Case No. 3 of Shri V. P. Raja, Chairman Shri Vijay L. Sonavane, Member. Reliance Infrastructure Ltd.

Transcription

1 Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai Tel / 65/ 69 Fax Website: Case No. 3 of 2013 IN THE MATTER OF Petition filed by Reliance Infrastructure Ltd. (RInfra-D) under Regulation 13 of the MERC (Distribution Open Access) Regulations, 2005, seeking determination of Cross Subsidy Surcharge to be levied on Open Access consumers Shri V. P. Raja, Chairman Shri Vijay L. Sonavane, Member Reliance Infrastructure Ltd.....Petitioner Principal Secretary (Energy), Govt. of Maharashtra Respondent 1 Principal Secretary (Planning), Govt. of Maharashtra Respondent 2 Principal Secretary (Finance), Govt. of Maharashtra Respondent 3 The Tata Power Company Limited (Distribution) Respondent 4 BEST Undertaking Respondent 5 Counsel/ Representative for the Petitioner: Smt. Anjali Chandurkar (Adv. For RInfra) Shri Kapil Sharma (Rep. for RInfra) ORDER Dated: 10 May, 2013 For its Distribution business, Reliance Infrastructure Ltd. (herein after to be referred as RInfra-D for the sake of brevity) filed a Petition on 7 January, 2013 seeking determination of cross subsidy surcharge for Open Access consumers under the provisions of Regulation 13 of MERC (Distribution Open Access) Regulations, Order Case No. 3 of 2013 Page 1 of 18

2 2. The prayers in the Petition are as under: 1. The Hon ble Commission may be pleased to admit the Petition for determination of Cross Subsidy Surcharge in accordance with the Section 42(2) and 86(1) of Electricity Act 2003 and Regulation 13 of MERC (Distribution Open Access) Regulations, 2005; 2. The Hon ble Commission may determine the CSS as proposed by the Petitioner; 3. The Hon ble Commission may approve the calculations of Cross Subsidy Surcharge as submitted in the Petition; 4. The Hon ble Commission may pass any other order as the Hon ble Commission may deem fit and appropriate under the circumstances of the case and in the interest of justice; 5. The Hon ble Commission may please allow addition / alterations/ changes/ modifications to the application at a future date; 6. The Hon ble Commission may allow any other relief, order or direction, which the Hon ble Commission may deem fit to be issued; 7. The Hon ble Commission may condone any inadvertent omissions/ errors/ rounding off differences/ shortcomings. 3. The submissions made by RInfra-D in the Petition have been summarized below: In the Tariff Order dated 15 June, 2012 in Case No. 180 of 2011, the Commission had refrained from determining cross subsidy surcharge (CSS) and retained the CSS as determined in the Order dated 9 September, 2011 in Case No. 43 of 2010, on the ground that there are certain pending proceedings before the Hon ble Appellate Tribunal of Electricity (ATE) viz. Appeals No. 132 of 2011, 133 of 2011, 139 of 2011, 140 of 2011 & 178 of 2011 in relation to determination of CSS. The Commission in the above referred Order held that a view can t be taken on the said issues since the matter was sub-judice The Hon ble ATE through a Judgement dated 21 December, 2012 on the Appeals No. 132,133,144,164 of 2011, dismissed the said Appeals. The Hon ble ATE held that the above matters were devoid of merit and inter alia, ruled that the findings and directions given by the Commission vide its Order dated 29 July, 2011 in Case No. 72 of 2010 in regard to payment of CSS by Category II consumers would promote healthy competition and are perfectly justified. It was also submitted that though Order Case No. 3 of 2013 Page 2 of 18

