Order Case 102 of 2009

Case No.
102 of 2009
MERC Order for MSPGCL for APR of FY 2009-10 and Tariff for FY 2010-11
Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai 400 005 Email: mercindia@mercindia.org.in Website: www.mercindia.org.in Case No. 102 of 2009 IN THE MATTER OF Petition filed by The Maharashtra State Power Generating Company Limited (MSPGCL) for approval of Truing up for FY 2008-09, Annual Performance Review for FY 2009-10 and Determination of Tariff for FY 2010-11 Shri V. P. Raja, Chairman Shri S. B. Kulkarni, Member Shri V. L. Sonavane, Member
Date: September 12, 2010 ORDER In accordance with MERC (Terms and Conditions of Tariff) Regulations, 2005 and upon directions from the Maharashtra Electricity Regulatory Commission (hereinafter referred as MERC or the Commission), Maharashtra State Power Generating Company Limited (MSPGCL), submitted its application on affidavit for approval of truing up of Aggregate Revenue Requirement (ARR) for FY 2008-09, Annual Performance Review (APR) for FY 2009-10 and tariff for FY 2010-11. The Commission, in exercise of the powers vested in it under Section 61 and Section 62 of the Electricity Act, 2003 (EA 2003) and all other powers enabling it in this behalf, and after taking into consideration all the submissions made by MSPGCL, all the suggestions and objections of the public, responses of MSPGCL, issues raised during the Public Hearing, and all other relevant material, and after review of Annual Performance for FY 200910, determines the tariff for MSPGCL for FY 2010-11 as under.
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Case No. 102 of 2009
List of Abbreviations
AAD AOH APR ATE A&G APR ARR APH AOH BHEL Capex CPI CEA CERC Cu.m CV COD CPRI DPR EA 2003 FAC FOCA FY GAAP GCV GFA GOM GOMWRD ID ITAT ICAI IWC Kcal kW kWh LD MCM MMSCMD MERC MSEB MSETCL MSLDC MSPGCL
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Advance Against Depreciation Annual Overhaul Annual Performance Review Appellate Tribunal for Electricity Administrative and General Annual Performance Review Aggregate Revenue Requirement Air Pre Heater Annual Overhauling Bharat Heavy Electrical Ltd. Capital Expenditure Consumer Price Index Central Electricity Authority Central Electricity Regulatory Commission Cubic meter Calorific Value Commercial Operation Date Central Power Research Institute Detailed Project Report Electricity Act, 2003 Fuel Adjustment Cost Fuel & Other Cost Adjustment Financial Year Generally Accepted Accounting Principles Gross Calorific Value Gross Fixed Assets Government of Maharashtra Government of Maharashtra-Water Resource Department Induced draft Income Tax Appellate Tribunal Institute of Chartered Accountants of India Interest on Working Capital kilo calories kilo Watt kilowatt hour Liquidity Damages Million Cubic Meter Million Metric Standard Cubic Meters per Day Maharashtra Electricity Regulatory Commission Maharashtra State Electricity Board Maharashtra State Electricity Transmission Company Limited Maharashtra State Load Despatch Centre Maharashtra State Power Generation Company Limited Page 2 of 121
MT MU MW MYT OEM O&M PLF PLR PPA R&M RH RLNG SFOC SH SHPs TVS WPI
Metric Tonnes Million Units Mega Watt Multi Year Tariff Original Equipment Manufacturer Operations and Maintenance Plant Load Factor Prime Lending Rate Power Purchase Agreement Repair and Maintenance Re-heater Re-gasified Liquid Natural Gas Secondary Fuel Oil Consumption Super Heater Small Hydel Plants Technical Validation Session Wholesale Price Index
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Table of Contents
1 BACKGROUND AND BRIEF HISTORY .......................................................................................... 7 1.1 TARIFF REGULATIONS ............................................................................................................ 7 1.2 COMMISSIONS ORDER ON ARR AND TARIFF PETITION FOR FY 2005-06 AND FY 2006-07 ..................................................................................................................................................... 7 1.3 REVIEW PETITION ON TARIFF ORDER FOR FY 2006-07 ................................................... 7 1.4 COMMISSIONS ORDER ON MYT PETITION OF MSPGCL FOR FY 2007-08 TO FY 2009-10 ..................................................................................................................................................... 8 1.5 MSPGCLS APPEAL BEFORE ATE AND ATE JUDGMENT ................................................. 8
1.6 COMMISSION'S ORDER IN THE MATTER OF TRUING UP PROCESS FOR MSPGCL FOR FY 2005-06, FY 2006-07 & FY 2007-08 BASED ON APPELLATE TRIBUNALS JUDGMENT AND CPRI REPORT. ............................................................................................................................. 14 1.7 PETITION FOR ANNUAL PERFORMANCE REVIEW FOR FY 2009-10 AND DETERMINATION OF TARIFF FOR FY 2010-11 ............................................................................. 15 1.8 1.9 2 ADMISSION OF PETITIONS AND PUBLIC PROCESS ........................................................ 16 ORGANISATION OF THE ORDER ......................................................................................... 17
