Petition for Final Truing-up of FY , FY & FY Provisional Truing up of FY and MYT Petition for Third MYT Control Period

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1 Petition for Final Truing-up of FY , FY & FY Provisional Truing up of FY and MYT Petition for Third MYT Control Period FY to FY (Case No. 33 of 2016) Brihan Mumbai Electric Supply & Transport Undertaking (of the Brihan Mumbai Mahanagar Palika) Volume-I of III April, 2016

2 Contents 1 Background Background Special Status of BEST Undertaking Deficit of Transport Division Parallel Licensing operation in BEST s area of Supply Truing up for FY Truing up details Energy Sales and Energy Balance Power Purchase expense for FY Operation and Maintenance Expenses Depreciation Capital Expenditure and Capitalisation Funding of Capitalization Interest on Long term loan Interest on Working Capital (IWC) Interest on consumer security deposit Contribution to Contingency Reserves Other expenses Provision for Bad and doubtful Debts Income Tax Return on Equity Return as Interest on Internal Funds Non-tariff Income Deficit of Transport Division Vigilance Drive Amount Incentive on performance of Wire and Supply Availability Incentive on reduction of Distribution loss Sharing of gain or loss for O&M expenses Sharing of gain or loss for Interest on Working Capital True-up of Aggregate Revenue Requirement of FY Revenue Gap of FY Truing Up for FY Truing Up Details MYT Petition BEST Undertaking Page 2

3 4.2 Sales and Energy Balance Power Purchase expense for FY Operation and Maintenance Expenses Depreciation Capital Expenditure and Capitalisation Funding of Capitalization Interest Expenses on Long Term Loan for FY Interest on Working Capital (IWC) Interest on consumer security deposit Contribution to Contingency Reserves Other expenses Provision for Bad and doubtful Debts Income Tax Return on Equity Return as Interest on Internal Funds Non-tariff Income Deficit of Transport Division Vigilance Drive Amount Incentive on performance of Wire and Supply Availability Incentive on reduction of Distribution loss Sharing of gain or loss for O&M expenses Sharing of gain or loss for Interest on Working Capital True-up of Aggregate Revenue Requirement of FY Revenue Gap of FY Truing up for FY Background Energy Sales Distribution Losses and Energy Balance Power Purchase expense for FY O&M expenses Capital Expenditure Depreciation Interest on Long Term Loans Interest on Working Capital Loans MYT Petition BEST Undertaking Page 3

4 5.10 Interest on Consumer Security Deposit Contribution to Contingency Reserves Other Expenses Provision for Bad and doubtful Debts Income Tax Return on Equity Return as Interest on Internal Funds Non-Tariff Income Deficit of Transport Division Vigilance Drive Amount Incentive for Wires and Supply Availability Incentive for reduction in Distribution Loss Sharing of gain or loss for Interest on Working Capital Past Revenue Gap Revenue from Existing Tariff True-up of Aggregate Revenue Requirement of FY Truing up for FY Background Energy Sales Distribution Losses and Energy Balance Power Purchase expense for FY O&M expenses Capital Expenditure Depreciation Interest on Long Term Loans Interest on Working Capital Loans Interest on Consumer Security Deposit Contribution to Contingency Reserves Other Expenses Provision for Bad and doubtful Debts Income Tax Return on Equity Return as Interest on Internal Funds Non-Tariff Income MYT Petition BEST Undertaking Page 4

5 6.18 Deficit of Transport Division Past Revenue Gap Impact of ATE Judgment in Appeal No. 265 of Impact of Review of MYT Order (Case No. 166 of 2013) Revenue from Existing Tariff Provisional True-up of Aggregate Revenue Requirement of FY MYT Petition for FY to FY Background Demand Assessment and Demand Projection Demand Projections in MUs Supply Projections Aggregate Revenue Requirement for FY to FY Energy Sales Energy Balance Power Purchase Expenses Operation and Maintenance Expenses Impact of Wage Revision Capital Expenditure and Capitalization Depreciation Interest on Long term loan Interest on Working Capital Loans Interest on Consumer Security Deposit Contribution to Contingency Reserves Other expenses Provision for Bad and doubtful debts Income Tax Return on equity Return as Interest on Internal funds Non Tariff Income Deficit of Transport Division Past Recoveries of Revenue Gaps from FY to FY Summary of Aggregate Revenue Requirement for FY to FY Tariff Philosophy Estimated Cumulative Revenue Gap at the end of FY MYT Petition BEST Undertaking Page 5

6 9 Schedule of Charges Voltage wise cost of Supply Financial Prudence Compliance of directives Tariff applicability issues Prayers MYT Petition BEST Undertaking Page 6