3 Appeal No. 178 of 2011 is pending, the Hon ble ATE has not in any manner directed the Commission to maintain status quo nor has stayed the Order dated 9 September, 2011 in Case No. 43 of It was submitted that Section 42 (2) of Electricity Act, 2003 (EA 2003) requires every distribution licensee to provide non-discriminatory Open Access to all eligible consumers subject to payment of cross subsidy surcharge and other prevailing Rules & Regulations. Section 86(1) of EA 2003 requires the Commission to determine such surcharge as referred above. Regulation 13 of MERC (Distribution Open Access) Regulations, 2005 provides that the Commission shall, based on the approved current level of cross subsidy, stipulate CSS for each approved Tariff category and/or subcategory and/or Tariff slab, of the distribution licensee. Further, it was submitted that the National Electricity Policy (NEP) provides that a surcharge is to be levied by the respective State Commissions on consumers availing Open Access. The Tariff Policy has further provided the surcharge formula as follows: S=T-[C* (1+L/100) + D] Where S is the surcharge T is the Tariff payable by the relevant category of consumers C is the weighted average cost of power purchase of top 5% at the margin excluding liquid fuel based generation and renewable power D is the Wheeling charge L is the system losses for the applicable voltage level, expressed as a percentage 3.4. The under-recovery of CSS is causing grave prejudice to RInfra-D and to its remaining consumers who are largely low end subsidized consumers. By submitting the Petition, RInfra-D prayed that CSS be determined based on the methodology adopted by the Commission in its Order dated 9 September, 2011 in Case No. 43 of 2010 and considering approved values of components, i.e., T, C, L and D as per the Tariff Order dated 15 June, 2012 in Case No. 180 of RInfra-D has provided detailed calculations of cross subsidy surcharge payable by different categories of consumers opting for Open Access, which is given below: Computation of C : RInfra-D has submitted that it has calculated C based on the approved power purchase quantum and cost per unit for FY , as per the Order dated 15 June, 2012 in Case No. 180 of RInfra-D has provided the merit order Order Case No. 3 of 2013 Page 3 of 18

4 stack of power purchase as per the table below considering the power purchase approved in the Commission s Order dated 15 June, 2012 in Case No. 180 of Table 1: Merit Order Stack for FY submitted by RInfra-D Source MUs Per unit Total Cost (Rs/kWh) WPCL 1, AMNEPL Short term 1, Renewable DTPS 3, Total 7, Rs per kwh was considered as value of C equivalent to weighted average power purchase cost of top 5% at the margin Computation of System Loss L : The value of L had been considered as approved wheeling losses at the respective voltage level and transmission losses for FY The loss values considered is provided in the table below. Table 2: System Losses L submitted by RInfra-D Particulars HT Level LT Level Transmission Losses (%) 4.26% 4.26% Wheeling Loss (%) 1.94% 9.0% Computation of Wheeling Charge D : The wheeling charges considered in the Petition has been shown in the table below: Table 3: Wheeling charge submitted by RInfra-D Particulars HT Level LT Level Wheeling charge (Rs/unit) D Determination of cross subsidy surcharge S : According to the values derived above, category-wise cross subsidy surcharge was computed, using the formula: S=T-[C/ (1-L/100) + D] Where S is the surcharge T is the Tariff payable by the relevant category of consumers C is the weighted average cost of power purchase of top 5% at the margin excluding liquid fuel based generation and renewable power Order Case No. 3 of 2013 Page 4 of 18

5 D is the Wheeling charge L is the system Losses for the applicable voltage level, expressed as a percentage 4. Regulatory proceedings and deliberations undertaken by the Commission 4.1. The Commission scheduled the first hearing on the matter on 15 January, The Commission deliberated on the provisions of the EA 2003 and Tariff Policy with regard to progressive reduction in the cross subsidy. The Commission also specified that a report on Roadmap to reduce cross subsidy in Maharashtra was submitted to the Government of Maharashtra (GoM) on 21 June, The Commission opined that reduction in cross subsidy surcharge and reduction in cross subsidy should be viewed together. In view of this, the Commission directed to implead the Government of Maharashtra (GoM) through the Principal Secretary (Energy), the Principal Secretary (Planning) and the Principal Secretary (Finance) as party in the present matters. The Commission also noted that progressive reduction in cross subsidy should be seen in relation to the average cost of supply and not on a stand-alone absolute basis The Commission directed to implead BEST Undertaking and Tata Power-Distribution as parties in the present matter. The Commission also directed all Distribution licensees to rework their proposal by taking into account the methodology proposed by the Commission in the report roadmap to reduce cross subsidy in Maharashtra submitted to the Government of Maharashtra RInfra-D mentioned that the recent Judgement of the Hon ble ATE dated 21 December, 2012 upheld the Commission s Order dated 29 July, 2011 in Case No. 72 of Therefore, in view of this, the Commission should re-determine the CSS as per its earlier Order dated 9 September, 2011 in Case No. 43 of The second hearing in the matter was scheduled on 8 February, The Commission mentioned that the Government of Maharashtra (GoM) through a letter dated 7 February, 2013, conveyed its views as follows: (a) (b) (c) The cross subsidy surcharge issue may be de-linked from the roadmap to reduce cross subsidy in Maharashtra ; The GoM agreed with Mahavitran (MSEDCL) on the issue of cross subsidy surcharge payable by Open Access consumers; and The roadmap to reduce cross subsidy in Maharashtra will be decided after due consultation in a period of three months. Order Case No. 3 of 2013 Page 5 of 18

