Paschim Gujarat Vij Company Ltd.

BEFORE THE GUJARAT ELECTRICITY REGULATORY COMMISSION GANDHINAGAR CASE NO. Filing of the Petition for True Up of FY 2015-16 & Determination of Multi-Year ARR for FY 2016-17 to FY 2020-21 & Determination of Final ARR for FY 2016-17 & Determination of Tariff for FY 2017-18 Under GERC (Multi Year Tariff) Regulations, 2016 along with other Guidelines and Directions issued by the GERC from time to time AND under Part VII (Section 61 to Section 64) of the Electricity Act, 2003 read with the relevant Guidelines Filed by:- Paschim Gujarat Vij Company Ltd. Corp. Office: OFF NANA MAVA ROAD, LAXMINAGAR, RAJKOT 360 004 Save Energy for Benefit of Self and Nation

BEFORE THE GUJARAT ELECTRICITY REGULATORY COMMISSION GANDHINAGAR Filing No: Case No: IN THE MATTER OF Filing of the Petition for True Up of FY 2015-16, Determination of Multi-Year ARR for FY 2016-17 to FY 2020-21, Determination of Final ARR for FY 2016-17 and Determination of Tariff for FY 2017-18 under GERC (Multi Year Tariff) Regulations, 2016 along with other Guidelines and Directions` issued by the GERC from time to time AND under Part VII (Section 61 to Section 64) of the Electricity Act, 2003 read with the relevant Guidelines AND IN THE MATTER OF Paschim Gujarat Vij Company Limited, Off Nana Mava Road, Laxminagar, Rajkot - 360004 PETITIONER Gujarat Urja Vikas Nigam Limited Sardar Patel Vidyut Bhavan, Race Course, Vadodara - 390 007 CO-PETITIONER THE PETITIONER ABOVE NAMED RESPECTFULLY SUBMITS Paschim Gujarat Vij Company Limited Page 1

TABLE OF CONTENTS SECTION 1. INTRODUCTION... 8 1.1. PREAMBLE... 8 1.2. INTRODUCTION... 8 1.3. MULTI YEAR TARIFF REGULATIONS, 2016... 9 1.4. SUBMISSION BY PGVCL TO THE HON BLE COMMISSION... 10 SECTION 2. EXECUTIVE SUMMARY... 11 2.1. PREAMBLE... 11 2.2. TRUE UP OF FY 2015-16... 11 2.3. MULTIYEAR ARR PROJECTIONS FROM FY 2016-17 TO FY 2020-21... 13 2.4. REVENUE GAP FOR FY 2017-18... 14 2.5. PROPOSED CHANGES IN THE TARIFF STRUCTURE FOR FY 2017-18... 15 SECTION 3. TRUE UP FOR FY 2015-16... 16 3.1. PREAMBLE... 16 3.2. PRINCIPLES FOR TRUE UP FOR FY 2015-16... 16 3.3. CATEGORY WISE SALES... 16 3.4. DISTRIBUTION LOSSES... 17 3.5. ENERGY REQUIREMENT AND ENERGY BALANCE... 17 3.6. POWER PURCHASE COST... 18 3.7. CAPITAL EXPENDITURE... 19 3.8. FUNDING OF CAPITALISATION... 22 3.9. FIXED COST FOR FY 2015-16... 23 3.10. OPERATION & MAINTENANCE EXPENSES... 23 3.11. DEPRECIATION... 26 3.12. INTEREST & FINANCIAL CHARGES... 27 3.13. INTEREST ON WORKING CAPITAL... 28 3.14. PROVISION FOR BAD DEBTS... 28 3.15. RETURN ON EQUITY... 29 3.16. TAXES... 29 3.17. NON-TARIFF INCOME FOR FY 2015-16... 30 3.18. AGGREGATE REVENUE REQUIREMENT FOR FY 2015-16... 30 3.19. SHARING OF GAINS & LOSSES... 31 3.20. SHARING OF GAIN/ (LOSS) FOR FY 2015-16... 32 3.21. REVENUE FOR FY 2015-16... 32 3.22. REVENUE GAP / SURPLUS FOR FY 2015-16... 33 SECTION 4. DETERMINATION OF MULTI-YEAR ARR PROJECTIONS FROM FY 2016-17 TO FY 2020-21... 35 4.1. PREAMBLE... 35 4.2. PROJECTION OF ENERGY REQUIREMENT FOR FY 2016-17 TO FY 2020-21. 35 4.3. DISTRIBUTION LOSSES... 42 4.4. ENERGY BALANCE ENERGY REQUIREMENT PROJECTION FOR PGVCL... 42 4.5. ESTIMATION OF ARR FOR CONTROL PERIOD FY 2016-17 TO FY 2020-21... 43 4.6. POWER PURCHASE COST FOR CONTROL PERIOD FOR FY 2016-17 TO FY 2020-21... 43 4.7. CAPITAL EXPENDITURE FOR THE CONTROL PERIOD... 63 4.8. FUNDING OF CAPEX... 67 4.9. OPERATION & MAINTENANCE EXPENSES... 67 Paschim Gujarat Vij Company Limited Page 2

4.10. PROVISION FOR BAD AND DOUBTFUL DEBTS... 70 4.11. DEPRECIATION... 70 4.12. INTEREST ON LOAN... 71 4.13. INTEREST ON WORKING CAPITAL... 72 4.14. RETURN ON EQUITY... 72 4.15. TAXES... 73 4.16. NON-TARIFF INCOME... 73 4.17. PROJECTED MULTI-YEAR ARR FOR FY 2016-17 TO FY 2020-21 UNDER MYT CONTROL PERIOD... 73 SECTION 5. DETERMINATION OF FINAL ARR FOR FY 2016-17 AND PROJECTED ARR & REVENUE GAP FOR FY 2017-18... 75 5.1. PREAMBLE... 75 5.2. PROJECTION OF FINAL ARR FOR FY 2016-17... 75 5.3. REVENUE GAP/ (SURPLUS) FOR FY 2017-18 WITH EXISTING TARIFF... 76 5.4. REVENUE FROM FPPPA CHARGES... 77 5.5. REVENUE PROJECTION FOR OTHER CONSUMER RELATED INCOME... 77 5.6. AGRICULTURE SUBSIDY... 78 5.7. TOTAL REVENUE FOR FY 2017-18... 78 5.8. ESTIMATED REVENUE GAP/ (SURPLUS) FOR FY 2017-18... 78 5.9. PROPOSED CHANGES IN THE TARIFF STRUCTURE FOR FY 2017-18... 79 SECTION 6. COMPLIANCE OF DIRECTIVES... 80 SECTION 7. PRAYER... 83 SECTION 8. ANNEXURE 1: TARIFF SCHEDULE FOR FY 2017-18... 86 8.1. GENERAL... 86 SECTION 9. ANNEXURE 2: TARIFF FILING FORMATS... 108 Paschim Gujarat Vij Company Limited Page 3

