur STPS as 74.95% whereas the actual PLF as per the MSLDC Certificate is 74.05%. In reply to a query in this regard, MSPGCL submitted that this discrepancy is due to inadvertent error in MSPGCL s submissions and the actual PLF as per the MSLDC certificate is to be considered Based on analysis of actual generation and backing down data submitted by MSPGCL, it is observed that even after considering the backing down, the actual generation in FY was lower than the net generation approved by the Commission in MYT The Commission has considered the actual PLF as certified by MSLDC in the Station/Unit final true-up for FY Table 4-5: PLF for FY Provisional true-up MTPR/ Tariff Approved by Commission Actual claimed by MSPGCL Final true-up Actual certified by MSLDC Approved in this Bhusawal 49.20% 63.35% 65.87% 65.87% 65.87% Chandrapur 64.78% 74.06% 74.95% 74.05% 74.05% Khaperkheda 71.47% 74.73% 74.73% 74.73% 74.73% Koradi 53.68% 58.64% 62.27% 62.27% 62.27% Nashik 79.55% 89.74% 89.83% 89.83% 89.83% Parli 25.66% 9.78% 9.20% 9.20% 9.20% Uran 58.57% 49.16% 49.16% 49.16% 49.16% Paras Units 3 & % 86.63% 86.62% 86.62% 86.62% Parli Units 6 & % 20.57% 20.55% 20.55% 20.55% Khaperkheda Unit % 83.47% 83.47% 83.47% 83.47% Bhusawal Units 4 & % 88.21% 88.28% 88.28% 88.28% Koradi Unit % % 48.09% 48.09% MERC in Case No. 196 of 2017 Page 55 of 250

56 4.6 AUXILIARY ENERGY CONSUMPTION (AEC) MSPGCL s Submission The actual AEC achieved for FY is as shown in the Table below: Table 4-6: Actual AEC for FY Norm Approved in Station/Unit MTPR/Tariff Actual claimed by MSPGCL Bhusawal 9.94% 10.89% Chandrapur 8.71% 8.27% Khaperkheda 9.70% 10.79% Koradi 9.91% 13.13% Nashik 13.41% 10.78% Parli 14.57% 16.18% Uran 3.00% 3.00% Paras Units 3 & % 10.72% Parli Units 6 & % 10.18% Khaperkheda Unit % 6.34% Bhusawal Units 4 & % 6.43% Koradi Unit % 7.76% MSPGCL submitted that the following factors have adversely affected the AEC of its stations in FY Bhusawal TPS and Koradi TPS: Higher AEC was due to frequent outages of the Units due to economic shut-down for longer period than that approved by the Commission and frequent zero schedules. This has resulted in lower gross generation but comparatively higher AEC Khaperkheda TPS: Higher AEC was due to partial loading and low PLF due to poor coal quality Parli TPS: Higher AEC was due to frequent outages of the Units due to economic shutdown for longer period than that approved by the Commission and water shortage. This has resulted in lower gross generation but comparatively higher AEC Paras Units 3 & 4 and Parli Units 6 & 7: The guaranteed auxiliary consumption as per the Original Equipment Manufacturer (OEM) for new Units at Paras and Parli is 9.98%. The achievable auxiliary consumption applying operational margin of 6.5% over the guaranteed auxiliary MERC in Case No. 196 of 2017 Page 56 of 250

57 consumption works out to 10.63%. The actual AEC for Paras Units 3 & 4 and Parli Units 6 & 7 is in line with the guaranteed performance plus operational margin of 6.5% Khaperkheda Unit 5 and Bhusawal Units 4 & 5: Higher AEC was due to partial loading on account of backing down during the monsoon period (June 2015 to September 2015) Koradi Unit 8: Higher AEC was due to partial loading/ outages during commissioning and stabilisation activities In accordance with the MYT Regulations, 2011, MSPGCL has proposed the sharing of gains/losses on account of variation in AEC for FY Commission s Analysis and Ruling In the true-up for the previous years, the Commission had not accepted the coal-related problems, partial loading and frequent outages as cogent reasons for relaxing the norms of operation. The same approach has been adopted for the true-up for FY MSPGCL has sought to justify the higher AEC for Paras Units 3 & 4 and Parli Units 6 & 7 citing the parameters guaranteed by the OEM. MSPGCL has only reiterated its submissions made in the true-up Petitions for the previous years. This issue was dealt in the true-up s for the previous years wherein the Commission had ruled that the rationale applied by MSPGCL is not tenable for revising the normative AEC for Paras Units 3 & 4 and Parli Units 6 & 7 in the true-up exercise. In line with that approach, the Commission has not revised the normative AEC for Paras Units 3 & 4 and Parli Units 6 & 7 for FY The Commission has approved the normative AEC in the final true-up for FY Station/Unit Table 4-7: AEC for FY Provisional Norm true-up Approved in Norm MTPR/ Approved by Tariff Commission Actual claimed by MSPGCL Final true-up Norm Approved in this Bhusawal 9.94% 9.94% 10.89% 9.94% MERC in Case No. 196 of 2017 Page 57 of 250

58 Station/Unit Provisional Norm Final true-up true-up Approved in Norm Actual Norm MTPR/ Approved by claimed by Approved in Tariff Commission MSPGCL this Chandrapur 8.71% 8.71% 8.27% 8.71% Khaperkheda 9.70% 9.70% 10.79% 9.70% Koradi 9.91% 10.81% 13.13% 10.81% Nashik 13.41% 13.41% 10.78% 13.41% Parli 14.57% 14.57% 16.18% 14.57% Uran 3.00% 3.00% 3.00% 3.00% Paras Units 3 & % 8.50% 10.72% 8.50% Parli Units 6 & % 8.50% 10.18% 8.50% Khaperkheda Unit % 6.00% 6.34% 6.00% Bhusawal Units 4 & % 6.00% 6.43% 6.00% Koradi Unit % % 6.00% The Commission has considered the difference between the actual and normative AEC for computing the sharing of efficiency gains/losses for FY in accordance with the MYT Regulations, GROSS GENERATION AND NET GENERATION Commission s Analysis and Ruling The actual total thermal generation for FY is lower than that projected by the Commission in the tariff determination for FY The Commission has considered the actual gross generation as submitted by MSPGCL and the net generation based on the approved normative AEC. Station/Unit Table 4-8: Gross Generation and Net Generation for FY (MU) Approved in MTPR/ Tariff Gross Net Generation Generation Approved in provisional true-up Gross Net Generation Generation Actual claimed by MSPGCL Gross Generation Net Generation Approved in this Gross Generation Net Generation Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & MERC in Case No. 196 of 2017 Page 58 of 250

59 Station/Unit Approved in MTPR/ Tariff Gross Net Generation Generation Approved in provisional true-up Gross Net Generation Generation Actual claimed by MSPGCL Gross Generation Net Generation Approved in this Gross Generation Net Generation Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Total The variation in station wise actual net generation as claimed by MSPGCL and as approved by the Commission in this is on account of variation in actual AEC with respect to the AEC norms. As AEC is a controllable parameter, the Commission has carried out sharing of gains and losses due to variation in AEC as discussed in Section 4.31 of the. 4.8 GROSS STATION HEAT RATE (GSHR) MSPGCL s Submission The actual GSHR achieved in FY is as shown in the Table below: Table 4-9: Actual GSHR for FY as claimed by MSPGCL (kcal/kwh) Station/Unit Norm Approved in Actual claimed MTPR/ Tariff by MSPGCL Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit The actual GSHR of most of the stations in FY is below the norm. The actual GSHR for Koradi Unit 8 was higher than the norm due to partial loading and high oil consumption during stabilisation period. The actual GSHR for Parli and Uran was marginally higher than the norm due to partial loading of the Units due to water and gas shortage, respectively MSPGCL has proposed the sharing of gains and losses in total variable MERC in Case No. 196 of 2017 Page 59 of 250

60 charges, on account of variation in norms of operation, in accordance with the MYT Regulations, Commission s Analysis and Ruling The Commission observes that MSPGCL could achieve the actual GSHR close to the norm for most of its stations. Only for the new Unit 8 at Koradi, the actual GSHR achieved is significantly higher than the norm due to stabilisation issues Koradi TPS: The Commission, in the tariff determination for FY , had approved the normative GSHR of kcal/kwh for Koradi based on the recommendations of CPRI, in which the benefit of EE R&M of Unit 6 was considered. The EE R&M of Unit 6 did not take place in FY as originally envisaged. In light of the same, the Commission, in the provisional true-up for FY had revised the normative GSHR for Koradi to kcal/kwh The Commission has considered the normative GSHR in the final true-up for FY As GSHR is a controllable performance parameter, the Commission has computed the sharing of gains/losses as per the MYT Regulations, Table 4-10: GSHR for FY (kcal/kwh) Provisional Norm true-up Approved in Station/Unit Norm Actual MTPR/ Tariff Approved by claimed by Final true-up Norm Approved in this Commission MSPGCL Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit MERC in Case No. 196 of 2017 Page 60 of 250

61 4.9 SECONDARY FUEL OIL CONSUMPTION (SFOC) MSPGCL s Submission The actual SFOC achieved for FY is as shown in the Table below: Table 4-11: Actual SFOC for FY as claimed by MSPGCL (ml/kwh) Station/Unit Norm Approved in Actual claimed MTPR/ Tariff by MSPGCL Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Except for Parli and Koradi Unit 8, the actual SFOC for all the stations is lower than the norms. The SFOC of Koradi Unit 8 was higher than the norm due to stabilisation issues. The SFOC of Parli was higher than the norm due to partial loading / outages of the Units due to water shortage MSPGCL has proposed the sharing of gains and losses in total variable charges, on account of variation in norms of operation, in accordance with the MYT Regulations, Commission s Analysis and Ruling The actual SFOC for all the stations except Parli and Koradi Unit 8 is lower than the norms. The Commission has considered the normative SFOC in the final true-up for FY As SFOC is a controllable performance parameter, the Commission has computed the sharing of gains/losses as per the MYT Regulations, Table 4-12: SFOC for FY (ml/kwh) Provisional Norm true-up Approved in Station/Unit Norm Actual MTPR/ Approved by claimed by Tariff Commission MSPGCL Final true-up Norm Approved in this Bhusawal MERC in Case No. 196 of 2017 Page 61 of 250

62 Station/Unit Provisional Norm Final true-up true-up Approved in Norm Actual Norm MTPR/ Approved by claimed by Approved in Tariff Commission MSPGCL this Chandrapur Khaperkheda Koradi Nashik Parli Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit TRANSIT AND HANDLING LOSS MSPGCL s Submission The actual transit and handling loss achieved for FY is as shown in the Table below: Table 4-13: Actual transit and handling loss for FY as claimed by MSPGCL Station/Unit Norm Approved in Actual claimed MTPR/ Tariff by MSPGCL Bhusawal 0.80% 1.28% Chandrapur 0.80% 0.86% Khaperkheda 0.80% 0.58% Koradi 0.80% 0.32% Nashik 0.80% 1.14% Parli 0.80% 0.18% Paras Units 3 & % 1.30% Parli Units 6 & % 0.18% Khaperkheda Unit % 0.65% Bhusawal Units 4 & % 1.28% Koradi Unit % 0.19% MSPGCL has proposed the sharing of gains and losses in total variable charges, on account of variation in norms of operation, in accordance with the MYT Regulations, Commission s Analysis and Ruling The MYT Regulations, 2011 specify the normative transit and handling loss MERC in Case No. 196 of 2017 Page 62 of 250

63 of 0.80% for non-pit head generating stations for all types of coal. Although MSPGCL has procured imported coal in FY , all such contracts were placed for delivery at the respective plant boundaries. Hence, in accordance with the Regulations, no transit and handling loss is applicable for imported coal The Commission has considered the normative transit and handling loss in the final true-up for FY As transit and handling loss is a controllable performance parameter, the Commission has computed the sharing of gains/losses as per the MYT Regulations, Table 4-14: Transit and handling loss for FY Norm Provisional Approved true-up Final true-up Station/Unit in MTPR/ Tariff Norm Approved by Commission Actual claimed by MSPGCL Norm Approved in this Bhusawal 0.80% 0.80% 1.28% 0.80% Chandrapur 0.80% 0.80% 0.86% 0.80% Khaperkheda 0.80% 0.80% 0.58% 0.80% Koradi 0.80% 0.80% 0.32% 0.80% Nashik 0.80% 0.80% 1.14% 0.80% Parli 0.80% 0.80% 0.18% 0.80% Paras Units 3 & % 0.80% 1.30% 0.80% Parli Units 6 & % 0.80% 0.18% 0.80% Khaperkheda Unit % 0.80% 0.65% 0.80% Bhusawal Units 4 & % 0.80% 1.28% 0.80% Koradi Unit % % 0.80% 4.11 GROSS CALORIFIC VALUE (GCV) OF FUELS MSPGCL s Submission The actual GCV of fuels for FY is as given in the Table below: Table 4-15: GCV of fuels for FY as submitted by MSPGCL Coal Station/Unit Domestic Imported As fired FO LDO Gas Coal Coal Coal kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/scm Bhusawal Chandrapur Khaperkheda Koradi MERC in Case No. 196 of 2017 Page 63 of 250

64 Station/Unit Domestic Coal Coal Imported Coal As fired Coal FO LDO Gas kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/scm Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Commission s Analysis and Ruling The MYT Regulations, 2011 specify that the GCV of coal be considered on as fired basis. In line with the previous s for truing-up of fuel expenses, the Commission has considered the bunkered calorific value ( as fired GCV) of coal and actual proportion (blending) of domestic and imported coal for the respective stations, as submitted by MSPGCL The Commission has considered the GCV of fuels for final true-up of fuel cost for FY , as submitted by MSPGCL LANDED PRICES OF FUELS MSPGCL s Submission The actual prices of fuels for FY is as given in the Table below. As regards the impact of Credit Notes on account of grade slippages from coal companies, MSPGCL submitted that till FY , the reduction in coal cost due to issuance of Credit Notes by the coal companies was reflected in the final accounts based on actual realisation and was not reflected in the daily cost accounting. Table 4-16: Actual prices of fuels as submitted by MSPGCL Coal Station/Unit Domestic Imported FO LDO Gas Coal Coal Rs./MT Rs./MT Rs./kL Rs./kL Rs./'000 SCM Bhusawal Chandrapur Khaperkheda Koradi MERC in Case No. 196 of 2017 Page 64 of 250

65 Coal Station/Unit Domestic Imported FO LDO Gas Coal Coal Rs./MT Rs./MT Rs./kL Rs./kL Rs./'000 SCM Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Commission s Analysis and Ruling The actual station-wise landed price of domestic coal as submitted by MSPGCL is after considering the actual transit and handling loss for the respective station. The Commission has re-computed the station-wise landed price of domestic coal considering the approved norms of transit and handling loss. The Commission has considered the actual station-wise landed prices of imported coal as submitted by MSPGCL For Uran, the Commission has considered the actual gas price as submitted by MSPGCL. The Commission has considered the actual prices of secondary fuel oil as submitted by MSPGCL. Table 4-17: Landed prices of fuels considered by Commission in final true-up for FY Coal Domestic Imported FO LDO Gas Station/Unit Coal Coal Rs./MT Rs./MT Rs./kL Rs./kL Rs./'000 SCM Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & MERC in Case No. 196 of 2017 Page 65 of 250

66 Station/Unit Domestic Coal Coal Imported Coal FO LDO Gas Rs./MT Rs./MT Rs./kL Rs./kL Rs./'000 SCM Koradi Unit OTHER GENERATION-RELATED COSTS MSPGCL s Submission MSPGCL has claimed other generation-related costs of Rs Crore towards coal handling charges, siding charges, oil handling charges, water charges, etc. Commission s Analysis and Ruling The actual other generation-related costs approved by the Commission during the last 4 years is as shown in the Table below: Table 4-18: Actual other generation-related costs for FY to FY (Rs. Crore) Station FY FY FY FY Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Hydro Total The actual other generation-related costs claimed by MSPGCL is comparable to the actual other generation-related costs approved by the Commission in the true-up of previous years The actual other generation-related costs claimed are towards coal handling charges, siding charges, oil handling charges, water charges, etc. From the MERC in Case No. 196 of 2017 Page 66 of 250

67 perusal of the reconciliation of actual expenses with the audited accounts submitted by MSPGCL, the Commission observed that the actual other generation-related costs claimed are in line with the audited accounts In line with the approach in previous s, the Commission has approved the other generation-related cost as claimed by MSPGCL, in the final true-up for FY The other generation-related costs approved by the Commission in the final true-up for FY is as given in the Table below: Table 4-19: Other generation-related costs for FY (Rs. Crore) Particulars Claimed by MSPGCL Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Total ENERGY CHARGES MSPGCL s Submission MYT Regulations, 2011 specify that the energy charges cover the landed fuel costs and shall be computed by multiplying the ex-bus generation with the Rate of Energy Charge (REC) The actual energy charges including the other generation-related costs as per the audited accounts for FY is Rs. 11, Crore. The difference in the approved and actual energy charges is on account of variation in generation, fuel prices, GCV of fuels and performance parameters. The energy charges at normative performance parameters has been computed considering the actual gross generation, fuel prices and GCV, for computing MERC in Case No. 196 of 2017 Page 67 of 250

68 the sharing of gains and losses on account of variations in performance parameters in accordance with the MYT Regulations, Commission s Analysis and Ruling The Commission has computed the REC and energy charges for each station considering the approved generation, performance parameters, GCV of fuels and landed prices of fuels. Table 4-20: REC and Energy Charges for FY Actual as claimed by MSPGCL Normative as claimed by MSPGCL Normative approved in this Station/Unit Energy Energy Energy REC REC REC Charges Charges Charges (Rs./kWh) (Rs./kWh) (Rs./kWh) (Rs. Crore) (Rs. Crore) (Rs. Crore) Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Total The variation in energy charges at normative performance parameters as computed by MSPGCL and as computed by the Commission is on account of computational error by MSPGCL in the secondary fuel oil prices As the energy charges approved by the Commission are at target norms of operation, viz., GSHR, SFOC and transit and handling loss, and the norms of operation are controllable factors, the Commission has undertaken the sharing of gains and losses in energy charges on account of variation in norms of operation ADDITIONAL CAPITALISATION MSPGCL s Submission MSPGCL has achieved actual additional capitalisation of Rs Crore as MERC in Case No. 196 of 2017 Page 68 of 250

69 against Rs Crore approved by the Commission. The claimed actual additional capitalisation is inclusive of deferred works of new Units namely Paras Unit 4, Parli Unit 7, Khaperkheda Unit 5 and Bhusawal Units 4 & 5. Table 4-21: Actual additional capitalisation for FY (Rs. Crore) Particulars Approved in MTPR/ Tariff Actual as claimed by MSPGCL Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Hydro Total Commission s Analysis and Ruling The additional capitalisation claimed by MSPGCL falls under the three categories namely (i) Works approved by the Commission by way of inprinciple approval of Detailed Project Reports (DPRs), (ii) miscellaneous works for which the in-principle approval of the Commission was not required to be sought, and (iii) deferred works of new Units as claimed within the original scope of work The Commission has examined the actual additional capitalisation claimed by MSPGCL as against the schemes accorded in-principle approval. The Commission s approach for approving the additional capitalisation in final true-up of FY is as follows: DPR Schemes (above Rs. 10 Crore each): 100% capitalisation is approved for all DPR schemes capitalised in the year in respect of which in-principle approval has been accorded. Non-DPR schemes (less than Rs. 10 Crore each): MERC in Case No. 196 of 2017 Page 69 of 250

70 o Where some DPR schemes have been capitalised during the year, capitalisation of the non-dpr schemes has been considered upto 20% of the cost of the capitalised DPR schemes. o Where there has been no capitalisation of any DPR scheme in the year, 50% of the cost of capitalised non-dpr schemes has been approved As regards disallowing the capitalisation of non-dpr schemes exceeding 20% of the DPR schemes, in its Judgment in Appeal No. 160 of 2012 the APTEL had held as under: 110. We do not find infirmity in the State Commission restricting the capital expenditure on non-dpr schemes to 20% of the capitalisation approved for DPR Scheme. However, we feel that the DPR schemes which had not approved and were awaiting approval of the State Commission should be considered by the State Commission and allowed after prudence check MSPGCL has claimed the additional capitalisation of Rs Crore for Paras Units 3 & 4 under the head transfer of asset from Paras project. In reply to Commission s query in this regard, MSPGCL submitted that this additional capitalisation pertains to difference in rates of steel and cement supplied for construction of quarters and other major works like foundation/superstructure, construction of Natural Draft Cooling Tower (NDCT), structural steel work, construction of Cooling Water Pump House (CWPH) etc. These works which were within the original scope were partly capitalised in FY and the balance work of quarters were capitalised in the same asset class in FY MSPGCL has claimed the additional capitalisation of Rs Crore for Paras Units 3 & 4 under the head Asset transferred from Civil Project. In reply to Commission s query in this regard, MSPGCL submitted that this amount includes (i) Rs Crore incurred towards land compensation, and (ii) Rs Crore incurred towards civil works. As regards the expenditure of Rs Crore, MSPGCL submitted that as per the award declared by Revenue authority, the land is handed over in phased manner and accordingly, the assets are transferred. After issuance of final payment, the asset is capitalised in FY As regards the expenditure of Rs Crore, MSPGCL submitted the following: MERC in Case No. 196 of 2017 Page 70 of 250

71 During the process of raising work of ash bund, the hearting is damaged frequently by the ash lifting agencies in raising of ash bund. Further, the work was carried without shutdown of plant, so the site was handed over in phased manner. Site was not clear for working and there were also problems in procuring the materials on account of royalty issue. Therefore, the work was delayed. During the process of building works, due to anti-social activities at site, the progress of work was affected. Further, due to non-availability of sand, the work got hampered badly till the auction of sand ghats by the Revenue Authority. Therefore, the work was delayed. During the construction of Reinforced Cement Concrete (RCC) barrage, there was a historical monument called Chhatri located near the barrage on the banks of river. Therefore, additional work of RCC wing wall was executed so as to protect the monument from collapse as per the directives of Archaeological Survey of India (ASI). Therefore, the work was delayed MSPGCL has claimed the additional capitalisation of Rs Crore for Paras Units 3 & 4 under the head Addition due to change in classification of Inventory. In reply to Commission s query in this regard, MSPGCL submitted that it placed 7 orders on BHEL for procurement of spares for smooth running of Units 3 & 4 which were capital in nature and the same has been capitalised as per MSPGCL s policy. Further, MSPGCL follows the principles of spares/inventory booking as expense only after its consumption After perusal of MSPGCL s submissions, the Commission finds it prudent to allow the additional capitalisation for Paras Units 3 & 4 as claimed by MSPGCL after the cut-off date in accordance with Regulation 30.3 of the MYT Regulations, MSPGCL has claimed the additional capitalisation of Rs Crore for Khaperkheda Unit 5 under the head Transfer from Civil & Project. In reply to Commission s query in this regard, MSPGCL submitted that this expenditure includes (i) Rs Crore towards Railway TNC and Central panel building, (ii) Rs Crore towards Rail over bridge and (iii) Rs Crore towards Railway siding works. The expenditure of Rs Crore is towards the work which was covered under provision of road bridges and railway siding, it was completed in FY before cut-off date and was in books of Khaperkheda Project civil MERC in Case No. 196 of 2017 Page 71 of 250

72 division and was in service from completion of work. However, inadvertently assets were laying in the books of account of Khaperkheda civil project and the same has been transferred to O&M in FY The expenditure of Rs Crore is towards the works of Rail Over Bridge (ROB) which was delayed on account of extraneous problems at site, non-availability of approved vendors for carrying out the works and delay in inspection of completed works by the appropriate authorities. The expenditure of Rs Crore is towards the railway siding works on account of increase in scope of work, delay in checking of completed works by railways department After perusal of MSPGCL s submissions, the Commission finds it prudent to allow the additional capitalisation for Khaperkheda 5 as claimed by MSPGCL after the cut-off date in accordance with Regulation 30.3 of the MYT Regulations, MSPGCL has claimed the additional capitalisation of Rs Crore for Bhusawal Units 4 & 5. In reply to Commission s query in this regard, MSPGCL submitted this expenditure includes BTG spares, pipeline works, ash water recovery system etc. After perusal of MSPGCL s submissions, the Commission finds it prudent to allow the additional capitalisation for Bhusawal Units 4 & 5 as claimed by MSPGCL within the cut-off date The additional capitalisation approved by the Commission in the final true-up for FY is as given in the Table below: Table 4-22: Additional capitalisation for FY (Rs. Crore) Provisional true-up Station/Unit MTPR/ Tariff Approved Final true-up MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & MERC in Case No. 196 of 2017 Page 72 of 250

73 Station/Unit MTPR/ Tariff Provisional true-up Approved Final true-up MTR Petition Approved in this Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Hydro Sub-total MEANS OF FINANCE OF ADDITIONAL CAPITALISATION MSPGCL s Submission The means of finance for the actual additional capitalisation has been considered in the debt-equity ratio of 70:30. Commission s Analysis and Ruling In line with the true-up of previous years, the Commission has considered the means of finance of the approved additional capitalisation in the debt: equity ratio of 70: ANNUAL FIXED CHARGES (AFC) Regulation 40.1 of the MYT Regulations, 2011 specifies the components of AFC as follows: a. Return on Equity (RoE) b. Interest on Loan c. Depreciation d. Operation and Maintenance (O&M) expenses e. Interest on Working Capital (IoWC) Less: f. Non-Tariff Income (NTI) 4.18 RETURN ON EQUITY (ROE) MSPGCL s Submission The Commission had approved RoE of Rs Crore in the tariff determination for FY As against the same, MSPGCL has claimed RoE of Rs Crore in the final true-up for FY The closing equity balance for FY has been considered as the MERC in Case No. 196 of 2017 Page 73 of 250

74 opening equity balance for FY The equity addition for FY has been considered as equivalent to 30% of the actual additional capitalisation claimed for the year. RoE has been computed as per the Regulations. Commission s Analysis and Ruling In accordance with the MYT Regulations, 2011, RoE is allowable on the opening equity for the year. The Commission observed that although MSPGCL stated that RoE has been computed in accordance with the Regulations, RoE has been claimed on equity addition during the year also The Commission has considered the closing equity approved for FY as the opening equity for FY Further, in line with the Commission s Review dated 8 August, 2018 in Case No. 77 of 2018, the Commission has considered the revised equity balance for Koradi Unit 8 for FY Table 4-23: Debt and Equity of Koradi Unit 8 as on COD Particulars Actual claimed in Approved by the Approved in this Case No. 59 of Commission in 2017 Case No. 59 of 2017 Capital Cost as on COD (Rs. Crore) Debt (%) 75.63% 75.63% 72.49% Debt (Rs. Crore) Equity (%) 24.37% 24.37% 27.51% Equity (Rs. Crore) For Koradi Unit 8, the RoE has been worked out on Equity approved in this and accordingly the Interest on Loan has also been worked out considering the revised debt amount approved in this Chandrapur Units 1 & 2 of 210 MW each were retired w.e.f. 1 September, 2015 and 21 January, 2016 onwards. Parli Unit 3 was retired w.e.f. 1 April, 2016 i.e., Parli Unit 3 was in operation for full year of FY and retired on the last day of the year. MSPGCL has deducted the equity portion of the retired Units derived based on the proportion of the Gross Fixed Assets (GFA) of the retired Units to the opening GFA for the year. The Commission has considered the equity portion of the retired Units namely Chandrapur Units 1 & 2 and Parli Unit 3, the same as submitted by MSPGCL. MERC in Case No. 196 of 2017 Page 74 of 250

75 The Commission has computed the station-wise RoE for FY considering the approved opening equity for the respective station at the rate of 15.50%. Further, the Commission has deducted RoE on the equity portion corresponding to Chandrapur Units 1 & 2 from the effective date of retirement for the balance period of FY , from the RoE of Chandrapur. The Commission has also deducted the RoE corresponding to the capacity under economic shutdown and for the corresponding period of economic shutdown during FY This approach is in line with the approach of the Commission adopted in the provisional true-up for FY In accordance with the Commission s decision on approval of economic shut-down, RoE is not allowable for the capacity under shutdown for the period of economic shutdown. The Commission in the provisional true-up had considered the economic shut-down of Koradi Units 5 & 6, however, in the instant Petition, MSPGCL submitted that only Unit 6 was under economic shut-down. Table 4-24: RoE for FY (Rs. Crore) Provisional true-up Station/Unit MTPR/ Tariff Approved Final true-up MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Hydro Total The Return of Equity for Koradi Unit 8 as approved by the Commission is higher than that claimed by MSPGCL as the Commission has considered the revised Equity as per the Commission s Review in Case No. 77 of MERC in Case No. 196 of 2017 Page 75 of 250

76 4.19 INTEREST ON LOAN MSPGCL s Submission The Commission had approved interest expenses of Rs Crore in the tariff determination for FY As against the same, MSPGCL has claimed interest and finance charges of Rs Crore in the final true-up for FY MSPGCL submitted that there were no actual outstanding loans pertaining to Chandrapur Units 1 & 2 and Parli Unit 3 retired during FY The closing loan balance for FY is considered as the opening loan balance for FY The addition to loans during the year has been considered as equivalent to the debt portion of the claimed actual additional capitalisation. The depreciation for the year has been considered as the normative repayment for the year. The weighted average interest rate as per the actual loan portfolio at the beginning of the year has been considered as the interest rate. The interest on loan has been computed applying the weighted average rate of interest on the average loan for the year In addition to the normative interest expenses, MSPGCL has claimed the finance charges of Rs Crore comprising of guarantee fee, service fee, bank remittance charges, bank commission, stamp duty towards working capital limit enhancement, etc. The guarantee fee is payable to GoM for providing guarantee to financial instruments for providing loan assistance to MSPGCL. Commission s Analysis and Ruling The Commission has considered the station-wise closing loan balances approved for FY as the opening loan balances for FY Further, in line with the Commission s Review dated 8 August, 2018 in Case No. 77 of 2018, the Commission has considered the revised loan balance for Koradi Unit 8 for FY The loan addition during the year has been considered as equivalent to the debt portion of the approved additional capitalisation. The allowable depreciation for the year has been considered as the normative repayment for the year. The actual weighted average interest rate has been applied to the average loan for the year for computing the interest expenses. In addition to the normative interest expenses, the Commission has considered the actual finance charges (Guarantee Fees and Bank Charges) as claimed by MSPGCL in accordance with the provisions of Regulations. MERC in Case No. 196 of 2017 Page 76 of 250

77 Further, the Commission has deducted the interest and finance charges corresponding to the capacity under economic shutdown and for the corresponding period of economic shutdown during FY from the total interest and finance charges as computed above. This approach is in line with the approach of the Commission adopted in the provisional true-up for FY The interest and finance charges pertaining to the capacity under economic shutdown is allowed separately under Idle Capacity Charges. Table 4-25: Interest and finance charges for FY (Rs. Crore) Provisional true-up Station/Unit MTPR/ Tariff Approved Final true-up MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Hydro Total DEPRECIATION MSPGCL s Submission The Commission had approved depreciation of Rs Crore in the tariff determination for FY As against the same, MSPGCL has claimed depreciation of Rs Crore in the final true-up for FY The claimed depreciation is inclusive of Head Office depreciation of Rs Crore The provisional Transfer Scheme notified under Section 131 (5) (g) of the EA, 2003 on 6 June, 2005 was finalized vide the notification Maharashtra Electricity Reforms Transfer (First Amendment) Scheme, 2016 dated 31 MERC in Case No. 196 of 2017 Page 77 of 250

78 March, This has resulted in an increase in net fixed assets of MSPGCL by Rs Crore as on 5 June, Schedule H of the Notification provides break-up of revised valuation of assets at various stations of MSPGCL as on 5 June This revised valuation of assets has an impact on the book value of assets; however, it does not have any impact on the regulatory value of assets The depreciation has been computed in accordance with the MYT Regulations, MSPGCL has considered the overall life of the old thermal generating stations as 40 years and for new Units (Paras Units 3 & 4, Parli Units 6 & 7, Khaperkheda Unit 5, Bhusawal Units 4 & 5 and Koradi Unit 8) as 25 years. The depreciation has been computed on the opening GFA for the full year and on pro-rata basis from the date of capitalisation during the year. Commission s Analysis and Ruling The Commission has perused the Maharashtra Electricity Reforms Transfer (First Amendment) Scheme, 2016 dated 31 March, 2016 wherein the value of Net Fixed Assets of MSPGCL as on 5 June, 2005 had increased by Rs Crore. MSPGCL has not claimed any impact of this revaluation of its assets Further, from the computations of depreciation submitted by MSPGCL, the Commission observed that MSPGCL s claim of depreciation for Nashik TPS for FY is only 50% of the depreciation computed The Commission has computed the depreciation for FY in accordance with the MYT Regulations, The closing GFA and accumulated depreciation for FY has been considered as the opening GFA and accumulated depreciation for FY The Commission observed that the opening balances considered by MSPGCL for FY for some of the stations are in variation to that approved by the Commission in the final true-up for FY If the accumulated depreciation for a particular asset class has reached 70% of the allowable depreciation, the remaining depreciable value has been spread over the remaining useful life of the station, as submitted by MSPGCL. Else, the depreciation on opening GFA and additional capitalisation has been computed at the depreciation rates specified in the Regulations. Although MSPGCL submitted that the depreciation on additional capitalisation has been computed on pro-rata basis from the date of capitalisation, the Commission observed from the MERC in Case No. 196 of 2017 Page 78 of 250