6 4.5. BEST submitted that it being a local authority is exempted from distribution Open Access, as per the provisions of the EA 2003 and relevant Regulations. This position is upheld in the Supreme Court vide its Judgement dated 8 February, 2011 in Civil Appeal No. 848 of Thus, the issue of determination of CSS does not arise as far as BEST s network is concerned Tata Power- Distribution submitted that the issue of determination of CSS of RInfra- D may be considered after the following:- (a) (b) (c) Determination of T based on the Average Cost of Supply (ACoS) for the respective year; Submission of roadmap to reduce cross subsidy in Maharashtra ; and Finalization of process of recovery of regulatory assets Dr. Ashok Pendse, Thane Belapur Industrial Association, consumer representative, mentioned that cross subsidy reduction should be measured as reduction in the multiplying factor in a respective year, instead of reduction in absolute values. He also mentioned that since the roadmap to reduce cross subsidy in Maharashtra has been formulated, the Commission can consider the referred roadmap and take the same into consideration in the MYT Tariff Order The Commission also directed RInfra-D to clarify in writing that the Petitioner has not approached two forums, i.e., Hon ble ATE and MERC in the said matter with contradictory contentions. 5. After hearing all the parties, the Commission constituted a Group of Officers to undertake the study of calculations of cross subsidy surcharge provided by RInfra-D and brief the Commission on the same. 6. RInfra-D made additional submission under affidavit on 15 February, 2013 in compliance to the direction of the Commission. The additional submissions made are as follows: 6.1. Due to delay in determination of CSS, burden on cross subsidized consumers is increasing by approximately Rs. 1.5 crores per day, which will be loaded to these consumers with additional carrying cost burden of 14.5% per annum. Thus, RInfra-D requested the Commission to expeditiously dispose of the present Petition In Appeal No. 178 of 2011 made to the Hon ble Appellate Tribunal, RInfra-D has challenged the values assigned by the Commission to the components of CSS formulae in the Order dated 9 September, 2011 in Case No. 43 of However, the Order Case No. 3 of 2013 Page 6 of 18

7 present CSS Petition of RInfra-D is based on the principles and the methodology adopted by the Commission in the said Order dated 9 September, 2011 in Case No. 43 of By continuing to pay the same CSS as determined in the Order dated 9 September, 2011 in Case No. 43 of 2010, the Open Access consumers are paying suppressed CSS as per the cost and Tariff determined in the Tariff Order dated 29 July, 2011 in Case No. 72 of 2010, instead of the Tariff Order dated 15 June, 2012 in Case No. 180 of CSS now paid by the Open Access consumers doesn t reflect the cross subsidy which such consumers would have otherwise borne Further, according to Section 61 of the EA, 2003, Tariff should progressively reflect the cost of supply and reduce cross subsidies in the manner specified by the Commission; and CSS should be determined on the basis of such Tariff. RInfra-D further submitted that the methodology proposed in the roadmap to reduce cross subsidy in Maharashtra would not arise at present since CSS is required to be determined on the basis of the Tariff and costs and should be as per the Tariff Order now in force, i.e., Tariff Order dated 15 June, 2012 in Case No. 180 of Further, the pendency of Appeal No. 178 of 2011 doesn t bar the Commission from following its earlier Order dated 9 September, 2011 in Case No. 43 of 2010, when there is no stay on the said Order. RInfra-D has also given reference of the Judgement of the Hon ble Supreme Court in AIR 1994 SC 1239 Collector of Customs, Bombay vs. M/s. Krishna Sales Pvt. Ltd., which upheld that mere filing of an Appeal doesn t operate as a stay of the Order appealed against RInfra-D in a subsequent submission under affidavit on 25 February, 2013, revised the Annexure I of the Petition, thus revising the cross subsidy surcharge computation. It submitted that there were certain inadvertent errors in the Petition, and revised submission was made to rectify the same. In this revised submission, the value of T, i.e., Average Billing Rate (ABR) of each category of consumers is considered as per the figures approved by the Commission in Order dated 15 June, 2012 in Case No. 180 of RInfra-D also revised the CSS formulae consistent with the formulae adopted by the Commission in the Order dated 9 September, 2011 in Case No. 43 of The CSS formulae used in the Petition was S=T-[C/ (1-L/100) + D]. However, in the revised submission, RInfra-D corrected the formula as S=T-[C* (1+L/100) + D], which is in line with the CSS formulae adopted by the Commission in Order dated 9 September, 2011 in Case No. 43 of Based on the above submissions, contentions, pleadings and suggestions/objections of the stakeholders views that in present matter, the following questions arise before the Order Case No. 3 of 2013 Page 7 of 18