7 Table 2: Impact of Increase in Sales of TPC-D in South Mumbai on account of Network Addition as submitted by TPC-D Table 3: Impact of energy sales by Parallel Licensee for FY to FY (MUs) Table 4: Tariff Category-wise energy consumption for FY (MU) Table 5: Energy Balance for FY Table 6: Summary of Power Purchase Expenses from TPC-G for FY Table 7: Summary of Power Purchase Expenses for FY Table 8: Prompt payment discount availed from TPC G (Rs. Crore) Table 9: Operation and Maintenance Expenses for FY (Rs. Crore) Table 10: Head wise detail of Employee Expenses (Rs. Crore) Table 11: Employee expenses excluding impact of wage agreement for FY (Rs. Crore) Table 12: Head wise detail of A&G Expenses (Rs. Crore) Table 13: Break-up of other costs for FY (Rs. Crore) Table 14: Allocation of General Administration between Electricity Supply and Transport Table 15: Details of allocation of General Administration to Supply Division (Rs. Crore) Table 16: Head wise detail of R&M Expenses (Rs. Crore) Table 17: Depreciation for FY (Rs. Crore) Table 18: Capital Expenditure and Capitalization details for FY (Rs. Crore) Table 19: Capitalisation for FY (Rs. Crore) Table 20: Details of funding of Capitalisation for FY (Rs. Crore) Table 21: Details of Actual Interest Expenses for FY (Rs. Crore) Table 22: Details of Normative Interest on loan for FY (Rs. Crore) Table 23: Interest on Working Capital details (Rs. Crore) Table 24: Actual Interest on Working Capital for FY (Rs. Crore) Table 25: Interest on Consumer Deposit for FY (Rs. Crore) Table 26: Details of Contingency Reserve for FY (Rs. Crore) Table 27: Contribution to Contingency Reserve for FY (Rs. Crore) Table 28: Other Expenses Details for FY (Rs. Crore) Table 29: Bad Debts written off for FY Table 30: Return on Equity for FY (Rs. Crore) Table 31: Return on Internal Fund Detail (Rs. Crore) Table 32: Details of the Non-Tariff income for FY (Rs. Crore) Table 33: Details of the Transport Division deficit (Rs. Crore) Table 34: Wire availability for FY Table 35: Supply availability for FY Table 36: Incentive for Wire and Supply availability for FY Table 37: Details of the Incentive on reduction of Distribution loss Table 38: Gain or loss due to variation in O&M Expenses for FY (Rs. Crore) Table 39: Gain or loss due to variation in Interest on Working Capital for FY (Rs. Crore) Table 40: True-up of Aggregate Revenue Requirement for FY (Rs. Crore) Table 41: Revenue Gap for FY (Rs. Crore) Table 42: Tariff Category-wise energy sales for FY (MU) Table 43: Energy Balance for FY Table 44: Summary of Power Purchase Expenses from TPC-G for FY Table 45: Summary of Power Purchase Expenses for FY (Rs. Crore) MYT Petition BEST Undertaking Page 7

8 Table 46: Prompt payment discount availed from TPC G (Rs. Crore) Table 47: Operation and Maintenance Expenses for FY (Rs. Crore) Table 48: Head wise detail of Employee Expenses (Rs. Crore) Table 49: Employee expenses excluding impact of wage agreement for FY (Rs. Crore) Table 50: Head wise detail of A&G Expenses (Rs. Crore) Table 51: Break-up of other costs (Rs. Crore) Table 52: Allocation of General Administration between Electricity Supply and Transport Table 53: Detail of allocation of General Administration to Supply Division (Rs. Crore) Table 54: Head wise detail of R&M Expenses (Rs. Crore) Table 55: Depreciation for FY (Rs. Crore) Table 56: Capitalization details for FY (Rs. Crore) Table 57: Capitalisation for FY (Rs. Crore) Table 58: Details of funding of Capitalisation for FY (Rs. Crore) Table 59: Details of Actual Interest Expenses for FY (Rs. Crore) Table 60: Details of Normative Interest on loan for FY (Rs. Crore) Table 61: Interest on Working Capital details (Rs. Crore) Table 62: Actual Interest on Working Capital for FY (Rs. Crore) Table 63: Interest on Consumer Deposit for FY (Rs. Crore) Table 64: Details of Contingency Reserve for FY (Rs. Crore) Table 65: Contribution to Contingency Reserve for FY (Rs. Crore) Table 66: Other Expenses Details for FY (Rs. Crore) Table 67: Bad Debts written off for FY Table 68: Return on Equity for FY (Rs. Crore) Table 69: Return as Interest on Internal Fund (Rs. Crore) Table 70: Details of the Non-Tariff income for FY (Rs. Crore) Table 71: Actual Transport Division deficit FY (Rs. Crore) Table 72: Wire availability for FY Table 73: Supply availability for FY Table 74: Incentive for Wire and Supply availability for FY Table 75: Details of the Incentive on reduction of Distribution loss for FY Table 76: Gain or loss due to variation in O&M Expenses for FY (Rs. Crore) Table 77: Gain or loss due to variation in Interest on Working Capital for FY (Rs. Crore) Table 78: True-up of Aggregate Revenue Requirement for FY (Rs. Crore) Table 79: Revenue Gaps approved in MYT Order (Rs. Crore) Table 80: Revised Total Revenue Gaps at the end of FY (Rs. Crore) Table 81: Revised Yearly Revenue Gaps in FY to FY (Rs. Crore) Table 82: Revenue Gap for FY (Rs. Crore) Table 83: Category wise energy consumption for FY (MUs) Table 84: Energy Balance for FY Table 85: Actual Power Purchase from TPC-G for FY Table 86: Unit-6 operation in different mode for FY Table 87: Actual Power Purchase for FY Table 88: Details of Prompt Payment Discount Table 89: O&M Expenses for FY Table 90: Employee Expenses for FY MYT Petition BEST Undertaking Page 8