79 computations submitted by MSPGCL that the depreciation on additional capitalisation has been computed for half year. Further, the Commission observed that MSPGCL has not furnished the dates of commissioning of additional capitalisation for many of the works claimed. The Commission has computed the depreciation on opening GFA for full year and depreciation on additional capitalisation has been computed for half year. The Commission has considered Head Office depreciation as claimed by MSPGCL Further, the Commission has deducted the depreciation corresponding to the capacity under economic shutdown and for the corresponding period of economic shutdown during FY from the total depreciation as computed above. This approach is in line with the approach of the Commission adopted in the provisional true-up for FY The depreciation pertaining to the capacity under economic shutdown is allowed separately under Idle Capacity Charges. Table 4-26: Depreciation for FY (Rs. Crore) Provisional true-up Station/Unit MTPR/ Tariff Approved Final true-up MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Hydro Total OPERATION AND MAINTENANCE (O&M) EXPENSES MSPGCL s Submission MERC in Case No. 196 of 2017 Page 79 of 250

80 The Commission had approved normative O&M expenses of Rs Crore in the tariff determination for FY As against the same, MSPGCL has claimed normative O&M expenses of Rs Crore and the actual O&M expenses of Rs Crore in the final true-up for FY The total actual O&M expenses for FY was Rs Crore. MSPGCL has claimed the actual O&M expenses of Rs Crore after subtracting the O&M expenses to be claimed under Idle Capacity Charges for the capacity under economic shutdown The actual O&M expense claimed by MSPGCL for true-up is inclusive of the actual impact of pay revision amounting to Rs Crore. Table 4-27: O&M expenses claimed by MSPGCL for FY (Rs. Crore) Station/Unit MTPR/ Tariff Provisional true-up MTR Petition Normative Normative Actual as per audited accounts Normative claimed for true-up Actual claimed for true-up Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Hydro Sub-total Impact of Pay Revision Total Commission s Analysis and Ruling MSPGCL has claimed the normative O&M expenses of Rs Crore in the final true-up for FY The Commission observes that while claiming the normative O&M expenses, MSPGCL has referred to the Table 5-17 of the Commission s dated 30 August, 2016 in Case No. 46 of The O&M expenses indicated in the said Table are the O&M expenses for the entire operating capacity, i.e., without factoring in the impact of MERC in Case No. 196 of 2017 Page 80 of 250

81 retirement of Chandrapur Units 1 & 2 and the impact of economic shut-down. The normative O&M expenses approved by the Commission in the provisional true-up for FY were indicated in Table 5-24 of the stated, which was after factoring in the impact of retirement of Chandrapur Units 1 & 2 and the impact of economic shut-down. The Commission has considered the normative O&M expenses for FY as approved in the provisional true-up, except for Koradi Unit 8. For Koradi Unit 8, the Commission has considered the normative O&M expenses for FY as approved in Case No. 59 of Table 4-28: Normative O&M expenses approved by the Commission for FY (Rs. Crore) Final true-up Station/Unit Normative Normative claimed by Approved in MSPGCL this Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Hydro Sub-total Impact of Pay Revision Total The actual total O&M expenses claimed by MSPGCL for FY are Rs Crore. After considering the impact of economic shutdown of Bhusawal Unit 2, Chandrapur Unit 1, Koradi Unit 6 and Parli Unit 3 for the period from 1 April, 2015 to 30 June, 2015, the Commission has worked out the actual O&M expenses corresponding to the operating capacity as Rs Crore. MERC in Case No. 196 of 2017 Page 81 of 250

82 From the audited accounts for FY , the Commission observed that the actual O&M expenses are inclusive of Rs Crore towards provision for doubtful advances, Rs Crore towards loss on obsolescence of fixed assets and Rs Crore towards loss on foreign exchange variance. The Commission sought justification for the above items of expenses. As regards the expenses of Rs Crore towards provision for doubtful advances, MSPGCL submitted that this provision is against investment in subsidiary companies, bad debts, provision against old debtors, etc. As regards the expenses of Rs Crore towards loss on obsolescence of fixed assets, MSPGCL submitted that this amount pertains to provision for loss of value of old Units at Parli (Rs Crore) and Koradi (Rs Crore). Both these expenses of Rs Crore and Rs Crore are provisions made in the audited accounts and are not actual expenses. Hence, the Commission deems it fit to exclude these provisions from the actual O&M expenses for the purpose of computation of gain/loss on account of O&M expenses As regards the expenses of Rs Crore towards loss on foreign exchange variance, MSPGCL submitted that this amount is net loss due to foreign exchange rate variation, which includes loss in Koradi project (Rs Crore), loss on solar project (Rs Crore) and forex gain at Bhusawal, Koradi and Uran (total Rs Crore). Koradi Units 9 & 10 were under construction during FY The Commission, in the approval of final capital cost of Koradi Units 8, 9 & 10 had approved the Foreign Exchange Rate Variation for the project. The solar projects of MSPGCL do not fall under the regulated generation business for which the true-up is being carried out in this. In light of the above, the Commission deems it fit to exclude these expenses of Rs Crore from the actual O&M expenses for the purpose of computation of gain/loss on account of O&M expenses The actual O&M expenses claimed by MSPGCL and considered by the Commission for the purpose of computation of gain/loss in O&M expenses are as shown in the Table below: Table 4-29: Actual O&M expenses for FY (Rs. Crore) Actual O&M Station/Unit expenses claimed by MSPGCL Actual O&M expenses considered by Commission Bhusawal Chandrapur Khaperkheda MERC in Case No. 196 of 2017 Page 82 of 250

83 Station/Unit Actual O&M expenses claimed by MSPGCL Actual O&M expenses considered by Commission Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Hydro Total Less: Provision for doubtful advances Loss on obsolescence of fixed assets Loss on foreign exchange Net actual O&M expenses The actual O&M expenses for FY as considered by the Commission are lower than the approved normative O&M expenses. Accordingly, the Commission has carried out the sharing of gains in O&M expenses in accordance with the provisions of Regulations INTEREST ON WORKING CAPITAL (IOWC) MSPGCL s Submission The Commission had approved normative IoWC of Rs Crore in the tariff determination for FY As against the same, MSPGCL has claimed normative IoWC of Rs Crore and the actual IoWC of Rs Crore in the final true-up for FY The normative IoWC has been computed in accordance with Regulation 35.1 of the MYT Regulations, Commission s Analysis and Ruling MSPGCL has computed normative IoWC considering the working capital requirements based on the actual generation whereas the MYT Regulations, 2011 specify that the working capital requirements are to be computed at the MERC in Case No. 196 of 2017 Page 83 of 250

84 generation corresponding to target Availability. Further, the Commission has observed computational errors in the computations of working capital requirements (in payables for fuel for one month that is to be deducted) of MSPGCL Regulation 35.1 specifies the normative working capital requirements (cost of coal, cost of oil and receivables) at target Availability. The actual Availability for FY was lower than the target Availability for some of the stations. That being the case, it would not be appropriate to allow the normative working capital requirements at target Availability, which was not actually achieved. Hence, the Commission has approved the normative working capital requirements (receivables as well as fuel cost) for each Station at actual Availability or target Availability, whichever is lower, and has approved the IoWC for FY accordingly. This approach is in line with the approach adopted by the Commission in the final true-up for FY The Commission has considered the interest rate of 14.05% while computing the interest on working capital in accordance with the provisions of MY Regulations, 2011 (interest rate for FY considered while carrying out the provisional truing up by the Commission in its dated 30 August, 2016). Station/Unit Table 4-30: IoWC for FY (Rs. Crore) Provisional true-up MTPR/ Tariff Approved Final true-up MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Hydro Total MERC in Case No. 196 of 2017 Page 84 of 250

85 4.23 NON-TARIFF INCOME (NTI) MSPGCL s Submission The actual NTI for FY as per the audited accounts (excluding the late payment surcharge) is Rs Crore. This actual NTI comprises of other income, income from sale of fly ash and income from sale of reject coal In the final true-up for FY and FY , the Commission had considered the late payment surcharge as an item of NTI. Aggrieved by the same, MSPGCL has filed an Appeal (No. 199 of 2015) before the APTEL. In its Judgment dated 18 April, 2017, APTEL upheld the Commission s. Aggrieved by the same, MSPGCL filed a Civil Appeal (No of 2017) before the Hon ble Supreme Court and the matter is sub-judice. As the matter is sub-judice, the actual late payment surcharge of Rs Crore for FY has been considered as an item of NTI in the final true-up MSPGCL has deducted an amount of Rs Crore from the actual NTI citing the following grounds. MSPGCL had signed contract agreement with M/s Coastal Energy Private Limited (M/s CEPL) dated 26 September, 2014 for supply of non-coking (steam) coal of foreign origin for Khaperkheda Unit 5. In exercise of the contractual provisions for non-performance as per the agreed terms; (i) liquidated damages of Rs Crore was levied during FY and the same was adjusted in the actual fuel price for Khaperkheda Unit 5 during the year and (ii) forfeiture of performance bank guarantee amounting to Rs Crore and the same was booked as NTI in FY The termination of the contract by MSPGCL was challenged by M/s CEPL in the Hon ble Bombay High Court and pursuant to arbitration in the matter, amicable settlement was reached between MSPGCL and M/s CEPL and MSPGCL had accepted the payment of Rs Crore ( ) to M/s CEPL. This amount was paid in FY Accordingly, the amount of Rs Crore is proposed to be deducted from the actual NTI for FY and the amount of Rs Crore is proposed for recovery as additional claim in FY The NTI claimed by MSPGCL for true-up is as given in the Table below: MERC in Case No. 196 of 2017 Page 85 of 250

86 Table 4-31: NTI claimed by MSPGCL in final true-up for FY Particulars Amount (Rs. Crore) Other income (as per the audited accounts) Income from sale of fly ash (as per the audited accounts) Income from sale of reject coal (as per the audited accounts) Late Payment Surcharge (as per the audited accounts) Total Less: Amount returned to M/s CEPL in FY in lieu of the forfeiture of performance bank guarantee NTI for true-up MSPGCL vide its additional submissions dated 10 August, 2018 requested the Commission to consider the NTI of Rs Crore in place of Rs Crore as submitted in its Petition due to following reasons: The total LPS for the period from FY to FY as submitted to the Commission was Rs Crore. As per the Audited Accounts of MSEDCL for FY , pursuant to the reconciliation up to FY , the LPS acknowledged by MSEDCL is Rs Crore. Therefore, the total LPS of Rs Crore submitted by MSPGCL is in excess of Rs Crore. MSPGCL requested the Commission to condone this error and accordingly reduce the LPS of Rs Crore submitted for FY by the amount of Rs Crore. Accordingly, MSPGCL requested the Commission to consider the NTI of Rs Crore in place of Rs Crore as submitted in its Petition. Commission s Analysis and Ruling The actual NTI, comprising of other income, income from sale of fly ash, income from sale of reject coal and late payment surcharge, as per the audited accounts for FY is Rs Crore. MERC in Case No. 196 of 2017 Page 86 of 250

87 The Commission has gone through the submissions of MSPGCL regarding the arbitration with M/s CEPL. The Commission finds merit in the claim of MSPGCL for recovery of Rs Crore which was deducted from the actual fuel cost for FY and included in NTI for FY However, as the amount was paid in FY , the Commission deems it fit to consider the recovery of the total amount of Rs Crore in the final true-up for FY Further, the Commission finds merit in the submissions of MSPGCL regarding the reconciliation of LPS with MSEDCL up to FY Accordingly, the Commission has considered the reduction of Rs Crore in the LPS for FY in the final true-up Accordingly, the NTI considered by the Commission in the final true-up for FY is as shown in the Table below: Table 4-32: NTI for FY (Rs. Crore) MTPR/ Provisional Tariff true-up Final true-up Station/Unit Approved MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Hydro Total * *Original Petition figure before reduction of Rs Crore MERC in Case No. 196 of 2017 Page 87 of 250

88 4.24 ANNUAL FIXED CHARGES (AFC) Commission s Analysis and Ruling Based on the above analysis, the AFC approved by the Commission in the final true-up for FY , that is fully recoverable at Target Availability is as shown in the Table below: MERC in Case No. 196 of 2017 Page 88 of 250

89 Table 4-33: AFC claimed by MSPGCL and approved by Commission in final true-up for FY recoverable at Normative Availability (Rs. Crore) Station/Unit MTPR/ Tariff Return on Equity Provisional true-up MTR Petition Approved in this MTPR/ Tariff Interest on Loan Depreciation O&M expenses IoWC Approved MTPR/ Approved MTPR/ Approved MTPR/ MTR Provisional MTR Provisional MTR Provisional in this Tariff in this Tariff in this Tariff Petition true-up Petition true-up Petition true-up Provisional true-up Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Hydro Impact of Pay Revision Total MTR Petition Approved in this MTPR/ Tariff Provisional true-up Less: NTI MTR Petition Approved in this MTPR/ Tariff Provisional true-up AFC MTR Petition Approved in this MERC in Case No. 196 of 2017 Page 89 of 250

90 The detailed analysis underlying the Commission s approval of individual AFC elements on Truing up of FY is already set out above, however, the variation in the AFC sought by the MSPGCL and that approved by the Commission in this is mainly on account of the following: Actual O&M expenses claimed for some of the stations are lower than the norms for O&M Expenses. For approving the normative AFC, the Commission has considered the norms for O&M Expenses. As O&M Expenses are controllable, the Commission has carried out the sharing of gains and losses as worked out in Section 4.32 of this. RoE approved on the opening approved Equity balances for the respective stations where as MSPGCL has claimed the RoE on Equity addition during the year also. The revised opening loan balance of Koradi Unit 8 in line with the Commission s dated 8 August, 2018 in Case No. 77 of Computational error in MSPGCL s claim of depreciation for Nashik. IoWC approved by the Commission considering the working capital requirements corresponding to the lower of actual generation and normative generation. Draft MSPGCL s additional submissions regarding NTI for FY REDUCTION IN AFC DUE TO SHORTFALL AGAINST TARGET AVAILABILITY MSPGCL s Submission The reduction in AFC due to shortfall in target Availability is Rs Crore. Although MSPGCL has sought recovery of full AFC for Uran at actual Availability, it has considered the reduction in AFC for not achieving the target Availability, as per the MYT Regulations, However, the AFC considered by MSPGCL for pro-rata reduction is excluding the impact of pay revision. Commission s Analysis and Ruling The Commission observed that MSPGCL in its computations of AFC had considered the target Availability as 80% for Uran, Paras Units 3 & 4, and Parli Units 6 & 7 whereas the target Availability for these stations is 85% As discussed above, the Commission has approved the recovery of full AFC for Uran for FY , at actual Availability. MERC in Case No. 196 of 2017 Page 90 of 250

91 As the actual Availability of some of the Stations was lower than the target Availability approved for recovery of full AFC, the Commission has approved the recovery of AFC for such stations on pro-rata basis, except for Uran The computation of AFC disallowance for FY is given in the Table below: Table 4-34: AFC disallowance approved by the Commission in the final true-up for FY Station/Unit Target Actual AFC Reduced AFC Availability Availability Reduction AFC Rs. % % Rs. Crore Rs. Crore Crore Bhusawal 80.00% 66.51% Chandrapur 80.00% 77.51% Khaperkheda 85.00% 81.84% Koradi 72.00% 64.39% Nashik 80.00% 92.96% Parli 80.00% Draft 11.18% Uran 52.42% 52.42% Paras Units 3 & % 91.64% Parli Units 6 & % 23.92% Khaperkheda Unit % 88.11% Bhusawal Units 4 & % 89.09% Koradi Unit % 58.63% Total The Commission has disallowed the AFC of Rs Crore on account of lower Availability in the final true-up for FY The reduction in AFC worked out by the Commission is lower than the reduction in AFC computed by MSPGCL on account of following two reasons: The total AFC allowed by the Commission recoverable at normative availability is lower than the total AFC claimed by MSPGCL and hence pro-rata reduction will also be lower than that claimed by MSPGCL. Commission has not reduced any AFC for Uran Gas based station as the actual availability was lower than the target availability due to shortage to gas LEASE RENT FOR HYDRO STATIONS MSPGCL s Submission MERC in Case No. 196 of 2017 Page 91 of 250

92 MSPGCL has claimed the actual lease rent for hydro stations of Rs Crore, the same as that approved by the Commission in the tariff determination for FY Commission s Analysis and Ruling The Commission approves the actual lease rent of Rs Crore for FY , the same being in line with the approved lease rent in the Commission s s dated 27 April, 2012 and 27 December, 2012 in Case Nos. 5 of 2012 and 2 of 2012 respectively INCOME TAX MSPGCL s Submission In the MYT for FY , the Commission had approved the Income Tax of Rs Crore for existing stations and Rs Crore for Koradi Unit 8 in Case No. 59 of The provisional Transfer Scheme notified under Section 131 (5) (g) of the EA, 2003 on 6 June, 2005 was finalized vide notification Maharashtra Draft Electricity Reforms Transfer (First Amendment) Scheme, 2016 dated 31 March, This has resulted in an increase in net fixed assets of MSPGCL by Rs Crore as on 5 June, Schedule H of the notification provides break-up of revised valuation of assets at various stations of MSPGCL as on 5 June This revised valuation of assets has led to increase in actual depreciation in the books of accounts of MSPGCL resulting in reduction in the Company s profit and has accordingly reduced the actual Income Tax outgo of MSPGCL for FY Hence, the actual Income Tax for FY has become zero MSPGCL has not claimed any Income Tax in the final true-up for FY Commission s Analysis and Ruling In accordance with MYT Regulations, 2011, the Commission has not approved any Income Tax in the final true-up for FY as the actual Income Tax during FY was nil IDLE CAPACITY CHARGES MSPGCL s Submission MSPGCL, in its computations, has claimed the idle capacity charges for MERC in Case No. 196 of 2017 Page 92 of 250

93 Bhusawal Unit 2, Chandrapur Unit 1, Koradi Unit 6 and Parli Unit 3 for the period from 1 April, 2015 up to 30 June, These comprise employee expenses, depreciation and interest and finance charges for the respective Units. The idle capacity charges claimed are as shown in the Table below: Table 4-35: Idle capacity charges claimed by MSPGCL in final true-up for FY (Rs. Crore) Particulars Bhusawal Chandrapur Koradi Parli Unit 2 Unit 1 Unit 6 Unit 3 Total Depreciation Interest and finance charges Employee expenses (based on actuals excluding pay revision impact) Total Commission s Analysis and Ruling Vide the dated 19 January, 2016 in Case No. 108 of 2015, the Commission had allowed the economic Draft shutdown of 5 Units, viz., Bhusawal Unit 2, Chandrapur Unit 1, Koradi Units 5 & 6 and Parli Unit 8 from 1 April, 2015 to 30 June, Although economic shutdown of Koradi Units 5 & 6 was approved by the Commission, only Koradi Unit 6 was kept under economic shutdown The idle capacity charges comprise employee expenses, depreciation and interest on loan for the capacity and period of economic shutdown. The Commission has allowed the idle capacity charges for the Units kept under economic shutdown The AFC for the entire Station, viz., Bhusawal, Chandrapur, Koradi and Parli, has been computed at normative Availability in accordance with the MYT Regulations, The AFC per MW per day has been worked out considering the total installed capacity of the respective stations. The AFC for the capacity operational during the full period of FY has been computed considering the operational Units and corresponding period of operation. The Idle Capacity Charges, viz., employee expenses (50% of the trued-up O&M expenses), depreciation and interest and finance charges, for the capacity under economic shutdown has been computed for the respective Units for the period of economic shutdown. MERC in Case No. 196 of 2017 Page 93 of 250

94 The idle capacity charges approved by the Commission are as shown in the Table below: Table 4-36: Idle capacity charges approved by the Commission in the final true-up for FY (Rs. Crore) Particulars Bhusawal Chandrapur Koradi Parli Unit 2 Unit 1 Unit 6 Unit 3 Total Depreciation Interest and finance charges Employee expenses (based on actual O&M expenses) Total PRIOR PERIOD EXPENSES/(INCOME) MSPGCL s Submission MSPGCL has claimed the prior period income of Rs Crore in the final true-up for FY based on the audited accounts. MSPGCL has Draft submitted the detailed list of prior period items. Commission s Analysis and Ruling On perusal of the information submitted by MSPGCL and in line with the approach in the final true-up of previous years, the Commission has considered the actual prior period income of Rs Crore REVENUE FROM SALE OF POWER MSPGCL s Submission MSPGCL has submitted the details of revenue as per the books of accounts for FY and the revenue reconciliation statement showing the revenue from sale of power. MSPGCL has considered the revenue from sale of power of Rs Crore in the final true-up for FY Commission s Analysis and Ruling The reconciliation of the actual operating revenue as per the audited accounts for FY is as shown in the Table below: MERC in Case No. 196 of 2017 Page 94 of 250

95 Table 4-37: Actual operating revenue as per the audited accounts for FY (Rs. Crore) Fuel Fixed Energy Lease Station Surcharge Others Total Charges Charges Rent Adjustment Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Hydro Solar Revenue Reactive Power charges Holding cost of surplus for FY to FY (Case No. 15 of 2015) Draft Total The Commission had approved the revenue surplus of Rs Crore in the provisional true-up for FY MSPGCL has adjusted the same from the actual fixed charges for FY while working out the revenue for final true-up, as shown in the Table below: Table 4-38: Revenue from sale of power considered by MSPGCL in the final true-up for FY (Rs. Crore) Fixed Charges Impact of provisional true- up Net Fixed Charges Energy Charges Fuel Surcharge Adjustment Lease Rent Total Station (iii)= (iii)+(iv)+ (i) (ii) (iv) (v) (vi) (i)+(ii) (v)+(vi) Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit MERC in Case No. 196 of 2017 Page 95 of 250

96 Fixed Charges Impact of provisional true- up Net Fixed Charges Energy Charges Fuel Surcharge Adjustment Lease Rent Total Station (iii)= (iii)+(iv)+ (i) (ii) (iv) (v) (vi) (i)+(ii) (v)+(vi) Bhusawal Units 4 & Koradi Unit Hydro Total The Commission finds this approach of adjusting the impact of provisional true-up from the revenue from fixed charges while computing the revenue for final true-up, as inappropriate. The impact of provisional true-up need to be adjusted from the revenue gap/(surplus) in the final true-up and the incremental revenue gap/(surplus) needs to worked out for recovery from/refund to the beneficiary The Commission has considered the revenue from sale of power for the generating stations under the regulated business under the heads of fixed charges, energy charges, fuel surcharge adjustment and lease rent. Draft Accordingly, the revenue from sale of power considered by the Commission for final true-up is as shown in the Table below: Table 4-39: Revenue from sale of power considered by Commission for FY (Rs. Crore) Station Fuel Fixed Energy Lease Surcharge Charges Charges Rent Adjustment Total Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Unit Hydro Total MERC in Case No. 196 of 2017 Page 96 of 250

97 4.31 SHARING OF GAIN/LOSS DUE TO VARIATION IN AUXILIARY ENERGY CONSUMPTION MSPGCL s Submission MSPGCL has computed the total revenue loss of Rs Crore for FY on account of variation in normative and actual AEC. Commission s Analysis and Ruling The Commission observed computational errors in the revenue loss computations submitted by MSPGCL. MSPGCL has considered REC as approved by the Commission in provisional true-up whereas the REC approved in tariff determination needs to be considered. Further, the normative AEC considered by MSPGCL for Khaperkheda is incorrect The Commission has computed the revenue loss on account of variation in normative and actual AEC for FY as shown in the Table below: Table 4-40: Revenue loss due to variation in AEC approved by the Commission in the final true-up for FY Actual Lesser/ Rate of Normative Draft Actual Gross (Additional) Energy AEC AEC Station/Unit Generation energy sale Charge MU % % MU Rs./kWh Revenue Loss /(Gain) Rs. Crore Bhusawal % 10.89% Chandrapur % 8.27% (53.43) 2.53 (13.52) Khaperkheda % 10.79% Koradi % 13.13% Nashik % 10.78% (114.13) 3.95 (45.08) Parli % 16.18% Uran % 3.00% (0.05) 2.58 (0.01) Paras Units 3 & % 10.72% Parli Units 6 & % 10.18% Khaperkheda Unit % 6.34% Bhusawal Units 4 & % 6.43% Koradi Unit % 7.76% Koyna % 0.91% (6.67) 0.14 (0.09) Bhira TR % 0.20% (0.37) 0.33 (0.01) Tillari % 0.66% (0.24) 0.22 (0.01) Total *As approved in Tariff determination for FY SUMMARY OF TRUE-UP FOR FY MSPGCL s Submission The final true-up for FY submitted by MSPGCL, after sharing of MERC in Case No. 196 of 2017 Page 97 of 250

98 gains and losses in accordance with MYT Regulations, 2011 is as shown in the Table below: Table 4-41: Summary of true-up for FY claimed by MSPGCL (Rs. Crore) Efficiency (Gain)/Loss Sharing of efficiency (Gain)/Loss Net entitlement Particulars Normative Actual A B C=B-A D=1/3rd of (Gain)/Loss E=A+D Expenses side summary Return on Equity Interest on Loan Depreciation O&M expenses (164.21) (54.74) Interest on Working Capital (117.78) (39.26) Less: Non-Tariff Income Annual Fixed Charges Income Tax - - Idle Capacity Charges Prior period expenses/(income) (32.32) (32.32) Hydro Lease Rent Energy Charges (118.99) (39.66) Aggregate Revenue Requirement AFC Reduction Draft Net Revenue Requirement Revenue from sale of power Revenue loss due to higher auxiliary consumption Revenue for true-up Revenue Gap/(Surplus) (233.70) Commission s Analysis and Ruling In accordance with the MYT Regulations, 2011, the Commission has allowed the expenses for FY based on the norms of operation approved in this, and carried out the sharing of gains and losses under the following heads: i. Sharing of gains in fuel expenses. ii. Sharing of gains towards IoWC. iii. Sharing of normative revenue loss due to higher Auxiliary Energy Consumption In accordance with the MYT Regulations, 2011, the Commission has shared 1/3 rd of the efficiency gains and losses on account of the controllable factors with the beneficiary while 2/3 rd of gains are allowed to be retained by MSPGCL and 2/3 rd of the losses are to be absorbed by it. MERC in Case No. 196 of 2017 Page 98 of 250

99 Table 4-42: Summary of true-up for FY as approved by the Commission (Rs. Crore) Particulars Expenses side summary Normative Actual Efficiency (Gain)/Loss Sharing of efficiency (Gain)/Loss Net entitlement A B C=B-A D=1/3rd of (Gain)/Loss E=A+D Return on Equity Interest on Loan Depreciation O&M expenses (236.53) (78.84) Interest on Working Capital (20.57) (6.86) Less: Non-Tariff Income Annual Fixed Charges Income Tax - - Idle Capacity Charges Prior period expenses/(income) (32.32) (32.32) Hydro Lease Rent Energy Charges (113.83) (37.94) Aggregate Revenue Requirement Draft AFC Reduction Net Revenue Requirement Revenue from sale of power Revenue loss due to higher auxiliary consumption Revenue for true-up Total Revenue Gap/(Surplus) Approved in final true-up ( ) Revenue Gap/(Surplus) approved in provisional true-up Incremental Revenue Gap/(Surplus) approved after final true-up ( ) (344.26) The treatment of revenue surplus as approved above after the final true-up for FY has been dealt with in Chapter 7 of this. MERC in Case No. 196 of 2017 Page 99 of 250

100 5 FINAL TRUE-UP FOR FY INSTALLED CAPACITY The installed capacity of MSPGCL as on 1 April, 2016 was 11,267 MW. Two Units of 660 MW capacity at Koradi TPS, two Units of 500 MW capacity at Chandrapur STPS and one Unit of 250 MW capacity at Parli TPS were commissioned during the year and older Units of 410 MW total installed capacity were retired during the year. Table 5-1: Installed capacity of MSPGCL during FY Station Bhusawal TPS Chandrapur TPS Khaperkheda TPS Koradi TPS Nashik TPS Unit No. Installed Capacity (MW) as on 1 April, 2016 Capacity Addition (MW) Retired Capacity (MW) Installed Capacity (MW) as on 31 March, Total Draft Total Total Total MERC in Case No. 196 of 2017 Page 100 of 250

101 Station Parli TPS Unit No. Installed Capacity (MW) as on 1 April, 2016 Capacity Addition (MW) Retired Capacity (MW) Installed Capacity (MW) as on 31 March, Total Total Paras TPS Total Uran GTPS Total Hydro Total Grand Total Draft Koradi Units 9 & 10 of 660 MW capacity each were commissioned on 22 November, 2016 and 17 January, 2017, respectively. Chandrapur Units 8 & 9 of 500 MW capacity each were commissioned on 4 June, 2016 and 24 November, 2016, respectively. Parli Unit 8 of 250 MW capacity was commissioned on 19 November, Bhusawal Unit 2 of 210 MW capacity was retired w.e.f. 10 February, Koradi Unit 5 of 200 MW capacity was retired w.e.f. 31 March, Although the new Units (Units commissioned after incorporation of MSPGCL) were commissioned in the premises of the existing stations, the Commission had been determining the tariff for such new Units separately. Accordingly, for tariff purposes, the following Units are treated as separate stations in addition to the existing old Units at the respective stations: i. Paras Units 3 & 4 ii. Parli Units 6 & 7 iii. Khaperkheda Unit 5 iv. Bhusawal Units 4 & 5 v. Koradi Units 8, 9 &10 vi. Chandrapur Units 8 & 9 vii. Parli Unit 8 MERC in Case No. 196 of 2017 Page 101 of 250

102 5.2 RELEVANT ORDERS The Commission vide its MYT for the 3 rd Control Period from FY to FY , dated 30 August, 2016 in Case No. 46 of 2016 had approved the tariff for FY The Commission in the said had approved the proposal of MSPGCL to keep the old Units at Parli TPS under Reserve Shutdown (RSD) during the 3 rd Control Period. The Commission had also approved the tariff for Parli (Units 4 & 5) to be applicable if the Units are taken into service. Parli Units 4 & 5 were kept under RSD during FY Accordingly, the RSD charges approved by the Commission comprising of (i) 10% of employee expenses (employee expenses = 45% of total O&M expenses), (ii) depreciation, (iii) interest on loan, and (iv)iowc (working capital pertaining to proposed components of AFC) are allowable for Parli during FY Further, the Commission in its MYT had approved the proposal of MSPGCL to retire Bhusawal Unit 2 w.e.f. 1 April, 2016 and had accordingly determined the tariff for Bhusawal Unit 3 alone for the 3 rd Control Period. Draft However, Bhusawal Unit 2 was in service up to its retirement w.e.f. 10 February, MSPGCL had billed the fixed charges and variable charges for Bhusawal Unit 2 also considering the approved tariff for Bhusawal Unit 3. MSPGCL requested the Commission to consider the operation of Bhusawal Unit 2 in final true-up for FY In light of the submissions of MSPGCL, the Commission has carried out the true-up of FY considering the operational capacity of Bhusawal TPS during the year The new Units 8, 9 & 10 at Koradi, Units 8 & 9 at Chandrapur and Unit 8 at Parli, were not covered in the Commission s dated 30 August, 2016 in Case No. 46 of Vide its dated 14 December, 2017 in Case No. 59 of 2017 the Commission approved the final capital cost and tariff for Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 from COD of the respective Units up to FY (i.e., end of the 3 rd MYT Control Period) MSPGCL, in the instant Petition, has sought the final true-up for FY based on the actual expenditure and revenue as per the Audited Accounts for FY under the MYT Regulations, It has stated the reasons for the differences between the actual expenses and those approved in the Tariff. The analysis of the true-up undertaken by the Commission is provided below. MERC in Case No. 196 of 2017 Page 102 of 250