LIST OF TABLES TABLE 1 : TRUE UP FOR FY 2015-16... 11 TABLE 2 : SUMMARY OF CONTROLLABLE AND UNCONTROLLABLE FACTORS FOR FY 2015-16... 12 TABLE 3 : REVENUE GAP FOR FY 2015-16... 12 TABLE 4 : MULTI-YEAR PROJECTED ARR FOR FY 2016-17 TO FY 2020-21... 13 TABLE 5 : TOTAL PROJECTED REVENUE FOR FY 2017-18 AT EXISTING TARIFF... 14 TABLE 6: ESTIMATED REVENUE GAP/ (SURPLUS) FOR FY 2017-18 AT EXISTING TARIFF... 14 TABLE 7 : CATEGORY-WISE SALES... 16 TABLE 8 : DISTRIBUTION LOSSES... 17 TABLE 9 : ENERGY REQUIREMENT AND ENERGY BALANCE... 17 TABLE 10 : NET POWER PURCHASE COST... 18 TABLE 11 : GAIN/ (LOSS) ON ACCOUNT OF DISTRIBUTION LOSSES FOR FY 2015-16... 19 TABLE 12 : GAINS / (LOSS) - POWER PURCHASE EXPENSES... 19 TABLE 13 : CAPITAL EXPENDITURE... 20 TABLE 14 : FUNDING OF CAPITALISATION... 22 TABLE 15 : OPERATION & MAINTENANCE EXPENSES... 24 TABLE 16 : TREATMENT OF OPERATION & MAINTENANCE EXPENSES... 24 TABLE 17 : EMPLOYEE COST FOR FY 2015-16... 25 TABLE 18 : REPAIR & MAINTENANCE COST FOR FY 2015-16... 25 TABLE 19 : ADMINISTRATION & GENERAL EXPENSES FOR FY 2015-16... 25 TABLE 20 : OTHER DEBITS FOR FY 2015-16... 26 TABLE 21 : FIXED ASSET AND DEPRECIATION FOR FY 2015-16... 26 TABLE 22 : TREATMENT OF DEPRECIATION... 27 TABLE 23 : INTEREST & FINANCE CHARGES... 27 TABLE 24 : TREATMENT OF INTEREST & FINANCE CHARGES... 28 TABLE 25 : INTEREST ON WORKING CAPITAL... 28 TABLE 26 : PROVISION FOR BAD DEBTS... 28 TABLE 27 : RETURN ON EQUITY... 29 TABLE 28 : TREATMENT OF RETURN ON EQUITY... 29 TABLE 29 : PROVISION FOR TAXES... 29 TABLE 30 : TREATMENT OF INCOME TAX... 30 TABLE 31 : TREATMENT OF NON-TARIFF INCOME... 30 TABLE 32 : AGGREGATE REVENUE REQUIREMENT FOR FY 2015-16... 30 TABLE 33 : NET GAIN/ (LOSS) FOR FY 2015-16... 32 TABLE 34 : REVENUE FOR FY 2015-16... 32 TABLE 35 : REVENUE GAP FOR FY 2015-16... 33 TABLE 36 : HISTORICAL TREND IN CATEGORY-WISE UNITS SOLD (MUS)... 36 TABLE 37 : CATEGORY-WISE CAGR OF UNITS SOLD... 36 TABLE 38 : CATEGORY-WISE NO. OF CONSUMERS... 36 TABLE 39 : CAGR OF NO. OF CONSUMERS... 37 TABLE 40 : CATEGORY-WISE CONNECTED LOAD (MW/MVA)... 37 TABLE 41 : CAGR OF CONNECTED LOAD... 37 TABLE 42 : PGVCL NEW CONNECTIONS TO AGRICULTURE CONSUMERS... 39 TABLE 43 : PGVCL SALES TO AGRICULTURE CONSUMERS (METERED)... 40 TABLE 44 : GROWTH RATE FOR SALES, NO. OF CONSUMERS AND CONNECTED LOAD... 41 TABLE 45 : PROJECTION OF SALES (MUS)... 41 Paschim Gujarat Vij Company Limited Page 4

TABLE 46 : PROJECTION OF NO. OF CONSUMERS... 41 TABLE 47 : PROJECTION OF CONNECTED LOAD (MW/MVA)... 42 TABLE 48 : DISTRIBUTION LOSS FOR FY 2016-17 TO FY 2020-21... 42 TABLE 49 : ENERGY BALANCE FOR FY 2016-17 TO FY 2020-21... 43 TABLE 50 : CONSOLIDATED ENERGY REQUIREMENT FOR FY 2016-17 TO FY 2020-21 (MUS)... 43 TABLE 51: EXISTING CAPACITY ALLOCATION WITH GUVNL... 44 TABLE 52: NEW CAPACITY ADDITION FROM FY 2016-17 TO FY 2020-21... 45 TABLE 53: ADDITIONAL CAPACITY ENVISAGED FOR FY 2016-17 TO FY 2020-21... 46 TABLE 54: DECOMMISSIONING/ PPA EXPIRY OF PLANTS... 46 TABLE 55: RPO TARGET (%)... 47 TABLE 56: PROCUREMENT FROM RE FOR MEETING PROJECTED RPO... 48 TABLE 57 : POWER PURCHASE COST FOR THE FY 2016-17... 49 TABLE 58 : POWER PURCHASE COST FOR THE FY 2017-18... 51 TABLE 59 : POWER PURCHASE COST FOR THE FY 2018-19... 52 TABLE 60 : POWER PURCHASE COST FOR THE FY 2019-20... 53 TABLE 61 : POWER PURCHASE COST FOR THE FY 2020-21... 55 TABLE 62 : TRANSMISSION CHARGES FROM FY 2016-17 TO FY 2020-21... 57 TABLE 63 : GUVNL COST FROM FY 2016-17 TO FY 2020-21... 57 TABLE 64: TRADING MUS ENVISAGED FROM FY 2016-17 TO FY 2020-21... 58 TABLE 65: FIXED COST FOR DISCOM FOR FY 2016-17 TO FY 2020-21... 58 TABLE 66: VARIABLE COST FOR DISCOM & TRADING UNITS FOR FY 2016-17 TO FY 2020-21... 58 TABLE 67: GUVNL NET POWER PURCHASE COST FOR FY 2016-17 TO FY 2020-21... 59 TABLE 68: ALLOCATION OF POWER PURCHASE COST- DGVCL... 60 TABLE 69: ALLOCATION OF POWER PURCHASE COST- MGVCL... 60 TABLE 70: ALLOCATION OF POWER PURCHASE COST- PGVCL... 61 TABLE 71: ALLOCATION OF POWER PURCHASE COST- UGVCL... 61 TABLE 72: TOTAL REVENUE GAP/ (SURPLUS)... 61 TABLE 73: BULK SUPPLY TARIFF FOR FY 2016-17... 61 TABLE 74: BULK SUPPLY TARIFF FOR FY 2017-18... 62 TABLE 75: BULK SUPPLY TARIFF FOR FY 2018-19... 62 TABLE 76: BULK SUPPLY TARIFF FOR FY 2019-20... 62 TABLE 77: BULK SUPPLY TARIFF FOR FY 2020-21... 63 TABLE 78: CAPITAL EXPENDITURE PLAN... 63 TABLE 79: FUNDING PLAN OF CAPITAL EXPENDITURE... 67 TABLE 80: AVERAGE O&M EXPENSES ARRIVED FOR BASE YEAR FY 2013-14... 68 TABLE 81: COMPARISON OF O&M EXPENSES FOR ACTUALS OF FY 2015-16 AND PROJECTED AS PER GERC NORMS FOR FY 2016-17... 68 TABLE 82: CONSOLIDATED DISCOM DATA FROM FY 2011-12 TO FY 2015-16... 69 TABLE 83: CAGR GROWTH RATES FROM FY 2011-12 TO FY 2015-16... 69 TABLE 84: PROPOSED O&M EXPENSES FOR FY 2016-17 TO FY 2020-21... 70 TABLE 85: BAD AND DOUBTFUL DEBTS FOR FY 2016-17 TO FY 2020-21... 70 TABLE 86: DEPRECIATION FOR FY 2016-17 TO FY 2020-21... 71 TABLE 87: INTEREST & FINANCIAL CHARGES FOR FY 2016-17 TO FY 2020-21... 71 TABLE 88: INTEREST ON WORKING CAPITAL FOR FY 2016-17 TO FY 2020-21... 72 TABLE 89: RETURN ON EQUITY FOR FY 2016-17 TO FY 2020-21... 73 TABLE 90: TAXES FOR FY 2016-17 TO FY 2020-21... 73 Paschim Gujarat Vij Company Limited Page 5