9 Table 91: Administrative & General Expenses for FY Table 92: Allocation Matrix for General Administration Expense Between Transport and Supply Business Table 93: Allocation of General Administration Expense Between Transport and Supply Business Table 94: Repair and Maintenance Expenses for FY Table 95: Details of Capital expenditure and capitalization for FY Table 96: Details of Year on Year Capital expenditure and capitalization Table 97: Table showing Funding plan for Capitalization during FY (in Rs. Crores) Table 98: Depreciation Expense for FY Table 99: Actual Interest Expense for FY Table 100: Normative Interest on loan for FY Table 101:Actual Interest on Working Capital for FY (Rs. Crores) Table 102: Normative Interest on Working Capital for FY (Rs. Crores) Table 103: Interest on Consumer Deposit for FY Table 104: Contribution to contingency reserve for FY Table 105: Investment through contingency reserve for FY Table 106: Other Expenses for FY Table 107: Provision for Bad and doubtful Debts for FY Table 108: Return on Equity for FY Table 109: Return on Interest on Internal Funds for FY Table 110: Non-Tariff Income for FY Table 111: Deficit of Transport Division for FY Table 112: Supply availability for FY Table 113: Incentive for Wires and Supply Availability Table 114: Incentive for Distribution Loss Reduction Table 115: Sharing of gain or loss for Interest on Working Capital for FY Table 116: Past Revenue Gap Table 117: True-up of Aggregate Revenue Requirement of FY Table 118: Category wise energy consumption for FY (MUs) Table 119: Energy Balance for FY Table 120: Unit wise Power Purchase for FY for TPC-G till January Table 121: Source wise Power Purchase for FY Table 122: Estimated Power Purchase for FY Table 123: Details of Prompt Payment Discount Table 124: O&M Expenses for FY Table 125: Employee Expenses for FY Table 126: Administrative & General Expenses for FY Table 127: Repair and Maintenance Expenses for FY Table 128: Details of Capital expenditure and capitalization for FY Table 129: Table showing Funding plan for Capitalization during FY (in Rs. Crores) Table 130: Depreciation Expense for FY Table 131: Provisional Interest Expense for FY Table 132: Normative Interest on loan for FY Table 133: Interest on Working Capital for FY as per actual (Rs. Crores) Table 134: Normative Interest on Working Capital for FY (Rs. Crores) MYT Petition BEST Undertaking Page 9

10 Table 135: Interest on Consumer Deposit for FY Table 136: Contribution to contingency reserve for FY Table 137: Investment from contingency reserve for FY Table 138: Other Expenses for FY Table 139: Provision for Bad and doubtful Debts for FY Table 140: Return on Equity for FY Table 141: Return on Interest on Internal Funds for FY Table 142: Non-Tariff Income for FY Table 143: Breakup of Non-Tariff Income for FY Table 144: Deficit of Transport Division for FY Table 145: Past Revenue Gap Table 146: Impact of Hon ble ATE Judgment dated 14 November, 2013 (Rs. Crore) Table 147: Impact of review of MYT Order (Rs. Crore) Table 148: Provisional True-up of Aggregate Revenue Requirement of FY Table 149: Peak Demand Projections of Business Plan(Except new development) Table 150: Peak Demand Projections of Business Plan Table 151: Peak Demand Projections vs. Actual for 2 nd MYT Period Table 152: Actual Peak Demand Trend Table 153: Actual Monthly Maximum Demand at T and D interface in MW Table 154: Actual Monthly Minimum Demand at T and D interface in MW Table 155: Peak Load/Demand Projections Table 156: Base Load Projections Table 157: Projected Category wise energy sales in (MUs) Table 158: Demand Projections in MUs Table 159: Available PPAs Table 160: Availability Projections Table 161: Transfer Capability (F.Y 2014) of Mumbai and MSETCL interconnection points Table 162: Category wise energy sales from FY to FY (MUs) and CAGR Table 163: Category wise energy sales projections for FY to FY (MUs) considering CAGR Table 164: Impact of energy sales by Parallel Licensee for FY to FY (MUs) Table 165: Impact of DSM Measures for FY to FY (MUs) Table 166: Projected Energy Sales for FY to FY (MUs) Table 167: Projected Category wise Energy Sales for FY to FY (MUs) Table 168: Comparison of Approved and actual distribution loss over last five years Table 169: Energy Balance for FY to FY Table 170: Generation from TPC-G for FY to FY (MUs) Table 171: Estimated Variable Cost of TPC-G for FY to FY Table 172: Estimated Fixed and Total Cost of TPC-G for FY to FY Table 173: RPO % for FY to FY (as per draft RE RPO Regulations) Table 174: RPO for FY to FY Table 175: Source Wise Renewable Power Purchase in MUs for FY to FY Table 176: Source Wise Renewable Power Purchase Cost for FY to FY Table 177: Power Purchase from External Sources for FY to FY MYT Petition BEST Undertaking Page 10

