MADHYA PRADESH ELECTRICITY REGULATORY COMMISSION

Transcription

1 MADHYA PRADESH ELECTRICITY REGULATORY COMMISSION 5 th Floor, "Metro Plaza", Bittan Market, Bhopal Petition No. 11 of 2017 PRESENT: Dr. Dev Raj Birdi, Chairman A. B. Bajpai, Member Alok Gupta, Member IN THE MATTER OF: In the matter of petition filed by M/s JPVL pursuant the directions of the Hon ble Appellate Tribunal for Electricity in its Judgment dated 13 th February 2017 passed in Appeal No. 25 of AND IN THE MATTER OF: M/s Jaiprakash Power Ventures Ltd., Secr 128, Noida, Uttar Pradesh Petitioner Versus 1. M. P. Power Management Co. Ltd., Jabalpur 2. M. P. Poorv Kshetra Vidyut Vitaran Co. Ltd., Jabalpur 3. M. P. Madhya Kshetra Vidyut Vitaran Co. Ltd., Bhopal Respondents 4. M. P. Paschim Kshetra Vidyut Vitaran Co. Ltd., Indore M.P. Electricity Regulary Commission Page 1

2 ORDER (Passed on this day of 04 th December 2017) 1. M/s. Jaiprakash Power Ventures Ltd. (hereinafter referred as the petitioner or JPVL ) has filed the subject petition on 17 th April 2017 for revision of the order dated 26 th November 2014 passed by the Madhya Pradesh Electricity Regulary Commission (hereinafter referred as the Commission or MPERC ) in petition No. 40 of 2012 in the matter of determination of final generation tariff of 2x250 MW (Phase-I) coal based thermal power project at Bina, pursuant the directions of Hon ble Appellate Tribunal for Electricity in its Judgment dated 13 th February, 2017 passed in Appeal No. 25 of The subject petition has been filed under Section 62 and Section 86 (1)(a) of the Electricity Act, 2003 and based on the provisions under MPERC (Terms and Conditions for Determination of Generation Tariff) Regulations, 2009 and MPERC (Terms and Conditions for Determination of Generation Tariff) Regulations, 2012 (hereinafter referred as the the Regulations, 2009 and the Regulations, 2012 respectively). A small background of the subject matter is mentioned below: 3. Vide order dated 26 th November 2014 in Petition No. 40 of 2012, the Commission determined the final generation tariff for 2 x 250MW (Phase-I) of petitioner s thermal power station at Bina for and based on Annual Audited Accounts. In the aforesaid order, the generation tariff for and was determined on provisional basis subject true-up on availability of Annual Audited Accounts of the respective year. 4. Further, on 23 rd January 2015, the petitioner had filed a review Petition No. 05 of 2015, seeking review of the aforesaid Commission s order dated 26 th November Out of four issues raised by the petitioner in the aforesaid review petition, the Commission had Considered the review on only one issue i.e. interest and finance charges, and the Annual Capacity (fixed) charges determined by order dated 26 th November 2014 were revised vide Commission s order dated 8 th May Aggrieved with the final tariff order dated 26 th November 2014 in petition No. 40 M.P. Electricity Regulary Commission Page 2

3 of 2012, the petitioner filed an Appeal No. 25 of 2016 before the Hon ble Tribunal challenging the following issues: a) Pre Commissioning Fuel Expenses b) Double Deduction of Infirm Power c) Inadequate recovery of Annual Capacity Charges. d) Post Fac adjustment on account of Non-Tariff Income. 6. During the pendency of the aforesaid Appeal with the Hon,ble Tribunal, the following petitions were also filed by the petitioner and orders on all such petitions have been issued by the Commission: (i) The petitioner had filed a petition (Petition No. 70 of 2015) for true-up of the Generation Tariff for of its Bina Thermal Power Project based on Annual Audited Accounts. Vide Commission s order dated 3 rd June 2016 the true-up of generation tariff for of the petitioner s Power Plant was determined and Charges were revised. the Annual Capacity (ii) Aggrieved by the aforesaid true-up order dated 3 rd June 2016, the petitioner had filed the review petition No. 47 of 2016 seeking review on disallowed grossing up of the base rate of Return on Equity with Minimum Alternate Tax during (iii) (iv) (v) Subsequently, at the fag end of the proceedings in above review petition, the petitioner had also filed an Interlocury Application (IA) in the above review petition adding another issue for review of disallowance of O&M expenses for the dedicated transmission line of its project. Vide order dated 25 th September 2017, the Commission had considered the grossing up the rate of return on equity with MAT and re-determined the return on equity. Subsequently, the Annual Capacity Charges for (determined vide true-up order dated 3 rd June 2016) have been revised by the Commission. The issue of O&M expenses for the dedicated transmission line of its project has not been considered by the Commission for the reasons mentioned in the Commission s order. The petitioner also filed next true-up petition for on 15 th November 2016 based on Annual Audited Accounts. Vide order dated M.P. Electricity Regulary Commission Page 3