8 Commission:- A. Whether the cross subsidy surcharge can be determined at this stage when various Appeals as mentioned above are pending before the Hon ble ATE? B. Whether cross subsidy surcharge can be determined at this stage independent of the finalisation of roadmap to reduce cross subsidy in Maharashtra? C. Whether computation of CSS proposed by RInfra-D is in line with methodology adopted by the Commission in the Order dated 9 September, 2011 in Case No. 43 of 2010? 8. In regard to the question (A) on determination of CSS considering the pendency of various Appeals before the Hon ble ATE, the Commission views as below: In the Appeals No. 132 of 2011, 133 of 2011, 139 of 2011, 144 of 2011 and 164 of 2011, reliefs sought were limited to the issue as to whether CSS was applicable on change-over consumers in licence areas of Mumbai suburbs. The Hon ble ATE through a Judgement dated 21 December, 2012 dismissed the above Appeals being devoid of merit. The Hon ble ATE also held that findings and directions of the Commission in the impugned Order dated 29 July, 2011 in Case No. 72 of 2010 in regard to applicability of CSS on change-over consumers would promote healthy competition and are perfectly justified Further, the principles and methodology for computation of CSS adopted by the Commission in Order dated 9 September, 2011 in Case No. 43 of 2010 has not been stayed by the Hon ble ATE. Further, RInfra-D has adopted the same principles and methodology in the Petition and also pleaded to the Commission to adopt the same The Commission views that to the extent principles and methodology adopted are in line with the Order dated 9 September, 2011 in Case No. 43 of 2010, the determination of CSS may be undertaken Further, RInfra-D aggrieved by the Order dated 15 June, 2012 in Case No. 180 of 2011 has preferred an Appeal numbered as Appeal No. of 160 of 2012 before the Hon ble ATE with one of the issues as determination of cross subsidy. Subsequently, RInfra-D submitted an Interim Application numbered as IA 313 of 2012 in the above referred Appeal seeking clarification of the Hon ble ATE that no stay has been granted on the Order dated 9 September, 2011 in Case No. 43 of 2010 warranting the CSS to be retained at the present level; and directions to the Commission to determine the CSS as the same basis as was done in the above referred Order The Commission observes that substantial reason for non-determination of CSS in the Order Case No. 3 of 2013 Page 8 of 18