11 Table 178: Transmission Charges, MSLDC charges and Standby charges for FY to FY Table 179: Summary of Power Purchase for FY to FY Table 180: Summary of Power Rate for FY to FY Table 181: O&M Escalation Normative % Table 182: O&M Escalation Projected % Table 183: Summary of O&M Expenses for FY to FY Table 184: Impact of Wage Revision for FY to FY Table 185: Capital Expenditure and Capitalization for FY to FY Table 186: Depreciation for FY to FY Table 187: Normative Interest on loan for FY to FY Table 188: Normative Interest on Working Capital for FY to FY Table 189: Interest on Consumer Security Deposit for FY to FY Table 190: Contribution to Contingency Reserves for FY to FY Table 191: Other Expenses for FY to FY Table 192: Provision for Bad and doubtful for FY to FY Table 193: Return on Equity for FY to FY Table 194: Return on Internal Funds for FY to FY Table 195: Non Tariff Income for FY to FY Table 196: Deficit of Transport Division for FY to FY Table 197: Past Recoveries of Revenue Gaps from FY to FY Table 198: Average Impact of Past Recoveries of Revenue Gaps from FY to FY Table 199: Average Impact of Past Recoveries of Revenue Gaps from FY to FY Cumulative Table 201: Summary of Aggregate Revenue Requirement for FY to FY for Distribution Wire Business (excluding past recoveries) Table 202: Summary of Aggregate Revenue Requirement for FY to FY for Retail Supply Business (excluding past recoveries) Table 203: cumulative revenue gap at the end of FY Table 204: Yearly Revenue Gap for MYT Control Period Table 205: ARR Recovery at Proposed Tariff for Transport and Electricity Business Table 206: Proposed Tariff Increase for Transport and Electricity Business Table 207: Proposed Cross Subsidy Percentage Table 208: Power Purchase Cost for FY Table 209: Power Purchase Cost for FY Table 210:Category-wise Power Purchase Cost for FY Table 211: Category-wise Power Purchase cost for FY Table 212: Category-wise Power Purchase cost for FY Table 213: Category-wise Power Purchase cost for FY Table 214: Category-wise Power Purchase cost for FY Table 215: Category-wise Power Purchase cost for FY Table 216: Apportion of BEST's GFA into Voltage-level GFA with respect to usage of assets Table 217: Voltage wise cost of supply for FY to FY Table 218: Voltage wise cost of supply for FY to FY MYT Petition BEST Undertaking Page 11

12 Table 219: Voltage wise cost of supply for third MYT control period from FY to FY Table 220: Arrears receivables from consumers (Rs. in Crores ) List of Abbreviations A&G Administrative & General ABR Average Billing Rate ACoS Average Cost of Supply APDRP Accelerated Power Development and Reforms Program ARR Aggregate Revenue Requirement APR Annual Performance Review ATC Available Transmission Capacity ATE Appellate Tribunal for Electricity BEST Brihan Mumbai Electric Supply and Transport Undertaking CAGR Compounded Annual Growth Rate COS Cost of Supply CWIP Capital Works in Progress CPI Consumer Price Index DSM Demand Side Management DPDC District Planning & Development Council DPR Detailed Project Report EA 2003 The Electricity Act, 2003 ECS Electronic Clearing System ED Electricity Duty EPA Energy Purchase Agreement FY Financial Year FBSM Final Balancing Settlement Mechanism FAC Fuel Adjustment Cost GFA Gross Fixed Assets H1 First half of the financial year H2 Second half of the financial year HT High Tension IT Information Technology IDC Interest During Construction IWC Interest on Working Capital kv Kilovolt kwh Kilowatt Hour kw Kilowatt kva Kilo Volt Ampere LT Low Tension LoI Letter of Intent MCGM Municipal Corporation of Greater Mumbai MERC Maharashtra Electricity Regulatory Commission MTR Mid Term Review MYT Multi Year Tariff MD Maximum Demand MMC Act Mumbai Municipal Corporation Act MMRDA Mumbai Metropolitan Region Development Authority MYT Petition BEST Undertaking Page 12

13 MoU MSLDC M Tax MU NEF NTI O&M PF PPA PRC RE REC REC Ltd. RLNG R&M T&D TDLR TOD TPC- G TVS Unit VRS YOY WPI Memorandum of Understanding Maharashtra State Load Despatch Centre Maharashtra Tax Million Units National Electricity Fund Non-Tariff Income Operation and Maintenance Power Factor Power Purchase Agreement Pay Revision Committee Revised Estimates Renewable Energy Certificates Rural Electrification Corporation Ltd. Re-gasified Liquefied Natural Gas Repair and Maintenance Transmission and Distribution Transport Division Loss Recovery Time of Day Tata Power Company limited (Generation) Technical Validation Session One kilo-watt-hour of energy Voluntary Retirement Scheme Year on Year Wholesale Price Index Table of Annexures (Volume III of III) Annexure No. Particulars Page No. From To Annexure I Audited Statement of Accounts for FY Annexure II Audited Proforma Accounts for FY for Electric Supply Division Annexure III Audited Proforma Accounts for FY for Transport Division Annexure IV Audited Statement of Accounts for FY Annexure V Audited Proforma Accounts for FY for Electric Supply Division Annexure VI Audited Proforma Accounts for FY for Transport Division Annexure VII Audited Statement of Accounts for FY Annexure VIII Audited Proforma Accounts for FY for Electric Supply Division Annexure IX Audited Proforma Accounts for FY for Transport Division Annexure X Details of Assets and Depreciation for FY , FY & FY Annexure XI Statement of Depreciation of Electric Supply and General Administration for FY Annexure - XII Statement of Depreciation of Electric Supply and General Administration for FY Annexure - XIII Statement of Depreciation of Electric Supply and General Administration for FY MYT Petition BEST Undertaking Page 13