4 21 st June 2017, the Commission determined the true-up of generation tariff for and revised the Annual Capacity Charges. 7. On 13 th February 2017, the Hon ble Tribunal pronounced the Judgment in Appeal No. 25 of 2016 and partly allowed the Appeal. The issues at S. No. (c) and (d) in Para 5 above have been decided against the petitioner and the impugned order was upheld by the Hon ble Tribunal on these two issues.the Commission s impugned order in aforesaid Appeal has been remanded back this Commission on other two issues at S.No. (a) and (b) in above Para 5 with regard pre-commissioning fuel expenses and double deduction of revenue earned from sale of infirm power. 8. In terms of the directions of Hon ble Tribunal in their Judgment dated 13 th February 2017, the peti ti oner filed the subject petition for revision of capital cost of the Bina power project. In the subject petition, the petitioner broadly submitted the following: i. The Hon ble Tribunal vide its Judgment dated has held that the Commission was not justified in disallowing the actual Pre-Commissioning Fuel Expenses in its Order dated passed in Petition No. 40 of 2012 ( Impugned Order ). Further, the Hon ble Tribunal after recording its observations and findings has set aside the Impugned Order of this Commission that extent. The relevant extract of the Hon ble Tribunal Judgment is stated as below: viii. In view of the above, the Impugned Order of the State Commission disallowing the cost of imported coal in pre-commissioning expenses is not justified and the Impugned Order of the State Commission that extent is set aside. ii. iii. Further, on the issue of Double Deduction of Revenue earned from the sale of Infirm Power the Hon ble Tribunal in its Judgment observed that the Petitioner has submitted the CA certificates, which clearly evinces that the revenue earned from sale of infirm power has been reduced from capital cost as on COD of the units. However, the same was not considered by the Hon ble Commission owing filings made in different points in time. The Hon ble Tribunal further stated that as a matter of Natural Justice one last opportunity ought be given the Petitioner prove its contention that the revenue earned from sale of infirm power has been actually reduced as on COD of the Units in order avoid the penalty of double deduction of the M.P. Electricity Regulary Commission Page 4

5 same from the capital cost. It is most respectfully submitted that the Hon ble Tribunal has remanded the issue of Double Deduction of Revenue earned from sale of Infirm Power back the Hon ble Commission, with specific directions the Hon ble Commission hear the Petitioner on the merits of the issue once again. The relevant extract of the Hon ble Tribunal Judgment is reproduced as below: C.. iv. While going through the details, the arguments and the counter arguments made by the parties, we feel that the whole issue needs be resolved with full clarity. The Petitioner has submitted the C.A. certificates mentioning that the revenue earned from sale of infirm power has been reduced from capital cost as on COD of the units. The State Commission tried reconcile the figures with the annual accounts of the Petitioner. The gap exists in reconciling the figures of CWIP as on COD of the Units and as on end of the financial years in which COD of the units occurred. v. We feel that as a matter of Natural Justice one last chance may be given the Petitioner prove its contention that revenue earned from sale of infirm power has been actually reduced as on COD of the Units avoid the penalty of double deduction of the same from the capital cost. We hereby grant liberty the Petitioner approach the State Commission on this issue and direct the State Commission hear the issue on merits again. However, we are not expressing any opinion. The Impugned Order is set aside that extent. iv. It is most respectfully submitted that the Petitioner is filing this present Petition before the Hon ble Commission pursuant the remand direction issued by the Hon ble Tribunal in its Judgment dated The present Petition is limited the issue of disallowance of Pre-Commissioning Fuel Expenses and arbitrary Double Deduction of Revenue earned from the sale of Infirm Power. v. It is also submitted that the Petitioner has already incurred cost wards such prudent expenditure, which were disallowed by the Hon ble Commission resulting in cash outflow for the Petitioner from such dates. The cost being incurred by the Petitioner would get reimbursed once the Hon ble Commission allows the relief climed in the present Petition. It is pertinent mention that non-grant of interest on delayed recovery is contrary Section 61(b), (c) and (d) of the Electricity Act. Thus, the Petitioner is entitled the carrying cost wards such prudent costs already incurred by the Petitioner. (Emphasis Supplied) M.P. Electricity Regulary Commission Page 5

6 9. With the above submission, the petitioner prayed the following: a) Allow the actual Pre-Commissioning Fuel Expenses incurred and claimed by the petitioner in Petition No. 40 of 2012; b) Re-consider the double deduction of revenue earned by the petitioner from sale of Infirm Power and grant relief the petitioner; c) Allow the past recovery along with carrying per annum. 10. In the subject petition, the petitioner raised the issue of disallowance of precommissioning fuel expenses and double deduction of revenue earned from sale of infirm power in terms of the directions of Hon ble Appellate Tribunal for Electricity in their Judgment dated 13 th February, 2017 passed in Appeal No. 25 of In the subject petition, the petitioner has prayed for revision of capital cost of its 2x250 MW Bina thermal power project on account of the following: Consider the actual Pre-Commissioning Fuel Expenses incurred and claimed by the petitioner in Petition No. 40 of 2012 and; Re-consider the double deduction of revenue earned by the petitioner from sale of infirm power. 11. The petitioner has filed the following documents with the subject petition: i. Copy of the Judgment dated passed by the Hon ble Tribunal for Electricity in Appeal No. 25 of ii. iii. iv. Copy of the Commission s tariff order dated passed in Petition No. 40 of Copy of the Commission s daily order dated in Review petition No. 05 of Copy of petitioner s affidavit dated filed in Review petition No. 05 of v. Copy of petitioner s additional affidavit dated filed in petition No. 40 of Proceedings: 12. Motion hearing in the subject petition was held on 16 th May, Vide order M.P. Electricity Regulary Commission Page 6