TABLE 91: NON-TARIFF INCOME FOR FY 2016-17 TO FY 2020-21... 73 TABLE 92: PROJECTED MULTI-YEAR ARR FOR FY 2016-17 TO FY 2020-21... 73 TABLE 93 : PROJECTED FINAL ARR FOR FY 2016-17... 75 TABLE 94 : PROJECTED ARR FOR FY 2017-18... 76 TABLE 95: PROJECTED SALES (MUS) FOR FY 2017-18... 76 TABLE 96: REVENUE AT EXISTING TARIFF FOR FY 2017-18... 77 TABLE 97: REVENUE FROM FPPPA CHARGES FOR THE FY 2017-18... 77 TABLE 98: OTHER CONSUMER RELATED INCOME FOR FY 2017-18... 78 TABLE 99: AGRICULTURE SUBSIDY FOR FY 2017-18... 78 TABLE 100: TOTAL REVENUE FOR FY 2017-18... 78 TABLE 101: ESTIMATED REVENUE GAP FOR FY 2017-18 AT EXISTING TARIFF... 78 Paschim Gujarat Vij Company Limited Page 6

ABBREVIATIONS 1. ARR Aggregate Revenue Requirement 2. DGVCL Dakshin Gujarat Vij Company Limited 3. FPPPA Fuel and Power Purchase Price Adjustment 4. FY Financial Year 5. GEB Erstwhile Gujarat Electricity Board 6. GERC Gujarat Electricity Regulatory Commission 7. GERC MYT Regulations, 2016 GERC (Multi Year Tariff) Regulations, 2016 8. GETCO Gujarat Energy Transmission Corporation Limited 9. GoG Government of Gujarat 10. GoI Government of India 11. GSECL Gujarat State Electricity Corporation Limited 12. GUVNL Gujarat Urja Vikas Nigam Limited 13. kv Kilo Volt 14. kva Kilo Volt Ampere 15. kvah Kilo Volt Ampere Hour 16. kwh Kilo Watt Hour 17. MGVCL Madhya Gujarat Vij Company Limited 18. MU Million Units (Million kwh) 19. MVA Mega Volt Ampere 20. MW Mega Watt 21. MYT Multi Year Tariff MYT Control 22. FY 2016-17, FY 2017-18, FY 2018-19, FY 2019-20 & FY 2020-21 Period 23. O&M Operation & Maintenance 24. PGVCL Paschim Gujarat Vij Company Limited 25. UGVCL Uttar Gujarat Vij Company Limited Paschim Gujarat Vij Company Limited Page 7

SECTION 1. INTRODUCTION 1.1. PREAMBLE 1.1.1. This section presents the background and reasons for filing this Petition. 1.2. INTRODUCTION 1.2.1 The Government of Gujarat (hereinafter referred to as GoG ) notified the Gujarat Electricity Industry (Reorganization and Regulation) Act 2003 (herein after called as Act ) in May 2003 for the reorganization of the entire power sector in the State of Gujarat. 1.2.2 Pursuant to the above, Government of Gujarat in their letter vide GO / 19th August 2003 had directed GEB to form four Distribution Companies (Discoms) based on geographical location of the circles. Accordingly the four distribution companies had been incorporated with the Registrar of Companies (RoC) on September 15th, 2003. Paschim Gujarat Vij Company Limited (PGVCL) is one of the distribution companies engaged in distribution of electricity in the west zone area of Gujarat. 1.2.3 The Paschim Gujarat Vij Co. Ltd obtained its Certificate of Commencement of Business on the 15th October, 2003. However, the company did not commence its commercial operations during the financial year ending 31st March, 2005. The Company has started its commercial function w.e.f. 1st April 2005. 1.2.4 The Gujarat Electricity Regulatory Commission (hereinafter referred to as GERC or the Hon ble Commission ), an independent statutory body constituted under the provisions of the Electricity Regulatory Commissions (ERC) Act, 1998 and is currently under purview of the Electricity Act, 2003. GERC is vested with the authority of regulating the power sector in the State inter alia including determination of Tariff for electricity consumers. 1.2.5 The Hon ble Commission has issued the GERC (Multi Year Tariff) Regulations 2011 which was made effective from 1st April 2011 onwards. 1.2.6 Under section 62 of the Electricity Act, 2003 and under the GERC MYT Regulations, 2011. PGVCL had filed its Annual Revenue Requirement for the Second Control Period (FY 2011-12 to FY 2015-16) and Determination of Tariff for the FY 2011-12 to the Hon ble Commission on 12th May 2011. In respect to the above Petition, the MYT Order was issued by the Hon ble Commission on 6th September 2011. The Hon ble Commission had allowed an increase in the Tariff for some categories and the new Tariff was effective from 01st September 2011. In the above Order, the Hon ble Commission had also approved the ARR for all the years of the Second Control Period i.e. FY 2011-12 to FY 2015-16. 1.2.7 As per the provisions stipulated in Regulation 29.8 of the GERC MYT Regulations, 2011 licensees were required to file the Petition for Mid-Term Performance Review of Business Plan for the purpose of truing up of FY 2012-13, modification of ARR for remaining years of the Control Period (FY 2014-15 Paschim Gujarat Vij Company Limited Page 8

and FY 2015-16), Revenue from the sale of power at existing tariffs and charges for the ensuing year (FY 2014-15). Revenue gap for the ensuing year (FY 2014-15) calculated based on ARR approved in the MYT Order and truing up for the previous year and determination of Tariff for FY 2014-15 and Order on which was passed on 29th April, 2014. 1.2.8 As per the provisions stipulated in Regulation 29.8, licensees were required to file the Petition for the Truing Up of FY 2013-14 and determination of Tariff for FY 2015-16 and Order on which was passed on 31st March, 2015. 1.2.9 GERC order dated 02nd December, 2015 on the Petition 1534/2015 had stated the following: We decide that the approved ARR of FY 2015-16 of the licensees / generating companies concerned be considered as provisional ARR of the licensees / generating companies for FY 2016-17. We also decide that the licensees / generating companies shall file the ARR for FY 2016-17 based on the MYT Regulations, for FY 2016-17 to FY 2020-21 and the true up for the same shall also be governed as per the new MYT Regulations 1.2.10 Accordingly, licensees were required to file the Petition for the Truing Up of FY 2014-15 and determination of Provisional ARR for FY 2016-17 and determination of Tariff for FY 2016-17 and Order on which was passed on 31st March, 2016. 1.2.11 Hon ble Commission notified the Gujarat Electricity Regulatory Commission (Multi-Year Tariff) Regulations, 2016 ( GERC MYT Regulations, 2016 ) on 29th March 2016 and shall be applicable for determination of tariff in all cases covered under the regulations from 1st April, 2016 onwards. 1.3. MULTI YEAR TARIFF REGULATIONS, 2016 1.3.1 Under section 62 of the Electricity Act, 2003 and under the MYT Regulation, 2016 along with other guidelines and directions issued by the GERC from time to time, PGVCL is required to file a Petition for Truing-Up for FY 2015-16 and Determination of Multi-Year ARR for FY 2016-17 to FY 2020-21 and Tariff Petition for FY 2017-18 to the Hon ble Commission. The relevant extracts of the MYT Regulations, 2016 are given in the following paragraphs. Section - 3.1 of MYT Regulations, 2016: 3.1 The Commission shall determine tariff within the Multi-Year Tariff framework, for all matters for which the Commission has jurisdiction under the Act, including in the following cases: 1. Supply of electricity by a Generating Company to a Distribution Licensee; Paschim Gujarat Vij Company Limited Page 9