14 Annexure No. Particulars Page No. From To Annexure - XIV Investment made against Contingency Reserves for FY Annexure - XV Investment made against Contingency Reserves for FY Annexure - XVI Investment made against Contingency Reserves for FY Annexure - XVII Reconciliation of FY with books of Account Annexure - XVIII Reconciliation of FY FY with books of Account Annexure - XIX Reconciliation of FY FY with books of Account Annexure - XX Details of IDC for FY Annexure - XXI Details of IDC for FY Annexure - XXII Details of IDC for FY Annexure XXIII Reconciliation of GFA Annexure - XXIV Voltage wise assets for FY Annexure - XXV Voltage wise assets for FY Annexure - XXVI Voltage wise assets for FY Annexure XXVII Progress of DSM Programs Annexure - XXVIII Hon ble Supreme Court Order dated 8 th December, 2014 in Civil Appeal No of 2014 Annexure XXIX Minutes of Meeting held on 24 March, 2014 regarding the alarming power demand and supply scenario for Mumbai System in Summer (2014) Annexure - XXX Actual Expenditure incurred towards fire incidence which took place at Backbay 110 kv Receiving Station Annexure - XXXI Estimation of Transport Deficit for the 3 rd MYT Control Period FY to Annexure - XXXII BEST's Transport deficit (Approved, Revised Actual, Recovery) Annexure - XXXIII Steps involved in various processes related to Schedule of Charges Annexure - XXXIV Working of charges for Schedule of Charges based on past trend Annexure - XXXV Working for calculation of Security Deposit Annexure - XXXVI The proposed charges for testing of meters in the Undertaking s laboratory MYT Petition BEST Undertaking Page 14

15 1 Background 1.1 Background Maharashtra Electricity Regulatory Commission has notified the MERC (Multi Year Tariff) Regulation, 2011 (herein after referred as MYT Regulations, 2011). These Regulations are applicable for second Control period from FY to FY Based on the MYT Regulations,2011 BEST submitted its Multi Year Tariff Business Plan Petition for the second Control Period on, 25 August The Hon ble Commission issued the Business Plan Order on 15 January, 2013 in Case No. 124 of BEST filed MYT Petition for Second MYT Control Period on 14 February, The Hon ble Commission issued MYT tariff Order for BEST Undertaking for Second Control Period from FY to FY on 28 August, Further, BEST had filed Petition for review of MYT Order dated 28 August, The Hon ble Commission vide its Order dated 9 January, 2014 in Case No. 166 of 2013 allowed additional amount of Rs Crore and directed BEST to include the same in the Mid Term review (MTR) Petition BEST submitted its MTR Petition on 12 February 2015 for Mid Term Performance Review for second MYT Control Period along with the audited accounts for FY and FY and the details in the stipulated formats The Hon ble Commission held Technical Validation Session on BEST s Mid-term Performance Review Petition (Case No. 26 of 2015) on 5 March, 2015 and 4 August, BEST had replied to the 4 sets of data gap queries and MoM of T. V. S. received from Hon ble Commission BEST submitted the Revised Mid Term Review Petition on July 3, 2015, in accordance with the aforementioned provisions of the MERC (MYT) Regulations, 2011 and based on various directives issued by Hon ble Commission In the meantime, Hon ble Commission notified the MERC (Multi Year Tariff) Regulation, 2015 (herein after referred as MYT Regulations, 2015 ) on 8th December 2015, and directed Licensee to file the petition before 15 January, These Regulations are applicable for Third MYT Control period from FY to FY BEST submits that as per 5.1 of MERC (MYT) Regulations, 2015: 5.1 a) Multi-Year Tariff Petition shall be filed by January 15, 2016, comprising i. Truing-up for FY to be carried out under the Maharashtra Electricity Regulatory Commission (Multi Year Tariff) Regulations, 2011: Provided that the Commission may, if it considers appropriate, carry out the Truing-up for years prior to FY under the Maharashtra Electricity MYT Petition BEST Undertaking Page 15

16 Regulatory Commission (Multi Year Tariff) Regulations, 2011, along with the Truing-up for FY , in case such Truing-up is yet to be completed; Considering that two parallel petitions will involve similar process of hearings and technical verification, BEST vide its letter dated 23 December, 2015, requested Hon ble Commission to either process Truing up for FY and FY under Mid-term Review Petition (Case No. 26 of 2015) with the BEST s MYT Petition for 3rd MYT Control Period Or allow BEST to withdraw its Petition in Case No. 26 of 2015 and file Truing up for FY and FY along with the MYT Petition for 3rd MYT Control Period Hon ble Commission vide its letter dated accorded its approval for allowing BEST to withdraw its Petition filed in Case No. 26 of 2015 and file true up for FY and FY as part of MYT Petition to be filed under Regulation 5.1(a) of MERC (Multi Year Tariff) Regulations, Further considering the complexities of the data required as per new MYT Regulations, 2015 and large volume of work involved, BEST through its letter dated 11 January, 2016, requested the Hon ble Commission to extend the time line for filing of MYT Petition for 3rd MYT Control Period by one month, thereby allow BEST to file MYT Petition by 15th February, Hon ble Commission vide its Order dated 15 January, 2016, allowed BEST to file MYT Petition by 15th February BEST is filling final Truing up for FY to FY and Provisional Truing up for FY under MYT Regulations, BEST is filling MYT Petition for approval of ARR and determination of Tariff for FY to FY under MYT Regulations, Special Status of BEST Undertaking The erstwhile Bombay Electric Supply & Tramways Company (BEST) started supplying electricity to the Mumbai city in In 1947, the Company was municipalised and came to be known as Bombay Electric Supply & Transport Undertaking ( BEST Undertaking or BEST ). BEST is an Undertaking of Brihanmumbai Mahanagarpalika and is in the business of providing electricity in the old city limits and public transport (Bus transport) covering the entire city and suburbs and some areas of the Mumbai Metropolitan region BEST is recognised as a Local Authority under the Electricity Act 2003 (herein after referred as the Act ). Historically there was a common administration set up for both the business activities, i.e., the Electric Supply division and the Transport division. Prior to enactment of the Act, the revenue of electricity utilities was approved under provisions of Schedule VI of the Electricity Supply Act 1948, however, the Local Authority was exempted from applicability of provisions of Schedule VI of the Electric Supply Act Thus, BEST being a Local Authority, and with the objective of providing better and essential services of Electricity supply and Transport to the citizens of Mumbai as its social obligation, the surplus generated by the Electric Supply Division, was utilised for subsidising the Transport business of the Undertaking. MYT Petition BEST Undertaking Page 16