7 dated 16 th May, 2017, the petition was admitted and petitioner was directed serve copies of the petition on all Respondents in the matter. The Rrespondents were also asked file their comments/ response on the petition by 12 th June Vide letter dated 13 th June 2017, the Respondent No. 1 (MPPMCL) sought four weeks time extension for filing its response/comments on the subject petition. 14. Vide order dated 20 th June 2017, Respondent No. 1 was directed file its response on the petition by 18 th July Vide Commission s aforesaid order dated 20 th June 2017, the petitioner was also asked file all such details and documents which were pending for detailed verification of petitioner s contention in the proceedings on the issue of double deduction of revenue earned from sale of infirm power under review petition No. 05 of The petitioner was directed file its reply all such issues in light of the observations of Commission in Para of its order dated 8 th May 2015 at the earliest but not later than 25 th July By affidavit dated 12 th July 2017, the petitioner filed its reply the issues raised by the Commission. The response of the petitioner on each issue raised by the Commission is mentioned in Para 40 of this order. 17. By affidavit dated 14 th July 2017, the Respondent No. 1, M.P. Power Management Company Ltd. filed its response/comments on the subject petition. 18. By affidavit dated 3 rd August 2017, the petitioner filed its rejoinder the aforesaid response filed by Respondent No. 1. The petitioner s response on each comment offered by the Respondent No. 1 (MPPMCL) is mentioned in Annexure-I of this order. 19. During the course of hearing held on 26 th September 2017, Counsels on behalf of the petitioner and respondents placed their final arguments before the Commission. Both the parties sought ten days time file their written submissions in this matter. 20. Vide Commission s order dated 26 th September 2017, the petitioner and respondents were directed file their written submission by 7 th Ocber With the above directions, the case was reserved for order. 21. Vide letter dated 4 th Ocber 2017, the respondent No. 1, M.P. Power M.P. Electricity Regulary Commission Page 7

8 Management Company Ltd., filed its written submission. Vide letter dated 6 th Ocber 2017, the petitioner M/s JPVL also filed its final written submission in the subject matter. Commission s Analysis: 22. In the subject petition the petitioner raised following two issues: (i) Disallowance of actual Pre-Commissioning Fuel Expenses incurred and claimed by the petitioner in Petition No. 40 of 2012 and; (ii) Consideration of double deduction of revenue earned by the petitioner from sale of infirm power. 23. The subject petition has been filed by the petitioner pursuant the directions of the Hon ble Tribunal for Electricity. Therefore, the Commission has examined this petition in light of the provisions under MPERC (Terms and Conditions for determination of generation tariff) Regulations, 2009 & 2012, the directions of Hon ble Tribunal in their Judgment dated 13 th February 2017 in Appeal No. 25 of 2016 and the submissions filed by the petitioner. 24. It is pertinent mention that for any revision in the capital cost as on CoD of the generating units, the Capital Cost /Annual Capacity (fixed) Charges admitted/determined vide Commission s earlier final/true-up tariff orders dated 8 th May 2015, 21 st June 2017 and 25 th September 2017, shall also be revised. 25. Accordingly, the break-up of Annual Capacity Charges of petitioner s generating station from CoD of Unit No. 1 i.e st March 2016 determined vide earlier final/true-up tariff orders dated 8 th May 2015, 21 st June 2017 and 25 th September 2017 are reproduced as under: Table 1: Annual Capacity Charges considered in earlier orders: Sr. No. Particular Unit Final / review order dated True-up /review order Dt /8/2012 1/4/2013 7/4/2013 1/4/2014 1/4/ /3/2013 6/4/201331/3/ /3/ /3/2016 Unit 1 Unit 1 Unit Unit 1&2 Unit 1&2 1&2 1 Return on equity Rs Cr Interest charges on loan Rs. Cr M.P. Electricity Regulary Commission Page 8

9 3 Depreciation Rs. Cr Operation & Maintenance Rs. Cr expenses 5 Secondary fuel oil Rs. Cr expenses 6 Interest on working capital Rs. Cr Lease rent payable for land Rs. Cr Annual capacity (fixed) charges Rs. Cr No. of days in operation No during the year 9 AFC apportioned in actual Rs. Cr days of operation 10 Less: Non tariff income Rs. Cr Net AFC Rs. Cr AFC for 65% Installed of Capacity Rs. Cr The issues be dealt with in this order are as given below: Issue No. 1: Pre-Commissioning Fuel Expenses. Petitioner Submission: 27. On the issue of Pre-ccommissioning Fuel Expenses, the petitioner has broadly submitted the following grounds: A. The Hon ble Tribunal vide its Judgment dated has set aside the Impugned Order passed by the Hon ble Commission the extent it disallows the cost of Imported Coal in pre-commissioning fuel expenses. B. The Hon ble Tribunal in its Judgment has categorically held that the terms landed cost of coal and weighted average cost of coal provided in the MPERC Tariff Regulations are synonymous and the cost of the coal is be arrived based on weighted average landed price. The Hon ble Tribunal further held that approach of the Hon ble Commission consider average rate of domestic coal instead of weighted average landed price of coal for the purpose of calculating the pre-commissioning fuel expenses is not in line with the MPERC Tariff Regulations, C. The reliance placed by the Hon ble Commission on Regulation 5 (5) of the CERC (Unscheduled Interchange/Deviation Settlement Mechanism and related matters) Regulations, 2014 state that the generating company is M.P. Electricity Regulary Commission Page 9