9 Order dated 15 June, 2012 in Case No. 180 of 2012 was due to the pendency of a batch of Appeal s, i.e., Appeal No. 132 of 2011, 133 of 2011, 139 of 2011 and 144 of The Hon ble ATE through a Judgment dated 21 December, 2012 on the above referred Appeals has upheld the Orders of the Commission Therefore, the Commission considering the Hon ble ATE s Judgment clearing the issues in the above appeal, has proceeded with the determination of CSS Further, Regulation 13.8 of MERC (Distribution Open Access) Regulations, 2005 is reproduced below: The Commission shall, based on the approved current level of cross subsidy, stipulate the cross subsidy surcharge for each approved Tariff category and/or subcategory and/or Tariff slab, of the Distribution Licensee In light of the above stated Regulation, the Commission has proceeded with the computation of CSS for RInfra-D based on the Tariff Order dated 15 June, 2012 in Case No. 180 of In regard to the Question (B) with respect to determination of CSS independent of the finalization of roadmap to reduce cross subsidy in Maharashtra at this stage, the Commission views as follows: Since the Tariff Order was passed on 15 June, 2012 in Case No. 180 of 2011, the Order in itself contains the level of cross subsidy for which the licensees should be compensated by way of levying cross subsidy surcharge on the Open Access consumers. It is pertinent to note that the reduction of cross subsidy may be undertaken in various Tariff Orders by fixation of the Tariff vis-a-vis cost of supply/average cost of supply. Once the cross subsidy is fixed in the Tariff Order, CSS is only a resultant value which needs to be approved based on the values of the components (i.e., T, C, L & D ) of the CSS formulae specified. Therefore, in the present case, the values of the components have been considered in line with the Order dated 15 June, 2012 in Case No. 180 of Further, the GoM through a communication as provided in para 4.4 above, specified that the decision on roadmap to reduce cross subsidy in Maharashtra would be taken after consultation in a period of three months and the CSS computation may be delinked from this. Considering the delay expected on the above decision, the Commission views that determination of CSS after the decision on roadmap to reduce cross subsidy in Maharashtra would lead to financial loss for RInfra-D Considering the above, the Commission views that in the present matter, CSS Order Case No. 3 of 2013 Page 9 of 18

10 determination may be undertaken independent of the finalisation of roadmap to reduce cross subsidy in Maharashtra. However, the Commission opines that road map to reduce cross subsidy in Maharashtra is a key consideration for determination of CSS. Therefore, the Commission directs RInfra-D to submit a roadmap to reduce cross subsidy and to reduce cross subsidy surcharge along with the proceedings of the MYT Petition. 10. In regard to the Question (C) with respect to computation of CSS to be in line with the methodology adopted in the Order dated 9 September, 2011 in Case No. 43 of 2010, the Commission views as follows: The Group of Officers constituted by the Commission studied the CSS computation proposed by RInfra-D in the Petition submitted on 7 January, The Group found that the formulae used by RInfra-D for computation of CSS is in variance with the formulae prescribed by the Commission in its Order dated 9 September, 2011 in Case No. 43 of Apart from this, the ABR considered by RInfra-D is in variance with the approved ABR in Tariff Order dated 15 June, 2012 in Case No. 180 of The variance in formulae is in respect of grossing up of the component C, wherein, RInfra-D has adopted C /(1-L/100) instead of C *(1+L/100) specified in the formulae of CSS in Tariff Policy. These corrections were incorporated by RInfra-D in the revised submission as explained in para In regard to the objections of Tata Power-Distribution, the Commission opines that the CSS computation needs to be undertaken only as per the approved values of components of CSS formulae, which are available only as per the Tariff Order dated 15 June, 2012 in Case No. 180 of The proceedings of the MYT Petition of RInfra-D are underway and CSS computation only after issuance of MYT Order would lead to financial loss of RInfra-D. Further, the issue of recovery of regulatory asset has been submitted in the MYT Petition by RInfra-D, which on finalisation would be treated appropriately. Hence, the Commission has decided to undertake determination of CSS in the present proceedings to avoid any financial loss to the licensee The Commission after considering all the above facts has adopted the methodology followed in the Order dated 9 September, 2011 in Case No. 43 of Cross subsidy surcharge Computation Methodology The Commission has decided to retain the computation methodology followed in its Order dated 9 September 2011 in Case No. 43 of 2010, wherein, the Commission computed the CSS based on the formula specified in the Tariff Policy. The Order Case No. 3 of 2013 Page 10 of 18