17 1.3 Deficit of Transport Division Exemptions granted to a Local Authority in Electricity Act 2003: BEST submits that the EA, 2003 grants certain exemptions to Local Authorities engaged in the business of electricity distribution under Section 51, which is reproduced below: Section 51. (Other businesses of distribution licensees): A distribution licensee may, with prior intimation to the Appropriate Commission, engage in any other business for optimum utilisation of its assets: Provided that a proportion of the revenues derived from such business shall, as may be specified by the concerned State Commission, be utilised for reducing its charges for wheeling : Provided further that the distribution licensee shall maintain separate accounts for each such business undertaking to ensure that distribution business neither subsidises in any way such business undertaking nor encumbers its distribution assets in any way to support such business. Provided also that nothing contained in this section shall apply to a local authority engaged, before the commencement of this Act, in the business of distribution of electricity. (emphasis added) Disallowance of Transport deficit, Hon ble Commission s Order in Case No.4 of 2004 and Judgment of Hon ble APTEL in Appeal No.61 of 2006: Being a local authority, BEST has been specifically excluded from the purview of the Section 51 of the Act. Accordingly, BEST in the ARR of FY and FY included the deficit of transport division in the tariff Petition. Hon ble Commission disallowed such inclusion in its Order dated 9 March, 2006 in Case No. 4 of Aggrieved by this Order, BEST filed an Appeal No. 61 of 2006 before Hon ble ATE. Hon ble ATE held that though BEST may continue its Transport Business, it will not enable BEST or authorize the electricity business to subsidise the Transport Business, nor support the said Transport Business or any other business carried by BEST. The Hon'ble ATE in its Judgment dated 18 August, 2006 in Para 56 & 57, ruled as under: Para 56. In the considered view of this Tribunal, the appellant may continue to carry on the transport business in addition to the distribution of electricity as a local authority engaged in such businesses. Yet that will not enable the appellant or authorize electricity business to subsidise the transport business nor it could support the said transport business or any other business carried by the appellant. If the contention advanced on behalf of the appellant is to be sustained, it would result in excluding the entire distribution of the Appellant Corporation from the provisions of The Electricity act, 2003, which is not the intendment of the Legislature. The interpretation advanced on behalf of the appellant cannot be sustained. Para 57. In the light of the above discussions and in the light of the Pronouncements referred, we hold that the construction placed on Section 51 of The Electricity Act by MERC is MYT Petition BEST Undertaking Page 17

18 sustainable. Consequently, points 3, 4 and 5 are answered against the appellant and in favour of the first respondent (emphasis added) Hon ble Supreme Court s Order in Appeal No. 848 of 2007, setting aside Judgment of Hon ble ATE in Appeal No.61 of 2006: BEST filed an Appeal against the impugned Judgment of the Hon'ble ATE dated August 18, 2006 before the Hon ble Supreme Court in Civil Appeal No. 848 of The Hon ble Supreme Court, in its Order dated February 8, 2011, ruled as under: Undisputedly the appellant was engaged inter alia in the business of distribution of electricity prior to the commencement of the Act. In our opinion it would not be correct to hold that despite the third proviso to Section 51 of the Act, the distribution licensee must not only maintain separate accounts for each of its businesses but must also ensure that the electricity distribution business should not subsidize the other business undertakings. Hence the view of the Tribunal in paragraphs 56 and 57 of its order is not correct. In our opinion in view of the third proviso to Section 51 of the Act a certain limited electricity distribution licensees are exempt from the operation of the Section insofar as the requirement of prior intimation to the commission or the obligations of the first and second proviso are concerned. The appellant is admittedly doing business of transport besides electricity distribution for several decades. On the facts of the case, we are of the opinion that the third proviso to Section 51 of the Act applies and hence the impugned judgment and order cannot be sustained. The appeal is allowed. The impugned judgment and order is set aside. (emphasis added) The Hon ble APTEL in its Judgment in Appeal No.61 of 2006 dated 18 August, 2006 in para 57 had concluded that points 3, 4 and 5, which were regarding fixation of BEST s Tariff by including the Transport business and whether the business of transport could be subsidised from the revenues of electricity supply undertaken by BEST, are answered against BEST. The points 3, 4 and 5 framed in the Hon ble APTEL s said Judgment are reproduced below: III. Whether the appellant, a distribution licensee, could seek for fixation of its Annual Revenue Requirement including its transport business carried on by it and seek for fixation of tariff so as to subsidise its transport business in any way from its distribution business? IV. Whether the approval of the Annual Revenue Requirement of the appellant for its electricity distribution business and determination of tariff by excluding the transport service run by the appellant by MERC is illegal and liable to be interfered? V. Whether the appellant s claim that Bus transport service operated by it should be included in the Electricity Distribution Annual Revenue Requirement? Whether the business of transport could be subsidised from the revenues of electricity supply undertaken by the appellant? MYT Petition BEST Undertaking Page 18