10 eligible earn revenue from sale of infirm power at the rates capped for domestic coal only even if it has consumed imported coal for blending purpose is erroneous. The Hon ble Tribunal in its Judgment at Para 11 (b) Page 24 has held that the said Regulation 5 (5) does not bar domestic coal based generating stations from using imported coal/blended coal for generating infirm power. The Hon ble Tribunal further clarified that the said Regulation 5 (5) prescribe ceiling of rates corresponding the main fuel used for infirm injection. It is also pertinent mention that the PPA entered between the Petitioner and the Respondent No.1 also provides for domestic/imported coal as primary fuel as observed by the Hon ble Tribunal at Para 11 (b) Page 20 of the Judgment. D. The issue of non-consideration of actual Pre-Commissioning Fuel Expense has been settled by the Hon ble Tribunal and the said issue has attained finality. In view of the above submissions and the findings/observation and directions of the Hon ble Tribunal, this Hon ble Commission is requested carry out the computation and allow the actual pre-commissioning fuel expenses claimed by the Petitioner in Petition No. 40 of Finding of the Hon ble Tribunal: 28. Regarding the Non-consideration of actual pre-commissioning fuel expenses, in para 11(b) (viii) of the judgment dated 13 th February 2017, Hon ble Tribunal has observed the following: The Impugned Order of the State Commission disallowing the cost of imported coal in pre-commissioning expenses is not justified and the Impugned Order of the State Commission that extent is set aside. MPPMCL s Response: 29. With respect the issue of pre-commissioning fuel expenses, by affidavit dated 14 th July 2017, the Respondent No. 1 (MPPMCL) oppose the blending of imported coal with FSA coal for generation of infirm power. The objections raised by the Respondent No. 1 are broadly reproduced below: i. With respect the issue of Pre-Commissioning fuel expenses, it is submitted that the entire focus and submission of the petitioner herein is misconceived as the Tariff Regulations, 2012 do not apply for calculation or determination of tariff for sale of infirm power. ii. Capital cost is defined in Regulation 17 of MPERC (Terms and conditions for determination of Tariff) Regulations, 2009, and Regulations, 2012 M.P. Electricity Regulary Commission Page 10

11 iii. iv. The capital cost may include expenditure incurred or projected be incurred on original scope of work, and the capital cost shall be admitted by the Commission subject prudent check. Further, 2 nd proviso Regulation 17.2 provides that prudent check may include scrutiny of the reasonableness of the capital expenditure, use of efficient technology, cost and time overrun, and such other matters as may be considered appropriate by the State Commission. MPERC is empowered conduct prudent check on reasonableness of the capital expenditure being claimed and accordingly, after conducting prudent check on reasonableness of the cost of coal, Hon,ble MPERC has rightly disallowed the exaggerated amount of cost of coal claimed by the petitioner. v. The Tariff Regulations specifically does not provide for consideration of precommissioning fuel expenses as a part of capital cost and accordingly, no description of the method of considering of pre-commissioning fuel expenses have been specified in Tariff Regulations. Further while specifying the energy charges, Regulation 39.2 provides for consideration of Weighted Average Landed price of Primary Fuel. vi. In the absence of any specific provision regarding basis of consideration of pre-commissioning fuel expenses in capital cost, Hon ble MPERC is fully justified in carrying out prudence check and scrutiny of reasonableness of the cost of coal consumed during pre-commissioning period. While carrying out the prudence check of pre-commissioning fuel expenses, Hon ble MPERC has considered average rate of domestic coal for for determining pre-commissioning fuel expenses for unit 1 and average rate of for Unit 2 as given below: Table 2: (Rs./MT) Particular Cost of coal claimed by Petitioner Cost of coal allowed by commission Landed cost of coal considered in tariff petition for ECR Wtd. Avg. rate of coal filed by petitioner vide affidavit dtd Wtd. Avg. rate of coal allowed GCV of coal claimed by Petitioner (Kcal/Kg.) M.P. Electricity Regulary Commission Page 11

12 vii. viii. The rates of coal claimed by the petitioner vis-à-vis allowed by the Hon. MPERC are also shown in above table and upon no point of time the Wtd. Avg. rate of coal is as high as Rs /MT as claimed by the petitioner wards pre-commissioning fuel expenses of Unit 2. The pre-commissioning fuel expenses becomes part of the capital cost on which RoE and IoL etc. are recoverable as pass through in Annual fixed Cost, hence, the Petitioner has claimed extremely higher rate of coal for precommissioning period enhance capital cost and earn RoE on without any basis. This should not be allowed in the interest of end consumers of the State. ix. Hon. MPERC has acted in consonance with above provisions of Act 2003 while conducting prudence check of the capital cost as regards fuel expenses and rightly disallowed the exorbitant claim of Petitioner in order ensure economical use of resources and safeguarding the consumer s interest. x. The tariff is be determined in accordance with the provision contained in Section 61 of Act, Section 61 (c ) and (d) inter-alia provides as under: Section 61(c): the facrs which would encourage competition, efficiency, economical use of the resources, good performance and optimum investments; xi. xii. Without prejudice above, it is submitted that it is the entire case of the Petitioner that the calculation ought have been done on the basis of weighted average cost of coal and not otherwise. In this regard Regulations 1, 2, 34 and 41 of the MPERC Tariff Regulations, 2012 are extremely pertinent. It is submitted that the issue of calculation of cost of coal/fuel for precommissioning expenses on average weighted average cost basis will only arise if the Tariff is be determined once COD has occurred for supply of power beneficiary. It is submitted that the Tariff Regulations, 2012 are not applicable determination of tariff for infirm power supply. It is further submitted that the Hon ble Tribunal, in its judgement passed in Appeal no. 25 of 2016, has only stated at page 22 that the landed cost of coal and weighted average cost of coal are synonymous as per the Tariff Regulations, However, it has no where held or examined if the Tariff Regulations, 2012 are applicable for determination of rate/tariff for supply of Infirm Power of the Unit-1 and 2. The entire submission of the petitioner are without any merit with respect infirm power cost of coal as per the Tariff Regulations, 2012 prescribed weighted average cost basis. M.P. Electricity Regulary Commission Page 12