2. Intra-State transmission of electricity; 3. SLDC Fees and Charges; 4. Intra-State Wheeling of electricity; 5. Retail sale of electricity. (Emphasis Added) Section 17 of the GERC MYT Regulations, 2016: 17.2 The filing for the Control Period under these Regulations shall be as under: a) MYT Petition shall comprise of: i. Truing up for FY 2015-16 to be carried out under Gujarat Electricity Regulatory Commission (Multi-Year Tariff) Regulations, 2011: Provided that Truing up for FY 2015-16 for SLDC shall be carried out under Gujarat Electricity Regulatory Commission (Levy and Collection of Fees and Charges by SLDC) Regulations, 2005; ii. Multi-Year Aggregate Revenue Requirement for the entire Control Period with year-wise details; iii. Revenue from the sale of power at existing tariffs and charges and projected revenue gap or revenue surplus, for the second year of the Control Period under these Regulations, viz., FY 2017-18; iv. Application for determination of final ARR for FY 2016-17 and determination of tariff for FY 2017-18. 1.4. SUBMISSION BY PGVCL TO THE HON BLE COMMISSION 1.4.1 Under section 62 of the Electricity Act, 2003 and GERC MYT Regulations, 2016, PGVCL hereby submits the Petition for True-up of FY 2015-16, Determination of Multi-Year ARR for FY 2016-17 to FY 2020-21, Determination of final ARR for FY 2016-17 and Determination of Tariff for FY 2017-18 to the Hon ble Commission for approval. Paschim Gujarat Vij Company Limited Page 10

SECTION 2. EXECUTIVE SUMMARY 2.1. PREAMBLE 2.1.1. This section highlights the summary of the and Multi-Year ARR Projections from FY 2016-17 to FY 2020-21 and Revenue gap/surplus for FY 2017-18. 2.2. TRUE UP OF FY 2015-16 2.2.1 PGVCL has worked out its actual Aggregate Revenue Requirement (ARR) for FY 2015-16 based on the audited accounts and the principles adopted by the Hon ble Commission in its previous Orders. 2.2.2 The actual expenses have been compared against those approved for FY 2015-16 in the Tariff Order dated 29th April, 2014. The detailed comparison of various cost components with the values approved by the Hon ble Commission has been presented in the next Chapter on True up of FY 2015-16. A summary of the actual ARR for Truing-up of FY 2015-16 compared with the approved ARR for FY 2015-16 is presented in the table given below: TABLE 1 : TRUE UP FOR FY 2015-16 FY 2015-16 FY 2015-16 (Approved) (Actual) Deviation 1 of Power Purchase 9,204.68 10,540.09 (1,335.41) 2 Operation & Maintenance Expenses 411.35 738.69 (327.35) 2.1 Employee 562.16 677.97 (115.82) 2.2 Repair & Maintenance 83.21 159.80 (76.59) 2.3 Administration & General Charges 114.91 122.71 (7.80) 2.4 Other Debits 3.71 86.30 (82.59) 2.5 Extraordinary Items - - - 2.6 Net Prior Period Expenses / (Income) - (0.94) 0.94 2.7 Other Expenses Capitalised (352.64) (307.15) (45.49) 3 Depreciation 567.63 575.50 (7.87) 4 Interest & Finance Charges 332.24 301.08 31.16 5 Interest on Working Capital - - - 6 Provision for Bad Debts 2.14 56.20 (54.06) 7 Sub-Total [1 to 6] 10,518.04 12,211.57 (1,693.53) 8 Return on Equity 359.42 371.49 (12.08) 9 Provision for Tax / Tax Paid 15.00 18.96 (3.96) 10 Total Expenditure (7 to 9) 10,892.45 12,602.01 (1,709.56) 11 Less: Non-Tariff Income 278.65 307.43 (28.78) 12 Aggregate Revenue Requirement (10-11) 10,613.80 12,294.58 (1,680.78) 2.2.3 In line with the provisions of the GERC MYT Regulations, 2011 PGVCL has computed the gains and losses on account of controllable and uncontrollable parameters and its proposed sharing mechanism. 2.2.4 The cost components have been segregated into controllable and uncontrollable factors as per the methodology outlined in Regulation 25 of the GERC MYT Regulations, 2011. Summary of the difference allocation to Paschim Gujarat Vij Company Limited Page 11

controllable & Uncontrollable factors is outlined as per the table below: TABLE 2 : SUMMARY OF CONTROLLABLE AND UNCONTROLLABLE FACTORS FOR FY 2015-16 Gain/(Loss) Gain/(Loss) FY 2015-16 FY 2015-16 due to due to No (Approved) (Actual) Controllable Uncontrollabl. Factors e Factors 1 of Power Purchase 9,204.68 10,540.09 (210.61) (1,124.80) 2 Operation & Maintenance Expenses 411.35 738.69 (200.21) (127.14) 2.1 Employee 562.16 677.97 (115.82) - 2.2 Repair & Maintenance 83.21 159.80 (76.59) - 2.3 Administration & General Charges 114.91 122.71 (7.80) - 2.4 Other Debits 3.71 86.30 - (82.59) 2.5 Extraordinary Items - - - - 2.6 Net Prior Period Expenses / (Income) - (0.94) - 0.94 2.7 Other Expenses Capitalised (352.64) (307.15) - (45.49) 3 Depreciation 567.63 575.50 - (7.87) 4 Interest & Finance Charges 332.24 301.08-31.16 5 Interest on Working Capital - - - - 6 Provision for Bad Debts 2.14 56.20 (54.06) - 7 Return on Equity 359.42 371.49 - (12.08) 8 Provision for Tax / Tax Paid 15.00 18.96 - (3.96) 9 ARR (1 to 8) 10,892.45 12,602.01 (464.88) (1,244.68) 10 Non - Tariff Income 278.65 307.43 - (28.78) 11 Total ARR (9-10) 10,613.80 12,294.58 (464.88) (1,215.89) 2.2.1. As per the mechanism specified in the GERC MYT Regulations, 2011 PGVCL proposes to pass on a sum of 1/3rd of total gain/(loss) on account of controllable factors i.e. Rs. (154.96) Crores and total gain/(loss) on account of uncontrollable factors i.e. Rs. (1215.89) Crores to the consumers. Adjusting these to the net Aggregate Revenue Requirement, PGVCL has arrived at the Revised Aggregate Revenue Requirement for FY 2015-16 at Rs. 12,329.92 Crores. 2.2.2. This revised Aggregate Revenue Requirement is compared against the revised income under various heads including Revenue with Existing Tariff of Rs. 10,973.88 Crores, Other Consumer related Income of Rs. 470.98 Crores, Agriculture Subsidies of Rs. 440.53 Crores, summing up to a Total Revenue of Rs. 11,885.38 Crores. Accordingly, total Revenue Gap of PGVCL for FY 2015-16 after treatment of gain/(loss) due to controllable / uncontrollable factors is computed at Rs. 444.53 Crores as shown in the table below: TABLE 3 : REVENUE GAP FOR FY 2015-16 FY 2015-16 1 Aggregate Revenue Requirement originally approved for FY 2015-16 10,613.80 2 Add: Gap/(Surplus) of FY 2013-14 305.26 3 Add: DSM Programme expenditure 40.00 4 Gain / (Loss) on account of Uncontrollable factor to be passed on to Consumer (1,215.89) 5 Gain / (Loss) on account of Controllable factor to be passed on to Consumer (1/3rd of Total Gain / Loss) (154.96) 6 Revised ARR for FY 2015-16 (1 + 2 + 3-4 - 5) 12,329.92 Paschim Gujarat Vij Company Limited Page 12