OBJECTIONS RECEIVED, MSPGCLS RESPONSE AND COMMISSIONS RULING .............. 19 2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 2.13 Non Compliance to MYT framework ......................................................................................... 19 Inadequate Time for Filing Suggestions and Objections ............................................................ 19 Capital Expenditure and Capitalisation....................................................................................... 20 Interest Expenses ........................................................................................................................ 22 Depreciation Including Advance Against Depreciation ............................................................. 23 O&M Expense Projections.......................................................................................................... 24 Earned Leave Encashment .......................................................................................................... 25 Material Cost Variance ............................................................................................................... 26 Performance Parameters and Variable Cost ................................................................................ 27 Coal Price .................................................................................................................................... 29 Renovation & Modernisation Schemes....................................................................................... 30 Comparative Analysis of MSPGCL and NTPC Plants ............................................................... 31 Lease Rent................................................................................................................................... 32 Page 4 of 121
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2.14 2.15 2.16 3
Power Purchase Agreement ........................................................................................................ 32 Uniform Tariff for all Generating Stations ................................................................................. 33 ARR for Ensuing Year ................................................................................................................ 33
TRUING UP OF REVENUE REQUIREMENT FOR FY 2008-09 ................................................... 35 3.1 PERFORMANCE PARAMETERS AND FUEL COSTS.......................................................... 35
Gross Generation ................................................................................................................................ 37 Auxiliary Consumption ....................................................................................................................... 40 Station Heat Rate (SHR) ..................................................................................................................... 40 Secondary Fuel Oil Consumption ....................................................................................................... 41 Transit Loss......................................................................................................................................... 42 Fuel Price, Fuel Mix and Calorific Value ........................................................................................... 42 Other Variable Charges ....................................................................................................................... 42 Total Variable Costs ........................................................................................................................... 44 3.2 OPERATION & MAINTENANCE (O&M) EXPENSES .......................................................... 44
Establishment Expenses ...................................................................................................................... 45 Administrative & General Expenses ................................................................................................... 47 Repair & Maintenance Expense .......................................................................................................... 47 3.3 3.4 3.5 3.6 3.7 3.8 3.9 3.10 3.11 3.12 3.13 3.14 4 CAPITAL EXPENDITURE (CAPEX) AND CAPITALISATION ........................................... 48 DEPRECIATION AND ADVANCE AGAINST DEPRECIATION (AAD) ............................. 50 INTEREST EXPENSES AND FINANCE CHARGES ............................................................. 53 Return on Equity ......................................................................................................................... 54 Income Tax ................................................................................................................................. 57 Interest on Working Capital ........................................................................................................ 58 Other Debits ................................................................................................................................ 59 Prior Period Items ....................................................................................................................... 60 Revenue side Truing-up computation ......................................................................................... 61 Reduction in Annual Fixed Charges on account of Reduction in Availability ........................... 62 Sharing of Gains and Losses ....................................................................................................... 63 Provisional Truing up for FY 2008-09 ....................................................................................... 65
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PERFORMANCE PARAMETERS.................................................................................................... 66 Page 5 of 121
4.1 4.2
GENERATING STATIONS OF MSPGCL ............................................................................... 66 STATION-WISE PERFORMANCE PARAMETERS AND TARIFF ...................................... 71 Availability and PLF of MSPGCLs Generating Stations .................................................. 71 Auxiliary Consumption ....................................................................................................... 80 Heat Rate ............................................................................................................................. 84 Transit Loss ......................................................................................................................... 85 Secondary Fuel Oil Consumption ....................................................................................... 87