13 xiii. xiv. xv. It is further submitted, that the main submission of the Petitioner has been that it had use imported coal for blending achieve the GCV value for the boiler functioning as the FSA coal was having low GCV and, therefore, was not feasible for trial run of Unit-1 and 2 for demonstrating of Maximum Continuous Rating. In this regard, it is submitted that the GCV of FSA coal for and was and Kcal/Kg respectively while the GCV design of the Boiler machine was 3300 Kcal/Kg. Also, there was sufficient quantity of the coal available the petitioner as there was MT and MT of coal available during the respective financial years. It is, therefore, submitted that there was absolutely no need or requirement for the Petitioner even seek imported coal and there is also no legal justification for the same. The only reason which may have led the Petitioner seek blending with imported coal must have been somehow raise the Capital Expenditure and thereby claim a higher ROI and ROE. It is submitted that the Commission should undertake a prudence check and verify for itself the quality and quantity of domestic coal available with the Petitioner and whether there was actually any need blend FSA coal with imported coal. Commission s Analysis: 30. In the tariff petition for determination of final tariff, the petitioner had claimed following Pre-commissioning fuel expenses and revenue from sale of infirm power : Table 3: Pre-commissioning fuel expenses claimed Period Generation (MUs) Coal consumption (MT) Cost of Coal (Rs. Crore) Oil consumed (KL) Cost of oil (Rs. Crore) Unit No. 1 Up July, , , August, , Sub-tal , , Unit No. 2 February, March, , st April th , April, 2013 Sub-tal , , Total (Unit-1 & 2) , , While issuing the final tariff order dated 26 th November 2014, the Commission M.P. Electricity Regulary Commission Page 13

14 had allowed full quantity of coal consumed by the petitioner for generation of infirm power and claimed in the petition No. 40 of The amount of coal expenses were determined by the Commission based on the weighted average rate of only domestic coal for determining the pre-commissioning fuel expenses. 32. Based on the source wise coal supply data made available by the petitioner, the Commission had considered the weighted average rate of domestic coal only for determining pre-commissioning fuel expenses. The Commission had considered the average rate of domestic coal for for determining precommissioning fuel expenses for Unit No. I and for for determining pre-commissioning fuel expenses for Unit No. II as given below: Table 4: Pre-commissioning coal costs approved by the Commission Particular Unit I Unit II Coal consumption MT 53,052 25,326 Average rate of domestic coal Rs. / nne 3, , Total Coal costs allowed by the Rs. Crore Commission Total Coal cost claimed by the Rs. Crore petitioner Amount disallowed on Rs. Crore account of pre commissioning fuel expenses The arguments placed by the respondent No. 1 on this issue had already been placed by this Commission before the Hon ble Tribunal during the proceedings in Appeal No. 25 of The Hon ble Tribunal s by Judgment dated 13 th February 2017 has directed consider the cost of imported coal also for determining the weighted average landed cost of coal. Accordingly,, in compliance with the directions of Hon ble Tribunal, the weighted average rate of domestic and imported coal has been considered and the pre-commissioning coal costs has been re-worked in this order as given below: Table 5: Revised coal costs allowed in this order Particular Unit I Unit II Coal consumption MT 53,052 25,326 Weighted Average rate of coal Rs. / nne including imported coal Coal cost filed by the petitioner (Rs. Crore) Revised coal costs allowed by (Rs. Crore) the Commission in this order M.P. Electricity Regulary Commission Page 14

15 Accordingly, the pre-commissioning fuel expenses allowed in order dated 26 th November 2014 are now revised and the capital cost has also been revised in this order. Issue No. 2: Double deduction of revenue earned from sale of infirm power. Petitioner s Submission: 34. Regarding the Double deduction of revenue earned from sale of infirm power, the petitioner in the subject petition has broadly submitted the following grounds: A. The Hon ble Tribunal in its Judgment dated at Para 11 C (iv) has observed that the Petitioner has submitted the CA certificates, which clearly evinces that the revenue earned from sale of infirm power has been reduced from capital cost as on COD of the units. However, the same was not considered by the Commission owing filings made in different points in time. B. The Hon ble Tribunal in its Judgment stated that as a matter of Natural Justice one last opportunity ought be given the Petitioner prove its contention that the revenue earned from sale of infirm power has been actually reduced as on COD of the Units in order avoid the penalty of double deduction of the same from the capital cost. It is most respectfully submitted that the Hon ble Tribunal has remanded the issue of Double Deduction of Revenue earned from sale of Infirm Power back the Hon ble Commission, with specific directions the Hon ble Commission hear the Petitioner on the merits of the issue once again. In view of the direction of the Hon ble Tribunal the Petitioner is making the following submission, which will unequivocally establish that the Hon ble Commission has doubly deducted Rs 9.23 Cr., revenue earned from sale of infirm power before the COD of Unit-1 & Unit-2 from the Capital Expenditure: - i. It is most respectfully submitted that the Hon ble Commission in passing the Impugned Order has erred by reducing Rs Crore from the Capital Expenditure, being the revenue earned against Generation of infirm power from Unit 1 and Unit 2. It is humbly submitted that the Petitioner in its affidavit dated 13 th August 2014 filed in Petition No. 40 of at Para 5 at Page No. 7 has clearly stated as under: - The Petitioner humbly submits that the details of Income earned on account of Sale of Power as Unscheduled Interchange before COD M.P. Electricity Regulary Commission Page 15