19 1.3.5 The Hon ble Supreme Court in its Order dated 8 February, 2011 in Civil Appeal No 848 of 2007 while setting aside the impugned Judgment of Hon ble ATE had specifically mentioned that the views of Hon ble APTEL in Para 56 & 57 are not correct. This clearly indicates that BEST, being a Local Authority has been mandated to subsidise its Transport business and BEST can seek for fixation of its Annual Revenue Requirement and tariff including deficit of its transport business. Allowance of Net Transport deficit subsequent to Judgment of Hon ble Supreme Court in Appeal No.848 of 2007: The matter has achieved finality in the Supreme Court Judgment in Civil Appeal No. 848 of 2007, which holds good even today. Further, In view of Hon ble Supreme Court Judgment dated 8 February, 2011 in Civil Appeal No. 848 of 2007, Hon ble Commission in Order dated 16 March, 2012 in Case No. 125 of 2011 had ascertained the methodology and approved the inclusion of deficit of transport division for FY and FY in ARR. Subsequently, Hon ble Commission allowed recovery of deficit of transport division in the tariff Order of FY dated 16 May, 2012 in Case No. 171 of 2011 through separate Transport Division Loss Recovery (TDLR) charge. Further, Hon ble Commission vide its Order dated 26 December, 2012 in Case No. 80 of 2012 approved the inclusion of deficit of transport division for FY to FY in ARR. Subsequently, Hon ble Commission considered the recovery of approved deficit of transport division in MYT Order in Case No. 26 of 2012 under Order dated 28 th August, It can be noted that, the subject matter has been decided by Hon ble Supreme Court and consequential Order have already been issued by Hon ble Commission in the matter. These orders remained unchallenged except Order in Case No. 80 of 2012, as such, at present Supreme Court Order in Civil Appeal No. 848 of 2007 is binding and should be adhered to till any further alternate order, if any, in pending Civil Appeal No of 2014, which has arisen out of challenge to Hon ble APTEL s Judgment in Appeal No. 155 of 2013, filed against Hon ble Commission s Order in Case No. 80 of Appeal against Hon ble Commission s Orders in Case Nos.171 of 2011 & 80 of 2012: Orders of the Hon ble Commission in Case No.171 of 2011 and Case No.80 of 2012 were challenged by M/s Indian Hotels & others, before Hon ble ATE. Hon ble APTEL dismissed the appeal against Order in Case no. 171 of 2011 on account of delay Hon ble ATE in its Judgment dated 31 October, 2014 in Appeal No. 155 of 2013 set aside the Hon ble Commission Order in Case No. 80 of 2012 and directed Hon ble Commission to issue consequential Order. Appeal filed by BEST before Hon ble Supreme Court against impugned Judgment of Hon ble ATE in Appeal No. 155 of 2013: Aggrieved by Judgment of Hon ble ATE in Appeal No.155 of 2013, BEST has filed an appeal before Hon ble Supreme Court in Civil Appeal No of Hon ble Supreme Court in its Interim Order dated 8 December, 2014 ruled as under: MYT Petition BEST Undertaking Page 19

20 The dispute is regarding the fixation of tariff and whether the appellant is entitled for the consideration of the revenue implications of the another wing of the appellant company which is carrying on the business of transport for the purpose of fixation of tariff of the electricity supplied by the appellant company to the consumers. The impugned order is substance recorded the conclusion that the appellant is entitled for consideration of the revenue of the other division of the company for the purpose of the determination of tariff. In view of the above circumstances, appeal is admitted... In the circumstances, we do not see any reason to stay the operation of the impugned judgment. We direct that the respondent will continue to pay the electricity bills demanded by the appellant company during the pendency of the appeal. State Commission shall proceed with the determination of tariff in light of the impugned judgment however such determination shall not be given effect to until further orders of this Court. BEST s understanding of interim Order of Hon ble Supreme Court in Appeal No of 2014: Hon ble Supreme Court has not stayed the operation of the Hon ble ATE Judgment dated 31 October, 2014 in Appeal No. 155 of 2013 so as to enable the further Regulatory process by Hon ble Commission Hon ble Supreme Court directed the Respondent i.e., Indian Hotels and others to continue to pay the electricity bill demanded by BEST during the pendency of appeal. Transport Division Loss Recovery (TDLR) Charge is one of the components of the electricity bill Hon ble Supreme Court has directed Hon ble Commission to initiate regulatory process for tariff determination considering the Judgment of Hon ble ATE. The Hon ble ATE has set aside only Order of the Hon ble Commission in Case No. 80 of 2012 which was pertaining to the allowance of transport deficit of Rs Crore only for the period from FY to FY Further, Hon ble Supreme Court has directed that such determination of tariff shall not be implemented until further Orders of Hon ble Supreme Court. Hence, the impact of setting aside of said Transport deficit of Rs Crore can be considered only after further Orders of the Hon ble Supreme Court BEST submits that perusal of the Hon ble Supreme Court Interim Order in Civil Appeal No of 2014, mandates that BEST can continue to recover its Net transport deficit (i.e., TDLR charges) as per the philosophy adopted by Hon ble Commission in various Orders while approving the Transport deficit. MYT Petition BEST Undertaking Page 20