103 5.3 NORMS OF OPERATION The norms of operation given under the MYT Regulations, 2015 for thermal generating stations are as follows: (i) (ii) (iii) (iv) (v) (vi) Availability Plant Load Factor (PLF) Auxiliary Energy Consumption (AEC) Gross Station Heat Rate (GSHR) Secondary fuel oil consumption (SFOC) Transit and handling loss The Commission has approved the norms of operation for FY based on the norms specified in the MYT Regulations, 2015 and considering other aspects as detailed in the respective s. MSPGCL has submitted the actual performance in FY , which is in variation to the norms approved by the Commission. The performance was better than the norms in some of the cases and inferior in some of the cases. MSPGCL submitted the Draft reasons for the actual performance that is inferior to the norms. MSPGCL s submissions on the actual performance in FY and the Commission s analysis is detailed hereunder. 5.4 AVAILABILITY MSPGCL s Submission MSPGCL submitted that its continued efforts to improve the performance of stations have resulted in achieving target Availability for many of its stations. The actual Availability achieved in FY is as shown in the Table below: Table 5-2: Actual Availability for FY submitted by MSPGCL Station/Unit Target Approved in Actual claimed by MYT MSPGCL Bhusawal 80.00% 80.82% Chandrapur 80.00% 79.20% Khaperkheda 85.00% 87.85% Koradi 72.00% 61.15% Nashik 80.00% 91.76% Uran 85.00% 58.88% Paras Units 3 & % 76.81% Parli Units 6 & % 46.05% MERC in Case No. 196 of 2017 Page 103 of 250

104 Station/Unit Target Approved in Actual claimed by MYT MSPGCL Khaperkheda Unit % 89.54% Bhusawal Units 4 & % 93.49% Koradi Units 8, 9 & % 56.50% Chandrapur Units 8 & % 69.26% Parli Unit % 4.28% MSPGCL submitted the MSLDC Certificate for actual Availability for FY MSPGCL submitted that the following factors have adversely affected the Availability of its stations in FY Koradi TPS: The actual Availability of Koradi was lower than target Availability on account of EE R&M of Unit 6 during the year Uran GTPS: The actual Availability of Uran GTPS was lower than the target Availability on account of lower receipt of gas. The Commission in its MYT dated 30 August, 2016 in Case No. 46 of 2016 had considered the gas shortage and had projected the Availability of Uran GTPS as 62.45% from Draft FY to FY assuming an increase of 5% over the actual average Availability from FY to FY The actual availability for Uran in FY was 58.88%. With the given quantum of gas available at the station, the possible generation was around MU whereas the actual generation was which is 97.90% of the possible generation. The gas availability is beyond the control of MSPGCL. Further, the gas quantity allocated by M/s GAIL (DNQ) is not always adequate to operate the entire capacity. Hence, 2 or sometimes 3 GTs are being run with available gas quantity. This creates difference in allocated DNQ and actual gas consumption. Also, number of starts/ stops of Units are more as well as condition of partial loading is created because of less gas availability Paras Units 3 & 4: The actual Availability of Paras Units 3 & 4 was lower than the target Availability on account of annual overhaul/ long shutdown from 25 October, 2016 to 16 March, Parli Units 6 & 7: The actual Availability of Parli Units 6 & 7 was lower than target Availability due to water shortage. Parli Units 6 & 7 were shut down from 1 April, 2016 to 22 September, 2016 due to scarcity of water. The drought situation in Marathwada region was a natural calamity over which MSPGCL had no control and is hence, a force majeure event. MERC in Case No. 196 of 2017 Page 104 of 250

105 5.4.7 Koradi Units 8, 9 & 10: The actual Availability for Koradi Units 8, 9 & 10 was lower than target Availability due to stabilisation. Vide its additional submissions dated 18 August, 2018, MSPGCL requested the Commission to consider the actual Availability for Koradi Units 8, 9 & 10 as 56.69% as against 56.50% as submitted in its Petition citing the relaxed AEC norm approved by the Commission in its dated 8 August, 2018 in Case No. 77 of MSPGCL submitted that it had submitted the revised Availability to MSLDC for rectification Chandrapur Units 8 & 9: The actual Availability for Chandrapur Units 8 & 9 was lower than target Availability due to stabilisation. Vide its additional submissions dated 18 August, 2018, MSPGCL requested the Commission to consider the actual Availability for Chandrapur Units 8 & 9 as 69.82% as against 69.26% as submitted in its Petition citing the relaxed AEC norm approved by the Commission in its dated 8 August, 2018 in Case No. 77 of MSPGCL submitted that it had submitted the revised Availability to MSLDC for rectification. Draft Parli Unit 8: The actual Availability for Parli Unit 8 was lower than target Availability due to stabilisation MSPGCL, in its claim of final true-up for FY , has carried out the pro-rata AFC reduction for all the stations that have not achieved target Availability. However, MSPGCL has requested the Commission to relax the target Availability for Uran on account of gas shortages and Parli Units 6 & 7, Parli Unit 8 on account of water shortages and allow the full AFC at actual Availability for the respective stations. Commission s Analysis and Ruling As regards MSPGCL s additional submissions to consider the revised Availability for Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9, the Commission finds the same to be correct by applying the revised auxiliary energy consumption norm approved by the Commission in its dated 8 August, 2018 in Case No. 77 of 2018 and accordingly considered the revised Availability for those stations As per the MYT Regulations, 2015, full AFC can be recovered only if the actual Availability is equal to or higher than the target. The target Availability MERC in Case No. 196 of 2017 Page 105 of 250

106 for recovery of full AFC for FY was approved in the earlier MYT. The actual Availability is higher than the target Availability only for Bhusawal, Khaperkheda, Nashik, Khaperkheda Unit 5 and Bhusawal Units 4 & 5. The actual Availability as claimed by MSPGCL is same as certified by MSLDC. The Commission has gone through the submissions of MSPGCL regarding the actual Availability of some of the stations being lower than the target Availability In the true-up for the previous years, the Commission had not accepted the partial loading and outages as cogent reasons for relaxing the norms of operation. The same approach has been adopted for the final true-up of FY The Commission asked MSPGCL to submit the supporting documents for substantiating the actual gas receipt in FY MSPGCL submitted the copies of actual gas receipts for FY From MSPGCL s submissions and the material furnished, the Commission finds merit in MSPGCL s submission regarding the shortage of gas, set out above. The Commission had Draft allowed the recovery of full AFC for Uran GTPS in the final true-up for FY , FY , FY and FY considering the shortage of gas as uncontrollable. In line with that approach, the recovery of full AFC, as trued-up in this, has been allowed for Uran GTPS at actual Availability for FY As stated earlier, in the final true-up for FY , the Commission had not approved the recovery of full AFC for Parli. MSPGCL has challenged the same before the APTEL and the matter is sub-judice. Hence, the Commission deems it fit to continue with its approach in the final true-up for FY and accordingly has proportionately disallowed AFC for Parli Units 6 & 7 and Parli Unit 8 at actual Availability, in the final true-up for FY Station/Unit Table 5-3: Availability for FY Target Final true-up Approved Actual Actual in MYT claimed by certified by MSPGCL MSLDC Approved in this for full AFC Recovery Bhusawal 80.00% 80.82% 80.82% 80.00% Chandrapur 80.00% 79.20% 79.20% 80.00% Khaperkheda 85.00% 87.85% 87.85% 85.00% Koradi 72.00% 61.15% 61.15% 72.00% MERC in Case No. 196 of 2017 Page 106 of 250

107 Station/Unit Target Approved in MYT Actual claimed by MSPGCL Final true-up Actual certified by MSLDC Approved in this for full AFC Recovery Nashik 80.00% 91.76% 91.76% 80.00% Uran 85.00% 58.88% 58.88% 58.88% Paras Units 3 & % 76.81% 76.81% 85.00% Parli Units 6 & % 46.05% 46.05% 85.00% Khaperkheda Unit % 89.54% 89.54% 85.00% Bhusawal Units 4 & % 93.49% 93.49% 85.00% Koradi Units 8, 9 & % 56.69%* 56.50% 85.00% Chandrapur Units 8 & % 69.82%* 69.26% 85.00% Parli Unit % 4.28% 4.28% 85.00% *additional submissions dated 18 August, The recovery of full AFC is allowable at target Availability. As the actual Availability is lower than the target Availability for some of the stations, the Commission has approved the recovery of trued-up AFC for FY on pro-rata basis, for these stations (except for Uran). For Uran GTPS, the Commission has approved the recovery of full trued-up AFC for FY at actual Availability. Draft 5.5 PLANT LOAD FACTOR (PLF) MSPGCL s Submission The Table below shows the PLF projections approved by the Commission in the tariff determination for FY and actual PLF as claimed by MSPGCL: Table 5-4: Actual PLF for FY as claimed by MSPGCL Station/Unit MYT Actual claimed by MSPGCL Bhusawal 61.48% 18.91% Chandrapur 80.00% 69.99% Khaperkheda 85.00% 57.51% Koradi 62.40% 17.90% Nashik 80.00% 60.52% Uran 62.45% 56.16% Paras Units 3 & % 66.85% Parli Units 6 & % 18.33% Khaperkheda Unit % 78.72% Bhusawal Units 4 & % 61.80% Koradi Units 8, 9 & % 49.84% MERC in Case No. 196 of 2017 Page 107 of 250

108 Station/Unit MYT Actual claimed by MSPGCL Chandrapur Units 8 & % 59.96% Parli Unit % 3.07% MSPGCL submitted the MSLDC Certificate for the actual PLF for FY MSPGCL submitted that on account of various reasons like improvement in power supply situation, reduction in demand during peak monsoon and winter season, the frequency of backing down instructions / zero schedule instructions to MSPGCL Units has increased during FY The loss of generation on account of such backing down was 13,400 MU in FY Vide its additional submissions dated 18 August, 2018, MSPGCL requested the Commission to consider the actual PLF for Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9 as 50.24% and 60.43% as against 49.84% and 59.96% respectively as submitted in its Petition citing the relaxed AEC norm approved by the Commission in its dated 8 August, 2018 in Case No. 77 of MSPGCL submitted that it had submitted the revised PLF to MSLDC for rectification. Draft Commission s Analysis and Ruling MSPGCL has claimed the actual PLF for Parli Units 6 & 7 as 18.33% whereas the actual PLF as per the MSLDC Certificate is 35.03%. MSPGCL was directed to clarify this discrepancy. MSPGCL replied that this is due to inadvertent error in its submissions and the actual PLF as per the MSLDC certificate is to be considered As regards MSPGCL s additional submissions to consider the revised PLF for Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9, the Commission finds the same to be correct by applying the revised auxiliary energy consumption norm approved by the Commission in its dated 8 August, 2018 in Case No. 77 of 2018 and accordingly considered the revised PLF for those stations MYT Regulations, 2015 specifies the target PLF of 85% for thermal generating stations, to be eligible for the incentive for actual generation in excess of ex-bus energy corresponding to target PLF. The actual PLF of all the stations is lower than the target PLF for incentive. MERC in Case No. 196 of 2017 Page 108 of 250

109 5.5.7 The Commission has considered the actual PLF as certified by MSLDC for FY Table 5-5: PLF for FY Final true-up MYT Station/Unit Actual Actual Approved in claimed by certified by this MSPGCL MSLDC Bhusawal 61.48% 18.91% 18.91% 18.91% Chandrapur 80.00% 69.99% 69.99% 69.99% Khaperkheda 85.00% 57.51% 57.51% 57.51% Koradi 62.40% 17.90% 17.90% 17.90% Nashik 80.00% 60.52% 60.52% 60.52% Uran 62.45% 56.16% 56.16% 56.16% Paras Units 3 & % 66.85% 66.85% 66.85% Parli Units 6 & % 18.33% 35.03% 35.03% Khaperkheda Unit % 78.72% 78.72% 78.72% Bhusawal Units 4 & % 61.80% 61.80% 61.80% Koradi Units 8, 9 & % 50.24%* 49.84% 49.84% Chandrapur Units 8 & % Draft 60.43%* 59.96% 59.96% Parli Unit % 3.07% 3.07% 3.07% *additional submissions dated 18 August, AUXILIARY ENERGY CONSUMPTION (AEC) MSPGCL s Submission The actual AEC achieved in FY is as shown in the Table below: Table 5-6: Actual AEC for FY Station/Unit Norm Approved Actual claimed in MYT by MSPGCL Bhusawal 10.96% 13.63% Chandrapur 8.67% 7.59% Khaperkheda 9.70% 10.46% Koradi 10.81% 15.33% Nashik 11.00% 10.81% Uran 3.00% 2.79% Paras Units 3 & % 10.29% Parli Units 6 & % 10.10% Khaperkheda Unit % 5.87% Bhusawal Units 4 & % 6.68% Koradi Units 8, 9 & % 7.34% Chandrapur Units 8 & % 6.78% Parli Unit % 24.51% MERC in Case No. 196 of 2017 Page 109 of 250

110 5.6.2 MSPGCL submitted that the following factors have adversely affected the AEC of its stations in FY Bhusawal TPS and Khaperkheda TPS: Higher AEC was due to RSD/zero schedule/ backing down due to low system demand Koradi TPS: Higher auxiliary energy consumption was due to forced outages, RSD and backing down Paras Units 3 & 4 and Parli Units 6 & 7: The guaranteed auxiliary consumption as per the OEM for new Units at Paras and Parli is 9.98%. The achievable auxiliary consumption applying operational margin of 6.5% over the guaranteed auxiliary consumption works out to 10.63%. The actual AEC for Paras Units 3 & 4 and Parli Units 6 & 7 is in line with the guaranteed performance plus operational margin of 6.5% Koradi Units 8, 9 & 10: Higher AEC was due to partial loading /outages Draft during stabilization activities. The guaranteed auxiliary consumption as per OEM is 5.32% at Maximum Continuous Rating (MCR). The norm of 5.25% approved by the Commission is too stringent as the guaranteed auxiliary consumption by OEM with due consideration of operational margin itself is higher than 5.32% Chandrapur Units 8 & 9: Higher AEC was due to partial loading /outages during stabilization activities. The guaranteed auxiliary consumption as per OEM is 5.59% at MCR. The norm of 5.25% approved by the Commission is too stringent as the guaranteed auxiliary consumption by OEM with due consideration of operational margin itself is higher than 5.59% In accordance with the MYT Regulations, 2015, MSPGCL has proposed the sharing of gains/losses on account of variation in AEC for FY Commission s Analysis and Ruling In the true-up for the previous years, the Commission had not accepted the partial loading and frequent outages as cogent reasons for relaxing the norms of operation. The same approach has been adopted for the true-up for FY MERC in Case No. 196 of 2017 Page 110 of 250

111 MSPGCL has sought to justify the higher AEC for Paras Units 3 & 4 and Parli Units 6 & 7 citing the parameters guaranteed by the OEM. MSPGCL has only reiterated its submissions in the true-up Petitions for the previous years. This issue was dealt in the true-up s for the previous years wherein the Commission had ruled that the rationale applied by MSPGCL is not tenable for revising the normative AEC for Paras Units 3 & 4 and Parli Units 6 & 7 in the true-up exercise. In line with that approach, the Commission has not revised the normative AEC for Paras Units 3 & 4 and Parli Units 6 & 7 for FY MSPGCL has sought to justify the higher AEC for Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9 citing the parameters guaranteed by the OEM. The same contentions were raised in the Review Petition filed by MSPGCL in Case No. 77 of In accordance with the Commission s Review dated 8 August, 2018 in Case No. 77 of 2018, the Commission has considered the normative AEC of 6% for Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9 for FY Draft The Commission has approved the normative AEC in the final true-up of FY Station/Unit Table 5-7: AEC for FY Norm Approved in MYT Actual claimed by MSPGCL Final true-up Norm Approved in this Bhusawal 10.96% 13.63% 10.96% Chandrapur 8.67% 7.59% 8.67% Khaperkheda 9.70% 10.46% 9.70% Koradi 10.81% 15.33% 10.81% Nashik 11.00% 10.81% 11.00% Uran 3.00% 2.79% 3.00% Paras Units 3 & % 10.29% 8.50% Parli Units 6 & % 10.10% 8.50% Khaperkheda Unit % 5.87% 6.00% Bhusawal Units 4 & % 6.68% 6.00% Koradi Units 8, 9 & % 7.34% 6.00% Chandrapur Units 8 & % 6.78% 6.00% Parli Unit % 24.51% 8.50% The Commission has considered the difference between the actual and MERC in Case No. 196 of 2017 Page 111 of 250

112 normative AEC for computing the sharing of efficiency gains/losses for FY in accordance with the MYT Regulations, GROSS GENERATION AND NET GENERATION Commission s Analysis and Ruling The actual total thermal generation for FY is lower than that projected by the Commission in the tariff determination for FY The Commission has considered the actual gross generation as submitted by MSPGCL and the net generation based on the approved AEC. Table 5-8: Gross Generation and Net Generation for FY (MU) Approved in MYT Actual claimed by Approved in this MSPGCL Station/Unit Gross Net Gross Net Gross Net Generation Generation Generation Generation Generation Generation Bhusawal Chandrapur Khaperkheda Koradi Draft Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Total The variation in station wise actual net generation as claimed by MSPGCL and as approved by the Commission in this is on account of variation in actual AEC with respect to the AEC norms. As AEC is a controllable parameter, the Commission has carried out sharing of gains and losses due to variation in AEC as discussed in Section 5.31 of the. 5.8 GROSS STATION HEAT RATE (GSHR) MSPGCL s Submission The actual GSHR achieved in FY is as shown in the Table below: MERC in Case No. 196 of 2017 Page 112 of 250

113 Table 5-9: Actual GSHR for FY as claimed by MSPGCL (kcal/kwh) Station/Unit Norm Approved Actual claimed in MYT by MSPGCL Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit The actual GSHR of most of the stations in FY was below the norm. The actual GSHR for Bhusawal Units 4 & 5 was higher than norm due to partial loading/rsd/ zero schedule. Draft The actual GSHR for Koradi Units 8, 9 & 10 was higher than the norm due to partial loading and high oil consumption during stabilisation MSPGCL has proposed the sharing of gains and losses in total variable charges, on account of variation in norms of operation, in accordance with the MYT Regulations, Commission s Analysis and Ruling The Commission observes that MSPGCL could achieve the actual GSHR close to the norm for most of its stations. Only for Bhusawal Units 4 & 5, Koradi Units 8, 9 &10, and Parli Unit 8, the actual GSHR achieved is higher than the norm In the true-up for the previous years, the Commission had not accepted the partial loading and frequent outages as cogent reasons for relaxing the norms of operation. The same approach has been adopted for the final true-up for FY The Commission has considered the normative GSHR in the final true-up of FY As GSHR is a controllable performance parameter, the Commission has computed the sharing of gains/losses as per the MYT Regulations, MERC in Case No. 196 of 2017 Page 113 of 250

114 Table 5-10: GSHR for FY (kcal/kwh) Final true-up Norm Approved in Actual MYT claimed by Station/Unit Draft Norm Approved in this MSPGCL Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit SECONDARY FUEL OIL CONSUMPTION (SFOC) MSPGCL s Submission The actual SFOC achieved in FY is as shown in the Table below: Table 5-11: Actual SFOC for FY as claimed by MSPGCL (ml/kwh) Station/Unit Norm Approved Actual claimed in MYT by MSPGCL Bhusawal Chandrapur Khaperkheda Koradi Nashik Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit The actual SFOC of most of the stations in FY was below the norm. The actual SFOC of Koradi was higher than the norm due to forced outages, MERC in Case No. 196 of 2017 Page 114 of 250

115 RSD and backing down. The actual SFOC for Parli Units 6 & 7 was higher than the norm due to water shortage. The actual SFOC for Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9 was higher than the norm due to stabilisation MSPGCL has proposed the sharing of gains and losses in total variable charges, on account of variation in norms of operation, in accordance with the MYT Regulations, Commission s Analysis and Ruling The actual SFOC for all the stations except Koradi, Parli Units 6 & 7, Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9 was lower than the norms. The Commission has considered the normative SFOC in the final true-up for FY As SFOC is a controllable performance parameter, the Commission has computed the sharing of gains/losses as per the MYT Regulations, Table 5-12: SFOC for FY (ml/kwh) Final true-up Norm Draft Station/Unit Approved in Actual MYT claimed by Norm Approved in this MSPGCL Bhusawal Chandrapur Khaperkheda Koradi Nashik Paras Units 3 & * 0.50 Parli Units 6 & Khaperkheda Unit * 0.50 Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit *As submitted in excel formats 5.10 TRANSIT AND HANDLING LOSS MSPGCL s Submission The actual transit and handling loss achieved in FY is as shown in the Table below: MERC in Case No. 196 of 2017 Page 115 of 250

116 Table 5-13: Actual transit and handling loss for FY as claimed by MSPGCL Station/Unit Norm Approved Actual claimed in MYT by MSPGCL Bhusawal 0.80% 0.79% Chandrapur 0.80% 1.44% Khaperkheda 0.80% 0.22% Koradi 0.80% 0.66% Nashik 0.80% 0.77% Paras Units 3 & % 1.32% Parli Units 6 & % 0.00% Khaperkheda Unit % 0.21% Bhusawal Units 4 & % 0.79% Koradi Units 8, 9 & % 0.66% Chandrapur Units 8 & % 1.44% Parli Unit % 0.00% MSPGCL has proposed the sharing of gains and losses in total variable charges, on account of variation in norms of operation, in accordance with the MYT Regulations, Draft Commission s Analysis and Ruling The MYT Regulations, 2015 specify the normative transit and handling loss of 0.80% for non-pit head generating stations for domestic coal. The MYT Regulations, 2015 specify the normative transit and handling loss of 0.2% for imported coal. Although MSPGCL has procured imported coal in FY , all such contracts were placed for delivery at the respective plant boundaries. Hence, in accordance with the Regulations, no transit and handling loss is applicable for imported coal. This fact is also corroborated from MSPGCL s computations of normative fuel cost for FY The Commission has considered the normative transit and handling loss in the final true-up for FY As transit and handling loss is a controllable performance parameter, the Commission has computed the sharing of gains/losses as per the MYT Regulations, Table 5-14: Transit and handling loss for FY Final true-up Norm Station/Unit Approved in Actual Norm MYT claimed by Approved in MSPGCL this Bhusawal 0.80% 0.79% 0.80% MERC in Case No. 196 of 2017 Page 116 of 250

117 Station/Unit Norm Approved in MYT Draft Actual claimed by MSPGCL Final true-up Norm Approved in this Chandrapur 0.80% 1.44% 0.80% Khaperkheda 0.80% 0.22% 0.80% Koradi 0.80% 0.66% 0.80% Nashik 0.80% 0.77% 0.80% Paras Units 3 & % 1.32% 0.80% Parli Units 6 & % 0.00% 0.80% Khaperkheda Unit % 0.21% 0.80% Bhusawal Units 4 & % 0.79% 0.80% Koradi Units 8, 9 & % 0.66% 0.80% Chandrapur Units 8 & % 1.44% 0.80% Parli Unit % 0.00% 0.80% 5.11 GROSS CALORIFIC VALUE (GCV) OF FUELS MSPGCL s Submission The actual GCV of fuels in FY is as given in the Table below: Table 5-15: GCV of fuels for FY as submitted by MSPGCL Station/Unit As received As fired Coal Actual stacking loss GCV for tariff FO LDO Gas kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/scm Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Commission s Analysis and Ruling MSPGCL has considered the as fired GCV of coal for all the coal based thermal generating stations. MERC in Case No. 196 of 2017 Page 117 of 250

118 The Commission has considered the actual GCV of secondary fuel oil as and actual GCV of gas as submitted by MSPGCL. The MYT Regulations, 2015 specify that the GCV of coal should be considered for tariff as received at unloading point less actual stacking loss subject to the maximum stacking loss of 150 kcal/kg. In line with the same, the Commission has considered the minimum of actual stacking loss and 150 kcal/kwh and subtracted the same from the actual as received GCV of coal as submitted by MSPGCL. Table 5-16: GCV of fuels for FY as considered by the Commission Coal Station/Unit As received As fired Allowable stacking loss GCV for tariff FO LDO Gas kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/scm Bhusawal Chandrapur Khaperkheda Koradi Nashik Draft Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit LANDED PRICES OF FUELS MSPGCL s Submission The actual prices of fuels in FY is as given in the Table below. As regards the Credit Notes by coal companies on account of grade slippages, MSPGCL submitted that with the appointment of M/s Central Institute of Mining and Fuel Research (CIMFR) by Ministry of Coal itself and with corresponding tripartite agreement between the coal companies, MSPGCL is reasonably certain in realisation of grade slippages. Therefore, MSPGCL has computed the difference in coal price on the basis of analysis results and requested the coal companies for issuance of Credit Notes based on grade slippage. MSPGCL has treated the Credit Note amount as deemed realised and accordingly adjusting the impact of such Credit Notes in coal prices from MERC in Case No. 196 of 2017 Page 118 of 250

119 October, 2016 onwards. MSPGCL further submitted that with such reduction in coal cost, the variable cost for coal based stations is reduced despite increase in coal price and transportation charges. Table 5-17: Actual prices of fuels for FY as submitted by MSPGCL Coal Domestic Imported FO LDO Gas Station/Unit Coal Coal Rs./MT Rs./MT Rs./kL Rs./kL Rs./'000 SCM Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Draft Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Commission s Analysis and Ruling The actual station-wise landed price of domestic coal as submitted by MSPGCL is after considering the actual transit and handling loss for the respective station. The Commission has re-computed the station-wise landed price of domestic coal considering the approved norms of transit and handling loss. The Commission has considered the actual station-wise landed prices of imported coal as submitted by MSPGCL. As regards the grade slippage, the Commission notes that MSPGCL is factoring the impact of Credit Notes on account of grade slippages in the monthly coal prices from October, 2016 onwards and hence the same is accounted in the actual landed price of coal considered for true-up. The Commission directs MSPGCL to continue this approach of factoring the impact of credit notes on account of grade slippages in the monthly coal prices For Uran, the Commission has considered the actual gas price as submitted by MSPGCL. The Commission has considered the actual prices of secondary fuel oil as submitted by MSPGCL. MERC in Case No. 196 of 2017 Page 119 of 250

120 Table 5-18: Landed prices of fuels considered by Commission in final true-up for FY Coal Station/Unit Domestic Imported FO LDO Gas Coal Coal Rs./MT Rs./MT Rs./kL Rs./kL Rs./'000 SCM Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Draft 5.13 OTHER GENERATION-RELATED COSTS MSPGCL s Submission MSPGCL has claimed other generation-related costs of Rs Crore towards coal handling charges, siding charges, oil handling charges, etc. Commission s Analysis and Ruling In line with the approach in previous s, the Commission has approved the other generation-related costs, as claimed by MSPGCL, in the final trueup for FY The other generation-related costs approved by the Commission in the final true-up for FY is as given in the Table below: Table 5-19: Other generation-related costs for FY (Rs. Crore) Particulars Claimed by MSPGCL Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik MERC in Case No. 196 of 2017 Page 120 of 250

121 Particulars 5.14 ENERGY CHARGES Claimed by MSPGCL Approved in this Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Total MSPGCL s Submission MYT Regulations, 2015 specify that the energy charges cover the landed fuel costs and shall be computed by multiplying the ex-bus generation with the REC The actual energy charges including Draft the other generation-related costs as per the audited accounts for FY is Rs. 10, Crore. The difference in the approved and actual energy charges is on account of variation in generation, fuel prices, GCV of fuels and performance parameters. The energy charges at normative performance parameters has been computed considering the actual gross generation, fuel prices and GCV, for computing the sharing of gains and losses on account variations in performance parameters in accordance with the MYT Regulations, Commission s Analysis and Ruling The Commission has computed the REC and energy charges for each station considering the approved generation, performance parameters, GCV of fuels and landed prices of fuels. Table 5-20: REC and Energy Charges for FY Actual as claimed by MSPGCL Normative as considered by MSPGCL Normative Approved in this Station/Unit Energy Energy Energy REC REC REC Charges Charges Charges (Rs./kWh) (Rs./kWh) (Rs./kWh) (Rs. Crore) (Rs. Crore) (Rs. Crore) Bhusawal Chandrapur Khaperkheda MERC in Case No. 196 of 2017 Page 121 of 250

122 Actual as claimed by MSPGCL Normative as considered by MSPGCL Normative Approved in this Station/Unit Energy Energy Energy REC REC REC Charges Charges Charges (Rs./kWh) (Rs./kWh) (Rs./kWh) (Rs. Crore) (Rs. Crore) (Rs. Crore) Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Total The variation in energy charges at normative performance parameters as computed by MSPGCL and as computed by the Commission for coal based thermal generating stations is on account of computational errors by MSPGCL in the secondary fuel oil prices. The variation in energy charges at Draft normative performance parameters as computed by MSPGCL and as computed by the Commission for Uran GTPS is on account of error in normative GSHR considered by MSPGCL As the energy charges approved by the Commission are at target norms of operation, viz., GSHR, SFOC and transit and handling loss and the norms of operation are controllable factors, the Commission has undertaken the sharing of gains and losses in energy charges on account of variation in norms of operation in accordance with the MYT Regulations, ADDITIONAL CAPITALISATION MSPGCL s Submission MSPGCL has achieved actual additional capitalisation of Rs Crore as against Rs Crore approved by the Commission. MSPGCL submitted that the claimed actual additional capitalisation is lower than approved additional capitalisation on account of lead time in supply of equipment by the manufacturers, adequate timeline to facilitate participation in the tendering process, due-diligence on the quoted prices by the bidders, due to which the implementation process may deviate from the initially envisaged schedule. As a result of this, the capitalization would increase in the MERC in Case No. 196 of 2017 Page 122 of 250

123 subsequent years once such approved schemes get capitalised. Table 5-21: Actual additional capitalisation for FY claimed by MSPGCL (Rs. Crore) Particulars MYT MTR Petition Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Draft Total Commission s Analysis and Ruling The additional capitalisation claimed by MSPGCL falls under the three categories, namely (i) Works approved by the Commission by way of inprinciple approval of DPRs, (ii) miscellaneous works for which the inprinciple approval of the Commission was not required to be sought, and (iii) deferred works of new Units as claimed within the original scope of work The Commission has examined the actual additional capitalisation claimed by MSPGCL as against the schemes accorded in-principle approval. The Commission s approach for approving the additional capitalisation in final true-up of FY is as follows: DPR Schemes (above Rs. 10 Crore each): 100% capitalisation is approved for all DPR schemes capitalised in the year in respect of which in-principle approval has been accorded. Non-DPR schemes (less than Rs. 10 Crore each): o Where some DPR schemes have been capitalised during the year, capitalisation of the non-dpr schemes has been MERC in Case No. 196 of 2017 Page 123 of 250

124 considered upto 20% of the cost of the capitalised DPR schemes. o Where there has been no capitalisation of any DPR scheme in the year, 50% of the cost of capitalised non-dpr schemes has been approved As regards disallowing the capitalisation of non-dpr schemes exceeding 20% of the DPR schemes, in its Judgment in Appeal No. 160 of 2012 the APTEL had held as under: 110. We do not find infirmity in the State Commission restricting the capital expenditure on non-dpr schemes to 20% of the capitalisation approved for DPR Scheme. However, we feel that the DPR schemes which had not approved and were awaiting approval of the State Commission should be considered by the State Commission and allowed after prudence check MSPGCL has claimed the additional capitalisation of Rs Crore for Paras Units 3 & 4 under the head addition due to change in classification of inventory. In reply to Commission s query in this regard, MSPGCL Draft submitted that it had placed 7 orders on BHEL for procurement of spares for smooth running of Paras Units 3 & 4 which were of capital nature and the same has been capitalised as per its policy. MSPGCL follows the principle of spares/ inventory booking as expense only after its consumption After perusal of MSPGCL s submissions, the Commission finds it prudent to allow the additional capitalisation towards spares for Paras Units 3 & 4 as proposed by MSPGCL as the overall spares are within the ceiling norms specified in the Regulations MSPGCL has claimed the additional capitalisation of Rs Crore for Khaperkheda Unit 5. In reply to Commission s query in this regard, MSPGCL submitted that this additional capitalisation is towards spares, Nandgaon ash bund pipe lines structural work etc. After perusal of MSPGCL s submissions, the Commission finds it prudent to allow the additional capitalisation for Khaperkheda Unit 5 after cut-off date as proposed by MSPGCL MSPGCL has claimed the additional capitalisation of Rs Crore for Bhusawal Units 4 & 5. In reply to Commission s query in this regard, MSPGCL submitted that this capitalisation is towards works within the MERC in Case No. 196 of 2017 Page 124 of 250

125 original scope of work and capitalised before the cut-off date of 31 March, After perusal of MSPGCL s submissions, the Commission finds it prudent to allow the additional capitalisation for Bhusawal Units 4 & 5 as proposed by MSPGCL The additional capitalisation approved by the Commission in the final true-up for FY is as given in the Table below: Table 5-22: Additional capitalisation for FY (Rs. Crore) Final true-up Station/Unit MYT MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Draft Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Sub-total MEANS OF FINANCE OF ADDITIONAL CAPITALISATION MSPGCL s Submission The means of finance for the actual additional capitalisation has been considered in the debt-equity ratio of 70:30. Commission s Analysis and Ruling In line with the true-up of previous years, the Commission has considered the means of finance of the approved additional capitalisation in the debt: equity ratio of 70:30. MERC in Case No. 196 of 2017 Page 125 of 250