16 along with all supporting documents has already been submitted as per the following details: (i) For infirm Power related U-1, the tal income earned as UI during the supply of infirm power between the date of synchronization and COD is Rs Crore and the details are as Annexure B (ii) For infirm Power related U-2, the tal income earned as UI during the supply of infirm power amount Rs Cr during Mar-13 and Rs Cr during Apr-13 talling Rs Cr., and are attached as Annexure C The said income on account of Infirm Power has been reduced from the capital expenditure. ii. iii. It is pertinent mention that the aforesaid deduction by the Petitioner was in strict consonance of Regulation 19 of the MPERC (Terms and Conditions of Tariff) Regulations, It is submitted that the above information was submitted by the Petitioner in response the query issued by the Hon ble Commission vide letter dated It is submitted that from the above quoted relevant extracts of the letter the following key issues emerge: - (a) (b) The Petitioner in previous submission dated had claimed Pre-Commissioning Expense as Rs. 96 Crore. However, in its subsequent submissions dated no such figure was inadvertently indicated and an explanation for, which was sought by the Hon ble Commission. Further, the Hon ble Commission sought complete documentary proof on the revenue earned by the Petitioner for sale of infirm power along with month-wise tal cost, quantity of oil, coal consumption and as well as specific oil and coal consumption. iv. Further, the Petitioner in the very same affidavit dated 13 th August 2014 in response Query 6 and 7 stated as follows: - The Petitioner humbly submits that the pre-commissioning fuel expense of Rs Crs was merged with Overheads & Pre-operative expenses in the additional submission dated 27 th June, The details of the fuel consumed in pre commissioning of U-1 and U-2, M.P. Electricity Regulary Commission Page 16

17 including fuel consumed from date of Grid synchronisation COD of U- 1 and U-2, v. From the above it is abundantly clear that firstly the Petitioner vide Affidavit dated had provided complete justification on the tal revenue earned in sale of Infirm power i.e. justification of Rs Crore, which has been accepted by the Hon ble Commission. Further, in response specific query No. 6 and 7 the Petitioner in unequivocal terms had informed the Hon ble Commission that the value of Rs Crore earlier provided as figure for pre-commissioning expenses has been appropriately reduced Rs Corers by the Petitioner itself and the table extracted above is a clear unambiguous indication of the same. vi. vii. In view of the above, it is pertinent mention that the Hon ble Commission while passing the impugned Order did not appreciate that the income earned by sale of infirm power has already been adequately reduced by the Petitioner in its final set of submissions. Further, the Hon ble Commission in passing the Impugned Order at Para 4.21 itself recognizes the above fact that the Petitioner has reduced its capital expenditure from sale of infirm power but then in subsequent paragraphs proceeds rule that the Petitioner has adjusted its Capital Cost only the extent of precommissioning fuel expenses and not considered the revenue earned from sale of infirm power while undertaking the adjustment as per Regulation 19 of the MPERC Tariff Regulations, From the above it is abundantly clear that the Hon ble Commission was already informed about the deduction of revenue from sale of infirm power which as seen above has been specifically recorded by the Hon ble Commission and therefore, it is unimaginable and legally untenable for the Hon ble Commission again deduct the same from the capital cost of the Petitioner. C. The Hon ble Commission has justified the double deduction of revenue earned from sale of infirm power in its Review Order on the following erroneous grounds: - (a). The Hon ble Commission even after seeking additional information qua the deduction vide its daily Order dated which was submitted by the Petitioner vide its Affidavit dated has proceeded hold that adequate information qua the deduction was not furnished the Commission at the time of hearing of Petition No. 40 of M.P. Electricity Regulary Commission Page 17

18 (b). The Hon ble Commission has then proceeded find fault in various pleadings filed by the Petitioner in support of its disallowance and in doing so the Hon ble Commission has failed appreciate that Tariff Determination is an evolving process where facts and figures change right up the Final Tariff determination is done. Further, the Hon ble Commission was clearly informed through Additional Affidavit dated 13 th August, 2014 that the revenue earned from sale of infirm power has been adequately reduced from the Capital Cost as per the Regulations. Therefore, if the Hon ble Commission had any further queries it ought have raised and sought clarification from the Petitioner as it did on numerous other issues. Hence, it is improper for the Hon ble Commission doubly reduce the earning from sale of infirm power, which is clearly against the Regulations and grave prejudice the Petitioner. (c). That in para 20 (ii) of the Review Order the Hon ble Commission has erroneously mentioned that the net revenue earned from sale of infirm power was Rs Crore. It is most respectfully submitted that the above finding of the Hon ble Commission is contrary the previous finding in the Impugned Order wherein the Hon ble Commission had clearly noted as follows: In the additional submission dated 13th August 2014, the petitioner submitted that it has incurred pre-commissioning fuel expense (wards coal and oil) of Crore. The petitioner also submitted that it has earned revenue of 9.23 Crore from sale of infirm power. Accordingly, the petitioner has incurred net pre commissioning fuel expense of Crore (95.83 Crore 9.23 Crore). (d). It is most respectfully submitted that the Hon ble Commission have themselves mentioned that the Petitioner has incurred Rs Crore as pre-commissioning fuel expenses and the Petitioner had earned revenue of Rs Crore from sale of infirm power. (e). Therefore, net pre-commissioning fuel expenses would be equal precommissioning fuel expenses minus revenue earned from sale of infirm power (Rs Cr Rs.9.23 Cr = Rs Cr). Further the Respondent Commission sought additional information qua the deduction vide its daily Order dated , which was duly submitted by the Petitioner vide its affidavit dated 18 th March M.P. Electricity Regulary Commission Page 18