FY 2015-16 7 Revenue from Sale of Power 10,973.88 8 Other Income (Consumer related) 470.98 9 Total Revenue excluding Subsidy (7 + 8) 11,444.85 10 Agriculture Subsidy 440.53 11 Total Revenue including Subsidy (9+10) 11,885.38 12 Revised Gap after treating gains/(losses) due to Controllable/ Uncontrollable factors (6-11) 444.53 2.3. MULTIYEAR ARR PROJECTIONS FROM FY 2016-17 TO FY 2020-21 2.3.1. The Hon ble Commission in March 2016 came up with its Gujarat Electricity Regulatory Commission (Multi-Year Tariff) Regulations, 2016 applicable from 1st April 2016. 2.3.2. Accordingly, the Aggregate Revenue Requirement for FY 2016-17 to FY 2020-21 as per GERC MYT Regulations, 2016 is projected as below: TABLE 4 : MULTI-YEAR PROJECTED ARR FOR FY 2016-17 TO FY 2020-21 FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 1 of Power Purchase 10202.87 11127.63 11882.92 12641.09 13909.21 2 Operation & Maintenance 699.54 739.43 781.59 826.17 873.30 Expenses 2.1 Employee 843.63 891.88 942.90 996.83 1,053.85 2.2 Repair & Maintenance 112.45 118.88 125.68 132.87 140.47 2.3 Administration & General Charges 133.91 141.57 149.67 158.23 167.28 2.4 Other Debits 2.26 2.26 2.26 2.26 2.26 2.5 Extraordinary Items - - - - - 2.6 Net Prior Period Expenses / (Income) - - - - - 2.7 Other Expenses Capitalised (392.71) (415.17) (438.92) (464.03) (490.57) 3 Depreciation 669.94 770.54 864.69 945.39 1,025.84 4 Interest & Finance Charges 344.42 379.62 406.47 421.19 430.41 5 Interest on Working Capital - - - - - 6 Provision for Bad Debts 56.20 56.20 56.20 56.20 56.20 7 Sub-Total (1 to 6) 11,972.98 13,073.42 13,991.88 14,890.05 16,294.96 8 Return on Equity 425.85 486.36 545.63 600.19 654.43 9 Provision for Tax / Tax Paid 18.96 18.96 18.96 18.96 18.96 10 Total Expenditure (7 to 9) 12,417.79 13,578.73 14,556.47 15,509.19 16,968.34 Paschim Gujarat Vij Company Limited Page 13

11 Less: Non-Tariff Income FY 2016-17 FY 2017-18 FY 2018-19 FY 2019-20 FY 2020-21 237.62 237.62 237.62 237.62 237.62 12 Aggregate Revenue Requirement (10-11) 12,180.17 13,341.11 14,318.85 15,271.57 16,730.72 2.3.3. PGVCL requests Hon ble Commission to approve Multi-Year ARR for the MYT control period from FY 2016-17 to FY 2020-21. Further, PGVCL also requests Hon ble Commission to approve Final ARR for FY 2016-17 as mentioned in the Table above. 2.4. REVENUE GAP FOR FY 2017-18 2.4.1. The sales projections for FY 2017-18 as per GERC MYT Regulations, 2016 is 23661 MUs. 2.4.2. Based on projected sales & existing retail tariff, revenue from sale of power works out to Rs. 8,795.82 Crore for FY 2017-18. 2.4.3. The Revenue from FPPPA charges for FY 2017-18 has been projected considering the base rate of 143 paise per unit as Rs. 3,383.53 Crore. 2.4.4. The income under the head Other Consumer Related Income and Agriculture subsidy for FY 2017-18 has been considered same as that of actuals for FY 2015-16. 2.4.5. Based on the above projections, the total revenue of the company comprises of revenue from sale of power at existing tariff, FPPPA charges, other consumer related income and Agriculture Subsidy. Total revenue for FY 2017-18 is as shown below: TABLE 5 : TOTAL PROJECTED REVENUE FOR FY 2017-18 AT EXISTING TARIFF FY 2017-18 1 Revenue with Existing Tariff 8,795.82 2 FPPPA Charges @ 143 paisa/kwh 3,383.53 3 Other Income (Consumer related) 470.98 4 Agriculture Subsidy 440.53 5 Total Revenue including subsidy (1 to 4) 13,090.86 2.4.6. The revenue gap of Rs. 444.53 crores after true up exercise of FY 2015-16 is also considered for estimating revenue gap/(surplus) for FY 2017-18. 2.4.7. Based on the above, the estimated revenue gap/ (surplus) for FY 2017-18 at existing tariff is as outlined in the table below: TABLE 6: ESTIMATED REVENUE GAP/ (SURPLUS) FOR FY 2017-18 AT EXISTING TARIFF FY 2017-18 1 Aggregate Revenue Requirement for FY 2017-18 13,341.11 2 Revenue Gap from True up of FY 2015-16 444.53 Paschim Gujarat Vij Company Limited Page 14

3 Total Aggregate Revenue Requirement for FY 2017-18 FY 2017-18 13,785.64 4 Revenue with Existing Tariff 8,795.82 5 FPPPA Charges @ 143 paisa/kwh 3,383.53 6 Other Income (Consumer related) 470.98 7 Agriculture Subsidy 440.53 8 Total Revenue including subsidy for FY 2017-18 (4 to 7) 13,090.86 9 Gap/(Surplus) (3-8) 694.78 2.4.8. The Hon ble Commission is requested to approve the above mentioned gap. 2.5. PROPOSED CHANGES IN THE TARIFF STRUCTURE FOR FY 2017-18 2.5.1. There are no changes/revision/modification proposed in the tariff structure by the company for FY 2017-18. Paschim Gujarat Vij Company Limited Page 15

SECTION 3. TRUE UP FOR FY 2015-16 3.1. PREAMBLE 3.1.1. This section outlines the performance of PGVCL for FY 2015-16. In line with the provisions of the GERC MYT Regulations, 2011, PGVCL hereby submits the True-Up Petition comparing the actual performance of PGVCL during FY 2015-16 with the forecast approved by the Hon ble Commission vide Mid-Term Review Order dated 29th April, 2014. 3.2. PRINCIPLES FOR TRUE UP FOR FY 2015-16 3.2.1. As per MYT Tariff Regulations, 2011, the Hon ble Commission is required to undertake the True-Up of the licensees for FY 2015-16 based on the comparison of the actual performance of the past year with the approved estimates for such year. Section 22.1 of the GERC MYT Regulations, 2011 is read as below: Where the Aggregate Revenue Requirement and expected revenue from tariff and charges of a Generating Company or Transmission Licensee or Distribution Licensee is covered under a Multi-Year Tariff framework, then such Generating Company or Transmission Licensee or Distribution Licensee, as the case may be, shall be subject to truing up of expenses and revenue during the Control Period in accordance with these Regulations. 3.2.2. In line with the provisions of MYT Regulations, 2011, PGVCL has filed this Petition for True-Up for the year FY 2015-16. Information provided in the True- Up for FY 2015-16 is on the basis of audited actual performance and considering principles adopted by the Hon ble Commission in its previous Orders. The actual performance has been compared with the approved numbers as per the Order dated 29 th April, 2014. 3.2.3. Accordingly, actual data for revised Aggregate Revenue Requirement, revenue and gap for FY 2015-16 are given in the following paragraphs of this chapter. 3.2.4. For the purpose of True-Up all the expense heads have been categorized into Controllable and Uncontrollable factors. A head-wise comparison has been made between the values approved by the Hon ble Commission and the actual values for various expenditures for FY 2015-16. 3.3. CATEGORY WISE SALES 3.3.1. The actual category wise sales for FY 2015-16 were 21888.93 MUs as against the approved sales of 20028 MUs. The table below highlights the comparison of actual category wise sales of PGVCL against that approved by the Hon ble Commission vide its Tariff Order. TABLE 7 : CATEGORY-WISE SALES Sales (MUs) FY 2015-16 (Approved) FY 2015-16 (Actual) A LT Consumers 1 RGP 3551.00 3473.93 2 GLP 113.00 104.68 Paschim Gujarat Vij Company Limited Page 16