126 5.17 ANNUAL FIXED CHARGES (AFC) Regulation 40 of the MYT Regulations, 2015 specifies the components of AFC as follows: a. Operation and Maintenance (O&M) expenses b. Depreciation c. Interest on Loan d. Interest on Working Capital (IoWC) e. Return on Equity (RoE) f. Income Tax Less: g. Non-Tariff Income (NTI) 5.18 OPERATION AND MAINTENANCE (O&M) EXPENSES MSPGCL s Submission The Commission had approved the total O&M expenses of Rs Crore in the tariff determination for FY As against the same, MSPGCL has claimed the actual O&M expenses of Rs Crore in the final trueup for FY The claimed actual O&M expenses are inclusive of actual water charges of Rs Crore. Draft Commission s Analysis and Ruling In the MYT for the 3 rd MYT Control Period, the Commission had approved the normative O&M expenses for FY to FY in accordance with Regulation 45 of the MYT Regulations, Subsequently, the Commission has notified the First Amendment to MYT Regulations, 2015 wherein the methodology of computing the escalation factor for projecting the normative O&M expenses was amended Regulation 45.1 of the MYT Regulations, 2015 specifies the methodology for determination of normative O&M expenses for thermal Generating Stations that achieved COD before 26 August, Regulation 45.2 specifies the normative O&M expenses in Rs. lakh/mw for the coal-based thermal Generating Stations that achieved COD on or after 26 August, Regulation 47.1 of MYT Regulations, 2015 specifies the methodology for determining the normative O&M expenses for existing Hydro Generating Stations For Bhusawal, Chandrapur, Khaperkheda, Koradi, Nashik, and Uran Stations, the Commission in its MYT had approved the normative O&M MERC in Case No. 196 of 2017 Page 126 of 250

127 expenses for the 3 rd MYT Control Period from FY to FY , considering the approved O&M expenses of FY to FY The average of the base year expenses was considered for the year ended 31 March, 2014 and escalated at 5.72% twice to arrive at the O&M expenses for the base year commencing from 1 April, The base year O&M expenses thus arrived at were escalated by the annual escalation factor of 2.97% for arriving at the normative O&M expenses for FY to FY Vide the First Amendment to the MYT Regulations, 2015, the Commission had revised the methodology of computing the escalation rate as under: Provided that, in the Truing-up of the O&M expenses for any particular year of the Control Period, an inflation factor with 50% weightage to the average yearly inflation derived based on the monthly Wholesale Price Index of the past five financial years (including the year of Truing-up) and 50% weightage to the average yearly inflation derived based on the monthly Consumer Price Index for Industrial Workers (all-india) of the past five financial years (including the year of Truing-up), as reduced by an efficiency factor of 1% or as may be stipulated by the Commission from time to time, Draft shall be applied to arrive at the permissible Operation and Maintenance Expenses for that year In accordance with the same, the Commission has computed the annual escalation factor of 4.27% considering the monthly Wholesale Price Indices and Consumer Price Indices from April, 2011 to March The normative O&M expenses arrived at as above for the base year have been escalated by the annual escalation of 4.27% to arrive at the normative O&M expenses for the 3 rd MYT Control Period from FY to FY The normative O&M expenses so arrived at for FY have been adjusted for the operational capacity during the year considering the retirement of old Units As detailed above, the Commission has revised the normative O&M expenses for Bhusawal, Chandrapur, Khaperkheda, Koradi, Nashik, and Uran Stations as determined in the MYT, for FY to give effect to the First Amendment to the MYT Regulations, The normative O&M expenses for Paras Units 3 & 4, Parli Units 6 & 7, Khaperkheda Unit 5, Bhusawal Units 4 & 5, Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 have been considered as approved in the MYT, for FY In addition to the normative O&M expenses, the Commission has considered MERC in Case No. 196 of 2017 Page 127 of 250

128 the station-wise actual water charges as submitted by MSPGCL. Table 5-23: Normative O&M expenses approved by the Commission in final true-up for FY (Rs. Crore) Station/Unit MYT MTR Petition Approved in this Normative including water charges Actual O&M expenses Actual water charges Draft Total O&M expenses Normative O&M expenses Actual water charges Total O&M expenses Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total MSPGCL submitted that both under the previous GAAP and Ind AS 19, the Company recognised costs relating to its post-employment defined benefit plan on an actuarial basis. Under previous GAAP, the entire cost including actuarial gains and losses were charged to the Statement of Profit and Loss. Under Ind AS 1, re-measurement (comprising of actuarial gains and losses) are recognised immediately in the Balance Sheet with a corresponding debit or credit to retained earnings through Other Comprehensive Income and the corresponding tax effect is also given in Other Comprehensive Income. Consequently, MSPGCL has recognised Rs Crore in FY under Other Comprehensive Income Statement as cost on the basis of actuarial report. Hence, the employee cost including Other Comprehensive Income is Rs Crore for FY The Commission finds that this expense of Rs Crore booked in FY is in the nature of provisioning and not actual expenses. Therefore, the Commission deems it fit to deduct this provision expenses of Rs Crore from the actual O&M expenses for the purpose of computing the gain/loss in O&M expenses. MERC in Case No. 196 of 2017 Page 128 of 250

129 The actual O&M expenses for FY are inclusive of Rs Crore towards provision for doubtful advances and Rs Crore towards impairment of financial instrument. In reply to the Commission s query in this regard, MSPGCL submitted that the amount of Rs Crore pertains to the provision against reactive power bills outstanding with Maharashtra State Electricity Transmission Company Limited (MSETCL), old advances lying with coal companies and loans to subsidiaries companies As regards the amount of Rs Crore towards impairment of financial instrument, MSPGCL submitted as follows: Under IGAAP, the Company recognised provision on Trade Receivables based on specific provisions to reflect the Company s expectations. Under Ind AS 109, impairment of Trade Receivables is recognised based on Expected Credit Loss on account of time value of money. Accordingly, MSPGCL has recognised impairment loss on Trade Receivables at transaction date in Opening Retained Earnings and in Statement of Profit Draft and Loss for FY Consequently, MSPGCL has recognised impairment loss on account of time value of money, in Profit and Loss account to the tune of Rs Crore MSPGCL further submitted that advance was given to Executive Engineer, Water Resource Department, GoM, for Loni Sawangi Water Supply Scheme at Parli TPS; the said scheme was suspended subsequently. As the amount is recoverable and falls under the category of financial asset tested for impairment and time value provision has been made against the said advance. Hence, MSPGCL has recognised the amount of Rs Crore in FY as impairment of financial assets-expenses in Profit and Loss account on account of time value of money. MSPGCL requested the Commission to approve the provisioning of expenses needed as per International Financial Reporting Standards Both these expenses of Rs Crore and Rs are provisions made in the audited accounts and are not actual expenses. Hence, the Commission deems it fit to exclude these provisions from the actual O&M expenses for the purpose of computation of gain/loss on account of O&M expenses Based on the above analysis, the actual O&M expenses considered by the MERC in Case No. 196 of 2017 Page 129 of 250

130 Commission in the final true-up for FY are as shown in the Table below: Table 5-24: Actual O&M expenses considered by the Commission in the final true-up for FY Particulars Amount (Rs. Crore) Total actual O&M expenses (excluding water charges) Less: Cost recognised under Other Comprehensive Income statement Provision for doubtful advances Impairment of financial instrument Actual O&M expenses considered by Commission (excluding water charges) The actual O&M expenses (excluding water charges) considered by the Commission in the final true-up are higher than the approved normative O&M expenses (excluding water charges). As the O&M expenses is a controllable factor, the Commission has carried out the sharing of loss on Draft account of variation in normative O&M expenses and actual O&M expenses, in accordance with MYT Regulations, DEPRECIATION MSPGCL s Submission The Commission approved depreciation of Rs Crore in the tariff determination for FY As against the same, MSPGCL has claimed depreciation of Rs Crore in the final true-up for FY The claimed depreciation is inclusive of Head Office depreciation of Rs Crore The depreciation has been computed in accordance with the MYT Regulations, Depreciation has been computed based on straight line method at the rates specified in the Regulations on the opening balance of the GFA as well as on the assets added during each year. Further, Regulation 27.1(b) of the MYT Regulations, 2015 provides that once the individual asset depreciates to the extent of 70%, remaining depreciable value as of the 31 st March of the year closing shall be spread over the balance useful life of the asset. MSPGCL has considered the balance useful life of the asset by assuming an overall life of 40 years for the existing thermal stations and 25 MERC in Case No. 196 of 2017 Page 130 of 250

131 years for the new stations (Paras Units 3 & 4, Parli Units 6 & 7, Khaperkheda Unit 5 and Bhusawal Units 4 & 5, Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9, and Parli Unit 8). Further, MSPGCL has considered the salvage value of the assets at 10% of the allowable capital cost and has allowed depreciation maximum up to 90% of the allowable cost of the assets in-line with the Regulation 27.1(c) of the MYT Regulations, Commission s Analysis and Ruling From the computations of depreciation submitted by MSPGCL, the Commission observed that MSPGCL s claim of depreciation for Nashik TPS for FY is only 50% of the depreciation computed The Commission has computed the depreciation for FY in accordance with the MYT Regulations, The closing GFA and accumulated depreciation approved in final true-up for FY has been considered as the opening GFA and accumulated depreciation for FY If the accumulated depreciation for a particular asset class has reached 70% of the allowable depreciation, the remaining depreciable value has been Draft spread over the remaining useful life of the station, as submitted by MSPGCL. Else, the depreciation on opening GFA and additional capitalisation has been computed at the depreciation rates specified in the Regulations. Although MSPGCL submitted that the depreciation on additional capitalisation has been computed on pro-rata basis from the date of capitalisation, the Commission observed from the computations submitted by MSPGCL that the depreciation on additional capitalisation has been computed for half year. Further, the Commission observed that MSPGCL has not furnished the dates of commissioning of additional capitalisation for many of the works claimed. The Commission has computed the depreciation on opening GFA for full year and depreciation on additional capitalisation has been computed for half year. The Commission has considered Head Office depreciation, the same as claimed by MSPGCL. Table 5-25: Depreciation for FY (Rs. Crore) Final true-up Station/Unit MYT MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda MERC in Case No. 196 of 2017 Page 131 of 250

132 Final true-up Station/Unit MYT MTR Petition Approved in this Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total INTEREST ON LOAN MSPGCL s Submission Draft The Commission had approved interest expenses of Rs Crore in the tariff determination for FY As against the same, MSPGCL has claimed interest and finance charges of Rs Crore in the final true-up for FY MSPGCL submitted that there were no actual outstanding loans pertaining to Koradi Unit 5 and Bhusawal Unit 2 retired during FY The closing loan balance for FY is considered as the opening loan balance for FY The addition to loans during the year has been considered equivalent to the debt portion of the claimed actual additional capitalisation. The depreciation for the year has been considered as the normative repayment for the year. The weighted average interest rate as per the actual loan portfolio at the beginning of the year has been considered as the interest rate. The interest on loan has been computed applying the weighted average rate of interest on the average loan for the year In addition to the normative interest expenses, MSPGCL has claimed the finance charges of Rs Crore comprising refinancing charges of Khaperkheda Unit 5 and other finance charges. MERC in Case No. 196 of 2017 Page 132 of 250

133 MSPGCL has claimed the amount of Rs Crore towards refinancing charges of Khaperkheda Unit 5. In this regard, MSPGCL submitted as follows: In FY , MSPGCL had refinanced the outstanding debt of Rs Crore borrowed for Khaperkheda Unit 5 from Power Finance Corporation (PFC) with new debt amounting to Rs Crore from State Bank of India (SBI). The key features of refinancing of outstanding debt of Khaperkheda Unit 5 are as below: Table 5-26: Key features of refinancing of outstanding debt of Khaperkheda Unit 5 S. No. Particulars PFC Loan Original loan SBI loan Refinanced loan 1 Rate of interest 10.22% p.a. 9.40% p.a. 2 Basis of rate of interest Fixed by PFC with 3 year reset 1-year MCLR + spread 0.25%. Annual reset in October 3 Margin 80% of project cost Take-over of loan Draft 4 Repayment terms 60 quarterly instalments payable on every 15 th of April, July, October and January of every year 5 Interest servicing Quarterly along with principal instalment hence, no margin Balance tenure of loan i.e., 51 quarterly instalments of Rs Crore commencing from 31 October, Instalments payable on 31 October, 31 January, 30 April and 30 July every year Every month on last day 6 Financing charges Nil Upfront 0.25% of sanctioned loan amount 7 Pre-payment 2.75% of loan prepaid, - i.e., Rs Crore paid to PFC 8 Other charges Loan document execution charges at actual Loan document execution charges at actual 9 Security Charge on Khaperkheda TPS Unit 5 Charge on Khaperkheda TPS Unit 5 MERC in Case No. 196 of 2017 Page 133 of 250

134 For the refinancing of loan, MSPGCL has incurred total expenses of Rs Crore. The break-up of the refinancing charges is as follows: Table 5-27: Refinancing charges of Khaperkheda Unit 5 S. No. Particulars Amount (Rs. Crore) 1 Pre-payment premium paid to PFC Service Tax paid on pre-payment premium Swachh Bharat Cess Krishi Kalyan Cess Upfront fee paid to SBI Service Tax on upfront fee to SBI Legal fee paid to SBI 0.03 Total MSPGCL submitted the supporting documents regarding the refinancing of Khaperkheda Unit 5 loan Regulation of the MYT Regulations, 2015 provides the mechanism for Draft computation of gains associated with savings in interest cost and further sharing of the same with the beneficiaries. In accordance with the Regulations, MSPGCL has computed annuity of net savings in the interest, for the term of the loan considering discount rate as per capital structure of MSPGCL. In order to compute the Net Present Value (NPV) of net savings, MSPGCL has used the discount rate which is equal to the Weighted Average Cost of Capital (WACC) for MSPGCL, which is 10.32%. The WACC has been computed based on the following assumptions: Table 5-28: Assumptions for WACC computations as submitted by MSPGCL Particulars Amount (Rs. Crore) Remarks Total Equity base of MSPGCL as on 31 March, Total Equity as per the audited accounts for FY Total long-term debt of Total debt (long-term and MSPGCL as on 31 March, 2017 short-term) as per the audited accounts for FY Cost of Equity 15.50% Rate of RoE as per the MYT Regulations MERC in Case No. 196 of 2017 Page 134 of 250

135 Particulars Cost of debt Income Tax Rate applicable for MSPGCL in FY Amount Remarks (Rs. Crore) 9.47% Weighted average interest rate of MSPGCL s long-term and short-term loans 20.96% Although no income tax was paid in FY , MAT Rate of 20.96% is considered Accordingly, MSPGCL has computed the NPV of savings in interest cost as Rs Crore and proposed to pass on 2/3 rd of this savings, i.e., Crore to the beneficiary, in accordance with the MYT Regulations, Commission s Analysis and Ruling Although MSPGCL has submitted that the rate of interest considered is the weighted average rate of interest as per the actual loan portfolio at the beginning of the year, the rate of interest considered by MSPGCL is the weighted average rate of interest computed on the basis of the actual loan Draft portfolio during the year, which is in accordance with the MYT Regulations, For Koradi Units 8, 9 & 10, MSPGCL has claimed the interest expenses of Rs Crore as against Rs Crore approved by the Commission. In reply to the Commission s query in this regard, MSPGCL submitted that it has considered average loan for the year instead of considering loan addition on specified dates (COD). As all the Units are not operational for the entire year, the approach adopted by MSPGCL in computing the interest expenses for Koradi Units 8, 9 & 10 is incorrect. The Commission has approved the interest expenses in accordance with the approved loan balance for each Unit and from the COD of the respective Unit, in line with its approach adopted in Case No. 59 of The Commission has considered the station-wise closing loan balances approved for FY as the opening loan balances for FY Further, in accordance with the Commission s Review dated 8 August, 2018 in Case No. 77 of 2018, the Commission has considered the revised loan balances for Koradi Units 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8. MERC in Case No. 196 of 2017 Page 135 of 250

136 Particulars Capital Cost as on COD Table 5-29: Debt and Equity of Koradi Units 9 & 10 as on COD Units Claimed in Case No. 59 of 2017 Koradi Unit 9 Koradi Unit 10 Approved in Case No. 59 of 2017 Approved in this Claimed in Case No. 59 of 2017 Approved in Case No. 59 of 2017 Approved in this Rs. Crore Debt % 79.71% 79.71% 77.09% 88.24% 88.24% 86.72% Debt Rs. Crore Equity % 20.29% 20.29% 22.91% 11.76% 11.76% 13.28% Equity Rs. Crore Particulars Capital Cost as on COD Table 5-30: Debt and Equity of Chandrapur Units 8 & 9 Units Claimed in Case No. 59 of 2017 Chandrapur Unit 8 Chandrapur Unit 9 Approved in Case No. 59 of 2017 Approved in this Claimed in Case No. 59 of 2017 Approved in Case No. 59 of 2017 Approved in this Rs. Crore Debt % 79.98% 79.98% 76.43% 90.77% 90.77% 89.13% Debt Rs. Crore Draft Equity % 20.02% 20.02% 23.57% 9.23% 9.23% 10.87% Equity Rs. Crore Particulars Table 5-31: Debt and Equity of Parli Unit 8 Units Claimed in Case No. 59 of 2017 Approved in Case No. 59 of 2017 Approved in this Capital Cost as on COD Rs. Crore Debt % 83.22% 83.22% 79.85% Debt Rs. Crore Equity % 16.78% 16.78% 20.15% Equity Rs. Crore For Koradi Units 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8, the Commission has considered the revised debt amount as approved in this and accordingly the Return on Equity has also been worked out considering the revised equity amount as shown above as approved in this The loan addition during the year has been considered as equivalent to the debt portion of the approved additional capitalisation. The allowable depreciation for the year has been considered as the normative repayment for MERC in Case No. 196 of 2017 Page 136 of 250

137 the year. The actual weighted average interest rate computed based on the actual loan portfolio during the year has been applied to the average loan for the year for computing the interest expenses As regards refinancing of existing long term loan, Regulation of the MYT Regulations, 2015 specifies that the Generating Company shall make effort to re-finance the loan as long as it results in net savings on interest and in that event, the costs associated with such re-financing shall be borne by the beneficiaries, and the net savings shall be shared between the beneficiaries and the generating company in the ratio of 2:1, subject to prudence check of the Commission. The Generating Company is required to submit documentary evidence of the costs associated with such re-financing. Further, the net savings in interest shall be calculated as an annuity for the term of the loan, and the annual net savings shall be shared between the Generating Company and the beneficiaries in the specified ratio The Commission has perused the submissions of MSPGCL regarding the refinancing of long-term loan of Khaperkheda Unit 5. MSPGCL has incurred Draft the refinancing charges of Rs Crore and the net savings in interest cost on annuity-basis has been computed to be Rs Crore. Thus, benefit is derived from the refinancing of the long-term loan of Khaperkheda Unit 5 and hence, the Commission deems it fit to accept the refinancing done by MSPGCL Vide its dated 4 September, 2013 in Case No. 44 of 2013, the Commission had approved the final capital cost of Khaperkheda Unit 5 considering the audited capital expenditure as on COD, i.e., 16 April, In the said, the Commission, after prudence check, had approved the loan amount of Rs Crore as against the actual loan amount of Rs Crore claimed by MSPGCL as on COD. As the Commission had not approved the total loan amount as on COD, the Commission does not find it prudent to allow the actual refinancing charges as incurred by MSPGCL. Accordingly, the Commission has approved the refinancing charges of Rs Crore as against the actual refinancing charges of Rs Crore by considering the proportion of loan amount approved by the Commission to the actual loan amount claimed by MSPGCL as on COD. MERC in Case No. 196 of 2017 Page 137 of 250

138 Table 5-32: Interest and finance charges for FY (Rs. Crore) Final true-up MYT Station/Unit MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Draft Total The Interest on loan as approved by the Commission is lower than that claimed by MSPGCL as the Commission has considered the revised Loan for Koradi Units, 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 as per the Commission s Review in Case No. 77 of MSPGCL has proposed to consider the amount of Rs Crore, i.e., 2/3 rd of the net savings in interest cost on annuity-basis, as a separate income item for FY MSPGCL, in its computations of interest expenses from FY onwards, has considered the reduced interest rates applicable after refinancing. The Commission finds MSPGCL s treatment of considering 2/3 rd of the net savings in interest cost as incorrect as it had already considered the reduced interest rates in the computations of interest expenses from FY onwards. Hence, 1/3 rd of the net savings in interest cost need to be considered as an expense item in FY In line with the approach adopted in the approval of refinancing charges, the Commission has considered the amount of Rs Crore towards 1/3 rd of net savings in interest cost and considered the same as a separate expense item in the final true-up for FY MERC in Case No. 196 of 2017 Page 138 of 250

139 5.21 INTEREST ON WORKING CAPITAL (IOWC) MSPGCL s Submission The Commission had approved IoWC of Rs Crore in the tariff determination for FY As against the same, MSPGCL has claimed normative IoWC of Rs Crore and the actual IoWC of Rs Crore in the final true-up for FY Further, MSPGCL vide its additional submissions dated 17 July, 2018 submitted as under: 7. It is also to submit that while computing the normative Interest on Working capital for the coal thermal stations for the 3rd Control Period (FY to FY 19-20), MSPGCL has inadvertently considered credit period of 30 days for payables for fuel and deducted the same from working capital requirement. The Public Sector coal companies who supply the coal requirement of MSPGCL insist for advance payment of coal bills thereby allowing no Draft credit as per the terms of the FSA. As per Regulations 31.1 (a) (i), cost towards stock for thirty days for nonpit-head Generating Stations, for generation corresponding to target availability is considered for arriving at the normative working capital requirement. However to build up stock equivalent to 30 days consumption, the actual coal procurement process needs to be started one month earlier. Considering the two month duration for coal procurement process between the start of coal procurement and billing for the power generation from this purchased coal, MSPGCL is effectively paying for 20 days coal cost in advance as per the Fuel Supply Agreements with the coal supplying companies. For freight charges, there is not credit period allowed by Railways and MSPGCL has to pay immediately as soon as the RR (Railway Receipt) is generated. So assuming coal supply throughout the period, there is advance payment of 15 days freight charges. Only for the purchase of secondary fuel oil (F.O as well as L.D.O), there is credit period of 25 days... As per Regulation (a) (vii) of MERC MYT Regulations, 2015, Payables for fuel (including oil and secondary fuel oil) to the extent of MERC in Case No. 196 of 2017 Page 139 of 250

140 thirty days of the cost of fuel computed at target Availability, depending on the modalities of payment: {Emphasis added} are to be deducted for arriving at the normative working capital requirement. However, despite of the deviations in the payment terms with respect to the norm specified in the regulations, MSPGCL has missed to compute as per the actual payment terms and erroneously computed the same with 30 days credit period. As MSPGCL is paying 20 days coal cost in advance, it is actually (-) 20 days (minus twenty days) credit and not (+) 30 days credit. Similarly, in case of secondary oil, the credit period is of 25 days only instead of 30 days. In case of freight charges, MSPGCL is effectively paying 15 days freight charges in advance i.e. (-) 15 days (minus fifteen days) credit for freight charges. Apart from this, MSPGCL has also provided the IRLC s as Default Payment Security Mechanism. So, MSPGCL requests Hon ble Commission to compute the normative Interest on Working capital taking into consideration (-) 20 days credit for payables for coal cost, (+) 25 days payables for secondary oil cost & (-) 15 days credit for freight charges and approve the entitlement of Draft IoWC as well as true-up gap/(surplus) for the 3rd Control Period. Commission s Analysis and Ruling Regulation 31.1 of the MYT Regulations, 2015 specifies the normative working capital requirements (cost of coal, cost of oil, O&M Expenses, Maintenance Spares and receivables) at actual Availability or Target Availability of generating station whichever is lower, in true-up MSPGCL has requested the Commission to compute the normative IoWC taking into consideration (-) 20 days credit for payables for coal cost, (+) 25 days payables for secondary fuel oil cost and (-) 15 days credit for freight charges. The Commission does not find it prudent to accept the prayer of MSPGCL to consider (-) 20 days credit for payables for coal cost and (-) 15 days credit for freight charges. In case of no credit available, the payables for fuel to be deducted in the working capital requirement should be considered as zero only. Hence, the Commission has considered the credit of 25 days of secondary fuel oil cost in the payables for fuel to be deducted in the working capital The Commission has computed IoWC in accordance with the MYT Regulations, The rate of IoWC has been considered as 10.79% in MERC in Case No. 196 of 2017 Page 140 of 250

141 . accordance with the First Amendment to MYT Regulations, Table 5-33: IoWC for FY (Rs. Crore) Final true-up Station/Unit MYT MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit 8 Draft Hydro Total The Interest on Working Capital as approved by the Commission is higher than that claimed by MSPGCL as the Commission has not deducted any payables of fuel towards coal cost while computing the working capital requirement in accordance with the provisions of the MYT Regulations, The provision to Regulation 31.6 of the MYT Regulations, 2015 stipulates as follows: Provided that the contribution of delay in receipt of payment to the actual interest on working capital shall be deducted from the actual interest on working capital, before sharing of the efficiency gain or efficiency loss, as the case may be The actual IoWC for FY is Rs Crore. As per the provisions to Regulation 31.6, the contribution of delay in receipt of payment to the actual interest on working capital is to be deducted from the actual interest on working capital. The exact details of contribution of delay in receipt of payment to actual interest on working capital is not available. As per the MERC in Case No. 196 of 2017 Page 141 of 250

142 audited accounts, the receivables as on are Rs 7627 Crore and the Delayed Payment Surcharge (DPS) in accounts for FY is Rs Crore. The extent of receivables as on and DPS for FY clearly indicates that there has been delay in receipt of payment. In the absence of actual impact of delay in receipt of payment to interest on working capital, the Commission has worked out the impact of delay in receipt of payment to interest on working capital based on the DPS for FY However, as the rate of DPS is higher than the working capital interest rate, the Commission has worked out the impact of delay in receipt of payment to interest on working capital on proportionate basis considering the working capital interest rate and DPS rate. Accordingly, the actual IoWC considered by the Commission in the final true-up for FY in accordance with Regulation 31.6 is as shown in the Table below: Table 5-34: Actual IoWC considered by the Commission for FY Particulars Units Legend Value Actual IoWC as per the audited accounts Rs. Crore A Actual Delayed Payment Draft Surcharge (DPS) as per the Rs. Crore B audited accounts Annual Rate of DPS as per the MYT Regulations, % C 15.00% 2015 Rate of IoWC as per the MYT Regulations, 2015 % D 10.79% Impact of Delay in Receipt of Payment to Interest on Rs. Crore E=(B C) x D Working Capital Actual IoWC for true-up in accordance with Regulation 31.6 Rs. Crore F=A-E, and if A-E<0, then As IoWC is a controllable factor under the MYT Regulations, 2015, the Commission has carried out the sharing of variation in normative IoWC and actual IoWC in accordance with the MYT Regulations, RETURN ON EQUITY (ROE) MSPGCL s Submission The Commission had approved RoE of Rs Crore in the tariff determination for FY As against the same, MSPGCL has claimed RoE of Crore in the final true-up for FY MERC in Case No. 196 of 2017 Page 142 of 250

143 The closing equity balance for FY has been considered as the opening equity balance for FY The equity addition for FY has been considered as equivalent to 30% of the actual additional capitalisation claimed for the year. RoE has been claimed at the rate of 7.5%. Commission s Analysis and Ruling In accordance with the MYT Regulations, 2015, the RoE has been computed on the opening balance of the equity portion of the capitalized assets and 50% of the equity portion of the capitalized assets added during each year Bhusawal Unit 2 of 210 MW Capacity was retired w.e.f. 10 February, Koradi Unit 5 of 200 MW capacity was retired w.e.f. 31 March, MSPGCL has deducted the equity portion of the retired Units derived based on the proportion of the GFA of the retired Units to the opening GFA for the year. The Commission has considered the equity portion of the retired Units, namely, Koradi Unit 5 and Bhusawal Unit 2, the same as submitted by MSPGCL. Draft The Commission has considered the approved closing equity for FY after final true-up as the opening equity for FY Further, in accordance with the Commission s Review in Case No. 77 of 2018, the Commission has considered the revised equity balances for Koradi Units 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 in this The Commission has computed the station-wise RoE for FY considering the approved opening equity for the respective station and 50% of the equity portion of the capitalized assets added during each year at the rate of 7.50%. Further, the Commission has deducted RoE on the equity portion corresponding to Bhusawal Unit 2 and Koradi Unit 5 from the effective date of retirement for the balance period of FY Table 5-35: RoE for FY (Rs. Crore) Final true-up Station/Unit MYT MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda MERC in Case No. 196 of 2017 Page 143 of 250

144 Final true-up Station/Unit MYT Approved MTR in this Petition Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total The Return of Equity for Koradi Units 8,9 & 10, Chandrapur Units 8&9 and Draft Parli Unit 8 as approved by the Commission is higher than that claimed by MSPGCL as the Commission has considered the revised Equity as per the Commission s Review in Case No. 77 of INCOME TAX MSPGCL s Submission In the MYT for FY , the Commission had approved the Income Tax of Rs Crore for existing stations and Rs Crore for Koradi Units 8, 9 & 10, Rs Crore for Chandrapur Units 8 & 9, and Rs Crore for Parli Unit 8 in Case No. 59 of The provisional Transfer Scheme notified under Section 131 (5) (g) of the EA, 2003 on 6 June, 2005 was finalized vide notification Maharashtra Electricity Reforms Transfer (First Amendment) Scheme, 2016 dated 31 March, This has resulted in an increase in Net Fixed Assets of MSPGCL by Rs. 15,111 Crore as on 5 June, Schedule H of the notification provides break-up of revised valuation of assets at various stations of MSPGCL as on 5 June This revised valuation of assets has led to increase in actual depreciation in the books of accounts of MSPGCL resulting in reduction in the Company s profit and has accordingly reduced the actual Income Tax outgo of MSPGCL for FY to zero. MERC in Case No. 196 of 2017 Page 144 of 250

145 MSPGCL has not claimed any Income Tax in the final true-up for FY Commission s Analysis and Ruling In accordance with MYT Regulations, 2015, the Commission has not approved any Income Tax in the final true-up for FY as the actual Income Tax during FY was nil NON-TARIFF INCOME (NTI) MSPGCL s Submission The Commission had approved NTI of Rs Crore in the tariff determination for FY and nil for newly commissioned stations. As against the same, MSPGCL has considered NTI of Rs Crore in the final true-up for FY Regulation 36.3 of the MYT Regulations, 2015 specifies that the Delayed Payment Charges and Interest on Delayed Payment accrued to the Generating Company or the Licensee shall not be considered under the NTI. Draft Accordingly, MSPGCL has not considered the Late Payment Surcharge as NTI The actual NTI for FY as per the audited accounts (excluding the Late Payment Surcharge) is Rs Crore (including NTI of Parli). This actual NTI comprises of other income and income from sale of reject coal. As regards the income from sale of fly ash, it was considered as NTI up to FY However, in compliance to the Ministry of Environment and Forest (MoEF) Notification dated 6 November, 2008, MSPGCL has created fly ash utilisation fund for development of infrastructure or facilities and promotion/facilitation activities for use of fly ash until 100% fly ash utilisation level is achieved. Accordingly, the income from sale of fly ash is not considered as NTI for final true-up of FY The NTI claimed by MSPGCL for true-up is as given in the Table below: Table 5-36: NTI claimed by MSPGCL in final true-up for FY Particulars Amount (Rs. Crore) Other income Rejected Coal Total MERC in Case No. 196 of 2017 Page 145 of 250

146 Commission s Analysis and Ruling The Commission has considered the station-wise NTI for FY , as submitted by MSPGCL. Further, the NTI pertaining to Parli is considered in the approval of RSD Charges for Parli as AFC for Parli is not approved. Table 5-37: NTI for FY (Rs. Crore) MYT Final true-up Station/Unit Draft MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total ANNUAL FIXED CHARGES (AFC) Commission s Analysis and Ruling Based on the above analysis, the AFC approved by the Commission in the final true-up for FY , that is fully recoverable at Target Availability, is as shown in the Table below: MERC in Case No. 196 of 2017 Page 146 of 250

147 Table 5-38: AFC claimed by MSPGCL and approved by Commission in final true-up for FY recoverable at Normative Availability (Rs. Crore) Station/Unit Return on Equity Interest on Loan Depreciation O&M expenses IoWC Less: NTI AFC Approved Approved Approved Approved Approved Approved MYT MTR MYT MTR MYT MTR MYT MTR MYT MTR MYT MTR MYT MTR in this in this in this in this in this in this Petition Petition Petition Petition Petition Petition Petition Bhusawal Chandrapur Khaperkheda Koradi Draft Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total Approved in this MERC in Case No. 196 of 2017 Page 147 of 250