19 D. As per the accounting principles and procedures laid down by the Institute of Chartered Accountants of India, income prior the commercial operation, whether interest earned on Fixed Deposit or income from Generation of infirm power, is be reduced from the capital cost which the Petitioner had already done. Therefore, the Petitioner has already reduced its capital cost adequately by reducing the amount earned from infirm power generation. MPPMCL s Response: 35. With respect the issue of double deduction of revenue from sale of infirm power, Respondent No. 1 (MPPMCL) by affidavit dated 14 th July 2017 submitted the following: The Hon ble Tribunal has also itself held that the Petitioner has not been able demonstrate that the revenue earned from sale of infirm power has been utilized for reduction of capital cost as on COD of the Units. In this regard the Hon ble Tribunal has, in the interest of justice, given an opportunity the Petitioner demonstrate that there is double deduction. It is, therefore, submitted that on the basis of documents filed in earlier petition, the Petitioner herein should demonstrate that there is double deduction. It is submitted by the Respondent that the earlier orders of the Hon ble Commission have dealt with the issue appropriately and the same have not been set-aside by the Hon ble Tribunal, however only a fresh opportunity has been given the Petitioner re-demonstrate the issue the satisfaction of this Hon ble Commission. Commission s Analysis: 36. In Para 11(c) of the Judgment dated 13 th February 2017 in Appeal No. 25 of 2016, the observations and findings of Hon ble Tribunal are as given below: (i) We once again look at the State Commission s Tariff Regulations 2009 & 2012 which provide following regarding infirm power injection the grid prior the COD of the Unit. 19 Sale of Infirm Power 19.1 Infirm Power shall be accounted as Unscheduled Interchange (UI) and paid for from the regional / State UI pool account at the applicable frequency-linked UI rate: Provided that any revenue earned by the Generating Company from sale of Infirm Power after accounting for the fuel expenses shall be applied for reduction in capital cost. M.P. Electricity Regulary Commission Page 19

20 It is the responsibility of the Appellant/ Generating Company clearly establish that the revenue earned from the injection of infirm power after accounting for fuel expenses has been reduced from the capital cost as on COD of the Unit(s). (ii) During the proceedings in Petition No. 40 of 2012, the Appellant could not clearly establish that the Capital Cost as on COD of the Units is net of revenue earned from the sale of infirm power from the respective units. (iii) During the proceedings of the Review Petition 5 of 2015, the Appellant produced Chartered Accountant Certificate dated certifying that the revenue earned from the sale of infirm power has been credited CWIP. The State Commission asked for further detailed documents like audited annual accounts for & , reconciliation of CWIP as on COD of the Units and at the end of the financial years and etc. from the Appellant confirm that the revenue from sale of infirm power has been reduced from capital cost as on COD of the Units. But the Appellant was not able establish that the revenue earned from sale of infirm has been reduced from the capital cost as on COD of the respective units. The State Commission has held that based on available documents and submissions before the State Commission, it is seen that the revenue earned from sale of infirm power lies in CWIP as on and Accordingly, the State Commission dismissed Review Petition on this account. (iv) While going through the details, the arguments and the counter arguments made by the parties, we feel that the whole issue needs be resolved with full clarity. The Appellant has submitted the C.A. certificates mentioning that the revenue earned from sale of infirm power has been reduced from capital cost as on COD of the units. The State Commission tried reconcile the figures with the annual accounts of the Appellant. The gap exists in reconciling the figures of CWIP as on COD of the Units and as on end of the financial years in which COD of the units occurred. (v) We feel that as a matter of Natural Justice one last chance may be given the Appellant prove its contention that revenue earned from sale of infirm power has been actually reduced as on COD of the Units avoid the penalty of double deduction of the same from the capital cost. We hereby grant liberty the Appellant approach the State Commission on this issue and direct the State Commission hear the issue on merits again. However, we are not expressing any opinion. The Impugned Order is set aside that extent. (Emphasis supplied) 37. Accordingly, it was observed by Hon ble Tribunal that the petitioner (Appellant in Appeal No. 25 of 2016) was not able establish with the documents before this Commission that the revenue earned from sale of infirm power has been reduced M.P. Electricity Regulary Commission Page 20

21 from the Capital cost as on COD of respective units. It was further observed by the Hon ble Tribunal that based on documents placed by the petitioner before this Commission, the revenue earned from sale of infirm power lies in Capital works in progress (CWIP). Considering that this whole issue needs be resolved with complete clarity, the Hon ble Tribunal has not expressed any opinion on this issue and given one last chance the petitioner prove its contention that revenue earned from sale of infirm power has been actually reduced from the capital cost as on respective COD of the Units. 38. On examination of contents and documents filed by the petitioner in the subject petition, it was observed that the petitioner should file all such details and documents which were sought from the petitioner by the Commission for detailed verification of its contention on this issue under Review Petition No. 05 of All aforesaid details and documents as submitted by the petitioner in the aforesaid Review petition were found inadequate and also lacking clarity establish by the petitioner that the revenue earned from sale of infirm power has been reduced from the capital cost as on respective COD of each unit. Therefore, vide Commission s order dated 20 th June 2017 in the subject petition, all such issues were again conveyed the petitioner and the petitioner was directed file a comprehensive reply all such issues in light of the observations of Commission in Para of Commission s order dated 8 th May 2015 (in Review Petition No. 5 of 2015). 39. In response the above, by affidavit dated 12 th July 2017, the petitioner filed its reply on the issues raised by the Commission. On perusal of aforesaid reply filed by the petitioner, the Commission has categorically observed that the details and the documents filed by the petitioner are almost same the reply and documents filed by the petitioner by its earlier affidavit dated 18 th March 2015 in Review Petition No. 05/2015 in Petition No. 40/2012. The petitioner has not submitted any additional details or documents over and above the reply which was filed by it in Review Petition No. 5 of 2015 (in Petition No. 40 of 2012). The reply along with the details / documents filed by petitioner in the aforesaid Review Petition has been mentioned at Para 8 of Commission s order dated 8 th May 2015 in the aforesaid Review Petition The issue-wise response filed by the petitioner in Review Petition and also in the subject petition is reproduced below for the sake of comparison: M.P. Electricity Regulary Commission Page 21