Sales (MUs) FY 2015-16 (Approved) FY 2015-16 (Actual) 3 Non-RGP & LTMD 3719.00 3042.14 4 Public Water Works 748.00 633.74 5 Agriculture Unmetered 4081.00 4436.77 6 Agriculture metered 1924.00 2647.81 7 Public Lighting 93.00 93.27 LT Total (A) 14229.00 14432.35 B HT Consumers 8 Industrial HT 5799.00 6756.58 9 Railway Traction 0.00 0.00 HT Total (A) 5799.00 6756.58 Grand Total (A + B) 20028.00 21188.93 C Licensees (Kandla Port Trust) - 19.91 Grand Total (A + B + C) 21208.84 3.4. DISTRIBUTION LOSSES 3.4.1. In FY 2015-16, the actual distribution losses were 24.73% as against the approved level of 23.00%. The table below highlights the comparison of actual distribution losses of PGVCL against that approved by the Hon ble Commission vide its Tariff Order. TABLE 8 : DISTRIBUTION LOSSES FY 2015-16 (Approved) FY 2015-16 (Actual) 1 Distribution Losses 23.00% 24.73% 3.4.2. The MYT Regulations, categorise the Distribution Losses as a controllable factor and accordingly any gain or loss on account of this would be shared with the consumers as per the provisions of the Regulations. 3.4.3. PGVCL submits that it has achieved a significant reduction in distribution losses during recent years. The Hon ble Commission had approved the distribution loss levels for PGVCL at 23.00% for FY 2015-16. PGVCL shall still continue its efforts to lower distribution losses further. 3.4.4. Since PGVCL has losses higher than those approved by the Hon ble Commission, its effect has been discussed in the section relating to power purchase and the gains and losses has been captured there itself. 3.5. ENERGY REQUIREMENT AND ENERGY BALANCE 3.5.1. The gross energy requirement of PGVCL is as follows given in the table below: TABLE 9 : ENERGY REQUIREMENT AND ENERGY BALANCE FY 2015-16 FY 2015-16 S. Unit (Approved) (Actual) 1 Energy Sales MUs 20,028.00 21,188.93* MUs 5,982.39 6,961.63 2 Distribution Losses % 23.00% 24.73% 3 Energy Requirement MUs 26,010.39 28,150.56 Paschim Gujarat Vij Company Limited Page 17

S. Unit FY 2015-16 FY 2015-16 (Approved) (Actual) 4 Transmission Losses MUs 1,117.68 1,094.34 5 Total Energy to be input to Transmission System MUs 27,128.07 29,244.90 6 Pooled Losses in PGCIL System MUs 541.00 530.70 7 Total Energy Requirement MUs 27,669.07 29,775.60 *Energy sales to licensee (KPT) of 19.91 MUs not included 3.5.2. The gross energy requirement for subsequent sale to the consumers in FY 2015-16 is 29,775.60 MUs as compared to 27,669.07 MUs as approved by the Hon ble Commission. 3.6. POWER PURCHASE COST 3.6.1. The company has been currently allocated share of generation capacities as per the scheme worked out by GUVNL. In order to minimize power purchase cost, GUVNL adopts the Merit Order Despatch principles for despatching power from the generating stations based on the demand and accordingly power gets allocated to PGVCL. 3.6.2. The actual power purchase from GUVNL is different from allocation because the demand from PGVCL is not constant and it varies from time to time. 3.6.3. The total power purchase cost of PGVCL for FY 2015-16 consists of the basic power purchase cost, transmission charges payable to GETCO and PGCIL and the Discom s share of GUVNL cost. Based on the same, the comparison of the approved and the actual cost of power purchase are as shown below: TABLE 10 : NET POWER PURCHASE COST FY 2015-16 FY 2015-16 (Approved) (Actual) A 1 Power Purchased from GUVNL 10,640.01 2 Power Purchased from CPP / Wind Farms 40.63 3 Power Purchased from Solar 9.02 4 Reactive Energy charges 0.08 5 Uninterrupted Interchange Charges 108.17 10,797.92 B Income 1 Sale of Power to GUVNL 251.58 2 Unscheduled Interchange 6.25 Net Power Purchase (A-B) 9,204.68 10,540.09 3.6.4. The variation in the approved and the actual power purchase expenses is on account of various reasons including change in approved cost of power, change in quantum of power purchased allowed, consequent changes in the transmission charges payable and change in cost allocation to GUVNL. 3.6.5. The quantum of power purchase depends upon the sales during the year as well as the losses in the system. The actual distribution losses in PGVCL distribution network have been higher than the approved level but the sales were also higher than that approved by the Hon ble Commission and hence, the quantum of power purchased was higher than the approved quantum of Paschim Gujarat Vij Company Limited Page 18

power required. 3.6.6. As per the MYT Regulations, the Hon ble Commission has categorised the variation in the price of fuel and/ or price of power purchase according to the FPPPA formula approved by the Hon ble Commission as an uncontrollable factor. Further, the Hon ble Commission has also identified the variation in the number or mix of consumers or quantity of electricity sold to consumers as an uncontrollable factor. Thus the variation in the above factors affects the power purchase expenses and results into either a loss or gain. Accordingly, any gain or loss on this account is to be entirely passed on to the consumers as per the methodology approved by the Hon ble Commission. 3.6.7. In addition to the above, there is an incidence of higher power purchase cost on account of the higher Distribution Losses as compared to the losses approved by the Hon ble Commission. These losses has resulted in higher power purchase expenses as the quantum of power required to be purchased to meet the same level of demand would be higher hence resulting in the losses as explained below: TABLE 11 : GAIN/ (LOSS) ON ACCOUNT OF DISTRIBUTION LOSSES FOR FY 2015-16 Unit FY 2015-16 (with Approved Distribution Losses) FY 2015-16 (with Actual Distribution Losses) 1 Energy Sales MUs 21,188.93 21,188.93 2 Distribution Losses MUs 6,329.16 6,961.63 % 23.00% 24.73% 3 Energy Requirement MUs 27,518.09 28,150.56 4 Saving due to Distribution Losses MUs (632.47) 5 Average Power Purchase Rs./Unit 3.33 6 Gain/(Loss) due to Dist. Losses (210.61) 3.6.8. As can be seen from the above, the total loss on account of higher distribution losses as compared to approved is Rs. 210.61 Crores. This loss is categorised as on account of controllable factors and the appropriate treatment is given below: 1 Total Power Purchase TABLE 12 : GAINS / (LOSS) - POWER PURCHASE EXPENSES FY 2015-16 (Approved) FY 2015-16 (Actual) Deviation Gain/(Loss) due to Controllable Factor Gain/(Loss) due to Uncontrollable Factor 9,204.68 10,540,09 (1335.41) (210.61) (1,124.80) 3.6.9. Thus, as can be seen from the above table, the power purchase gain/(loss) due to controllable & uncontrollable factors are Rs. (210.61) Crores and Rs. (1,124.80) Crores respectively which would have to be passed on to the consumers as per the methodology approved by the Hon ble Commission. 3.7. CAPITAL EXPENDITURE 3.7.1. Capital expenditure incurred by PGVCL in FY 2015-16 was Rs. 1552.63 Crores. The actual capital expenditure by PGVCL during the FY 2015-16 is Rs. 17.63 Crores higher than that approved by the Hon ble Commission. The Paschim Gujarat Vij Company Limited Page 19