11 Commission accepts the argument given by RInfra-D that the computation of CSS needs to be based on the approved values of each of the components such as ABR, Losses (L), C (weighted average power purchase cost of top 5% at margin) and wheeling charges as per the latest Tariff Order. The Commission, thus, adopts the Tariff Order dated 15 June, 2012 in Case No. 180 of 2011 for computation of cross subsidy surcharge in this Order As mentioned in the above para, the Commission is adopting CSS formulae as specified through the Para of the Tariff Policy. The formulae for CSS is provided below: S=T-[C* (1+L/100) + D] Where S is the surcharge T is the Tariff payable by the relevant category of consumers C is the weighted average cost of power purchase of top 5% at the margin excluding liquid fuel based generation and renewable power D is the Wheeling charge L is the system Losses for the applicable voltage level, expressed as a percentage Computation of C is based on the approved power purchase quantum and cost per unit from the Tariff Order dated 15 June, 2012 in Case No. 180 of The merit order stack for the approved power purchase excluding renewable source considered by the Commission is given in the table below:- Table 4: Merit Order Stack for FY (approved by the Commission) Source MUs Per unit Total Cost (Rs/kWh) KSK-Wardha Power Company Ltd 1, (WPCL) (Medium-Term) Abhijeet MADC Nagpur Energy Pvt Ltd. (Medium Term) Short term/bilateral sources 1, DTPS 3, Total 7, From the above table, it is observed that purchase of power from WPCL constitutes around top 25.3% of the total approved power purchase quantum. Therefore, C has been computed as Rs. 5.47/kWh representing the weighted average power purchase equivalent to the cost of power purchase of top 5% at the margin excluding liquid fuel based generation and renewable power. Order Case No. 3 of 2013 Page 11 of 18

12 11.5. While computation of C in the Order dated 9 September, 2011 in Case No. 43 of 2010, the Commission in para 47 (g) to (l) of the referred Order, observed that actual source-wise analysis of short-term/bilateral power purchase of RInfra-D provided more near to accurate results vis-à-vis the weighted average cost of shortterm/bilateral power purchase. This was evident as the source-wise cost of power purchase from short-term/bilateral source varied widely from Rs 4.79 per unit to Rs 8.51 per unit. Therefore, the Commission had adopted the actual source-wise power purchase cost for computation of C In line with the above specified philosophy, the Commission also analysed the actual short-term/bilateral power purchase of FY from the data submitted by RInfra-D in the Petition for True-Up of FY and FY , in Case No. 124 of The Commission analysed these information to examine if any such source of power purchase gets qualified in the stacking to arrive at the top 5% of power purchase at the margin, excluding liquid fuel based generation and renewable power. However, the Commission observed that none of these sources gets qualified in the stacking order to compute C. Therefore, in the present case the actual source- wise short-term/bilateral power purchase cost doesn t affect the value of C Average Billing Rate (ABR) for each of the categories of consumer has been considered in line with Tariff Order dated 15 June, 2012 in Case No. 180 of System Loss L : Following the methodology adopted in its Order dated 9 September, 2011 in Case No. 43 of 2010, the Commission considers approved wheeling losses at the voltage level of the consumer category and transmission losses corresponding to the identified source of power purchase representing the weighted average power purchase cost of top 5% at the margin as system losses, i.e., L. The Commission has considered the loss applicable for respective category for migrated consumers as approved in Tariff Order dated 15 June, 2012 in Case No. 180 of Intra-state transmission losses have been considered as the sources identified for computation of C pertain to generation sources connected to the intra-state network. Table 5: Computation of System Losses (approved by the Commission) Particulars HT Level LT Level Transmission Losses (%) 4.26% 4.26% Wheeling Loss (%) 1.94% 9% Total System Losses (%) 6.12% 12.88% Wheeling charges D for each of the voltage levels is taken from the Tariff Order dated 15 June, 2012 in Case No. 180 of 2011, which is provided below. Order Case No. 3 of 2013 Page 12 of 18

13 Table 6: Wheeling charge (approved by the Commission) Particulars HT consumers LT consumers Wheeling charge (Rs/kWh) Category wise cross subsidy surcharge computed by the Commission The category wise CSS computed on consideration of the components T, C, L & D from the above section is provided in Annexure I The Commission observes that computation of CSS on the basis of revised figures of components T, C, L and D as per the Order dated 15 June, 2012 in Case No. 180 of 2011, results into the following: (a) (b) Increase in CSS of consumer categories for which CSS existed as per Order in Case No. 43 of 2010; and Introduction of CSS for consumer categories for which CSS didn t exist as per Order in Case No. 43 of The Commission observes that change in CSS of any consumer category is contingent on approved Tariff and cost of a distribution licensee, which govern the value of the components of CSS formulae. The Tariff and cost components undergo change from time to time, which may result in upward or downward revision of CSS. Thus, any upward or downward revision of CSS is an ongoing mechanism and is a result of the CSS computation The key factors which contribute to the revision in CSS are the components T and C of the CSS formulae. It can be observed that if T increases, the CSS also increases considering a constant C. Similarly, if C increases, the CSS decreases considering a constant T. Thus, revision in CSS is largely governed by variations in approved Tariff and cost of the distribution licensee. This phenomenon has also been observed in revision of CSS from previous Order (Case No. 43 of 2010) to the present Order (Case No. 3 of 2013). This has been analysed in detail in the following paragraphs considering the following:- (a) Increase in T, i.e., ABR for FY vis-à-vis FY ; and (b) Decrease in C for FY vis-à-vis FY Increase in ABR of FY vis-à-vis FY : (a) The Commission compared the ABR of FY considered in the present Order (Case No. 3 of 2013) vis-à-vis the ABR of FY considered in the Order Case No. 3 of 2013 Page 13 of 18