22 (i) (ii) (a) Issue: All supporting documents related the accounting of the revenue earned from sale of infirm power in CWIP account and its adjustments in the capital cost as on CoD claimed in the petition for each unit. The break-up of CWIP as on CoD of Unit 1, 31 st March, 2013, CoD of Unit 2 and 31 st March, 2014 duly tallied with the concerned schedule in the books of account duly certified by the statury audir. The aforesaid break-up should indicate the adjustments of revenue earned from sale of infirm power in CWIP as per the books of account. Petitioner s Response in Review Petition No. 05 of 2015 in Petition No. 40 of 2012: In response Para 1, 2 & 3 of the Order Sheet, the Petitioner has attached CA certificate dated 11 th March, 2015 which clearly certifies that, in respect of Unit-I, revenue of Rs crores earned from Sale of Infirm Power has been credited Capital Works in Progress pertaining cost of Unit-I exclusively during Financial Year and the Capital Cost of Unit-I as on of Rs. 1, Crores is net of Rs Crores of Infirm Power Receipt. Similarly, this certificate further certifies that the Capital Cost of Unit-II of Rs. 1, Crores as on is net of Rs Crores of Infirm Power Receipt. The Audir s certificate dated 11 th March, 2015 is attached as Annexure -1. CA Certificate dated 6 th February, 2014 certifying Capital Cost of Rs. 1, Crores as on COD of Unit-I ( ) is attached as Annexure-1.1. CA Certificate dated 6 th February, 2014 certifying Capital Cost of Rs. 1, Crores as on COD of Unit-I ( ) is attached as Annexure-1.1. (b) Petitioner s Response in the subject petition: Before replying point wise, the Petitioner would humbly like put forth the fact that during the petitioner has credited the Revenue of Rs 5.92 Crore earned from the sale of infirm power the capital work in progress pertaining Unit-I. Similarly, during the petitioner has credited the Revenue Rs 3.31 Crore earned from the sale of infirm power the capital work in progress pertaining Unit-II. In addition, the petitioner has debited the pre-commissioning fuel expenses of Rs Crore pertaining Unit I & II the Overheads and Pre Operative expenses which in turn was debited CWIP leading the net expenses of Rs Crore (Rs Crore Rs 9.23 Crore) of infirm power revenue. Furthermore the petitioner would like put forth that instead of M.P. Electricity Regulary Commission Page 22

23 crediting the revenue from sale of infirm power Overheads and Pre-Operative expenses the petitioner has credited the same CWIP. In response Sub Para (i) of Para 3 of the Order Sheet, the Petitioner has attached CA certificate dated 11 th March, 2015 which clearly certifies that, in respect of Unit-I, revenue of Rs.5.92 Crore earned from Sale of Infirm Power has been credited Capital Works in Progress pertaining exclusively cost of Unit-I exclusively during Financial Year and the Capital Cost of Unit-I as on of Rs.1, Crore is net of Rs.5.92 Crore of Infirm Power Receipt. Similarly, this certificate further certifies that the Capital Cost of Unit-II of Rs.1, Crore as on is net of Rs.3.31 Crore of Infirm Power Receipt. The Audir s certificate dated 11th March, 2015 is attached as Annexure-1. CA Certificate dated 6 th February, 2014 certifying Capital Cost of Rs.1, Crore as on COD of Unit-I ( ) is attached as Annexure-1.1 CA Certificate dated 6 th February, 2014 certifying Capital Cost of Rs.1, Crore as on COD of Unit-II ( ) is attached as Annexure-1.2 Issue: The set of accounting policies of the company and Break-up of CWIP as on various dates. (a) Petitioner s Response in Review Petition No. 05 of 2015 in Petition No. 40 of 2012: In response Para 4 & 5 of the Order Sheet, the Petitioner humbly submits the reconciliation of Capitalized Cost of Jaypee Bina Thermal Power Plant as on and between CA Certificates certifying Capital Cost & Balance Sheet, and is attached as Annexure-2 Balance Sheets as on & have been attached as Annexure-2.1 & Annexure 2.2 respectively along with schedules, notes and accounting policies. Certificates certifying Capital Cost up & are attached as Annexure-2.3 & Annexure-2.4 respectively. (b) Petitioner s Response in the subject petition: In response Para 3 (ii) & 3 (iii) of the Order Sheet, the Petitioner humbly submits the reconciliation of Capitalized Cost of Jaypee Bina Thermal Power Plant as on and between CA Certificates certifying Capital Cost & Balance Sheet, and is attached as Annexure-2. Balance Sheets as on & have been attached as Annexure-2.1 & Annexure-2.2 respectively along with schedules, notes and accounting policies. CA M.P. Electricity Regulary Commission Page 23