scheme-wise capital expenditure incurred in FY 2015-16 against approved by the Hon ble Commission is as shown below: A B C D Schemes TABLE 13 : CAPITAL EXPENDITURE FY 2015-16 (Approved) FY 2015-16 (Actual) Deviation Paschim Gujarat Vij Company Limited Page 20 Distribution Schemes Normal Development Scheme 413.00 305.72 107.28 System Improvement Scheme 95.00 183.44 (88.44) Electrification of hutments 5.00 22.20 (17.20) Scheme for meters 75.00 38.30 36.70 Others Harijan Basti - Petapara 1.00 0.47 0.53 Total 589.00 550.13 38.87 Rural Electrification Schemes Special Component plan 1.00 10.48 (9.48) RE Normal + Tatkal 675.00 635.38 39.62 Total 676.00 645.86 30.14 Non Plan Schemes - RAPDRP - 99.22 (99.22) SCADA/DMS 100.00-100.00 Total 100.00 99.22 0.78 Other New Schemes - Fencing to Distribution Transformer 13.00-13.00 Aerial Bunch Conductors 1.00-1.00 HVDS 100.00 118.44 (18.44) Under Ground System at Pilgrim Places like Dwarka, Somnath, Bhavnath (Junagadh) etc. and important GIDC area 25.00 0.18 24.82 JGY Load Shedding Transformers 1.00-1.00 Smart village - 1.76 (1.76) Solar AG Pumps - 35.55 (35.55) DISS - 44.58 (44.58) Coastal area scheme 30.00 56.91 (26.91) Total 170.00 257.42 (87.42) E Capital Expenditure Total 1,535.00 1,552.63 (17.63) 3.7.2. Scheme wise deviation in capital expenditure is explained as under: Normal Development: Under the head Normal Development Scheme, generally expenses are incurred to meet with the Supply Obligation which is mainly based on the numbers of applications received. Therefore, during the FY 2015-16, company had to incur Rs. 305.72 Crores against approved Rs. 413.00 Crores. System Improvement: Under the head System Improvement, PGVCL carries out renovation/replacement of old Distribution line, bifurcation of feeder, installation/augmentation of Distribution Transformer etc. System Improvement is carried out on requirement basis with the objective to improve reliability of power supply and also to reduce distribution loss. Company incurred Rs. 183.44 Crores against approved Rs. 95.00 Crores. RE Scheme: Under the head RE Schemes, Company releases Agriculture Category connections. Following the directive of Hon ble Commission, Company has maximised the targets for releasing the Connections of

Agriculture category. Accordingly, during FY 2015-16 Company released more than 55000 Agriculture connections during the year at the cost of Rs. 635.38 Crores against approved Rs. 675 Crores. Following the policy framed by State Government, Company has started releasing connection in the Dark Zone area too from the year 2013-14. R- APDRP: R-APDRP (Restructured Accelerated Power Development & Reforms Programme) is the Central Sector Scheme. GoI has appointed Power Finance Corporation (PFC) as the Nodal Agency. The basic purpose of the scheme is to reduce AT&C Losses in the urban areas. Accordingly, all the towns having population more than 30,000 have been covered under this scheme. PGVCL has 36 such towns, covering 84 sub divisions. Scheme will be implemented in two parts: Part-A (IT Infrastructure establishment) and Part-B (Distribution strengthening and modernization). Moreover, three towns having population more than 4 lakhs and energy input more than 350 MUs /year have been identified for installing SCADA/DMS system, which are Rajkot, Bhavnagar and Jamnagar. Part-A includes: Establishment of baseline data and adoption of IT applications for meter reading, billing & collection; energy accounting & auditing; MIS; redressal of consumer grievances; establishment of IT enabled consumer service centers etc. Part-B includes: Renovation, modernization and strengthening of 11 kv level Substations, Transformers/Transformer Centers, Re-conductoring of lines at 11 kv level and below, Load Bifurcation, feeder separation, Load Balancing, HVDS (11 kv), Aerial Bunched Conductoring in dense areas, replacement of electromagnetic energy meters with electronics meters, Installation of capacitor banks and mobile service centers etc. Scheme is to be implemented as per the guidelines issued by PFC from time to time. Company has spent Rs. 99.22 Crores during the FY 2015-16 under this scheme. SCADA/DMS: The objective of reducing Aggregate Technical and Commercial (AT&C) losses in the project areas can be achieved by plugging pilferage points, supply of quality power, faster identification of faults & early restoration of power, proper metering, strategic placement of capacitor banks & switches and proper planning & designing of distribution networks. The real time monitoring & control of the distribution system through state-of-the art SCADA/DMS system encompassing all distribution substations & 11 KV network would help in achieving this objective of R-APDRP. For deriving maximum benefits it is essential that necessary upgradation of distribution Paschim Gujarat Vij Company Limited Page 21

S/S & 11kV network shall be carried out to meet the SCADA/DMS requirements. SCADA is to be implemented through SCADA Implementation Agency (SIA). High Voltage Distribution System (HVDS): Company is having large nos. of Low Tension category consumers. To eliminate low voltage distribution and to have better voltage profile as well as for reduction in Technical loss and associated commercial loss company has proposed to shift over on High Voltage Distribution System by erecting small capacity Transformer matching with the connected load of individual consumer or very small group of consumers in phased manner. During the year company has incurred Rs. 118.44 Crore as against approved Rs. 100 Crores. Coastal Area Scheme: PGVCL covers largest costal area of the state. Majority of the Distribution network of the Company is Overhead type. Overhead network is highly susceptible to environmental changes in general and particularly in coastal area. To provide better quality power supply in the coastal belt, Company undertakes various activities like renovation of Distribution network, Distribution Transformer review, providing Aerial Bunch Conductor, conversion of LT Distribution network into High Voltage Distribution System etc. Scope of work is planned depending on time to time requirement and exigency of work. Accordingly, Company has spent Rs. 56.91 Crores during FY 2015-16 against approved Rs. 30 Crores. Underground Network: Government of India has notified Integrated Power Development System. One of the main components of the scheme is to convert existing Overhead System to Underground System. To implement the scheme in integrated manner, the earlier proposed Underground schemes for Pilgrim area etc. couldn t be implemented. However, now it has been taken up and during the current year it will be implemented. 3.8. FUNDING OF CAPITALISATION 3.8.1. The funding of actual capitalisation is done through various sources categorised under four headings namely: Consumer Contribution, Grants, Equity and Debt. The detailed breakup of funding of capitalised asset during FY 2015-16 is mentioned in the table below. TABLE 14 : FUNDING OF CAPITALISATION FY 2015-16 FY 2015-16 (Approved) (Actual) Deviation 1 Capitalization 1,427.55 1,504.52 (76.97) 2 Less : Consumer Contribution 326.48 173.86 152.62 3 Grants 90.22 109.11 (18.89) 4 Balance CAPEX 1,010.85 1,221.54 (210.69) 5 Debt @ 70% 707.60 855.08 (147.49) 6 Equity @ 30% 303.26 366.46 (63.21) Paschim Gujarat Vij Company Limited Page 22