148 The detailed analysis underlying the Commission s approval of individual AFC elements on Truing up of FY is already set out above, however, the variation in the AFC sought by the MSPGCL and that approved by the Commission in this is mainly on account of the following: Revised approved Equity balances for Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 in line with the Commission s dated 8 August, 2018 in Case No. 77 of Computational error in MSPGCL s claim of Depreciation for Koradi TPS. Revision in escalation rate for normative O&M expenses in accordance with MYT (First Amendment) Regulations, MSPGCL s additional submissions regarding the payables for fuel to be considered in the normative working capital requirements REDUCTION IN AFC DUE TO SHORTFALL AGAINST TARGET AVAILABILITY MSPGCL s Submission The reduction in AFC due to shortfall in target Availability is Rs Draft Crore. Although MSPGCL has sought recovery of full AFC for Uran, Parli Units 6 & 7 and Parli Unit 8 at actual Availability, it has considered the reduction in AFC for not achieving the target Availability. Commission s Analysis and Ruling As the actual Availability of some of the Stations was lower than the target Availability approved for recovery of full AFC, the Commission has approved the recovery of trued-up AFC for such stations on pro-rata basis, except for Uran. For Uran, the Commission has approved the recovery of full trued-up AFC, at actual Availability The computation of AFC disallowance for FY is given in the Table below: MERC in Case No. 196 of 2017 Page 148 of 250

149 Station/Unit Table 5-39: AFC disallowance approved by the Commission in the final true-up for FY Target Availability Actual Availability Total AFC Draft Less: water charges Total AFC minus water charges AFC Reduction Reduced AFC Reduced AFC plus water charges % % Rs. Crore Rs. Crore Rs. Crore Rs. Crore Rs. Crore Rs. Crore Bhusawal 80.00% 80.82% Chandrapur 80.00% 79.20% Khaperkheda 85.00% 87.85% Koradi 72.00% 61.15% Nashik 80.00% 91.76% Uran 58.88% 58.88% Paras Units 3 & % 76.81% Parli Units 6 & % 46.05% Khaperkheda Unit % 89.54% Bhusawal Units 4 & % 93.49% Koradi Units 8, 9 & % 56.69% Chandrapur Units 8 & % 69.82% Parli Unit % 4.28% Total MERC in Case No. 196 of 2017 Page 149 of 250

150 The Commission has disallowed the AFC of Rs Crore on account of lower Availability in the final true-up for FY The reduction in AFC worked out by the Commission is lower than the reduction in AFC computed by MSPGCL on account of following two reasons: The total AFC allowed by the Commission recoverable at normative availability is lower than the total AFC claimed by MSPGCL and hence pro-rata reduction will also be lower than that claimed by MSPGCL. Commission has not reduced any AFC for Uran Gas based station as the actual availability was lower than the target availability due to shortage to gas LEASE RENT FOR HYDRO STATIONS MSPGCL s Submission MSPGCL has claimed the lease rent of Rs Crore for hydro stations, the same as approved by the Commission in the tariff determination for FY Draft MSPGCL submitted that as per Ind AS 17, leases in which a significant portion of the risks and rewards of ownership are not transferred to the Company, are classified as operating leases. Accordingly, the hydro station leases are classified as operating leases. As per Ind AS 17, payments made under operating leases (net of any incentives received from the lessor) are charged to profit or loss on a straight-line basis over the period of the lease unless the payments are structured to increase in line with expected general inflation to compensate inflationary cost increases for the lessor. Consequently, lease rent expenses for hydro power stations are reduced by Rs Crore and the same are indicated as Lease rent payable in balance sheet, whereas the amount payable to GoM on account of lease rent will be as per the Commission s MSPGCL requested the Commission to approved the lease rent of Rs Crore, which was actually paid. Commission s Analysis and Ruling The Commission approves the actual lease rent of Rs Crore for FY , the same being in line with the approved lease rent in the Commission s s dated 27 April, 2012 and 27 December, 2012 in Case Nos. 5 of 2012 and 2 of 2012 respectively. MERC in Case No. 196 of 2017 Page 150 of 250

151 5.28 RESERVE SHUTDOWN (RSD) CHARGES MSPGCL s Submission Parli TPS (Units 4 & 5) was under RSD during FY The RSD charges claimed by MSPGCL for Parli for FY is as shown in the Table below: Table 5-40: RSD charges claimed by MSPGCL for FY (Rs. Crore) Particulars MYT MTR Petition Employee expenses Depreciation Interest on loan and finance charges Interest on Working Capital Total Commission s Analysis and Ruling The Commission, in its MYT for the 3 rd Control Period dated 30 August, 2016 had approved the proposal of MSPGCL for RSD of Parli during Draft the 3 rd Control Period. Accordingly, the Commission had approved the RSD Charges comprising (i) 10% of employee expenses, (ii) interest on loan, (iii) depreciation and (iv) IoWC (working capital pertaining to proposed components of AFC) MSPGCL has considered the NTI for FY for Parli along with the NTI of other stations and has accordingly claimed the final true-up for FY As Parli was under RSD during FY , the approval of AFC for FY is not necessitated. Hence, the Commission has considered the NTI for Parli for FY in the RSD Charges Accordingly, the Commission has approved the RSD charges for Parli for FY as given in the Table below: Table 5-41: RSD charges for Parli for FY (Rs. Crore) FY Particulars MYT MTR Petition Approved in this Employee expenses Depreciation Interest on loan and finance charges MERC in Case No. 196 of 2017 Page 151 of 250

152 Particulars Interest on Working Capital Less: MYT FY MTR Petition Approved in this Non-Tariff Income RSD Charges PRIOR PERIOD EXPENSES MSPGCL s Submission MSPGCL has claimed prior period expenses of Rs Crore on account of the outcome of arbitration regarding the imported coal contract with CEPL for Khaperkheda Unit 5. In this regard, MSPGCL submitted as under: MSPGCL had signed contract agreement with CEPL dated 26 September, 2014 for supply of non-coking (steam) coal of foreign origin for Khaperkheda Unit 5. In exercise of the contractual provisions for non-performance as per the agreed terms: (i) Draft liquidated damages of Rs Crore was levied during FY and the same was adjusted in the actual fuel price for Khaperkheda Unit 5 during the year, and (ii) forfeiture of performance bank guarantee amounting to Rs Crore and the same was booked as NTI in FY The termination of the contract by MSPGCL was challenged by CEPL in Bombay High Court and pursuant to arbitration in the matter, amicable settlement was reached between MSPGCL and CEPL, and MSPGCL had accepted the payment of Rs Crore ( ) to M/s CEPL. This amount was paid in FY Accordingly, the amount of Rs Crore is proposed to be deducted from the actual NTI for FY and the amount of Rs Crore is proposed for recovery as additional claim in FY Commission s Analysis and Ruling The Commission in the final true-up for FY had not deducted the expenses of Rs Crore from the NTI as proposed by MSPGCL and ruled that the total expenses of Rs Crore shall be allowed in FY , as they have been paid in FY Accordingly, the Commission has MERC in Case No. 196 of 2017 Page 152 of 250

153 considered the total expenses of Rs Crore in the final true-up for FY REVENUE FROM SALE OF POWER MSPGCL s Submission MSPGCL has submitted the details of revenue as per the books of accounts for FY and the revenue reconciliation statement showing the revenue from sale of power. MSPGCL has considered the revenue from sale of power of Rs Crore in the final true-up for FY Commission s Analysis and Ruling The reconciliation of the actual operating revenue as per the audited accounts for FY is as shown in the Table below: Table 5-42: Actual operating revenue as per the audited accounts for FY (Rs. Crore) Station Fuel Fixed Energy Lease Surcharge Charges Charges Rent Adjustment Others Total Bhusawal Chandrapur Draft Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Solar Revenue Reactive power Incentive FY Revenue True-up FY (Case 46/2016) (Withdrawal) Revenue True-up FY (Case 46/2016) (Withdrawal) MERC in Case No. 196 of 2017 Page 153 of 250

154 Station Revenue Gap True-up FY (Case 46/2016) Fixed Charges Energy Charges Fuel Surcharge Adjustment Lease Rent Others Total Advance against Depreciation Book Adjustment Total Table 5-43: Revenue considered by MSPGCL in the final true-up for FY (Rs. Crore) Station Fuel Fixed Energy Lease Surcharge Charges Charges Rent Adjustment Total Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & 4 Draft Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total The Commission observes that MSPGCL has booked an amount of Rs Crore towards the thermal incentive for FY , in the audited accounts for FY As this incentive is for higher PLF achieved during FY in accordance with the MYT Regulations, 2011 but billed in FY , MSPGCL has not considered the same in the revenue for true-up for FY The Commission has considered the revenue from sale of power for final true-up for FY , as submitted by MSPGCL. As proposed by MSPGCL, the Commission has not considered the incentive for FY billed in FY as part of revenue for true up. MERC in Case No. 196 of 2017 Page 154 of 250

155 5.31 SHARING OF GAIN/LOSS DUE TO VARIATION IN AUXILIARY ENERGY CONSUMPTION MSPGCL s Submission MSPGCL has computed the total revenue loss of Rs Crore for FY on account of variation in normative and actual Auxiliary Energy Consumption. Commission s Analysis and Ruling The Commission has computed the revenue loss on account of variation in normative and actual Auxiliary Energy Consumption for FY as shown in the Table below: Table 5-44: Revenue loss due to variation in Auxiliary Energy Consumption approved by the Commission in the final true-up for FY Station/Unit Actual Gross Generation Normative AEC Actual AEC Draft Lesser/ (Additional) energy sale Rate of Energy Charge* Revenue Loss /(Gain) MU % % MU Rs./kWh Rs. Crore Bhusawal % 13.63% Chandrapur % 7.59% (125.32) 2.56 (32.07) Khaperkheda % 10.46% Koradi % 15.33% Nashik % 10.81% (6.44) 3.17 (2.04) Uran % 2.79% (7.08) 2.60 (1.84) Paras Units 3 & % 10.29% Parli Units 6 & % 10.10% Khaperkheda Unit % 5.87% (4.44) 2.79 (1.24) Bhusawal Units 4 & % 6.68% Koradi Units 8, 9 & % 7.34% Chandrapur Units 8 & % 6.78% Parli Unit % 24.51% Koyna % 0.79% (11.26) 0.22 (0.24) Bhira TR % 0.15% (0.56) 0.36 (0.02) Tillari % 0.36% (0.89) 0.19 (0.02) Total *As approved in Tariff determination for FY SUMMARY OF TRUE-UP FOR FY MSPGCL s Submission The final true-up for FY submitted by MSPGCL, after sharing of gains and losses in accordance with MYT Regulations, 2015 is as shown in the Table below: MERC in Case No. 196 of 2017 Page 155 of 250

156 Table 5-45: Summary of true-up for FY claimed by MSPGCL (Rs. Crore) Sharing of Efficiency Normative Actual efficiency (Gain)/Loss Particulars (Gain)/Loss D=2/3rd of (Gain); A B C=B-A 1/3rd of Loss Net entitlement E=A+D Expenses side summary Return on Equity Interest on Loan Depreciation O&M expenses Water Charges Interest on Working Capital Less: Non-Tariff Income Annual Fixed Charges Income Tax RSD Charges Hydro Lease Rent Energy Charges Prior period expenses Aggregate Revenue Requirement AFC Reduction Draft Less: 2/3rd of net savings in interest cost (Khaperkheda Unit 5) Net Revenue Requirement Revenue from sale of power Revenue loss due to higher auxiliary consumption Revenue for true-up Revenue Gap/(Surplus) Commission s Analysis and Ruling In accordance with the MYT Regulations, 2015, the Commission has allowed the expenses for FY based on the norms of operation approved in this, and carried out the sharing of gains and losses under the following heads: i. Sharing of losses in O&M Expenses ii. Sharing of losses in fuel expenses. iii. Sharing of gains towards IoWC. iv. Sharing of normative revenue loss due to higher Auxiliary Energy Consumption In accordance with the MYT Regulations, 2015, 2/3 rd of efficiency gains and 1/3 rd of the efficiency loss on account of variation in controllable factors is to be passed on to the beneficiary. MERC in Case No. 196 of 2017 Page 156 of 250

157 Table 5-46: Summary of true-up for FY as approved by the Commission (Rs. Crore) Sharing of Efficiency Normative Actual efficiency (Gain)/Loss (Gain)/Loss Particulars A B C=B-A D=2/3rd of (Gain); 1/3rd of Loss Net entitlement E=A+D Expenses side summary Return on Equity Interest on Loan Depreciation O&M expenses Water Charges Interest on Working Capital Less: Non-Tariff Income Annual Fixed Charges Income Tax RSD Charges Hydro Lease Rent Energy Charges Prior period expenses Aggregate Revenue Requirement AFC Reduction Draft Add: 1/3rd of net savings in interest cost (Khaperkheda Unit 5) Net Revenue Requirement Revenue from sale of power Revenue loss due to higher auxiliary consumption Revenue for true-up Revenue Gap/(Surplus) (236.50) The treatment of revenue gap as approved above after the final true-up for FY is dealt with in Chapter 7 of this. MERC in Case No. 196 of 2017 Page 157 of 250

158 6 PROVISIONAL TRUE-UP FOR FY INSTALLED CAPACITY The installed capacity of MSPGCL during FY was MW. Table 6-1: Installed capacity during FY Station Unit No. Installed Capacity (MW) Bhusawal TPS Total Chandrapur TPS Total 2920 Draft Khaperkheda TPS Total Koradi TPS Total Nashik TPS Total Parli TPS Total 1170 Paras TPS MERC in Case No. 196 of 2017 Page 158 of 250

159 Station Unit No. Installed Capacity (MW) Total 500 Uran GTPS Total 672 Hydro Total 2585 Grand Total Although the new Units (that are commissioned after incorporation of MSPGCL) were commissioned in the premises of the existing stations, the Commission had been determining the tariff for such new Units separately. Accordingly, for tariff purposes, the following Units are treated as separate stations in addition to the existing old Units at the respective stations: i. Paras Units 3 & 4 ii. Parli Units 6 & 7 iii. Khaperkheda Unit 5 iv. Bhusawal Units 4 & 5 v. Koradi Units 8, 9 & 10 vi. Chandrapur Units 8 & 9 vii. Parli Unit 8 Draft 6.2 RELEVANT ORDERS The Commission vide its dated 30 August, 2016 in Case No. 46 of 2016 had approved the tariff for FY The Commission in the said had approved the proposal of MSPGCL to keep the old Units at Parli TPS under RSD. Accordingly, Parli Units 4 & 5 were kept under RSD during FY The new Units 8, 9 & 10 at Koradi, Units 8 & 9 at Chandrapur and Unit 8 at Parli, were not covered in the Commission s dated 30 August, 2016 in Case No. 46 of Vide its dated 14 December, 2017 in Case No. 59 of 2017 the Commission had approved the final capital cost and tariff for Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 from COD of the respective Units up to FY (i.e., end of the 3 rd MYT Control Period) MSPGCL, in the instant Petition, has sought the provisional true-up for FY under the MYT Regulations, In its original Petition, MSPGCL submitted the actual performance for the first six months (H1) of FY MERC in Case No. 196 of 2017 Page 159 of 250

160 and estimates for the remaining six months (H2). Subsequently, MSPGCL submitted the unaudited actual performance for the entire year. 6.3 NORMS OF OPERATION The norms of operation given under the MYT Regulations, 2015 for thermal generating stations are as follows: (i) (ii) (iii) (iv) (v) (vi) Availability Plant Load Factor (PLF) Auxiliary Energy Consumption (AEC) Gross Station Heat Rate (GSHR) Secondary fuel oil consumption (SFOC) Transit and handling loss The Commission has approved the norms of operation for FY based on the norms specified MYT Regulations, 2015 and considering other aspects as detailed out in respective s. MSPGCL has submitted the actual unaudited performance in FY , which is in variation to the norms Draft approved by the Commission. The performance was better than the norms in some of the cases and inferior in some of the cases. MSPGCL submitted the reasons for the actual performance that is inferior to the norms. MSPGCL s submissions on the actual performance in FY and the Commission s analysis is detailed hereunder. 6.4 AVAILABILITY MSPGCL s Submission The actual Availability achieved for FY is as shown in the Table below: Table 6-2: Actual Availability for FY as submitted by MSPGCL Station/Unit Target Approved in MYT Actual claimed by MSPGCL Bhusawal 80.00% 56.17% Chandrapur 80.00% 56.77% Khaperkheda 85.00% 52.80% Koradi 72.00% 12.90% Nashik 80.00% 73.55% Uran 85.00% 56.21% Paras Units 3 & % 77.73% MERC in Case No. 196 of 2017 Page 160 of 250

161 Station/Unit Target Approved in MYT Actual claimed by MSPGCL Parli Units 6 & % 73.90% Khaperkheda Unit % 77.96% Bhusawal Units 4 & % 80.90% Koradi Units 8, 9 & % 53.59% Chandrapur Units 8 & % 76.21% Parli Unit % 57.59% MSPGCL submitted that its stations could not achieve the target Availability due to coal shortage, water shortage at Chandrapur and Paras and gas shortage at Uran. Further, Koradi Unit 6 was under EE R&M throughout the year All the coal-based thermal generating stations of MSPGCL have faced severe coal supply shortage situation during the year. Due to non-availability of adequate coal, MSPGCL was forced to keep some of the Units closed and even for the Units in service, it was difficult to run them on full load. This has Draft resulted in reduced Availability and therefore reduction in AFC recovery during this period The coal materialization during FY is as shown below: Table 6-3: Coal materialisation during FY as submitted by MSPGCL Coal materialisation during FY Station Linkage (Lakh MT) Actual receipt (Lakh MT) % materialization Chandrapur Khaperkheda Parli Nashik Koradi Paras Bhusawal Total Considering the grade slippage of around 1.5 grades in coal GCV, the available coal is useful for running the present capacity at around 60% loadability MSPGCL has filed a Petition (Case No. 151 of 2017) before the Commission for considering the coal shortage situation as force majeure event and to MERC in Case No. 196 of 2017 Page 161 of 250

162 consider the actual Availability as target Availability. MSPGCL has also requested the Commission to re-introduce the provision for differential capacity declaration during coal shortage period In order to use the available coal optimally and ensure maximum possible availability during summer peak demand, MSPGCL had to keep some Units shut down during FY , depending on coal availability, such that generation can be maximized at optimal cost. MSPGCL requested the Commission to consider unavailability of coal in these circumstances as an uncontrollable and unforeseen circumstance, and therefore a Force Majeure event, and 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 backed down owing to the lack of availability of coal At Chandrapur TPS and Paras TPS, there was problem with water availability due to inadequate rains during monsoon. If available water resource was not judiciously used, it may have affected the Unit availability during the summer Draft season when demand is at peak. Therefore, in order to use the available water optimally and ensure maximum possible availability during summer peak demand, MSPGCL had kept the Units under shut-down for different periods during FY Table 6-4: Capacity kept under shutdown due to water shortage during FY Station Unit Installed capacity From To No. (MW) Chandrapur November, November, December, 2017 Contd. Chandrapur November, November, December, 2017 Contd. Chandrapur February, February, February, February, February, February, March, 2018 Contd. Chandrapur December, January, January, 2018 Contd. Chandrapur February, March, March, March, 2018 Paras November, January, 2018 MERC in Case No. 196 of 2017 Page 162 of 250

163 Station Unit Installed capacity From To No. (MW) 22 January, February, 2018 Paras January, January, MSPGCL submitted the Minutes of Meeting of Akola District Water Reservation Committee, and correspondence of Paras TPS with relevant authorities regarding water shortage. MSPGCL requested the Commission to approve the actual Availability and performance parameters for Chandrapur and Paras for FY and approve the actual cost considering the force majeure situation due to water shortage. Vide its additional submissions dated 2 August, 2018, MSPGCL submitted that there was no water shortage at Parli during FY Actual Availability of Uran GTPS was lower that the target Availability on account of lower receipt of gas. The Commission, in its MYT dated 30 August, 2016 in Case No. 46 of 2016 had considered the gas shortage, and had projected the Availability of Uran GTPS at 62.45% from FY to Draft FY assuming an increase of 5% over the actual average Availability for FY to FY During FY , the gas availability has further reduced and as no substantial alternative gas supply arrangement was available, the actual availability for Uran GTPS during FY was 56.21%. Gas availability is beyond the control of MSPGCL. MSPGCL requested the Commission to consider the actual Availability of Uran as normative Availability of FY Vide its additional submissions dated 18 August, 2018, MSPGCL requested the Commission to consider the actual Availability for Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9 as 53.98% and 76.82% as against 53.59% and 76.21% respectively as submitted in its Petition citing the relaxed AEC norm approved by the Commission in its dated 8 August, 2018 in Case No. 77 of MSPGCL submitted that it had submitted the revised Availability to MSLDC for rectification. Commission s Analysis and Ruling As regards MSPGCL s additional submissions to consider the revised Availability for Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9, the Commission finds the same to be correct by applying the revised auxiliary energy consumption norm approved by the Commission in its dated 8 MERC in Case No. 196 of 2017 Page 163 of 250

164 August, 2018 in Case No. 77 of 2018 and accordingly considered the revised Availability for those stations As per the MYT Regulations, 2015, full AFC can be recovered only if the actual Availability is equal to or higher than the target. The target Availability for recovery of full AFC for FY was approved in the earlier MYT. The actual Availability is lower than the target Availability for all the stations. The Commission has gone through the submissions of the MSPGCL regarding the actual Availability of its stations being lower than the target Availability MSPGCL filed a Petition (Case No. 151 of 2017) for removal of difficulties in the matter of coal shortage and its adverse impact on its stations under Section 102 of the MYT Regulations, The issue of consequential relief on account of coal shortages sought by MSPGCL was settled vide the Commission s dated 19 June, 2018 in Case No. 151 of 2017 wherein it was ruled as under: Draft 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 honour 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 As regards water shortage for power generation, the Commission, in the final true-up for FY and FY has not allowed the recovery of full AFC at actual Availability and not considered the actual performance parameters without sharing of gains and losses for Parli, in light of the Appeal MERC in Case No. 196 of 2017 Page 164 of 250

165 (No. 281 of 2017) pending before the APTEL. In line with that approach, the Commission does not accept the prayer of MSPGCL to allow the consequential relief of water shortage for power generation at Chandrapur and Paras as sought by MSPGCL The Commission asked MSPGCL regarding the efforts made to secure adequate water for power generation at Chandrapur TPS and Paras TPS. MSPGCL submitted the copies of correspondences of District Authorities to substantiate the water shortage for Chandrapur TPS and Paras TPS The Commission asked MSPGCL to submit the supporting documents for substantiating the actual gas receipt in FY MSPGCL submitted the copies of actual gas receipts for FY From MSPGCL s submissions and the material furnished, the Commission finds merit in MSPGCL s contention regarding the shortage of gas, set out above. The Commission had allowed the recovery of full AFC for Uran GTPS in the final true-up for FY , FY , FY , FY and FY considering the shortage of gas as uncontrollable. In line with that approach, the recovery Draft of full AFC, as provisionally trued-up in this, has been allowed for Uran GTPS at actual Availability for FY MSPGCL has submitted the actual Availability for its stations for FY In the absence of MSLDC certificate for actual Availability, the Commission has considered the actual Availability as submitted by MSPGCL in the provisional true-up of FY Table 6-5: Availability for FY Provisional true-up Target Station/Unit Approved in Actual Approved in this MYT claimed by for full MSPGCL AFC recovery Bhusawal 80.00% 56.17% 80.00% Chandrapur 80.00% 56.77% 80.00% Khaperkheda 85.00% 52.80% 85.00% Koradi 72.00% 12.90% 72.00% Nashik 80.00% 73.55% 80.00% Uran 85.00% 56.21% 56.21% Paras Units 3 & % 77.73% 85.00% Parli Units 6 & % 73.90% 85.00% Khaperkheda Unit % 77.96% 85.00% MERC in Case No. 196 of 2017 Page 165 of 250

166 Station/Unit Target Approved in MYT Actual claimed by MSPGCL Provisional true-up Approved in this for full AFC recovery Bhusawal Units 4 & % 80.90% 85.00% Koradi Units 8, 9 & % 53.98% 85.00% Chandrapur Units 8 & % 76.82% 85.00% Parli Unit % 57.59% 85.00% *additional submissions dated 18 August, The recovery of full AFC is allowable at target Availability. As the actual Availability, as submitted by MSPGCL, is lower than the target Availability, the Commission has approved the recovery of provisionally trued-up AFC for FY on pro-rata basis for all the stations, except for Uran. For Uran GTPS, the Commission has approved the recovery of full provisionally truedup AFC for FY at actual Availability. The Commission shall consider the actual Availability as certified by MSLDC for FY at the time of final true-up. Draft 6.5 PLANT LOAD FACTOR (PLF) MSPGCL s Submission The Table below shows the PLF projections approved by the Commission in the tariff determination for FY and actual PLF as claimed by MSPGCL: Table 6-6: Actual PLF for FY as claimed by MSPGCL Station/Unit MYT Actual claimed by MSPGCL Bhusawal 61.48% 32.72% Chandrapur 80.00% 52.55% Khaperkheda 85.00% 42.37% Koradi 62.40% 11.48% Nashik 80.00% 52.53% Uran 62.45% 54.65% Paras Units 3 & % 70.09% Parli Units 6 & % 49.53% Khaperkheda Unit % 68.38% Bhusawal Units 4 & % 68.30% Koradi Units 8, 9 & % 50.26% Chandrapur Units 8 & % 68.78% Parli Unit % 37.53% MERC in Case No. 196 of 2017 Page 166 of 250

167 6.5.2 MSPGCL submitted that the loss of generation on account of backing down and zero scheduling was 6490 MU and on account of coal shortage was 11,233.9 MU, in FY Vide its additional submissions dated 18 August, 2018, MSPGCL requested the Commission to consider the actual PLF for Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9 as 50.63% and 69.33% as against 50.26% and 68.78% respectively as submitted in its Petition citing the relaxed AEC norm approved by the Commission in its dated 8 August, 2018 in Case No. 77 of MSPGCL submitted that it had submitted the revised PLF to MSLDC for rectification. Commission s Analysis and Ruling MSPGCL has submitted the actual PLF for FY As regards MSPGCL s additional submissions to consider the revised PLF for Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9, the Commission finds the same to be correct by applying the revised auxiliary energy consumption norm approved by the Commission in its dated 8 August, 2018 in Case No. 77 of 2018 and accordingly considered Draft the revised PLF for those stations In the absence of MSLDC certificate of actual PLF, the Commission has considered the actual PLF as submitted by MSPGCL in the provisional trueup of FY Table 6-7: PLF for FY Provisional true-up MYT Station/Unit Actual claimed by MSPGCL Approved in this Bhusawal 61.48% 32.72% 32.72% Chandrapur 80.00% 52.55% 52.55% Khaperkheda 85.00% 42.37% 42.37% Koradi 62.40% 11.48% 11.48% Nashik 80.00% 52.53% 52.53% Uran 62.45% 54.65% 54.65% Paras Units 3 & % 70.09% 70.09% Parli Units 6 & % 49.53% 49.53% Khaperkheda Unit % 68.38% 68.38% Bhusawal Units 4 & % 68.30% 68.30% Koradi Units 8, 9 & % 50.63% 50.26% Chandrapur Units 8 & % 69.33% 68.78% Parli Unit % 37.53% 37.53% *additional submissions dated 18 August, 2018 MERC in Case No. 196 of 2017 Page 167 of 250

168 6.6 AUXILIARY ENERGY CONSUMPTION (AEC) MSPGCL s Submission The actual AEC achieved in FY is as shown in the Table below: Table 6-8: Actual AEC for FY as claimed by MSPGCL Station/Unit MYT Actual claimed by MSPGCL Bhusawal 10.96% 12.95% Chandrapur 8.67% 7.42% Khaperkheda 9.70% 11.45% Koradi 9.00% 15.25% Nashik 11.00% 10.66% Uran 3.00% 2.86% Paras Units 3 & % 9.87% Parli Units 6 & % 10.61% Khaperkheda Unit % 6.20% Bhusawal Units 4 & % 6.40% Koradi Units 8, 9 & % 7.63% Chandrapur Units 8 & 9 Draft 5.25% 6.10% Parli Unit % 11.17%* *As submitted in excel formats Major reason for deviation in Auxiliary Energy Consumption of MSPGCL s stations was partial loading / outages due to coal shortage and water shortages Koradi TPS: Higher auxiliary energy consumption was due to commissioning activities of Unit 6 after EE R&M and outages of Unit 7 due to coal shortages In the MYT for 3 rd Control Period, the Commission had approved the normative AEC for Koradi as 9% for FY , which is the Auxiliary Energy Consumption applicable to Koradi Unit 6 after undergoing EE R&M. Koradi Unit 6 was not available during FY The Auxiliary Energy Consumption for Koradi Unit 7 shall be 10.81% for FY as per MYT Regulations, MSPGCL requested the Commission to approved the normative Auxiliary Energy Consumption of 10.81% for FY MERC in Case No. 196 of 2017 Page 168 of 250

169 6.6.6 Paras Units 3 & 4 and Parli Units 6 & 7: The guaranteed auxiliary consumption as per OEM for new Units at Paras and Parli is 9.98%. The achievable auxiliary consumption applying operational margin of 6.5% over the guaranteed auxiliary consumption works out to 10.63%. The actual AEC for Paras Units 3 & 4 and Parli Units 6 & 7 is in line with the guaranteed performance plus operational margin of 6.5% Koradi Units 8, 9 & 10: The guaranteed auxiliary consumption as per OEM is 5.32% at MCR. The norm of 5.25% approved by the Commission is too stringent as the guaranteed auxiliary consumption by OEM with due consideration of operational margin itself is higher than 5.32% Chandrapur Units 8 & 9: The guaranteed auxiliary consumption as per OEM is 5.59% at MCR. The norm of 5.25% approved by the Commission is too stringent as the guaranteed auxiliary consumption by OEM with due consideration of operational margin itself is higher than 5.59%. Commission s Analysis and Ruling Draft In the true-up for the previous years, the Commission had not accepted the coal-related problems, partial loading and frequent outages as cogent reasons for relaxing the norms of operation. The same approach has been adopted for the provisional true-up for FY The Commission in the MYT dated 30 August, 2016 in Case No. 46 of 2016 had approved the normative AEC for Koradi as 9%. MSPGCL sought review of the same in its Review Petition in Case No. 138 of The Commission disposed of the said Petition vide its dated 3 July, 2017 wherein it was ruled as under: Koradi TPS comprised the existing Units 5, 6 and 7. MSPGCL has stated that, in its impugned, the Commission has considered operation of Units 6 and 7 over the 3 rd Control Period, and the retirement of Unit 5 from April, The Commission had considered SHR of 2864 kcal/kwh for FY and 2350 kcal/kwh from FY to FY for these Units - which is the SHR applicable to Koradi Unit 6 once its Renovation and Modernisation is completed. However, the SHR approved for Unit 6 cannot be applied to Unit 7 since it would not have undergone Renovation and Modernisation. A similar approach has been adopted by the Commission MERC in Case No. 196 of 2017 Page 169 of 250

170 while approving the AEC. Hence, MSPGCL has sought that the SHR and AEC for Unit 7 be approved in accordance with the MYT Regulations, 2015 instead of at the level of Unit 6. The Commission notes that it had determined the tariff for Koradi TPS as a whole and not for Unit 6 and 7 separately. The Commission does not agree with MSPGCL that the normative SHR and AEC specified in the MYT Regulations, 2015 (for Koradi Units 5 to 7) be applied to Unit 7. With the retirement of Unit 5 and Renovation and Modernisation of Unit 6, the SHR and AEC of Koradi TPS (Units 6 and 7) would need to be reassessed. As MSPGCL is required to file its MTR Petition for the 3rd Control Period by 30 November, 2017, it may include its proposal with regard to the SHR and AEC for Koradi Units 6 and 7 separately in that Petition The normative AEC for Koradi as specified in the MYT Regulations, 2015 was based on the recommendations of CPRI. The Commission in its MYT for 3 rd MYT Control Period had approved the normative AEC for Koradi considering the EE R&M of Unit 6 to be completed in FY Draft However, the EE R&M of Unit 6 was in progress during FY and FY also. MSPGCL has proposed the normative AEC of 10.81% for FY , which is the normative AEC specified in the MYT Regulations, 2015 for Koradi. The Commission finds merit in MSPGCL s submissions in this regard and accordingly considered the normative AEC of 10.81% for Koradi for FY , as specified in the MYT Regulations, MSPGCL has sought to justify the higher AEC for Paras Units 3 & 4 and Parli Units 6 & 7 citing the parameters guaranteed by the OEM. MSPGCL has only reiterated its submissions made in the true-up Petitions for the previous years. This issue was dealt in the true-up s for the previous years wherein the Commission had ruled that the rationale applied by MSPGCL is not tenable for revising the normative AEC for Paras Units 3 & 4 and Parli Units 6 & 7 in the true-up exercise. In line with that approach, the Commission has not revised the normative AEC for Paras Units 3 & 4 and Parli Units 6 & 7 for FY MSPGCL has sought to justify the higher AEC for Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9 citing the parameters guaranteed by the OEM. The same submissions were raised in the Review Petition filed by MSPGCL in Case No. 77 of In accordance with the Commission s Review MERC in Case No. 196 of 2017 Page 170 of 250