4.2.1 4.2.2 4.2.3 4.2.4 4.2.5
5 ANALYSIS OF ENERGY AVAILABILITY, ENERGY CHARGE AND ANNUAL FIXED CHARGES FOR FY 2009-10 AND FY 2010-11 ....................................................................................... 89 5.1 5.2 ENERGY AVAILABILITY DURING FY 2009-10 .................................................................. 89 ENERGY AVAILABILITY AND GROSS GENERATION DURING FY 2010-11 ................ 91 Generation from Hydel Stations ......................................................................................... 91 Generation from Thermal Stations ...................................................................................... 91
5.2.1 5.2.2 5.3
VARIABLE COSTS OF THERMAL GENERATING STATIONS .......................................... 92 Fuel Costs for FY 2009-10.................................................................................................. 92 Fuel Price and Fuel Calorific Value for FY 2010-11 .......................................................... 93 Cost of Lubricants, Other Consumables and Water Charges, etc. ...................................... 96 Rate of Energy Charge ........................................................................................................ 96
5.3.1 5.3.2 5.3.3 5.3.4 5.4 5.5 5.6 6
LEASE RENT FOR HYDEL STATIONS ................................................................................. 97 OPERATION & MAINTENANCE (O&M) EXPENSES .......................................................... 98 CAPITAL EXPENDITURE AND CAPITALISATION .......................................................... 100
TARIFF OF MSPGCLS GENERATING STATIONS ................................................................... 113 6.1 6.2 6.3 6.4 TARIFF FOR THERMAL POWER GENERATING STATIONS .......................................... 113 TARIFF FOR HYDEL POWER GENERATING STATIONS ................................................ 116 Provisional Tariff for Paras Unit 4 and Parli Unit 7 ................................................................. 119 APPLICABILITY OF ORDER AND TARIFF ........................................................................ 120
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1 BACKGROUND AND BRIEF HISTORY This Order relates to the Petition filed by the Maharashtra State Power Generation Company Limited (MSPGCL) for approval of Annual Performance Review for FY 2009-10 and tariff determination for FY 2010-11. The Maharashtra State Power Generation Company Limited (MSPGCL or Mahagenco) is a Company formed under the Government of Maharashtra General Resolution No. ELA-1003/P.K.8588/Bhag-2/Urja-5 dated January 24, 2005 with effect from June 6, 2005 according to the provisions envisaged in the Electricity Act, 2003 (EA 2003). MSPGCL has been registered with the Registrar of Companies, Mumbai under the Companies Act, 1956. The provisional Transfer Scheme was notified under Section 131(5)(g) of the EA 2003 on June 6, 2005, which resulted in the creation of following four successor companies and MSEB Residual Company, to the erstwhile Maharashtra State Electricity Board (MSEB), namely, MSEB Holding Company Ltd., Maharashtra State Power Generation Company Ltd., Maharashtra State Electricity Transmission Company Ltd., and Maharashtra State Electricity Distribution Company Ltd.
1.1 TARIFF REGULATIONS The Commission, in exercise of the powers conferred by the EA 2003, notified the Maharashtra Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2005, (hereinafter referred as the MERC Tariff Regulations) on August 26, 2005. These Regulations superseded the MERC (Terms and Conditions of Tariff) Regulations, 2004. COMMISSIONS ORDER ON ARR AND TARIFF PETITION FOR FY 2005-06 AND FY 2006-07 The Commission issued the Order on the ARR Petition of MSPGCL for FY 2005-06 and ARR and Tariff Petition of MSPGCL for FY 2006-07 in Case No. 48 of 2005 on September 7, 2006. 1.2 1.3 REVIEW PETITION ON TARIFF ORDER FOR FY 2006-07 MSPGCL filed a Review Petition (numbered as Case No. 34 of 2006) against the above said Commissions Order. The Commission disposed off the Review Petition vide its Order dated December 7, 2006.
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COMMISSIONS ORDER ON MYT PETITION OF MSPGCL FOR FY 2007-08 TO FY 2009-10 The Commission issued the MYT Order (Case No. 68 of 2006) for MSPGCL for the first Control Period, i.e., FY 2007-08 to FY 2009-10, on April 25, 2007, which came into effect from April 25, 2007. 1.4 1.5 MSPGCLS APPEAL BEFORE ATE AND ATE JUDGMENT MSPGCL filed two Appeals before the Honble Appellate Tribunal for Electricity (ATE), viz., Appeal No. 86 of 2007 on the Commissions Order dated September 7, 2006 on ARR and Tariff for FY 2005-06 and FY 2006-07 in Case No. 48 of 2005, and Appeal No. 87 of 2007 on the Commissions Order dated April 25, 2007 on MSPGCLs MYT Petition in Case No. 68 of 2006. MSPGCL challenged the Commissions Order for FY 2005-06 and FY 2006-07 on the following issues: Administrative and General expenses Transit loss of coal Station Heat Rate Tariff for small hydro projects. MSPGCL challenged the Commissions MYT Order on the following issues: Truing up of the fuel expenses for FY 2005-06 Disapproval of A&G expenses Truing up of depreciation Truing up of other debits Truing up of interest expenses and financing charges Truing up of revenue earned Transit loss of coal Station Heat Rate Auxiliary consumption of various stations Secondary Fuel Oil Consumption O&M expenses for base year for MYT Period Hydel tariff Tariff for small hydro power stations Reactive energy charges