3.8.2. The interest and finance charges incurred for the debt funding portion have been discussed in the paragraph 3.12 and the Return on the Equity under paragraph 3.15 of the Petition. 3.9. FIXED COST FOR FY 2015-16 3.9.1. The fixed cost of PGVCL for FY 2015-16 has been determined in accordance with the GERC MYT Regulations, 2011. As outlined under the regulations, the fixed cost for PGVCL has been determined under the following major heads: Operation and Maintenance Expenses Depreciation Interest and Finance Charges Interest on Working Capital Income Tax Return on Equity 3.9.2. Net Annual Revenue Requirement of PGVCL has been computed after netting off expenses capitalised and non-tariff income. 3.9.3. For the purpose of True Up, all the heads mentioned above have been categorized into Controllable or Uncontrollable in line with provisions of GERC MYT Regulations, 2011. A head wise comparison of cost has been made between the values approved by the Hon ble Commission vide Tariff Order dated 29th April, 2014 and the actual expenses of PGVCL in FY 2015-16. 3.10. OPERATION & MAINTENANCE EXPENSES 3.10.1. Operations and Maintenance (O&M) Expenses of PGVCL consists of the following elements: Employee Expenses Repairs and Maintenance s Administrative and General Expenses 3.10.2. Employee expenses comprise of salaries, dearness allowance, bonus, terminal benefits in the form of pension & gratuity, leave encashment and staff welfare expenses. 3.10.3. Repairs and Maintenance expenses are incurred towards the day to day upkeep of the distribution network and form an integral part of the efforts towards reliable and quality power supply as also in the reduction of losses in the distribution system. 3.10.4. Administration & General expenses mainly comprise of rents, telephone and other communication expenses, professional charges, conveyance and travelling allowances, etc. 3.10.5. PGVCL is also required to include the expenses of the following items of the ARR into O&M expenses by the Hon ble Commission: Other Debits Paschim Gujarat Vij Company Limited Page 23

Extraordinary Items Net Prior Period Expenses / (Income) Other Expenses Capitalised 3.10.6. After the combination of all the above parameters for FY 2015-16, PGVCL s actual O&M expense was Rs 738.69 Crores which is inclusive of Employee cost of Rs. 677.97 Crores, Repair & Maintenance Charges of Rs. 159.80 Crores and Administration & General Expenses of Rs. 122.71 Crores along with other debits, extraordinary items, net prior period expense/ (income) and other expenses capitalized against the approved O&M expense which is Rs. 411.35 Crores. TABLE 15 : OPERATION & MAINTENANCE EXPENSES FY 2015-16 FY 2015-16 (Approved) (Actual) Deviation 1 Employee 562.16 677.97 (115.82) 2 Repair & Maintenance 83.21 159.80 (76.59) 3 Administration & General Charges 114.91 122.71 (7.80) 4 Other Debits 3.71 86.30 (82.59) 5 Extraordinary Items - - - 6 Net Prior Period Expenses / (Income) - (0.94) 0.94 7 Other Expenses Capitalised (352.64) (307.15) (45.49) 8 Operation & Maintenance Expenses 411.35 738.69 (327.35) 3.10.7. Comparison of actual O&M charges during FY 2015-16 with the value approved by the Hon ble Commission reflects net gain/(loss) of Rs. (200.21) Crores on account of controllable factors and gain/(loss) of Rs (127.14) Crores on account of uncontrollable factors to PGVCL. TABLE 16 : TREATMENT OF OPERATION & MAINTENANCE EXPENSES Gain/(Loss) Gain/(Loss) FY 2015-16 FY 2015-16 due to due to No (Approved) (Actual) Controllable Uncontrollable Factor Factor 1 Employee Expenses 562.16 677.97 (115.82) - 2 Repair & Maintenance 83.21 159.80 (76.59) - 3 Administration & General Charges 114.91 122.71 (7.80) - 4 Other Debits 3.71 86.30 - (82.59) 5 Extraordinary Items - - - - 6 Net Prior Period Expenses / (Income) - (0.94) - 0.94 7 Other Expenses Capitalised (352.64) (307.15) - (45.49) 8 Total O&M Expenses 411.35 738.69 (200.21) (127.14) Employee 3.10.8. The actual employee cost for FY 2015-16 were Rs. 677.97 Crores. The employee cost incurred by the company is purely on the basis of the guidelines issued by competent authorities like the state government. Hence, the entire expenditure estimated by the company is a legitimate expenditure and any variation is purely beyond its control. Accordingly, PGVCL has estimated a gain/ (loss) of Rs. (115.82) Crores on account of controllable employee cost. Paschim Gujarat Vij Company Limited Page 24

3.10.9. The summary of the comparison of the actual employee expenses for FY 2015-16 vis-à-vis the expenses approved by the Hon ble Commission is given in the table below: TABLE 17 : EMPLOYEE COST FOR FY 2015-16 Gain/(Loss) due Gain/(Loss) due to FY 2015-16 FY 2015-16 to Controllable Uncontrollable (Approved) (Actual) Factor Factor 1 Employee 562.16 677.97 (115.82) - Repair & Maintenance 3.10.10. Repair and Maintenance expenditure is dependent on various factors. The assets of PGVCL are old and require regular maintenance to ensure uninterrupted operations. PGVCL has been trying its best to ensure uninterrupted operations of the system and accordingly has been undertaking necessary expenditure for R&M activities. The GERC MYT Regulations, 2011 provides for R&M expenditure as a controllable expenditure. The actual R&M cost for FY 2015-16 is Rs 159.80 Crores including amount incurred in restoration of damage due to natural calamities like flood & cyclones. Accordingly, on the basis of comparison of actual R&M expenditure of PGVCL with the values approved by the Hon ble Commission, there is a gain/(loss) of Rs. (76.59) Crores as indicated in the table below: 1 Repair & Maintenance TABLE 18 : REPAIR & MAINTENANCE COST FOR FY 2015-16 FY 2015-16 (Approved) FY 2015-16 (Actual) Gain/(Loss) due to Controllable Factor Gain/(Loss) due to Uncontrollable Factor 83.21 159.80 (76.59) - Administration & General Expenses 3.10.11. The actual A&G expense for FY 2015-16 were Rs. 122.71 Crores. As per the provisions of the GERC MYT Regulations, 2011 A&G expenses are categorised as controllable expenses and accordingly, the comparison of value approved by the Hon ble Commission with the actual A&G expenses of PGVCL shows a gain/(loss) of Rs. (7.80) Crores as highlighted in the table below: 1 Administration & General Charges TABLE 19 : ADMINISTRATION & GENERAL EXPENSES FOR FY 2015-16 FY 2015-16 (Approved) FY 2015-16 (Actual) Gain/(Loss) due to Controllable Factor Gain/(Loss) due to Uncontrollable Factor 114.91 122.71 (7.80) - Other Debits 3.10.12. As per the G.R. No: NPL/452014/UOR-40/M dated 06.01.2015 issued by Government of Gujarat to waive the delayed payment charges debited up to 31.03.2014 to weak Nagar Palikas under One Time Settlement of their dues through Gujarat Municipal Finance Board, PGVCL had waived off delay payment charges amounting to Rs. 49.22 Crores in its audited accounts for FY Paschim Gujarat Vij Company Limited Page 25