171 dated 8 August, 2018 in Case No. 77 of 2018, the Commission has considered the normative AEC of 6% for Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9 for FY The Commission has approved the normative AEC in the provisional true-up for FY Table 6-9: Auxiliary Energy Consumption for FY Norm Provisional true-up Approved Station/Unit in MYT Actual claimed by MSPGCL Draft Norm Approved in this Bhusawal 10.96% 12.95% 10.96% Chandrapur 8.67% 7.42% 8.67% Khaperkheda 9.70% 11.45% 9.70% Koradi 9.00% 15.25% 10.81% Nashik 11.00% 10.66% 11.00% Uran 3.00% 2.86% 3.00% Paras Units 3 & % 9.87% 8.50% Parli Units 6 & % 10.61% 8.50% Khaperkheda Unit % 6.20% 6.00% Bhusawal Units 4 & % 6.40% 6.00% Koradi Units 8, 9 & % 7.63% 6.00% Chandrapur Units 8 & % 6.10% 6.00% Parli Unit % 11.17% 8.50% The Commission shall consider the difference between the actual and normative Auxiliary Energy Consumption for computing the sharing of efficiency gains/losses for FY in accordance with the MYT Regulations, 2015, in the final true-up for FY GROSS GENERATION AND NET GENERATION Commission s Analysis and Ruling The actual total thermal generation for FY is lower than that projected by the Commission in the tariff determination for FY The Commission has considered the actual gross generation as submitted by MSPGCL and the net generation based on the approved AEC. MERC in Case No. 196 of 2017 Page 171 of 250

172 Table 6-10: Gross Generation and Net Generation for FY (MU) Station/Unit Approved in MYT Gross Generation Net Generation Draft Actual claimed by MSPGCL Gross Generation Net Generation Approved in this Gross Generation Net Generation Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Total GROSS STATION HEAT RATE (GSHR) MSPGCL s Submission The actual GSHR achieved for FY is as shown in the Table below: Table 6-11: Actual GSHR for FY as claimed by MSPGCL (kcal/kwh) Station/Unit MYT Actual claimed by MSPGCL Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit MERC in Case No. 196 of 2017 Page 172 of 250

173 6.8.2 The actual GSHR for all the stations for FY is lower than the norms except for Koradi Units 8, 9 & 10, Parli Units 6 & 7 and Parli Unit 8. The actual GSHR for Parli Units 6 & 7 and Unit 8 was higher than the norms on account of partial loading and outages due to coal shortages In the MYT for 3 rd MYT Control Period, the Commission had approved the normative GSHR for Koradi as 2350 kcal/kwh for FY , which is the GSHR applicable to Koradi Unit 6 after undergoing EE R&M. Koradi Unit 6 was not available during FY The GSHR for Koradi Unit 7 shall be 2874 kcal/kwh for FY as per Regulation 44.5 of the MYT Regulations, MSPGCL requested the Commission to approve the normative GSHR of 2874 kcal/kwh for Koradi for FY Commission s Analysis and Ruling In the true-up for the previous years, the Commission had not accepted the coal-related problems, partial loading and frequent outages as cogent reasons Draft for relaxing the norms of operation. The same approach has been adopted for the provisional true-up for FY The Commission in the MYT dated 30 August, 2016 in Case No. 46 of 2016 had approved the normative GSHR for Koradi as 2350 kcal/kwh. MSPGCL sought review of the same in its Review Petition in Case No. 138 of The Commission disposed of the said Petition vide its dated 3 July, 2017 wherein it was ruled as under: Koradi TPS comprised the existing Units 5, 6 and 7. MSPGCL has stated that, in its impugned, the Commission has considered operation of Units 6 and 7 over the 3 rd Control Period, and the retirement of Unit 5 from April, The Commission had considered SHR of 2864 kcal/kwh for FY and 2350 kcal/kwh from FY to FY for these Units - which is the SHR applicable to Koradi Unit 6 once its Renovation and Modernisation is completed. However, the SHR approved for Unit 6 cannot be applied to Unit 7 since it would not have undergone Renovation and Modernisation. A similar approach has been adopted by the Commission while approving the AEC. Hence, MSPGCL has sought that the SHR and AEC for Unit 7 be approved in accordance with the MYT Regulations, 2015 instead of at the level of Unit 6. MERC in Case No. 196 of 2017 Page 173 of 250

174 The Commission notes that it had determined the tariff for Koradi TPS as a whole and not for Unit 6 and 7 separately. The Commission does not agree with MSPGCL that the normative SHR and AEC specified in the MYT Regulations, 2015 (for Koradi Units 5 to 7) be applied to Unit 7. With the retirement of Unit 5 and Renovation and Modernisation of Unit 6, the SHR and AEC of Koradi TPS (Units 6 and 7) would need to be reassessed. As MSPGCL is required to file its MTR Petition for the 3rd Control Period by 30 November, 2017, it may include its proposal with regard to the SHR and AEC for Koradi Units 6 and 7 separately in that Petition The normative GSHR for Koradi as specified in the MYT Regulations, 2015 was based on the recommendations of CPRI. The Commission in its MYT for 3 rd MYT Control Period had approved the normative GSHR for Koradi considering the EE R&M of Unit 6 to be completed in FY However, the EE R&M of Unit 6 was in progress during FY and FY also. MSPGCL has proposed the normative GSHR of 2874 kcal/kwh for FY , which is the normative GSHR specified in the MYT Regulations, 2015 for Koradi. The Commission finds merit in Draft MSPGCL s submissions in this regard and accordingly considered the normative GSHR for Koradi for FY , as specified in the MYT Regulations, The Commission has considered the normative GSHR in the provisional trueup of FY Table 6-12: GSHR for FY (kcal/kwh) Norm Provisional true-up Station/Unit Approved in MYT Actual claimed by MSPGCL Norm Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & MERC in Case No. 196 of 2017 Page 174 of 250

175 Station/Unit Norm Approved in MYT Actual claimed by MSPGCL Provisional true-up Norm Approved in this Parli Unit As GSHR is a controllable performance parameter, the Commission shall consider the sharing of gains/losses as per the MYT Regulations, 2015, in the final true-up for FY SECONDARY FUEL OIL CONSUMPTION (SFOC) MSPGCL s Submission The actual SFOC achieved for FY is as shown in the Table below: Table 6-13: Actual SFOC for FY as submitted by MSPGCL (ml/kwh) Station/Unit MYT Actual claimed by MSPGCL Bhusawal Chandrapur Khaperkheda Koradi Draft Nashik Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit The actual SFOC for all the stations, except for Koradi, Paras Units 3 & 4 and Bhusawal Units 4 & 5, was lower than the norms. The actual SFOC for Paras Units 3 & 4 and Bhusawal Units 4 & 5 was higher than the norms due to shutdown/ start-ups and partial loading on account of coal shortages. The actual SFOC of Koradi was higher than the norm due to commissioning activities of Unit 6 after EE R&M. Commission s Analysis and Ruling In the true-up for the previous years, the Commission had not accepted the coal-related problems, partial loading and frequent outages as cogent reasons for relaxing the norms of operation. The same approach has been adopted for the provisional true-up for FY MERC in Case No. 196 of 2017 Page 175 of 250

176 6.9.4 The Commission has considered the normative SFOC in the provisional trueup for FY Table 6-14: SFOC for FY (ml/kwh) Norm Provisional true-up Station/Unit Approved in MYT Actual claimed by MSPGCL Norm Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Draft As SFOC is a controllable performance parameter, the Commission shall consider the sharing of gains/losses as per the MYT Regulations, 2015, in the final true-up for FY TRANSIT AND HANDLING LOSS MSPGCL s Submission The actual transit and handling loss achieved for FY is as shown in the Table below: Table 6-15: Actual transit and handling loss for FY as claimed by MSPGCL Station/Unit MYT Actual claimed by MSPGCL Bhusawal 0.80% 0.00% Chandrapur 0.80% 0.72% Khaperkheda 0.80% 0.60% Koradi 0.80% 0.63% Nashik 0.80% 0.61% Paras Units 3 & % 0.80% Parli Units 6 & % 0.03% Khaperkheda Unit % 0.72% Bhusawal Units 4 & % 0.75% MERC in Case No. 196 of 2017 Page 176 of 250

177 Station/Unit MYT Actual claimed by MSPGCL Koradi Units 8, 9 & % 0.80% Chandrapur Units 8 & % 0.83% Parli Unit % 0.00% Commission s Analysis and Ruling The MYT Regulations, 2015 specify the normative transit and handling loss of 0.80% for non-pit head generating stations for domestic coal. MSPGCL has consumed only domestic coal in its thermal generating stations during FY The Commission has considered the normative transit and handling loss in the provisional true-up for FY Table 6-16: Transit and handling loss for FY Norm Provisional true-up Approved Station/Unit in MYT Actual claimed by MSPGCL Draft Norm Approved in this Bhusawal 0.80% 0.00% 0.80% Chandrapur 0.80% 0.72% 0.80% Khaperkheda 0.80% 0.60% 0.80% Koradi 0.80% 0.63% 0.80% Nashik 0.80% 0.61% 0.80% Paras Units 3 & % 0.80% 0.80% Parli Units 6 & % 0.03% 0.80% Khaperkheda Unit % 0.72% 0.80% Bhusawal Units 4 & % 0.75% 0.80% Koradi Units 8, 9 & % 0.80% 0.80% Chandrapur Units 8 & % 0.83% 0.80% Parli Unit % 0.00% 0.80% As transit and handling loss is a controllable performance parameter, the Commission shall compute the sharing of gains/losses as per the MYT Regulations, 2015, in the final true-up of FY GROSS CALORIFIC VALUE (GCV) OF FUELS MSPGCL s Submission The actual GCV of fuels for FY is as given in the Table below: MERC in Case No. 196 of 2017 Page 177 of 250

178 Table 6-17: GCV of fuels for FY as submitted by MSPGCL Coal Actual GCV As As FO LDO Gas Station/Unit stacking for received fired loss tariff kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/scm Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Commission s Analysis and Ruling Draft MSPGCL has considered the as fired GCV of coal for all the coal based thermal generating stations The Commission has considered the actual GCV of secondary fuel oil as submitted by MSPGCL. The Commission has considered the actual GCV of gas as submitted by MSPGCL. The MYT Regulations, 2015 specify that the GCV of coal to be considered for tariff on as received at unloading point less actual stacking loss subject to the maximum stacking loss of 150 kcal/kg. In line with the same, the Commission has considered the minimum of actual stacking loss and 150 kcal/kwh and subtracted the same from the actual as received GCV of coal as submitted by MSPGCL. Table 6-18: GCV of fuels for FY as considered by the Commission Coal Allowable GCV As As FO LDO APM Gas Station/Unit stacking for received fired loss tariff kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/scm Bhusawal Chandrapur Khaperkheda MERC in Case No. 196 of 2017 Page 178 of 250

179 Station/Unit Coal Allowable GCV As As FO LDO APM Gas stacking for received fired loss tariff kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/scm Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit LANDED PRICES OF FUELS MSPGCL s Submission The actual prices of fuels for FY is as given in the Table below: Draft Table 6-19: Actual prices of fuels as submitted by MSPGCL Station/Unit Domestic Coal FO LDO Gas Rs./MT Rs./kL Rs./kL Rs./'000 SCM Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Commission s Analysis and Ruling The actual station-wise landed price of domestic coal as submitted by MSPGCL is after considering the actual transit and handling loss of coal for the respective station. The Commission has re-computed the station-wise landed price of domestic coal considering the approved norms of transit and MERC in Case No. 196 of 2017 Page 179 of 250

180 handling loss. For Uran, the Commission has considered the actual gas price as submitted by MSPGCL. The Commission has considered the actual prices of secondary fuel oil as submitted by MSPGCL. Table 6-20: Landed prices of fuels as considered by Commission in provisional true-up for FY Station/Unit Domestic Coal FO LDO Gas Rs./MT Rs./kL Rs./kL Rs./'000 SCM Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Draft 6.13 OTHER GENERATION-RELATED COSTS MSPGCL s Submission MSPGCL has claimed other generation-related costs of Rs Crore towards coal handling charges, siding charges, oil handling charges, etc. Commission s Analysis and Ruling In line with the approach in previous s, the Commission has approved the other generation-related cost, as claimed by MSPGCL, in the provisional true-up for FY The other generation-related costs approved by the Commission in the provisional true-up for FY is as given in the Table below: Table 6-21: Other generation-related costs for FY (Rs. Crore) Particulars Claimed by MSPGCL Approved in this Bhusawal Chandrapur Khaperkheda Koradi MERC in Case No. 196 of 2017 Page 180 of 250

181 Particulars Claimed by MSPGCL Approved in this Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Total ENERGY CHARGES MSPGCL s Submission MYT Regulations, 2015 specify that the energy charges cover the landed fuel costs and shall be computed by multiplying the ex-bus generation with the REC. Draft The actual REC and energy charges (unaudited) for FY is as given in the Table below: Table 6-22: Actual REC and Energy Charges for FY as submitted by MSPGCL Actual (unaudited) as claimed Station/Unit by MSPGCL REC Energy Charges (Rs./kWh) (Rs. Crore) Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Total MERC in Case No. 196 of 2017 Page 181 of 250

182 Commission s Analysis and Ruling The Commission has computed the REC and energy charges for each station considering the approved generation, performance parameters, GCV of fuels and landed prices of fuels. Table 6-23: REC and energy charges approved by the Commission for FY Actual (unaudited) as claimed by MSPGCL Normative as considered by MSPGCL Normative approved by the Commission Station/Unit Energy Energy Energy REC REC REC Charges Charges Charges (Rs./kWh) (Rs./kWh) (Rs./kWh) (Rs. Crore) (Rs. Crore) (Rs. Crore) Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Draft Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Total The energy charges at normative performance parameters approved by the Commission works out to be higher than that claimed by MSPGCL on account of: Revised Normative GSHR for Koradi. Computational error in GCV of coal considered by MSPGCL for Bhusawal Units 4 & As the energy charges approved by the Commission are at target norms of operation, viz., GSHR, SFOC and transit and handling loss and the norms of operation are controllable factors, the Commission shall undertake the sharing of gains and losses in energy charges on account of variation in norms of operation viz., GSHR, SFOC and transit and handling loss in the final true-up for FY MERC in Case No. 196 of 2017 Page 182 of 250

183 6.15 ADDITIONAL CAPITALISATION MSPGCL s Submission MSPGCL has proposed the additional capitalisation of Rs Crore as against Rs Crore approved by the Commission. The claimed actual additional capitalisation is inclusive of deferred works of new Units namely Khaperkheda Unit 5, Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9, and Parli Unit 8. Table 6-24: Additional capitalisation for FY claimed by MSPGCL (Rs. Crore) Station/Unit MYT MTR Petition Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Draft Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total Commission s Analysis and Ruling The additional capitalisation claimed by MSPGCL falls under three categories, namely (i) Works approved by the Commission by way of inprinciple approval of DPRs, (ii) miscellaneous works for which the inprinciple approval of the Commission was not required to be sought, and (iii) deferred works of new Units as claimed within the original scope of work The Commission has examined the actual additional capitalisation claimed by MSPGCL as against the schemes accorded in-principle approval. The Commission s approach for approving the additional capitalisation in provisional true-up of FY is as follows: MERC in Case No. 196 of 2017 Page 183 of 250

184 DPR Schemes (above Rs. 10 Crore each): 100% capitalisation is approved for all DPR schemes capitalised in the year in respect of which in-principle approval has been accorded. Non-DPR schemes (less than Rs. 10 Crore each): o Where some DPR schemes have been capitalised during the year, capitalisation of the non-dpr schemes has been considered upto 20% of the cost of the capitalised DPR schemes. o Where there has been no capitalisation of any DPR scheme in the year, 50% of the cost of capitalised non-dpr schemes has been approved As regards disallowing the capitalisation of non-dpr schemes exceeding 20% of the DPR schemes, in its Judgment in Appeal No. 160 of 2012 the APTEL had held as under: 110. We do not find infirmity in the State Commission restricting the capital expenditure on non-dpr schemes to 20% of the capitalisation approved for DPR Scheme. However, we feel that the DPR schemes which had not Draft approved and were awaiting approval of the State Commission should be considered by the State Commission and allowed after prudence check The additional capitalisation approved by the Commission in the provisional true-up for FY is as given in the Table below: Table 6-25: Additional capitalisation for FY Provisional true-up MYT Station/Unit MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & MERC in Case No. 196 of 2017 Page 184 of 250

185 Station/Unit MYT Provisional true-up MTR Petition Approved in this Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total MEANS OF FINANCE OF ADDITIONAL CAPITALISATION MSPGCL s Submission The means of finance for the actual additional capitalisation has been considered in the debt-equity ratio of 70:30. Commission s Analysis and Ruling In line with the true-up of previous years, the Commission has considered the means of finance of the approved additional capitalisation in the debt: equity ratio of 70:30. Draft 6.17 ANNUAL FIXED CHARGES (AFC) Regulation 40 of the MYT Regulations, 2015 specifies the components of AFC as follows: a. Operation and Maintenance (O&M) expenses b. Depreciation c. Interest on loan d. Interest on Working Capital (IoWC) e. Return on Equity (RoE) f. Income Tax Less: g. Non-Tariff Income 6.18 OPERATION AND MAINTENANCE (O&M) EXPENSES MSPGCL s Submission The station-wise O&M expenses have been submitted based on the actual expenses for April to September, 2017 and estimated expenses for the remaining six months. As per Regulation 45.1(e) of the MYT Regulations, 2015, the water charges are separately considered in addition to the normative O&M expenses. The water charges paid for Koradi Units 8, 9 & 10 are MERC in Case No. 196 of 2017 Page 185 of 250

186 inclusive of the charges being paid for the water sourced from Bhandewadi STP As against the total O&M expenses of Rs Crore approved in the MYT, MSPGCL has claimed the total O&M expenses of Rs Crore in the provisional true-up of FY The claimed O&M expenses by MSPGCL are inclusive of the estimated water charges of Rs Crore. Commission s Analysis and Ruling In the MYT for the 3 rd MYT Control Period, the Commission had approved the normative O&M expenses for FY to FY in accordance with Regulation 45 of the MYT Regulations, Subsequently, the Commission has notified the First Amendment to MYT Regulations, 2015 wherein the methodology of computing the escalation factor for projecting the normative O&M expenses was amended Regulation 45.1 of the MYT Regulations, 2015 specifies the methodology for Draft determination of normative O&M expenses for the thermal generating stations that achieved COD before 26 August, Regulation 45.2 of the MYT Regulations, 2015 specifies the normative O&M expenses in Rs. lakh/mw for the coal-based thermal generating stations that achieved COD on or after 26 August, Regulation 47.1 of the MYT Regulations, 2015 specifies the methodology for determining the normative O&M expenses for existing hydro generating stations. The Commission has revised the normative O&M expenses for Bhusawal, Chandrapur, Khaperkheda, Koradi, Nashik and Uran stations as determined in the MYT, for FY to give effect to the First Amendment to the MYT Regulations, The normative O&M expenses for Paras Units 3 & 4, Parli Units 6 & 7, Khaperkheda Unit 5, Bhusawal Units 4 & 5, Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 has been considered as approved in the MYT, for FY In addition to the normative O&M expenses, the Commission has considered the station-wise water charges as submitted by MSPGCL. MERC in Case No. 196 of 2017 Page 186 of 250

187 Station/Unit Table 6-26: O&M expenses for FY (Rs. Crore) MYT Normative including water charges Estimated O&M expenses MTR Petition Estimated water charges Total O&M expenses Normative O&M expenses Approved in this Water charges Total O&M expenses Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Draft Total As the O&M expenses is a controllable factor, the Commission shall carry out the sharing of gains/losses on account of variation in normative O&M expenses and actual O&M expenses, in the final true-up of FY DEPRECIATION MSPGCL s Submission The depreciation for FY has been computed in accordance with the MYT Regulations, Depreciation has been computed based on straight line method at the rates specified in the Regulations on the opening balance of the GFA as well as on the assets added during each year. Further, Regulation 27.1(b) of the MYT Regulations, 2015 provides that once the individual asset depreciates to the extent of 70%, the remaining depreciable value as on the 31 st March of the year closing, shall be spread over the balance useful life of the asset. MSPGCL has considered the balance useful life of the asset by assuming an overall life of 40 years for the existing thermal stations and 25 years for the new stations (Paras Units 3 & 4, Parli Units 6 & 7, Khaperkheda Unit 5 and Bhusawal Units 4 & 5, Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9, and Parli Unit 8). Further, MSPGCL has considered the salvage value of the assets at 10% of the allowable capital cost and has allowed depreciation MERC in Case No. 196 of 2017 Page 187 of 250

188 maximum up to 90% of the allowable cost of the assets in-line with the Regulation 27.1(c) of the MYT Regulations, As against the depreciation of Rs Crore approved in the MYT, MSPGCL has claimed the depreciation of Rs Crore in the provisional true-up of FY Commission s Analysis and Ruling The closing GFA and closing accumulated depreciation approved in the final true-up for FY has been considered as the opening GFA and opening accumulated depreciation for FY If the accumulated depreciation of a particular asset class has reached 70% of the allowable depreciation, the remaining depreciable value has been spread over the remaining useful life of the respective station, as submitted by MSPGCL. The depreciation on additional capitalisation has been computed for the half-year considering the depreciation rate for the corresponding asset class as specified in the Regulations. Draft Table 6-27: Depreciation for FY (Rs. Crore) Provisional true-up Approved Station/Unit MYT MTR in this Petition Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total MERC in Case No. 196 of 2017 Page 188 of 250

189 6.20 INTEREST ON LOAN MSPGCL s Submission Regulation 29.6 of the MYT Regulations, 2015 provides that the interest on loan shall be calculated on the normative average loan of the year by applying the weighted average rate of interest. Regulation 29.3 of the MYT Regulations, 2015 provides that the repayment for the year shall be deemed to be equal to the depreciation allowed for that year MSPGCL has considered the funding of additional capitalisation at the normative debt-equity ratio of 70:30. The rate of interest considered is the weighted average interest rate on the basis of the actual loan portfolio at the beginning of FY The interest on loan has been computed by applying the weighted average rate of interest on the average of opening and closing loan balances As against the interest on loan of Rs Crore approved in the MYT, MSPGCL has claimed the interest on loan of Rs Crore in the provisional true-up of FY Draft Commission s Analysis and Ruling The Commission has considered the approved closing loan balance for FY as the opening loan balance for FY The debt portion of the approved additional capitalisation has been considered as the loan addition during the year. The approved depreciation has been considered as the repayment for the year. The weighted average rate of interest as submitted by MSPGCL has been provisionally considered as the interest rate. The interest on loan has been calculated on the normative average loan for the year by applying the weighted average rate of interest. The Commission has considered the finance charges for FY as claimed by MSPGCL. Table 6-28: Interest and finance charges for FY (Rs. Crore) Provisional true-up Station/Unit MYT Approved MTR in this Petition Bhusawal Chandrapur Khaperkheda Koradi Nashik MERC in Case No. 196 of 2017 Page 189 of 250

190 Provisional true-up Station/Unit MYT Approved MTR in this Petition Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total INTEREST ON WORKING CAPITAL (IOWC) MSPGCL s Submission Regulation 31.1 of the MYT Regulations, 2015 provides the norms for computation of the working capital for generating companies. The IoWC has been computed as per the norms. Draft Further, as per the First Amendment to the MYT Regulations, 2015, the rate of IoWC has been computed as 10.20% As against the IoWC of Rs Crore approved in the MYT, MSPGCL has claimed IoWC of Rs Crore in the provisional true-up of FY Further, MSPGCL vide its additional submissions dated 17 July, 2018 submitted as under: 7. It is also to submit that while computing the normative Interest on Working capital for the coal thermal stations for the 3rd Control Period (FY to FY 19-20), MSPGCL has inadvertently considered credit period of 30 days for payables for fuel and deducted the same from working capital requirement. The Public Sector coal companies who supply the coal requirement of MSPGCL insist for advance payment of coal bills thereby allowing no credit as per the terms of the FSA. MERC in Case No. 196 of 2017 Page 190 of 250

191 As per Regulations 31.1 (a) (i), cost towards stock for thirty days for nonpit-head Generating Stations, for generation corresponding to target availability is considered for arriving at the normative working capital requirement. However to build up stock equivalent to 30 days consumption, the actual coal procurement process needs to be started one month earlier. Considering the two month duration for coal procurement process between the start of coal procurement and billing for the power generation from this purchased coal, MSPGCL is effectively paying for 20 days coal cost in advance as per the Fuel Supply Agreements with the coal supplying companies. For freight charges, there is not credit period allowed by Railways and MSPGCL has to pay immediately as soon as the RR (Railway Receipt) is generated. So assuming coal supply throughout the period, there is advance payment of 15 days freight charges. Only for the purchase of secondary fuel oil (F.O as well as L.D.O), there is credit period of 25 days... As per Regulation (a) (vii) of MERC MYT Regulations, 2015, Draft Payables for fuel (including oil and secondary fuel oil) to the extent of thirty days of the cost of fuel computed at target Availability, depending on the modalities of payment: {Emphasis added} are to be deducted for arriving at the normative working capital requirement. However, despite of the deviations in the payment terms with respect to the norm specified in the regulations, MSPGCL has missed to compute as per the actual payment terms and erroneously computed the same with 30 days credit period. As MSPGCL is paying 20 days coal cost in advance, it is actually (-) 20 days (minus twenty days) credit and not (+) 30 days credit. Similarly, in case of secondary oil, the credit period is of 25 days only instead of 30 days. In case of freight charges, MSPGCL is effectively paying 15 days freight charges in advance i.e. (-) 15 days (minus fifteen days) credit for freight charges. Apart from this, MSPGCL has also provided the IRLC s as Default Payment Security Mechanism. So, MSPGCL requests Hon ble Commission to compute the normative Interest on Working capital taking into consideration (-) 20 days credit for payables for coal cost, (+) 25 days payables for secondary oil cost & (-) 15 days credit for freight charges and approve the entitlement of IoWC as well as true-up gap/(surplus) for the 3rd Control Period. MERC in Case No. 196 of 2017 Page 191 of 250

192 Commission s Analysis and Ruling Regulation 31.1 of the MYT Regulations, 2015 specifies the normative working capital requirements (cost of coal, cost of oil and receivables) to be computed based on the actual generation or target Availability, whichever is lower, in true-up MSPGCL has requested the Commission to compute the normative IoWC taking into consideration (-) 20 days credit for payables for coal cost, (+) 25 days payables for secondary fuel oil cost and (-) 15 days credit for freight charges. The Commission does not find it prudent to accept the prayer of MSPGCL to consider (-) 20 days credit for payables for coal cost and (-) 15 days credit for freight charges. In case of no credit available, the payables for fuel to be deducted in the working capital requirement should be considered as zero only. Hence, the Commission has considered the credit of 25 days of secondary fuel oil cost in the payables for fuel to be deducted in the working capital The Commission has computed IoWC in accordance with the MYT Draft Regulations, The rate of IoWC has been considered as 10.20% in accordance with the First Amendment to MYT Regulations, Table 6-29: IoWC for FY (Rs. Crore) Station/Unit MYT Provisional true-up MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total MERC in Case No. 196 of 2017 Page 192 of 250

193 6.22 RETURN ON EQUITY (ROE) MSPGCL s Submission The closing equity balance for FY has been considered as the opening equity balance for FY The equity addition for FY has been considered as equivalent to 30% of the additional capitalisation for the year. RoE has been claimed at the rate of 7.5%. RoE has been computed in accordance with Regulation 28 of the MYT Regulations, As against RoE of Rs Crore approved in the MYT, MSPGCL has claimed RoE of Rs Crore in the provisional true-up of FY Commission s Analysis and Ruling The Commission observed that MSPGCL, in its computations of RoE of Uran has considered the rate of RoE as 15.5% although for all the other stations, the rate of RoE has been considered as 7.5%. Draft The Commission has considered the approved closing equity in the final trueup for FY as the opening equity for FY The addition to equity has been considered as equivalent to the equity portion of the approved additional capitalisation for the year. The Commission has approved the RoE at the rate of return of 7.5%, on the opening equity as well as on 50% of the addition during the year. Table 6-30: RoE for FY (Rs. Crore) Provisional true-up MYT Station/Unit MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & MERC in Case No. 196 of 2017 Page 193 of 250

194 Station/Unit MYT Provisional true-up Approved MTR in this Petition Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total The Return of Equity as approved by the Commission is higher than that claimed by MSPGCL as the Commission has considered the revised Equity for Koradi Units, 8,9 &10, Chandrapur Units 8 & 9 and Parli Unit 8 as per the Commission s Review in Case No. 77 of INCOME TAX MSPGCL s Submission The Commission had approved the Income Tax of Rs Crore for FY , in the MYT. Regulation 33.1 of the MYT Regulations, 2015 Draft provides that the Commission shall provisionally approve the Income Tax payable for each year of the Control Period, based on the actual Income Tax paid by the Generating Company on the actual Profit Before Tax of the regulated business as per the latest audited accounts, subject to prudence check Accordingly, the Income Tax for FY is considered at the same level as submitted for FY , since that is the latest year for which the audited accounts are available. MSPGCL has not paid any Income Tax in FY on income from regulated business. Accordingly, MSPGCL has not claimed any Income Tax for FY The actual income paid for FY on the regulated business of MSPGCL shall be submitted at the time of final true-up for FY Commission s Analysis and Ruling As there was no actual Income Tax paid in FY , the Commission has not considered any Income Tax in the provisional true-up for FY , in accordance with the MYT Regulations. MERC in Case No. 196 of 2017 Page 194 of 250

195 6.24 NON-TARIFF INCOME (NTI) MSPGCL s Submission The NTI for FY has been projected considering the actuals for first six months and estimates for the remaining six months. As against the NTI of Rs Crore approved in the MYT, MSPGCL has claimed the NTI of Rs Crore in the provisional true-up for FY Commission s Analysis and Ruling The NTI claimed by MSPGCL for FY is the same as the actual NTI claimed in the final true-up for FY The Commission has considered the NTI for FY as claimed by MSPGCL. Table 6-31: NTI for FY (Rs. Crore) Provisional true-up MYT Station/Unit Approved MTR in this Petition Bhusawal Chandrapur Draft Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total ANNUAL FIXED CHARGES (AFC) Commission s Analysis and Ruling Based on the above analysis, the AFC approved by the Commission in the provisional true-up for FY , that is fully recoverable at target Availability, is as shown in the Table below: MERC in Case No. 196 of 2017 Page 195 of 250

196 Table 6-32: AFC claimed by MSPGCL and approved by Commission in provisional true-up for FY recoverable at Normative Availability (Rs. Crore) Station/Unit MYT Return on Equity Interest on Loan Depreciation O&M expenses Approved Approved Approved MTR MYT MTR MYT MTR MYT MTR in this in this in this Petition Petition Petition Petition Approved in this MYT IoWC Less: NTI AFC Approved Approved MTR MYT MTR MYT MTR in this in this Petition Petition Petition Bhusawal Chandrapur Khaperkheda Koradi Nashik Draft Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total Approved in this MERC in Case No. 196 of 2017 Page 196 of 250

197 The detailed analysis underlying the Commission s approval of individual AFC elements on Truing up of FY is already set out above, however, the variation in the AFC sought by the MSPGCL and that approved by the Commission in this is mainly on account of the following: Revised approved Equity balances for Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 in line with the Commission s dated 8 August, 2018 in Case No. 77 of The variation in additional capitalisation approved by the Commission and that claimed by MSPGCL. Computational error in MSPGCL s claim of Depreciation for Koradi TPS. Normative O&M expenses approved in accordance with the Regulations as against the projected expenses claimed by MSPGCL. MSPGCL s additional submissions regarding the payables for fuel to be considered in the computations of normative working capital requirements LEASE RENT FOR HYDRO STATIONS MSPGCL s Submission MSPGCL has claimed the lease rent for hydro stations of Rs Crore, as approved by the Commission in the tariff determination for FY Commission s Analysis and Ruling The Commission approves the lease rent of Rs Crore for FY , the same being in line with the approved lease rent in the Commission s s dated 27 April, 2012 and 27 December, 2012 in Case Nos. 5 of 2012 and 2 of 2012 respectively RESERVE SHUTDOWN (RSD) CHARGES MSPGCL s Submission Parli TPS (Units 4 & 5) was under RSD during FY The RSD charges claimed by MSPGCL for Parli for FY is as shown in the Table below: Table 6-33: RSD charges claimed by MSPGCL for FY (Rs. Crore) Particulars Approved in the MYT Claimed by MSPGCL in provisional true-up Employee expenses Depreciation MERC in Case No. 196 of 2017 Page 197 of 250