21 BEST s Efforts for exploring avenues to ease of burden of transport deficit from electricity Consumers: BEST further submits that every avenue is being explored and every attempt is being made by BEST to ensure self-sufficiency of its Transport Business. In this regard, BEST has introduced various measures to improve the efficiency of operations and maintenance of its Transport Business. BEST has increased the bus fares of its Transport Business to generate additional revenue. BEST is also through the mode of advertising on, as well as licensing /renting out of the assets of, its Transport Business duly seeking to generate additional revenue for its Transport Business. Furthermore, the statutory BEST Committee by Resolution No. 38 dated 15 May, 2015, has proposed and resolved to introduce a levy and recovery of Transport Cess, on property tax levied under the Mumbai Municipal Corporation Act, The said matter has been forwarded to MCGM and thereafter will be forwarded to the Government of Maharashtra for making consequential amendment in the Mumbai Municipal Corporation Act, 1888, for such levy and recovery of Transport Cess The matter of such levy and recovery of Transport Cess, is now pending before MCGM for further and necessary action. It is humbly submitted by BEST that all these acts and deeds by or on behalf of BEST have been undertaken to progressively reduce and subsequently to do away with the burden of TDLR charges from the electricity consumers of BEST BEST submits that it is taking all out efforts to get support for Transport Business from Municipal Corporation of Greater Mumbai as well as State Government of Maharashtra. However, for the present petition BEST has considered the Transport Deficit approved by the Commission (net of actual RoE and RoIF) only. Treatment given to Transport deficit in present petition: The issue of inclusion of Transport deficit in the ARR of Supply Business of BEST was decided by Hon ble Supreme Court in its Order dated 8 February 2011 in Civil Appeal No.848 of Hon ble Supreme Court has not overruled its Order dated 8 February, 2011 in Civil Appeal No. 848 of 2007, which entitled BEST to subsidise its transport business. The said Order of Hon ble Supreme Court in Appeal No.848 of 2007 still holds good Also, the Hon ble Commission considered the recovery of approved deficit of transport division in MYT Order in Case No. 26 of 2012 under Order dated 28th August, BEST submits that till the end of FY the total Transport Deficit position is as in the table below. Table 1: Status of Transport Deficit Total Transport Deficit Approved By Commission without any Carrying cost in Rs. Crores Total Transport Deficit Recovered Till FY in Rs. Crores (provisional) Total Transport Deficit Remaining to be Recovered as per Approved Value without any Carrying cost in Rs. Crores Total Transport Deficit Remaining to be Recovered as per Approved Value with Carrying cost in Rs. Crores Total Transport Deficit Remaining to be Recovered as per Actual Transport Deficit with Carrying cost in Rs. Crores MYT Petition BEST Undertaking Page 21

22 As can be seen in the above table, even without considering the actual Transport Deficit and carrying cost an amount equivalent to Rs Crores is still pending to be recovered through TDLR chares Consequent to the Hon ble APTEL s judgment in Appeal No. 155 of 2013, the Commission in its Order Dated 20 April, 2016, in Case No. 80 of 2012, has disallowed Transport Deficit of Rs Crore pertaining to the period of FY to FY The Commission in its Order has stated that the order of the Commission is subject to further Order of Hon ble Supreme Court in Civil Appeal No of In this regard, BEST submits that since the matter is pending before the Hon ble Supreme Court and Hon ble Supreme Court has directed that such determination of tariff shall not be implemented until further Orders of Hon ble Supreme Court. Hence, the impact of setting aside of said Transport deficit of Rs Crore can be considered only after the further Orders of the Hon ble Supreme Court Considering all the above, in the present petition BEST has considered the Transport Deficit approved by the Commission (net of actual RoE and RoIF) till FY Also, the total Transport Deficit of Rs Crore and Rs Crores remaining to be recovered as per approved value and actual value of transport deficit respectively, is not claimed in the Third Control Period due to ambiguity regarding the allowance of TDLR charges beyond FY in wake of various Order of the Commission (Order Dated 20 April, 2016, in Case 80 of 2012), APTEL and Hon ble Supreme Court However, BEST reiterates that the Civil Appeal No of 2014 is pending with Hon ble Supreme Court and with this case attaining finality in future, BEST reserve the right to revise its claim for transport deficit (i.e., TDLR charges) as per the Order of the Hon ble Supreme Court Further, although BEST has not claimed any Transport Deficit for Third Control Period, Rs Crores of Transport Deficit is remaining to be recovered (as per Approved Value without any Carrying cost). It is likely that BEST will recover an equivalent amount as the current Tariff is likely to be continued for first few months of the control period BEST submits that any deviation in recovery of Transport Deficit with respect to approved value will be Trued-up during MTR of Third Control Period. 2 Parallel Licensing operation in BEST s area of Supply BEST submits that the Hon ble Commission vide Order dated 14 August, 2014 in Case No. 90 of 2014 has granted distribution licence to M/s The Tata Power Company- Distribution for next 25 years for the area of supply which overlaps with the BEST s area of supply. Aggrieved by this Order, BEST has filed an appeal before Hon ble ATE in Appeal No. 216 of Further, Hon ble ATE in Judgment dated 25 November, 2014 in Appeal No. 216 of 2014 held as under: MYT Petition BEST Undertaking Page 22