14 previous Order (Case No. 43 of 2010). It is evident that the ABR has increased in the range of Rs 0.24 per unit to Rs 1.78 per unit for different categories of consumer. The increase in ABR for some of the consumer categories is mentioned below: Table 7: Change in ABR (in Rs per unit) Particulars LT I Residential- Single Phase (500 and above) LT II- Non-domestic (>20 kw and <50 kw) LT III Industry below 20 kw Order in Case Order in Case No. 72 of 2010 No. Case 180 of 2011 Increase LT V Advertisement & Hoardings LT VII Temporary Others HT I Industry (b) (c) (d) The ABR considered in CSS Order dated 9 September, 2011 in Case No. 43 of 2010 was considered as per Order dated July 29, 2011 in Case No. 72 of In the above referred Order, ARR for FY was approved wherein revenue was approved based on the actual revenue for ten months and estimated revenue for the remaining two months. It is highlighted that the Tariff applicable until 9 September, 2010 was suppressed due to partial stay of new Tariff; approved in the Order dated 15 June, 2009 in Case No. 121 of However, this partial stay was vacated on 9 September, 2010 and the new Tariff was made applicable for the remaining period of FY Due to this, the revenue and the corresponding ABR pertaining to FY were suppressed to an extent. However, the Tariff specified in Order dated 15 June, 2009 in Case No. 121 of 2008 was applicable for the full period of FY Therefore, the ABR of FY was higher compared to the suppressed ABR of FY This increase in ABR has been one of the major reasons for the increase in CSS in Order Case No. 3 of 2013 Page 14 of 18

15 the present Order Decrease in C for FY vis-à-vis FY : (a) (b) The Commission compared the C of FY considered in the present Order (Case No. 3 of 2013) vis-à-vis the C of FY considered in the previous Order (Case No. 43 of 2010). The Commission approves Rs 5.47 per unit as C in the present Order, which is significantly lower than the approved C of Rs 7.35 per unit in the previous Order. The reduction in C is due to change in power purchase cost of top 5% at margin in FY vis-à-vis FY This change in power purchase cost of top 5% at margin is majorly on account of change in mix and the corresponding cost of power purchase source getting qualified in the stacking of component C. This is evident from the fact that the costly short-term/bilateral power purchase source (Rs 7.35 per unit from multiple short-term sources) constituted the component C in the previous Order whereas less costly medium-term power purchase source (Rs 5.47 per unit from WPCL) constitutes the component C in the present Order. Thus, the decrease in C by Rs 1.88 per unit is also one of the major reasons for increase in CSS Therefore, from the above, it is evident that the increase in CSS has occurred on account of increase in T and decrease in C. In addition, the movement of values of these two components in the opposite direction has resulted into higher difference between these two components As can be seen, the approved CSS in the present Order has increased for RInfra-D as compared to the previous Order in Case No. 43 of However, the Tariff Policy provides that the CSS should be brought down progressively and, as far as possible, at a linear rate to a maximum of 20% of its opening level by the year The CSS of a distribution licensee is a reflection of the cross subsidy existing in the Tariffs of the consumer categories for which the Tariffs are above ACoS. Unless cross subsidy is progressively reduced and the Tariffs are brought within + 20% of the ACoS in line with the provisions of the Tariff Policy, the reduction in CSS is impracticable. The Commission in order to achieve the above provision of the Tariff Policy undertook a study and submitted a report on Roadmap to reduce cross subsidy in Maharashtra to GoM. The comments of the GoM are awaited by the Commission which would be considered for taking necessary future steps However, the CSS is determined on the basis of the prevailing Tariffs and cost of a distribution licensee. The Tariff is designed in a manner where certain categories of Order Case No. 3 of 2013 Page 15 of 18