198 Particulars Approved in the MYT Claimed by MSPGCL in provisional true-up Interest on loan and finance charges Interest on Working Capital Total Commission s Analysis and Ruling The Commission, in its MYT for the 3 rd Control Period dated 30 August, 2016 in Case No. 46 of 2016 had approved the proposal of MSPGCL for RSD of Parli during the 3 rd Control Period. Accordingly, the Commission had approved the RSD charges comprising of (i) 10% of employee expenses, (ii) interest on loan, (iii) depreciation and (iv) IoWC (working capital pertaining to proposed components of AFC) MSPGCL has considered the NTI for FY for Parli along with the NTI of other stations and has accordingly claimed the provisional true-up for FY As Parli was under RSD during FY , the approval of AFC for FY is not necessitated. Hence, the Commission has considered the NTI for Parli for FY in the RSD charges Accordingly, the Commission has approved the RSD Charges for Parli for FY as given in the Table below: Table 6-34: RSD Charges for Parli for FY (Rs. Crore) FY Particulars MYT MTR Petition Approved in this Employee expenses Depreciation Interest on loan and finance charges Interest on Working Capital Less: Non-Tariff Income RSD Charges MERC in Case No. 196 of 2017 Page 198 of 250

199 6.28 REDUCTION IN AFC DUE TO SHORTFALL AGAINST TARGET AVAILABILITY MSPGCL s Submission The reduction in AFC due to shortfall in target Availability is Rs Crore. Although MSPGCL has sought recovery of full AFC for Chandrapur, Uran and Paras Units 3 & 4, at actual Availability, it has considered the reduction in AFC for not achieving the target Availability considering the target Availability as approved by the Commission in the MYT, for FY Commission s Analysis and Ruling As the actual Availability of some of the Stations was lower than the target Availability approved for recovery of full AFC, the Commission has approved the recovery of AFC for such stations on pro-rata basis, except for Uran, where the Commission has approved the recovery of full AFC for FY at actual Availability The computation of AFC disallowance for FY is given in the Table below: Table 6-35: AFC disallowance approved by the Commission in the provisional true-up for FY Station/Unit Target Availability Actual Availability Total AFC Less: water charges Total AFC minus water charges AFC Reduction Reduced AFC Reduced AFC plus water charges % % Rs. Crore Rs. Crore Rs. Crore Rs. Crore Rs. Crore Rs. Crore Bhusawal 80.00% 56.17% Chandrapur 80.00% 56.77% Khaperkheda 85.00% 52.80% Koradi 72.00% 12.90% Nashik 80.00% 73.55% Uran 56.21% 56.21% Paras Units 3 & % 77.73% Parli Units 6 & % 73.90% Khaperkheda Unit % 77.96% Bhusawal Units 4 & % 80.90% Koradi Units 8, 9 & % 53.98% Chandrapur Units 8 & % 76.82% Parli Unit % 57.59% Total The Commission has disallowed the AFC of Rs Crore on account of lower Availability in the provisional true-up for FY The reduction in AFC worked out by the Commission is lower than the reduction in AFC MERC in Case No. 196 of 2017 Page 199 of 250

200 computed by MSPGCL on account of following two reasons: The total AFC allowed by the Commission recoverable at normative availability is lower than the total AFC claimed by MSPGCL and hence pro-rata reduction will also be lower than that claimed by MSPGCL. Commission has not reduced any AFC for Uran Gas based station as the actual availability was lower than the target availability due to shortage to gas REVENUE FROM SALE OF POWER MSPGCL s Submission MSPGCL has considered the revenue from sale of power of Rs Crore in the provisional true-up for FY Commission s Analysis and Ruling The Commission has considered the revenue from sale of power for FY , as submitted by MSPGCL SUMMARY OF TRUE-UP FOR FY MSPGCL s Submission The summary of provisional true-up claimed by MSPGCL for FY is as shown in the Table below: Table 6-36: Summary of provisional true-up for FY as claimed by MSPGCL Particulars Net entitlement Expenses side summary Return on Equity Interest on Loan Depreciation O&M expenses Water Charges Interest on Working Capital Less: Non-Tariff Income Annual Fixed Charges Income Tax 0.00 Hydro Lease Rent Energy Charges Aggregate Revenue Requirement AFC Reduction Net Revenue Requirement MERC in Case No. 196 of 2017 Page 200 of 250

201 Particulars Net entitlement Revenue from sale of power Revenue for true-up Revenue Gap/(Surplus) (293.57) Commission s Analysis and Ruling The summary of provisional true-up approved by the Commission for FY is as shown in the Table below: Table 6-37: Summary of provisional true-up for FY approved by the Commission Particulars Net entitlement (Rs. Crore) Expenses side summary Return on Equity Interest on Loan Depreciation O&M expenses Water Charges Interest on Working Capital Less: Non-Tariff Income Annual Fixed Charges Income Tax 0.00 Hydro Lease Rent Energy Charges Aggregate Revenue Requirement AFC Reduction Net Revenue Requirement Revenue from sale of power Revenue for true-up Revenue Gap/(Surplus) (437.95) The treatment of revenue surplus as approved above after the provisional true-up for FY is dealt with in Chapter 7 of this. MERC in Case No. 196 of 2017 Page 201 of 250

202 7 IMPACT OF FINAL TRUE-UP FOR FY , FY AND PROVISIONAL TRUE-UP FOR FY MSPGCL s Submission The APTEL in its Judgment dated 2 January, 2013 in Review Petition No. 13 of 2012 in Appeal No. 203 of 2010 ruled that the utility is entitled to carrying cost on its claim of legitimate expenditure that has been allowed by the Commission as a part of true-up exercise. The carrying cost/ (holding) cost on the revenue gap/(surplus) claimed in the final true-up for FY , FY and provisional true-up for FY has been claimed in accordance with the same considering the rate of IoWC. Table 7-1: Total impact of final true-up for FY , FY and provisional trueup for FY as claimed by MSPGCL Particulars Principal amount Carrying/(holding) cost FY FY FY Rs. Crore 14.05% 10.79% 10.20% Total prncipal amount plus carrying/ (holding) cost Impact of Commission's in Case No. 28 of 2013 for FY and FY Incremental Revenue FY Gap/(Surplus) claimed in final true-up (233.70) (16.42) (25.22) (23.84) (299.17) Revenue FY Gap/(Surplus) claimed in final true-up Revenue Gap/(Surplus) FY claimed in provisional true-up (293.57) (293.57) Total (281.35) (11.70) (8.33) 1.25 (300.13) Commission s Analysis and Ruling Vide its dated 30 August, 2016 in Case No. 46 of 2016, the Commission had carried out the provisional true-up for FY and accordingly passed on the resultant revenue surplus, without any holding cost, to MSEDCL in FY In this, the Commission has carried out the final true-up for FY and determined the total revenue surplus for FY and the incremental revenue surplus after adjusting the revenue surplus approved in the provisional true-up. MERC in Case No. 196 of 2017 Page 202 of 250

203 7.1.3 The Commission has carried out the final true-up for FY and FY and provisional true-up for FY in this. To estimate the carrying/holding cost on revenue gap/(surplus), the Commission has considered the rate of IoWC approved for each year. The Commission has considered the revenue gap/(surplus) to be applicable from the middle of the year of its occurrence till the middle of FY in which the adjustment is allowed. Particulars Impact of Commission's in Case No. 28 of 2013 for FY and FY Total Revenue gap/(surplus) approved after final true-up for FY Incremental Revenue gap/(surplus) approved after final true-up for FY Revenue gap/(surplus) approved after final true-up for FY Revenue gap/(surplus) approved after provisional true-up for FY Principal Amount Carrying/Holding cost considered for allowed for recovery/ (adjustment) in FY FY FY FY FY Yes No Half Half - - year year Yes - Half Full Half year year year Yes - Half Full Half year year year Yes In line with the above approach, the Commission has approved the total revenue gap/(surplus) as given in the Table below: Table 7-2: Impact of final true-up for FY , FY and provisional true-up for FY as approved by the Commission The Commission approves the total revenue surplus of Rs Crore MERC in Case No. 196 of 2017 Page 203 of 250

204 including holding cost, after final true-up for FY and FY and provisional true-up for FY As the net revenue surplus has to be ultimately passed on to MSEDCL, the Commission will apply this approved amount while adjusting the ARR for FY for MSEDCL. MERC in Case No. 196 of 2017 Page 204 of 250

205 8 REVISED TARIFF FOR FY AND FY INSTALLED CAPACITY The installed capacity of MSPGCL as on 1 April 2018 is MW. Table 8-1: Installed capacity of MSPGCL as on 1 April, 2018 Station Unit No. Installed Capacity (MW) Bhusawal TPS Total Chandrapur STPS Total Khaperkheda TPS Total Koradi TPS Total Nashik TPS Total Parli TPS Total 1170 Paras TPS MERC in Case No. 196 of 2017 Page 205 of 250

206 Station Unit No. Installed Capacity (MW) Total 500 Uran GTPS Total 672 Hydro Total 2585 Grand Total Although the new Units (that are commissioned after incorporation of MSPGCL) were commissioned in the premises of the existing stations, the Commission had been determining the tariff for such new Units separately. Accordingly, for tariff purposes, the following Units are treated as separate stations in addition to the existing old Units at the respective stations: i. Paras Units 3 & 4 ii. Parli Units 6 & 7 iii. Khaperkheda Unit 5 iv. Bhusawal Units 4 & 5 v. Koradi Units 8 & 9 vi. Chandrapur Units 8 & 9 vii. Parli Unit RELEVANT ORDERS The Commission vide its dated 30 August, 2016 in Case No. 46 of 2016 had approved the tariff for FY and FY Further, the Commission in the said had approved the proposal of MSPGCL to keep the old Units at Parli TPS under Reserve Shutdown. In the instant Petition, MSPGCL has proposed to continue RSD of Parli Units 4 & 5 during FY and FY The new Units 8, 9 & 10 at Koradi, Units 8 & 9 at Chandrapur and Unit 8 at Parli, were not covered in the Commission s dated 30 August, 2016 in Case No. 46 of Vide its dated 14 December, 2017 in Case No. 59 of 2017 the Commission had approved the final capital cost and tariff for Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 from COD of the respective Units up to FY (i.e., end of the 3 rd MYT Control Period) The Commission in this has carried out the final true-up of FY and FY and provisional true-up of FY Based on the same, MERC in Case No. 196 of 2017 Page 206 of 250

207 the Commission has approved the revised Tariff for FY and FY in this. 8.3 NORMS OF OPERATION The norms of operation given under the MYT Regulations, 2015 for thermal generating stations are as follows: (i) (ii) (iii) (iv) (v) (vi) Availability Plant Load Factor (PLF) Auxiliary Energy Consumption (AEC) Gross Station Heat Rate (GSHR) Secondary Fuel Oil Consumption (SFOC) Transit and handling loss The norms of operation proposed by MSPGCL and Commission s analysis thereon is as detailed hereunder: 8.4 AVAILABILITY MSPGCL s Submission MSPGCL has projected the Availability of its stations in line with the target Availability specified in the MYT Regulations, 2015, except for Chandrapur, Koradi and Uran. The Availability of Chandrapur for FY is projected to be lower than the target on account of water shortage and proposed shutdown of Units 3 & 4 from April 2018 up to June The Availability of Uran for FY and FY is projected to be lower than the target on account of lower gas availability, which is expected to be at the current levels only. The Availability of Koradi is projected to be lower than the target on account of EE R&M activities of Unit 6. The present status of EE R&M of Koradi Unit 6 is as under: The actual execution of the project was commenced by M/s Bharat Heavy Electricals Limited (BHEL) from 20 July, M/s BHEL vide dated 13 November, 2017 informed the revised tentative milestone schedule as under: MERC in Case No. 196 of 2017 Page 207 of 250

208 Table 8-2: Revised tentative milestone schedule of EE R&M of Koradi Unit 6 as submitted by MSPGCL Sl. Milestone Start Finish Actual/Estimate No. 15 November, 19 November, 19 November, 1 Boiler Non-drainable HT November, 25 November, 12 December, 2 Chemical cleaning 3 Boiler Light Up 4 2nd Stage Passivation 5 Barring Gear 6 Steam blowing 7 HP/LP Bypass normalization 8 Boiler Light Up for Synch 9 Synchronization with coal firing December, December, December, December, December, December, February, December, December, December, December, December, December, December, January, January, January, February February, February, Steam blowing was scheduled for completion on 24 January 2018, however, was actually completed on 12 February, Consequently, condition for boiler light up was achieved on 10 March, The activity of TG rolling was undertaken to achieve first synchronization of the Unit w.e.f. 10 March, 2018 but Unit synchronization could not be achieved due to damaged barring gear. Thereafter, full speed rolling was attempted twice on 11 March, 2018 and 25 March, The following abnormalities were observed in the rolling attempted on 11 March, 2018: (i) oil leakage at bearing no. 7, (ii) Fire at bearing no. 2 and, (iii) babbitt metal damages at bearing no. 5. Repairs were carried out to these bearings by BHEL. Subsequent to the repairs carried out, rolling was undertaken on 25 March, The turbine was hand tripped due to high vibrations. Subsequently, BHEL decided to carry out the internal inspection of HP turbine and HP rotor, 2 sets of liners, Barring gear assembly were sent to Haridwar for repairs. All items were received from Haridwar on 21 May, Reinstallation of HP rotor and other parts is in progress. Further, full load, Unit stabilization, Trial Operation/PG Test shall require additional time of 2 to 3 months. The supply of material was affected due to implementation of GST from 1 July, MERC in Case No. 196 of 2017 Page 208 of 250

209 Commission s Analysis and Ruling Regulations 44.1 and 44.2 of the MYT Regulations, 2015 specify the target Availability for full recovery of AFC for MSPGCL s stations. The Availability projections of MSPGCL for its stations for FY are in line with the target specified in the MYT Regulations, 2015 except for Chandrapur and Uran. MSPGCL cited water shortage for power generation at Chandrapur and gas shortage for projected Availability at Uran The actual Availability of some of MSPGCL s stations has been consistently lower than the normative in the recent years. The Commission had disallowed AFC for not achieving target Availability, in accordance with the MYT Regulations, in the true-up of respective years. As the Availability for subsequent years is projected at the normative level, the energy available from MSPGCL s stations is also projected at normative levels, while MSPGCL has been unable to achieve the target Availability In light of the above, the Commission in its MYT for the 3 rd Control Period had projected the Availability of MSPGCL s stations based on the actual Availability during the immediately preceding three years and accordingly, reduced the AFC on pro-rata basis for those stations whose projected Availability was lower than the target. MSPGCL in its Review Petition in Case No. 138 of 2016 sought review of the Commission s decision in this regard. The Commission vide its Review dated 3 July, 2017 ruled as under: The Commission had projected the Availability for the 3 rd Control Period considering the actual levels achieved in the past during FY to FY However, the Target Availability, which is the level at which the full AFC for the respective Stations/Units is allowed, is as approved in Table 6-1 of the impugned MYT. If the actual Availability turns out to be higher than projected, MSPGCL will be entitled to Fixed Charges to that extent, and full Fixed Cost recovery would be allowed when Target Availability is achieved. Hence, the Commission does not find any merit in the submissions of MSPGCL in this regard, and no error apparent or other ground to justify review In light of the Commission s decision on the Review dated 3 July, 2017, the Commission deems it fit to continue with its approach of pro-rata reduction of AFC based on the Availability projections for the future years. MERC in Case No. 196 of 2017 Page 209 of 250

210 8.4.6 The station-wise Availability for FY and FY has been projected assuming an increase of 5% over the actual average Availability for FY to FY , considering the improvement in efficiency of operations. For new Units which have not been in operation for 3 years namely Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9, the Commission has considered the target Availability of 85%. For Parli Unit 8, the Commission has considered the Availability same as projected for Parli Units 6 & As per the MYT Regulations, 2015, full recovery of AFC is allowed only if the Availability is equal to or higher than the target Availability. Accordingly, the Commission has reduced the AFC on a pro-rata basis for those stations whose projected Availability is lower than the target, except for Uran. Although the Commission has not reduced the AFC for Uran on pro-rata basis like other stations, it should not be construed as relaxation in the target Availability for recovery of full AFC. The actual Availability and corresponding adjustment in AFC for FY and FY shall be considered in the true-up of the respective year. Station/Unit Table 8-3: Availability for FY and FY Target Approved in MYT Projected by MSPGCL FY FY Target Approved by Commission Considered for AFC adjustment Projected by MSPGCL Target Approved by Commission Considered for AFC adjustment Bhusawal 80.00% 80.00% 80.00% 72.83% 80.00% 80.00% 72.83% Chandrapur 80.00% 73.90% 80.00% 76.16% 80.00% 80.00% 76.16% Khaperkheda 85.00% 85.00% 85.00% 79.16% 85.00% 85.00% 79.16% Koradi 72.00% 72.00% 72.00% 72.00% 72.00% 72.00% 72.00% Nashik 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% 80.00% Uran 85.00% 55.00% 85.00% 60.84% 55.00% 85.00% 60.84% Paras Units 3 & % 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% Parli Units 6 & % 85.00% 85.00% 52.96% 85.00% 85.00% 52.96% Khaperkheda Unit % 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% Bhusawal Units 4 & % 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% Koradi Units 8, 9 & % 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% Chandrapur Units 8 & % 85.00% 85.00% 85.00% 85.00% 85.00% 85.00% Parli Unit % 85.00% 85.00% 52.96% 85.00% 85.00% 52.96% MERC in Case No. 196 of 2017 Page 210 of 250

211 8.5 PLANT LOAD FACTOR (PLF) MSPGCL s Submission MSPGCL has projected the PLF of its stations for FY and FY at the same levels of projected Availability for the corresponding year. Commission s Analysis and Ruling MSPGCL has submitted the energy availability projections for FY and FY considering normative Availability levels. In light of actual generation being lower than the generation at normative availability during the last three years i.e., FY to FY due to coal shortage, gas shortage, water charges, and backing down, MSPGCL was directed to revisit energy availability projections and submit realistic estimates for FY and FY In case MSPGCL generation is projected at normative levels in Tariff and if actual generation is less than the normative levels, the same will affect the MSEDCL and MSEDCL will have to resort to costly power purchase thereby affecting the consumers tariff. Hence the Commission directed MSPGCL to submit the realistic estimates. In reply, MSPGCL submitted that the loss in generation on account of uncontrollable factors like coal shortage, water shortage, lower schedules, etc., is to the tune of 27% of the possible generation. The coal realisation for MSPGCL s generating stations is improving. The water shortage issue at Paras Units 3 & 4 has been mitigated. The Erai dam level at Chandrapur is improving during the monsoon of FY Hence, in the forthcoming years, it is expected that the loss on account of uncontrollable factors along with operational factors will be minimised. The projected generation levels for FY are in line with the actual total generation for FY plus the loss in generation during that year Regulation 44.3 of the MYT Regulations, 2015 specifies the target PLF for incentive for thermal generating stations as 85%. The Commission has considered the PLF projections for FY and FY the same as Availability projections for the respective year. Station/Unit Table 8-4: PLF for FY and FY MYT FY FY MTR Petition MTR Petition Approved in this Approved in this Bhusawal 61.48% 80.00% 72.83% 80.00% 72.83% Chandrapur 80.00% 73.90% 76.16% 80.00% 76.16% MERC in Case No. 196 of 2017 Page 211 of 250

212 Station/Unit MYT MTR Petition FY FY Approved in this MTR Petition Approved in this Khaperkheda 85.00% 85.00% 79.16% 85.00% 79.16% Koradi 62.40% 72.00% 72.00% 72.00% 72.00% Nashik 80.00% 80.00% 80.00% 80.00% 80.00% Uran 62.45% 55.00% 60.84% 55.00% 60.84% Paras Units 3 & % 85.00% 85.00% 85.00% 85.00% Parli Units 6 & % 85.00% 52.96% 85.00% 52.96% Khaperkheda Unit % 85.00% 85.00% 85.00% 85.00% Bhusawal Units 4 & % 85.00% 85.00% 85.00% 85.00% Koradi Units 8, 9 & % 85.00% 85.00% 85.00% 85.00% Chandrapur Units 8 & % 85.00% 85.00% 85.00% 85.00% Parli Unit % 85.00% 52.96% 85.00% 52.96% 8.6 AUXILIARY ENERGY CONSUMPTION (AEC) MSPGCL s Submission MSPGCL has proposed the AEC for its stations for FY and FY in line with the norms approved by the Commission in the MYT, except for Koradi. For Koradi, MSPGCL has proposed the AEC norm of 10.21% for FY and 9.90% for FY considering the operational Units 6 & 7 and the guaranteed auxiliary consumption of Unit 6 after EE R&M. Commission s Analysis and Ruling The Commission, in its MYT for the 3 rd Control Period, had approved the normative AEC for FY and FY in accordance with the MYT Regulations, Further, in accordance with the Commission s Review in Case No. 77 of 2018, the Commission has considered the normative AEC of 6% for Koradi Units 8, 9 & 10 and Chandrapur Units 8 & 9. In this, the Commission has considered the normative AEC for FY and FY as approved in the MYT, except for Koradi TPS The normative AEC for Koradi as specified in the MYT Regulations, 2015 was based on the recommendations of CPRI. The Commission in its MYT for 3 rd MYT Control Period had approved the normative AEC for Koradi considering the EE R&M of Unit 6 to be completed in FY However, the EE R&M of Unit 6 was in progress during FY and FY MERC in Case No. 196 of 2017 Page 212 of 250

213 also and is expected to be commissioned in FY The AEC norm proposed by MSPGCL for Koradi for FY and FY is by considering the guaranteed AEC for Unit 6 after EE R&M and the normative AEC for Unit 7 as approved in the MYT Regulations, The Commission has accordingly considered the AEC for Koradi Unit 7 as per norm specified in the MYT Regulations, 2015 and the guaranteed AEC for Unit 6 after R&M. Station/Unit Table 8-5: AEC for FY and FY MYT FY FY MTR Petition Approved in this MTR Petition Approved in this Bhusawal 10.96% 10.96% 10.96% 10.96% 10.96% Chandrapur 8.67% 8.67% 8.67% 8.67% 8.67% Khaperkheda 9.70% 9.70% 9.70% 9.70% 9.70% Koradi 9.00% 10.21% 10.21% 9.91% 9.91% Nashik 11.00% 11.00% 11.00% 11.00% 11.00% Uran 3.00% 3.00% 3.00% 3.00% 3.00% Paras Units 3 & % 8.50% 8.50% 8.50% 8.50% Parli Units 6 & % 8.50% 8.50% 8.50% 8.50% Khaperkheda Unit % 6.00% 6.00% 6.00% 6.00% Bhusawal Units 4 & % 6.00% 6.00% 6.00% 6.00% Koradi Units 8, 9 & % 5.50% 6.00% 5.50% 6.00% Chandrapur Units 8 & % 5.25% 6.00% 5.25% 6.00% Parli Unit % 8.50% 8.50% 8.50% 8.50% 8.7 GROSS GENERATION AND NET GENERATION MSPGCL s Submission MSPGCL has projected the gross generation and net generation for FY and FY considering the projected PLF and AEC. Commission s Analysis and Ruling The Commission has projected the gross generation for FY and FY considering the approved PLF. The net generation has been projected considering the projected gross generation and the approved normative AEC. MERC in Case No. 196 of 2017 Page 213 of 250

214 Station/Unit Table 8-6: Gross generation and net generation for FY (MU) Gross Generation MYT MTR Petition Projected in this Net Generation Gross Generation Net Generation Gross Generation Net Generation Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & * Parli Unit Total *As submitted in excel formats Station/Unit Table 8-7: Gross generation and net generation for FY (MU) Gross Generation MYT MTR Petition Projected in this Net Generation Gross Generation Net Generation Gross Generation MERC in Case No. 196 of 2017 Page 214 of 250 Net Generation Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda

215 Station/Unit Gross Generation MYT MTR Petition Projected in this Net Generation Gross Generation Net Generation Gross Generation Net Generation Unit 5 Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & * Parli Unit Total *As submitted in excel formats 8.8 GROSS STATION HEAT RATE (GSHR) MSPGCL s Submission MSPGCL has proposed the GSHR for its stations for FY and FY in line with the norms approved by the Commission in the MYT, except for Koradi. For Koradi, MSPGCL has proposed the GSHR norm of kcal/kwh for FY and kcal/kwh for FY considering the operational Units 6 & 7 and the guaranteed GSHR of Unit 6 after EE R&M. Commission s Analysis and Ruling The Commission, in its MYT for the 3 rd Control Period, had approved the normative GSHR for FY and FY in accordance with the MYT Regulations, In this, the Commission has considered the normative GSHR for FY and FY as approved in the MYT, except for Koradi TPS The normative GSHR for Koradi as specified in the MYT Regulations, 2015 was based on the recommendations of CPRI. The Commission in its MYT for 3 rd MYT Control Period had approved the normative GSHR for Koradi considering the EE R&M of Unit 6 to be completed in FY However, the EE R&M of Unit 6 was in progress during FY and FY also and is expected to be commissioned in FY The GSHR norm proposed by MSPGCL for Koradi for FY and FY is by considering the guaranteed GSHR for Unit 6 after EE R&M and the MERC in Case No. 196 of 2017 Page 215 of 250

216 normative GSHR for Unit 7 as approved in the MYT Regulations, The Commission has accordingly considered the GSHR for Koradi Unit 7 as per norm specified in the MYT Regulations, 2015 and the guaranteed GSHR for Unit 6 after R&M. Table 8-8: GSHR for FY and FY (kcal/kwh) Station/Unit FY FY Approved Approved MYT MYT MTR MTR Petition in this in this Petition Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit SECONDARY FUEL OIL CONSUMPTION (SFOC) MSPGCL s Submission MSPGCL has proposed the SFOC for its stations for FY and FY in line with the norms approved by the Commission in the MYT. Commission s Analysis and Ruling The Commission, in its MYT for the 3 rd Control Period, had approved the normative SFOC for FY and FY in accordance with the MYT Regulations, In this, the Commission has considered the normative SFOC for FY and FY as approved in the MYT. MERC in Case No. 196 of 2017 Page 216 of 250

217 Table 8-9: SFOC for FY and FY (ml/kwh) FY FY MYT Station/Unit MTR Petition Approved in this MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit TRANSIT AND HANDLING LOSS MSPGCL s Submission MSPGCL has proposed the use of only domestic coal in its stations during FY and FY and accordingly, it has proposed the transit and handling loss of 0.80% in line with the norm approved in the MYT. Commission s Analysis and Ruling The Commission, in its MYT for the 3 rd Control Period, had approved the normative transit and handling loss of 0.80% for FY and FY in accordance with the MYT Regulations, In this, the Commission has considered the normative transit loss and handling loss of 0.80% for FY and FY as approved in the MYT GROSS CALORIFIC VALUE (GCV) OF FUELS MSPGCL s Submission MSPGCL has considered the GCV of fuels for FY and FY , the same as the actual GCV for FY MSPGCL submitted that on the assumption that optimum efforts have already been taken for flexible utilisation of coal amongst its stations, no further improvement in GCV of coal is envisaged for FY and FY MERC in Case No. 196 of 2017 Page 217 of 250

218 Table 8-10: GCV of fuels projected by MSPGCL for FY and FY Coal Station/Unit Actual GCV As As FO LDO Gas stacking for received fired loss tariff kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/kg kcal/scm Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Commission s Analysis and Ruling The Commission has considered the actual GCV of coal and secondary fuel oil for the months of January, 2018 to March, 2018 as submitted by MSPGCL. For some of the stations, the stacking loss of coal is higher than the allowable limit of 150 kcal/kg. Hence, the Commission has considered the lower of actual stacking loss and 150 kcal/kg for considering the GCV of coal for tariff. For Uran station, the Commission has considered the actual Gas Price for the month of April 2018 as there has been revision in the price of APM Gas during April The Commission has considered the GCV of gas as submitted by MSPGCL. Table 8-11: GCV of fuels considered by the Commission for FY and FY Coal Allowable GCV As As FO LDO Gas Station/Unit stacking for received fired loss tariff kcal/kg kcal/kg kcal/kg kcal/kg kcal/l kcal/l kcal/scm Bhusawal Chandrapur Khaperkheda Koradi Nashik MERC in Case No. 196 of 2017 Page 218 of 250

219 Station/Unit Coal Allowable GCV As As FO LDO Gas stacking for received fired loss tariff kcal/kg kcal/kg kcal/kg kcal/kg kcal/l kcal/l kcal/scm Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit LANDED PRICES OF FUELS MSPGCL s Submission Escalation of 10% in fuel prices over the actual fuel prices for FY , has been considered to factor in the rise in fuel prices from January, For Uran, the actual gas price for the month of April, 2018 notified by Ministry of Petroleum and Natural Gas, has been considered. Table 8-12: Prices of fuels considered by MSPGCL for FY and FY Station/Unit Domestic Coal FO LDO Gas Rs./MT Rs./kL Rs./kL Rs./'000 SCM Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Commission s Analysis and Ruling The Commission has considered the actual prices of coal and secondary fuel oil for the months of January, 2018 to March, 2018 as submitted by MSPGCL. Based on the actual coal prices submitted by MSPGCL, the MERC in Case No. 196 of 2017 Page 219 of 250

220 Commission has computed the landed prices of coal for each station considering the approved normative transit and handling loss. The Commission has considered the price of gas as submitted by MSPGCL. Table 8-13: Prices of fuels considered by the Commission for FY and FY Domestic Coal FO LDO Gas Station/Unit Rs./MT Rs./kL Rs./kL Rs./'000 SCM Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit ENERGY CHARGE RATE (ECR) MSPGCL s Submission MSPGCL submitted that it had undertaken the following efforts to reduce the variable cost of its generating stations: Transfer of coal linkages especially from MCL with the coal linkages of WCL for Bhusawal TPS, Chandrapur STPS and Paras TPS. Flexible utilization of available coal amongst its different generating Units such that the generating Units near to coal source and having lower GSHR will be provided maximum possible quantum. Commission s Analysis and Ruling Based on the approved performance parameters, fuel prices and GCV, the Energy Charge Rates approved by the Commission for FY and FY is as given in the Table below: MERC in Case No. 196 of 2017 Page 220 of 250

221 Table 8-14: Energy Charge Rates for FY and FY (Rs./kWh) FY FY Station/Unit MYT MTR Petition Approved in this MYT MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit The Energy Charge Rates as approved above for determination of tariff for FY and FY are the base values for computing the normative working capital requirements for the respective years. The variation in energy charges on account of difference in prices and GCV of fuels as considered above and the actual prices and GCV of fuels is allowable to be subsequently passed on to the beneficiary in accordance with the MYT Regulations, ADDITIONAL CAPITALISATION MSPGCL s Submission MSPGCL has proposed additional capitalisation of Rs Crore and Rs Crore as against Rs Crore and Rs Crore approved by the Commission for FY and FY in the MYT for the 3 rd Control Period dated 30 August, 2016 in Case No. 46 of It has submitted the station-wise and year-wise details of the proposed additional capitalisation As regards the project cost of EE R&M of Koradi Unit 6, MSPGCL submitted the details of project cost as on 30 October 2017 as follows: MERC in Case No. 196 of 2017 Page 221 of 250

222 Table 8-15: Capital expenditure of EE R&M of Koradi Unit 6 as submitted by MSPGCL Estimate Actual/Projected Expenditure S. Remarks Description as per (Rs. Crore) No DPR BTG BOP Electrical Total Total Plant, Equipment, Erection & Commissioning with Taxes & duties Provision of Price Escalation Contingencies for Physical surprises Contingencies for unforeseen expenses Financing & other charges Project cost without IDC value of CT Rs Crore AHP Rs Crore FF Rs Crore DM Rs. 1.0 Crore (Estimated) Total Rs Crore BTG- BOP - No price escalation, Electrical-actual price escalation approved 1) Rs Crore against Coal Mill Body procurement 2) Rs. 7.3 Lakhs for rerouting of pipes at ESP C/R. Rs Crore allocated to site for present contingencies & remaining provision for contingencies if any Considered same IDC * 8 Escalated on pro rata basis Total project cost (including IDC) *IDC component as per DPR is Rs Crore based on the market. However, the loan is obtained from World Bank at low interest rate MSPGCL, vide its letter dated 29 August, 2018 submitted a list of inprincipally approved schemes which had not been executed and are to be cancelled permanently as approved by its Board. Commission s Analysis and Ruling The additional capitalisation proposed by MSPGCL falls under three categories, namely (i) Works approved by the Commission by way of inprinciple approval of DPRs, (ii) miscellaneous works for which the inprinciple approval of the Commission was not required to be sought and (iii) MERC in Case No. 196 of 2017 Page 222 of 250

223 deferred works of new Units as claimed within the original scope of work The Commission has analysed the details of additional capitalisation proposed, as against the capex schemes approved and pending for in-principle approval. The Commission s rationale for approving the additional capitalisation for FY and FY is as follows: DPR Schemes (above Rs. 10 Crore each): Capitalisation is approved for all DPR schemes which have been accorded in-principle approval by the Commission considering the actual progress of the works and capitalisation proposed by MSPGCL. For DPR schemes submitted for approval but yet to be scrutinised in detail, in order to avoid any large increase in additional capitalisation at the time of true-up, with associated carrying cost, the Commission has provisionally considered the capitalisation of those schemes which it has prima facie found to be prudent and considering the progress of works. Formal in-principle approvals of these schemes will be conveyed separately. As regards, R&M of Koradi Unit 6, the Commission has provisionally considered the capitalisation as approved by the Commission while granting inprinciple work and the Commission will carry out the prudence check after completion of R&M works. Non-DPR schemes (less than Rs. 10 Crore each): The Commission has approved the capitalisation of non-dpr schemes which it has considered to be prudent. Deferred Works of New Units as claimed within the Original Scope of Work: The Commission has approved the capitalisation of deferred works of new Units as claimed within the original scope of work considering the status of such works The Commission observes that one scheme which is to be permanently cancelled as submitted by MSPGCL vide its letter dated 29 August, 2018 had been proposed in additional capitalisation in FY for Chandrapur TPS. The Commission observes that the amount of this scheme proposed to be capitalised in FY is not significant considering the overall additional capitalisation approved by the Commission in this for FY The Commission shall consider the actual scheme wise additional capitalisation in final true-up for the respective years. MERC in Case No. 196 of 2017 Page 223 of 250

224 The Additional Capitalisation considered by the Commission for FY and FY is as follows: Table 8-16: Additional capitalisation for FY and FY (Rs. Crore) FY FY Station/Unit Approved MYT MTR Approved in MYT MTR in this Petition this Petition Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total MEANS OF FINANCE OF ADDITIONAL CAPITALISATION MSPGCL s Submission The means of finance for the proposed additional capitalisation for FY and FY has been considered in the debt-equity ratio of 70:30. Commission s Analysis and Ruling The Commission has considered the means of finance of the approved additional capitalisation in the debt: equity ratio of 70: ANNUAL FIXED CHARGES (AFC) Regulation 40 of the MYT Regulations, 2015 specifies the components of AFC as follows: h. Operation and Maintenance (O&M) expenses i. Depreciation MERC in Case No. 196 of 2017 Page 224 of 250

225 j. Interest on loan k. Interest on Working Capital (IoWC) l. Return on Equity (RoE) m. Income Tax Less: n. Non-Tariff Income 8.17 OPERATION AND MAINTENANCE (O&M) EXPENSES MSPGCL s Submission The O&M expenses have been claimed as per the provisions of the MYT Regulations, For old thermal stations namely Bhusawal, Chandrapur, Khaperkheda, Koradi, Nashik, and Uran and hydro stations, the O&M expenses approved by the Commission for FY in its MYT dated 30 August, 2016 in Case No. 46 of 2016 have been considered as base O&M expenses. Further, the inflation factor of 4.27% has been considered in line with the Regulations. For new Units namely Paras Units 3 & 4, Parli Units 6 & 7, Khaperkheda Unit 5, Bhusawal Units 4 & 5, Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8, the normative O&M expenses in Rs. Lakh/MW as specified in Regulation 45.2 has been considered. Further, as per Regulation 45.1(e), the water charges have been considered in addition to the normative O&M expenses. In case of Koradi Units 8, 9 & 10, the water charges are inclusive of charges being paid for the water sourced from Bhandewadi STP. In addition, the other generation-related costs which are of fixed in nature have been included in the O&M expenses MSPGCL has claimed the total O&M expenses of Rs Crore and Rs Crore as against Rs Crore and Rs Crore approved by the Commission for FY and FY , respectively. Commission s Analysis and Ruling Regulation 45.1 of the MYT Regulations, 2015 specifies the methodology for determination of normative O&M expenses for the thermal generating stations that achieved COD before 26 August, Regulation 45.2 of the MYT Regulations, 2015 specifies the normative O&M expenses in Rs. lakh/mw for the coal-based thermal generating stations that achieved COD on or after 26 August, Regulation 47.1 of the MYT Regulations, 2015 specifies the methodology for determining the normative O&M expenses for existing hydro generating stations. The Commission has revised the normative MERC in Case No. 196 of 2017 Page 225 of 250

226 O&M expenses for Bhusawal, Chandrapur, Khaperkheda, Koradi, Nashik and Uran and hydro stations as determined in the MYT, for FY and FY to give effect to the First Amendment to the MYT Regulations, The normative O&M expenses for Paras Units 3 & 4, Parli Units 6 & 7, Khaperkheda Unit 5, Bhusawal Units 4 & 5, Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 has been considered as approved in the MYT, for FY and FY MSPGCL has claimed the water charges of Rs Crore and Rs Crore for FY and FY , respectively. Regulation 45.1(e) of the MYT Regulations, 2015 provides for allowing water charges, in addition to normative O&M expenses, based on actuals. The actual water charges for FY were Rs Crore. However, the new Units namely Koradi Units 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 were operational for part period during FY and hence, it would not be prudent to consider the actual water charges for FY in tariff determination for FY and FY in this. The provisional estimates of water charges for FY are Rs Crore. The water charges claimed by MSPGCL for FY and FY are substantially higher than the provisional estimated water charges for FY , which is mainly due to charges for the water sourced from Bhandewadi STP. However, the actual water charges will depend upon the water sourced from various sources including Bhandewadi STP. Hence, at this stage, the Commission deems it prudent to consider the provisional water charges for FY , in the tariff determination of FY and FY in this. Accordingly, the Commission has approved the water charges of Rs Crore for FY and FY The Commission will consider the actual water charges for FY and FY while carrying out the truing up subject to prudence check MSPGCL has claimed the other generation-related costs of Rs Crore and Rs Crore in addition to the normative O&M expenses for FY and FY , respectively. In its MYT for the 3 rd Control Period, the Commission had derived the normative O&M expenses in accordance with the MYT Regulations, 2015 wherein such other generationrelated costs for the base years were not considered in the base O&M expenses. The Commission, in this has considered the other generationrelated costs of fixed nature as claimed by MSPGCL for FY and FY , in addition to the normative O&M expenses. MERC in Case No. 196 of 2017 Page 226 of 250

227 Table 8-17: O&M expenses for FY (Rs. Crore) MYT MTR Petition Approved in this Normative Station/Unit Normative Total Normative Total including Water Other Water Other O&M O&M O&M O&M water charges charges charges charges expenses expenses expenses expenses charges Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total Table 8-18: O&M expenses for FY (Rs. Crore) MYT MTR Petition Approved in this Normative Station/Unit Normative Total Normative including Water Other Water Other Total O&M O&M O&M O&M water charges charges charges charges expenses expenses expenses expenses charges Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total MERC in Case No. 196 of 2017 Page 227 of 250

228 8.18 DEPRECIATION MSPGCL s Submission The depreciation for FY and FY has been computed in accordance with Regulation 27 of the MYT Regulations, Depreciation has been computed based on straight line method at the rates specified in the Regulations on the opening balance of the GFA as well as on the assets added during each year. Further, Regulation 27.1(b) of the MYT Regulations, 2015 provides that once the individual asset depreciates to the extent of 70%, remaining depreciable value as on 31 March of the year closing shall be spread over the balance useful life of the asset. MSPGCL has considered the balance useful life of the asset by assuming an overall life of 40 years for the existing thermal stations and 25 years for the new stations (Paras Units 3 & 4, Parli Units 6 & 7, Khaperkheda Unit 5, Bhusawal Units 4 & 5, Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9, and Parli Unit 8). Further, MSPGCL has considered the salvage value of the assets at 10% of the allowable capital cost and has allowed depreciation maximum up to 90% of the allowable cost of the assets in-line with the Regulation 27.1(c) of the MYT Regulations, MSPGCL has claimed the depreciation of Rs Crore and Rs Crore as against Rs Crore and Rs Crore approved by the Commission for FY and FY , respectively. Commission s Analysis and Ruling The Commission has considered the station-wise approved closing GFA for FY , in this, as the opening GFA for FY and so on, for FY Depreciation for FY and FY has been approved considering the approved GFA and rates of depreciation for each asset class specified in the Regulations. If the accumulated depreciation of a particular asset class has reached 70% of the allowable depreciation, the remaining depreciable value has been spread over the remaining useful life of the respective station, as submitted by MSPGCL. The Commission has computed the depreciation on additional capitalisation during year of capitalisation for the half year. MERC in Case No. 196 of 2017 Page 228 of 250

229 Table 8-19: Depreciation for FY and FY (Rs. Crore) FY FY Station/Unit MYT MTR Petition Approved in this MYT MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total The significant difference in the depreciation claimed by MSPGCL and that approved by the Commission for Chandrapur and Nashik for FY is on account of the difference in the additional capitalisation claimed by MSPGCL and that approved by the Commission for the respective stations for FY and FY INTEREST ON LOAN MSPGCL s Submission The closing loan balance for FY has been considered as the opening loan balance for FY and so on for FY The debt portion of the proposed additional capitalisation has been considered as the loan addition during the year. The depreciation for the year has been considered as the repayment. The weighted average rate of interest computed based on the actual loan portfolio at the beginning of the year has been considered for computing the interest expenses on the average normative loan during the year. In addition to interest expenses, the actual finance charges for FY have been claimed provisionally for FY and FY MSPGCL has claimed the interest and finance charges of Rs Crore and Rs Crore as against Rs Crore and Rs Crore approved by the Commission for FY and FY respectively. MERC in Case No. 196 of 2017 Page 229 of 250

230 Commission s Analysis and Ruling The Commission has considered the approved closing loan balance for FY in this, as the opening loan balance for FY and so on for FY The addition to loan has been considered as equivalent to the debt portion of the approved additional capitalisation for the respective years. The depreciation for the year has been considered as the repayment for the respective year. The Commission has considered the interest rates for FY and FY as submitted by MSPGCL, which shall be subject to true-up based on the actual interest rates. The finance charges claimed by MSPGCL are the actual finance charges for FY The Commission has considered those as proposed by MSPGCL. Table 8-20: Interest and finance charges for FY and FY (Rs. Crore) FY FY Station/Unit Approved MYT MTR Approved in MYT MTR in this Petition this Petition Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total INTEREST ON WORKING CAPITAL (IOWC) MSPGCL s Submission The IoWC for FY and FY has been computed as per the provisions of Regulation 31.1 of the MYT Regulations, The rate of interest has been computed as 9.45% in accordance with the First Amendment to MYT Regulations, MERC in Case No. 196 of 2017 Page 230 of 250

231 MSPGCL has claimed IoWC of Rs Crore and Rs Crore as against Rs Crore and Rs Crore approved by the Commission for FY and FY , respectively Further, MSPGCL vide its additional submissions dated 17 July, 2018 submitted as under: 7. It is also to submit that while computing the normative Interest on Working capital for the coal thermal stations for the 3rd Control Period (FY to FY 19-20), MSPGCL has inadvertently considered credit period of 30 days for payables for fuel and deducted the same from working capital requirement. The Public Sector coal companies who supply the coal requirement of MSPGCL insist for advance payment of coal bills thereby allowing no credit as per the terms of the FSA. As per Regulations 31.1 (a) (i), cost towards stock for thirty days for nonpit-head Generating Stations, for generation corresponding to target availability is considered for arriving at the normative working capital requirement. However to build up stock equivalent to 30 days consumption, the actual coal procurement process needs to be started one month earlier. Considering the two month duration for coal procurement process between the start of coal procurement and billing for the power generation from this purchased coal, MSPGCL is effectively paying for 20 days coal cost in advance as per the Fuel Supply Agreements with the coal supplying companies. For freight charges, there is not credit period allowed by Railways and MSPGCL has to pay immediately as soon as the RR (Railway Receipt) is generated. So assuming coal supply throughout the period, there is advance payment of 15 days freight charges. Only for the purchase of secondary fuel oil (F.O as well as L.D.O), there is credit period of 25 days... As per Regulation (a) (vii) of MERC MYT Regulations, 2015, Payables for fuel (including oil and secondary fuel oil) to the extent of thirty days of the cost of fuel computed at target Availability, depending on the modalities of payment: {Emphasis added} are to be deducted for arriving at the normative working capital requirement. MERC in Case No. 196 of 2017 Page 231 of 250

232 However, despite of the deviations in the payment terms with respect to the norm specified in the regulations, MSPGCL has missed to compute as per the actual payment terms and erroneously computed the same with 30 days credit period. As MSPGCL is paying 20 days coal cost in advance, it is actually (-) 20 days (minus twenty days) credit and not (+) 30 days credit. Similarly, in case of secondary oil, the credit period is of 25 days only instead of 30 days. In case of freight charges, MSPGCL is effectively paying 15 days freight charges in advance i.e. (-) 15 days (minus fifteen days) credit for freight charges. Apart from this, MSPGCL has also provided the IRLC s as Default Payment Security Mechanism. So, MSPGCL requests Hon ble Commission to compute the normative Interest on Working capital taking into consideration (-) 20 days credit for payables for coal cost, (+) 25 days payables for secondary oil cost & (-) 15 days credit for freight charges and approve the entitlement of IoWC as well as true-up gap/(surplus) for the 3rd Control Period. Commission s Analysis and Ruling Regulation 31.1 of the MYT Regulations, 2015 specifies the normative working capital requirements (cost of coal, cost of oil and receivables) at target Availability. The Commission has projected the Availability for some stations as lower than the target Availability. In such cases, it would not be appropriate to allow the normative working capital requirements at target Availability. Hence, the Commission has approved the normative working capital requirements (receivables as well as fuel cost) for each station at the approved or target Availability, whichever is lower, and has accordingly approved IoWC for FY and FY MSPGCL has requested the Commission to compute the normative IoWC taking into consideration (-) 20 days credit for payables for coal cost, (+) 25 days payables for secondary fuel oil cost and (-) 15 days credit for freight charges. The Commission does not find it prudent to accept the prayer of MSPGCL to consider (-) 20 days credit for payables for coal cost and (-) 15 days credit for freight charges. In case of no credit available, the payables for fuel to be deducted in the working capital requirement should be considered as zero only. Hence, the Commission has considered the credit of 25 days of secondary fuel oil cost in the payables for fuel to be deducted in the working capital. MERC in Case No. 196 of 2017 Page 232 of 250

233 In accordance with the First Amendment to the MYT Regulations, 2015, the Commission has considered the rate of interest as 9.45% for FY and FY Table 8-21: IoWC for FY and FY (Rs. Crore) FY FY Station/Unit Approved MYT MTR Approved in MYT MTR in this Petition this Petition Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total RETURN ON EQUITY (ROE) MSPGCL s Submission Regulation 28.1 of the MYT Regulations, 2015 specifies the rate of RoE of 15.50%. MSPGCL has computed RoE considering the rate of 15.50% on the opening balance of equity portion of the capitalised assets and 50% of the equity portion of the capitalised assets added during the year MSPGCL has claimed RoE of Rs Crore and Rs Crore as against Rs Crore and Rs Crore approved by the Commission for FY and FY , respectively. Commission s Analysis and Ruling The Commission has considered the closing equity for FY approved in this, as the opening equity for FY and so on for FY The addition to equity has been considered as equivalent to the equity portion of the approved additional capitalisation for the respective year. The MERC in Case No. 196 of 2017 Page 233 of 250

234 Commission has approved RoE at the rate of 15.50% on the opening equity as well as on 50% of the addition during the year. Table 8-22: RoE for FY and FY (Rs. Crore) FY FY Station/Unit MYT MTR Petition Approved in this MYT MTR Petition Approved in this Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total The Return of Equity as approved by the Commission is higher than that claimed by MSPGCL as the Commission has considered the revised Equity for Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 as per the Commission s Review in Case No. 77 of INCOME TAX MSPGCL s Submission Regulation 33.1 of the MYT Regulations, 2015 specifies that the Income Tax on regulatory Profit Before Tax as allowed by the Commission relating to generation business regulated by the Commission shall be provisionally approved. In line with the same, MSPGCL has claimed the Income Tax of zero for FY and FY as per the audited accounts for FY Commission s Analysis and Ruling Regulation 33.1 of the MYT Regulations, 2015 specifies that the Income Tax shall be based on the latest available audited accounts. The Commission has approved the Income Tax of zero in the final true-up of FY Accordingly, the Commission has not approved any Income Tax for FY MERC in Case No. 196 of 2017 Page 234 of 250

235 and FY , in this NON-TARIFF INCOME (NTI) MSPGCL s Submission MSPGCL has considered the NTI of Rs Crore (including Parli) for FY and FY , based on the actual NTI for FY Commission s Analysis and Ruling The NTI claimed by MSPGCL for FY and FY is the same as the actual NTI considered in the final true-up for FY The Commission has considered the NTI (excluding Parli) for FY and FY as claimed by MSPGCL. The NTI for Parli has been considered in the RSD charges approved by the Commission, in this. Table 8-23: NTI for FY and FY (Rs. Crore) FY FY Station/Unit Approved Approved MYT MTR MYT MTR in this in this Petition Petition Bhusawal Chandrapur Khaperkheda Koradi Nashik Parli Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total ANNUAL FIXED CHARGES (AFC) Commission s Analysis and Ruling Based on the above analysis, the AFC approved by the Commission for FY and FY , that is fully recoverable at target Availability is as shown in the Table below: MERC in Case No. 196 of 2017 Page 235 of 250

236 Station/Unit Table 8-24: target Availability for FY (Rs. Crore) Return on Equity Interest on Loan Depreciation O&M expenses IoWC Less: NTI AFC Approved Approved Approved Approved Approved Approved MYT MTR MYT MTR MYT MTR MYT MTR MYT MTR MYT MTR MYT MTR in this in this in this in this in this in this Petition Petition Petition Petition Petition Petition Petition Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total Approved in this MERC in Case No. 196 of 2017 Page 236 of 250

237 Station/Unit Table 8-25: target Availability for FY (Rs. Crore) Return on Equity Interest on Loan Depreciation O&M expenses IoWC Approved Approved Approved Approved MYT MTR MYT MTR MYT MTR MYT MTR MYT MTR in this in this in this in this Petition Petition Petition Petition Petition Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Hydro Total Approved in this MYT Less: NTI MTR Petition Approved in this MYT AFC MTR Petition Approved in this MERC in Case No. 196 of 2017 Page 237 of 250

238 The detailed analysis underlying the Commission s approval of individual AFC elements on revised tariff for FY and FY is already set out above, however, the variation in the AFC sought by the MSPGCL and that approved by the Commission in this is mainly on account of the following: Revised approved Equity balances for Koradi Units 8, 9 & 10, Chandrapur Units 8 & 9 and Parli Unit 8 in line with the Commission s dated 8 August, 2018 in Case No. 77 of Difference in the additional capitalisation approved and that claimed by MSPGCL. Lower generation projected by the Commission in comparison to MSPGCL s projections As detailed in the preceding section, the Commission has reduced the AFC for FY and FY , as shown in the Table below: Station/Unit Table 8-26: AFC disallowed for FY (Rs. Crore) Target Availability Projected Availability Total AFC Less: water charges Total AFC minus water charges AFC Reduction Reduced AFC Reduced AFC plus water charges % % Rs. Crore Rs. Crore Rs. Crore Rs. Crore Rs. Crore Rs. Crore Bhusawal 80.00% 72.83% Chandrapur 80.00% 76.16% Khaperkheda 85.00% 79.16% Koradi 72.00% 72.00% Nashik 80.00% 80.00% Uran 85.00% 60.84% Paras Units 3 & % 85.00% Parli Units 6 & % 52.96% Khaperkheda Unit % 85.00% Bhusawal Units 4 & % 85.00% Koradi Units 8, 9 & % 85.00% Chandrapur Units 8 & % 85.00% Parli Unit % 52.96% Total *Pro-rata AFC reduction not considered in this MERC in Case No. 196 of 2017 Page 238 of 250

239 Station/Unit Table 8-27: AFC disallowed for FY (Rs. Crore) Target Availability Projected Availability Total AFC Less: water charges Total AFC minus water charges AFC Reduction Reduced AFC Reduced AFC plus water charges % % Rs. Crore Rs. Crore Rs. Crore Rs. Crore Rs. Crore Rs. Crore Bhusawal 80.00% 72.83% Chandrapur 80.00% 76.16% Khaperkheda 85.00% 79.16% Koradi 72.00% 72.00% Nashik 80.00% 80.00% Uran 85.00% 60.84% Paras Units 3 & % 85.00% Parli Units 6 & % 52.96% Khaperkheda Unit % 85.00% Bhusawal Units 4 & % 85.00% Koradi Units 8, 9 & % 85.00% Chandrapur Units 8 & % 85.00% Parli Unit % 52.96% Total *Pro-rata AFC reduction not considered in this 8.25 TARIFF FOR THERMAL GENERATING STATIONS Commission s Analysis and Ruling The approved tariff for thermal generating stations for FY and FY is given in the Table below: Table 8-28: Approved Tariff for thermal generating stations for FY Station/Unit MYT MTR Petition Approved in this AFC ECR AFC ECR AFC ECR Rs. Crore Rs./kWh Rs. Crore Rs./kWh Rs. Crore Rs./kWh Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & MERC in Case No. 196 of 2017 Page 239 of 250

240 Station/Unit MYT MTR Petition Approved in this AFC ECR AFC ECR AFC ECR Rs. Crore Rs./kWh Rs. Crore Rs./kWh Rs. Crore Rs./kWh Chandrapur Units 8 & Parli Unit Total Table 8-29: Approved Tariff for thermal generating stations for FY Approved in this MYT MTR Petition Station/Unit AFC ECR AFC ECR AFC ECR Rs. Crore Rs./kWh Rs. Crore Rs./kWh Rs. Crore Rs./kWh Bhusawal Chandrapur Khaperkheda Koradi Nashik Uran Paras Units 3 & Parli Units 6 & Khaperkheda Unit Bhusawal Units 4 & Koradi Units 8, 9 & Chandrapur Units 8 & Parli Unit Total RESERVE SHUTDOWN (RSD) CHARGES FOR PARLI MSPGCL s Submission On the basis of actual data for FY , MSPGCL has proposed the revised RSD charges for Parli. MSPGCL has proposed the RSD charges of Rs Crore and Rs Crore as against Rs Crore and Rs Crore approved by the Commission for FY and FY , respectively Further, MSPGCL submitted that if the Units are taken into service, the tariff as approved in the MYT, for FY and FY will be applied and it would submit the actual costs to the Commission in true-up for the respective year. MERC in Case No. 196 of 2017 Page 240 of 250

241 Commission s Analysis and Ruling The Commission has approved the components of RSD charges in line with its approach in the MYT. Table 8-30: RSD charges for Parli for FY and FY (Rs. Crore) FY FY Particulars MYT MTR Petition Approved in this MYT MTR Petition Approved in this Employee expenses Depreciation Interest on loan and finance charges Interest on Working Capital Less: Non-Tariff Income RSD Charges In case the Units are taken into service, MSPGCL has proposed to bill the tariff as approved in the MYT, for FY and FY As the Commission has revised tariff for FY and FY in this, the Commission deems it necessary to revise the AFC for Parli to be applicable in case the Units are taken into service. Table 8-31: Tariff for Parli for FY and FY (Rs. Crore) FY FY Particulars MYT MTR Petition Approved in this MYT MTR Petition MERC in Case No. 196 of 2017 Page 241 of 250 Approved in this O&M expenses Depreciation Interest on loan Interest on Working Capital Return on Equity Income Tax Less: Non-Tariff Income Annual Fixed Charges ECR (Rs./kWh) The significant variation in O&M expenses approved in the MYT and revised O&M expenses approved in this is because the O&M expenses approved in the MYT were without factoring in the retirement of Unit

242 3 w.e.f. 1 April, LEASE RENT FOR HYDRO STATIONS MSPGCL s Submission MSPGCL has claimed the lease rent of Rs Crore and Rs Crore for FY and FY , respectively, the same as approved by the Commission in the MYT. Commission s Analysis and Ruling The Commission has approved the lease rent of Rs Crore and Rs Crore for FY and FY , respectively, as approved by the Commission in the MYT TARIFF FOR HYDRO STATIONS Commission s Analysis and Ruling The Commission, in its MYT for the 3 rd Control Period from FY to FY had approved the recovery mechanism of hydro stations with installed capacity above 25 MW, which are pure power projects (Koyna, Bhira TR and Tillari) in accordance with the MYT Regulations, In line with that approach, the Commission has now approved the AFC for these hydro stations considering the proportion of AFC as submitted by MSPGCL for each of those stations out of the total AFC for all hydro stations The Commission observes that the actual net generation from Tillari in FY was lower than the design energy. In line with Regulation 49.7(ii) of the MYT Regulations, 2015, the Commission has considered the Design Energy for computing the ECR as shown in the Table below: Table 8-32: Design Energy in accordance with Regulation 49.7(ii) Particulars Units Koyna Bhira TR Tillari Design Energy (DE) MU Actual Generation in FY (A1) MU Is A1<DE Yes/No No No Yes Is Regulation 49.7(ii) applicable Yes/No No No Yes Actual Generation in FY (A2) MU A1+A2-DE MU Design Energy for ECR in accordance with Regulation 49.7(ii) = A1+A2-DE, subject to maximum of DE and minimum of A1 MU MERC in Case No. 196 of 2017 Page 242 of 250

243 The Capacity Charge and Energy Charge Rate for hydro stations approved by the Commission for FY and FY is as shown in the Table below: Table 8-33: Capacity Charge and Energy Charge Rate approved by Commission for hydro stations for FY and FY Particulars Units FY FY AFC for Hydro projected by MSPGCL Rs. Crore AFC for Hydro Stations with capacity more than 25 MW Koyna Rs. Crore Bhira TR Rs. Crore Tillari Rs. Crore AFC for Hydro approved by the Commission Rs. Crore AFC for Hydro Stations with capacity more than 25 MW Koyna Rs. Crore Bhira TR Rs. Crore Tillari Rs. Crore Design Energy Koyna MU Bhira TR MU Tillari MU Auxiliary Energy Consumption Koyna % 1.13% 1.13% Bhira TR % 0.70% 0.70% Tillari % 1.20% 1.20% Capacity Charge Koyna Rs. Crore Bhira TR Rs. Crore Tillari Rs. Crore Energy Charge Rate Koyna Rs./kWh Bhira TR Rs./kWh Tillari Rs./kWh MERC in Case No. 196 of 2017 Page 243 of 250

244 The AFC for hydro stations other than Koyna, Bhira TR and Tillari approved by the Commission for FY and FY is as shown in the Table below: Table 8-34: AFC for hydro stations other than Koyna, Bhira TR and Tillari for FY and FY Particulars Units FY FY AFC for hydro station other than Koyna, Bhira TR and Tillari as submitted by MSPGCL AFC for hydro station other than Koyna, Bhira TR and Tillari approved by the Commission Rs. Crore Rs. Crore The Commission allows the recovery of AFC of other hydro stations approved for the year in equal monthly instalments. MERC in Case No. 196 of 2017 Page 244 of 250

245 Commission s Directives 8.29 DIRECTIVES IN ORDER DATED 30 AUGUST, 2016 IN CASE NO. 46 OF 2016 Finalisation of Liquidated Damages The Commission directed MSPGCL to submit details of amount of Liquidated Damages (LD) determined and recovered from the Contractors for Khaperkheda Unit 5. MSPGCL has not submitted the reply to this directive. It is a matter of serious concern that MSPGCL has not finalised the LD amount even after 6 years after the COD. MSPGCL is directed to submit details of the amount of LD determined and recovered from the Contractors for Khaperkheda Unit 5 in its next Tariff Petition, failing which the Commission will consider the maximum LD amount that can be levied as per the Contracts for this project and finalise the Capital Cost accordingly The Commission directed MSPGCL to submit the details of LD recovered from the Contractors for Bhusawal Units 4 & 5. MSPGCL has not submitted the reply to this directive. The Commission notes with concern the delay in finalisation of the LD amount. MSPGCL should submit details of the LD recovered from the Contractors for Bhusawal Units 4 & 5 in its next Tariff Petition, failing which the Commission will consider the maximum LD amount that can be levied as per the Contracts for this project and finalise the Capital Cost accordingly. Payment Security Mechanism The Commission directed MSPGCL to submit the implementation status and issues, if any, regarding the Payment Security Mechanism and the Escrow provision. MSPGCL submitted that as per the terms of PPA, there are three provisions for Payment Security Mechanism, viz., (i) Irrevocable Revolving Letter of Credit (IRLC) (for all Units), (ii) Escrow Account (for Paras Unit 3 and Parli Unit 6), and (iii) Third Party Sale (for all Units). MSPGCL has regularly requested MSEDCL regarding establishment of IRLC. MSEDCL has established the IRLC only during FY , however, despite repeated follow up by MSPGCL, MSEDCL never renewed the same. Rather, MSEDCL has requested MSPGCL not to insist for establishing the IRLC, considering the precarious financial position of MSEDCL As per terms and conditions of PPA, MSPGCL has requested MSEDCL for establishing Escrow Account in favour of Paras Unit 4 and Parli Unit 6. In reply, MSEDCL had stated that MSPGCL and MSEDCL are working under MERC in Case No. 196 of 2017 Page 245 of 250

246 the control of MSEB Holding Company Ltd., therefore not to insist upon opening of Escrow Account in favour of Paras Unit 4 and Parli Unit 6. Although MSPGCL has been taking efforts for searching for the avenues for third party sale, however, till date this option has not been utilised. Notwithstanding, MSPGCL regularly requests MSEDCL to establish Payment Security Mechanism in favour of MSPGCL As regards the issues related to implementation of Payment Security Mechanism as per provisions of PPA, the Commission directs MSPGCL to take up these issues with MSEB Holding Company Limited and if required with Govt. of Maharashtra for appropriate resolution of the issues. Impact of Pay Revision The Commission directed MSPGCL to submit the provision for impact of pay revision in each year from FY to FY and the actual payments made till FY MSPGCL submitted the details for the provision for impact of pay revision in each year from FY to FY and the actual payments made till FY as shown below: Table 8-35: Details of impact of pay revision for FY to FY as submitted by MSPGCL (Rs. Crore) FY Provision for impact of pay revision as per MSPGCL Provision for impact of pay revision as approved by Commission Actual payment for impact of pay revision FY FY FY The details sought by the Commission towards pay revision have been submitted by MSPGCL and the Commission in the final true-up for FY , FY and FY had considered the actual impact of pay revision for the corresponding years and hence, there is no shortfall/surplus on this account. Details of Immediate and Medium-Term Measures as per CPRI Recommendations The Commission directed MSPGCL to submit the station-wise details of immediate and medium-term measures recommended by CPRI and the improvement in performance vis-à-vis the expected improvement and reasons for the under-achievement, if any, in the stipulated format. MSPGCL MERC in Case No. 196 of 2017 Page 246 of 250

247 submitted the requisite details From the details submitted by MSPGCL it is observed that MSPGCL has implemented many chemes and deferred some of the schemes. It appears that the implemented schemes are yielding the desired results as evident from the actual performance parameters namely AEC, GSHR and SFOC converging towards the normative values in FY and FY Segregation of Capital Cost related data for Retired Units The Commission directed MSPGCL to finalise the segregation of capital costrelated data for the retired Units. MSPGCL submitted the actual capital cost related details of retired Units in the instant Petition for the relevant years. The Commission has considered the actual GFA for the retired Units as submitted by MSPGCL as the same are certified by the Chartered Accountant FRESH DIRECTIVE The Commission directs MSPGCL to devise a yearly action plan for effective utilisation of water available for power generation at Koyna HPS in consultation with MSEDCL so that the peak demand requirements of MSEDCL during the corresponding year are met at least cost possible. MSPGCL is directed to apprise the Commission of the yearly action plan chalked out at the beginning of each water year and the monthly report on the adherence to the same along with detailed justification for deviations, if any. MERC in Case No. 196 of 2017 Page 247 of 250

248 9 APPLICABILITY OF ORDER This shall come into effect from 1 September, The Petition of Maharashtra State Power Generation Company Limited in Case No. 196 of 2017 stands disposed of accordingly. Sd/- (I. M. Bohari) Member Sd/- (Anand B. Kulkarni) Chairperson MERC in Case No. 196 of 2017 Page 248 of 250