16 consumers (cross subsidising consumers) pay higher Tariffs than other categories of consumers (cross subsidized consumers). The distribution licensee recovers its ARR by interplay of Tariff among these categories with an inbuilt cross subsidy. In case the cross subsidizing consumers opt for open access, a loss of cross subsidy would occur for the incumbent distribution licensee. This would require the amount of loss of cross subsidy to be recovered from the consumers remaining with incumbent distribution licensee through increased Tariffs. Specifically, the subsidised category of consumers would have an adverse impact due to the increased Tariffs The 1 st & 2 nd provisos of Section 42 (2) of EA 2003 specifies that open access should be allowed on payment of surcharge which shall be utilised to meet the current level of cross subsidy within the area of supply of the distribution licensee. Therefore, it is not only mandated by the EA 2003, but also will lead to adverse impact on Tariff of the remaining consumers. In order to avoid the above, appropriate CSS computed as per the prescribed formulae needs to be applicable With the introduction of open access and parallel distribution licensing, it is evident that a competitive retail distribution business has emerged where consumers have an option to choose their retail electricity supplier. This choice is exercised by the consumers primarily on the basis of price and quality of the electricity supplied by the competitor distribution licensee. The competitive environment amongst the distribution licensees would affect a two-way migration of consumers based on the Tariffs, quality of supply, service quality, etc. In a dynamic environment there would be change in the direction of migration from time to time. Till date, migration has been observed mainly from incumbent distribution licensee to the competitor distribution licensee. However, migration would take place in the future depending on the market dynamics and competitiveness of the distribution licensees Thus, after appropriate deliberations, the Commission approves the cross subsidy surcharge as determined in Annexure I. 13. Applicability of cross subsidy surcharge for consumers opting for Open Access The CSS under this Order shall be applicable from the date of issue of this Order. With this Order, the Commission disposes of RInfra-D s Petition in the matter of Case No. 3 of Sd/- (Vijay L. Sonavane) Member Sd/- (V.P. Raja) Chairman Order Case No. 3 of 2013 Page 16 of 18

17 Annexure I: Computation of cross subsidy surcharge (approved by the Commission) Consumer Category ABR C WL TL L D CSS CSS Computed Approved (Rs./Unit) (%) (%) (%) (Rs./Unit) (Rs./Unit) (Rs./Unit) HT Consumers (Above 66kV) Industry % 4.26% 4.26% Commercial % 4.26% 4.26% Group Housing % 4.26% 4.26% 0.00 (0.14) - Temporary Supply % 4.26% 4.26% HT Consumers (Below 66kV) Industry % 4.26% 6.12% Commercial % 4.26% 6.12% Group Housing % 4.26% 6.12% 0.46 (0.70) - Temporary Supply % 4.26% 6.12% LT Consumers Non Domestic Up to 20 kw % 4.26% 12.88% Up to 20 kw - TOD Option % 4.26% 12.88% '> 20 kw & < 50kW' % 4.26% 12.88% Above 50kW % 4.26% 12.88% Industrial Below 20kW load % 4.26% 12.88% Above 20kW load % 4.26% 12.88% BPL % 4.26% 12.88% 0.88 (6.15) - Residential Single Phase units % 4.26% 12.88% 0.88 (3.93) units % 4.26% 12.88% 0.88 (0.91) - Order Case No. 3 of 2013 Page 17 of 18

18 Consumer Category ABR C WL TL L D CSS CSS Computed Approved (Rs./Unit) (%) (%) (%) (Rs./Unit) (Rs./Unit) (Rs./Unit) units % 4.26% 12.88% and Above % 4.26% 12.88% Residential Three Phase units % 4.26% 12.88% 0.88 (3.87) units % 4.26% 12.88% 0.88 (1.18) units % 4.26% 12.88% and Above % 4.26% 12.88% Agriculture % 4.26% 12.88% 0.88 (6.25) - Advertisements % 4.26% 12.88% Street Lighting % 4.26% 12.88% Temporary Religious % 4.26% 12.88% 0.88 (1.84) - Temporary Others % 4.26% 12.88% Crematorium & Burial Grounds % 4.26% 12.88% 0.88 (3.19) - Order Case No. 3 of 2013 Page 18 of 18