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Normative O&M expenses for hydel plants Employee incentive schemes The Honble ATE dealt with the above issues vide its Judgment dated April 10, 2008 in Appeal Nos. 86 and 87 of 2007. The ATEs ruling on various aspects raised in MSPGCLs Appeals have been summarised below: ATE upheld MSPGCLs appeal regarding allowance of actual A&G expenses for FY 2005-06 for truing up purposes and directed the Commission to true up the said expenses based on actuals, subject to prudence check. ATE also directed the Commission not to consider the A&G expenses towards projects under construction as recoverable through tariff, since such expenses should be capitalised. ATE directed the Commission to consider the transit loss levels in terms of the stationwise loss reduction trajectory approved by the Commission in its Tariff Order for FY 2003-04. ATE directed the Commission to engage an appropriate agency/ies either on its own or through MSPGCL, to carry out a study in a time bound manner (preferably within three months) to reasonably assess the achievable heat rate of the plants owned by MSPGCL and to suggest measures to improve the heat rates over a period of time. ATE further directed the Commission to determine the heat rate based on the outcome of the study and directed that the pre-existing tariffs may be continued, subject to truing up based on the revised heat rates, when available. ATE directed the Commission to take into consideration the independent study and reset the operating parameters, viz., transit loss of coal, station heat rate, auxiliary consumption, and secondary fuel oil consumption, and align its Regulations by prescribing achievable norms and not merely ideal norms. ATE also advised the Commission to ensure that deliberate inefficiencies on the part of the Utility are not passed on to the consumers. Regarding the tariff for small hydro power stations, the ATE stipulated that fixed charge as determined by the Commission is subject to change only on account of redetermination of the lease rent payable to Government of Maharashtra and change in the working capital on account of the change in the expenses towards lease rentals.
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ATE rejected MSPGCLs appeal for entitlement of higher tariff for small hydro projects as the Commissions Order in this regard is applicable only in the case of new projects. The ATE also did not agree with MSPGCLs contention that the Commission has disregarded the provisions of Section 61 (h) of the Electricity Act, 2003, while undertaking the tariff fixation of small hydro projects. ATE upheld MSPGCLs appeal for monthly billing of the incentives and held that any under or over recovery on account of such claims may be adjusted on monthly basis. ATE upheld MSPGCLs appeal as regards truing up of actual fuel expenses till such time the re-assessed improvement trajectory of performance parameters is available. ATE upheld MSPGCLs appeal as regards truing-up of depreciation, while ruling that if the Commission has allowed any extra recovery in the past under the head of depreciation, the same may be adjusted. ATE, while allowing the truing up of other debits due to bad debts written off, held that o Both, MSPGCL and the consumers may bear the burden on this account, and hence, the sum to be recovered from the consumers may be spread over a period of three years, without any interest, to lessen the burden on the consumers. However, the above cannot be taken as a precedent for making similar claims in the future. o The Commission should examine the claim of MSPGCL for truing up on account of miscellaneous losses and write off, sundry expenses, intangible assets written off and intangible assets interest charges for HVDC, subject to prudence check. ATE directed the Commission to consider the interest on working capital on normative basis for FY 2005-06. As regards truing up of other income, the ATE ruled that if the other income cannot be reasonably linked to any cost item allowed by the Commission as a part of the ARR, the same should not be adjusted against the ARR of MSPGCL. As regards O&M expenses, ATE directed MSPGCL to take up the claim for base O&M expense for FY 2006-07 based on the audited accounts subject to prudence check as submitted by the Commission during the course of proceedings before the ATE.
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ATE directed the Commission to devise a mechanism, which addresses the concern of peak and off peak generation from hydel stations, by determining the ratio of peak and off-peak generation after taking into consideration the operational capacity of MSPGCL and system pattern.
ATE held that since MSPGCL is incurring additional expenditure without being compensated for extending support for reactive energy generation/absorption for grid stability, the Commission should either work out a scheme specifically for State power generators for compensation for incurring the additional expenditure or extend the incentive/penalty mechanism applicable for transmission licensees, distribution licensees and open access users, to the State generators. ATE rejected MSPGCLs request to set aside the norm for O&M expenses set by the Commission for old hydel plants and ruled that since the existing hydro electric plants are not covered by the Policy of the Government, it will be inappropriate to compare the O&M expenses of the existing plants with that of the new hydel stations covered under MERC Tariff Regulations. ATE directed the Commission to consider the issue of employee incentive schemes in accordance with law. The ATE, in view of the above findings/observations, set aside the impugned Tariff Orders and allowed the appeals partially, and remitted the matter back to the Commission for redetermination of the tariff for MSPGCL. The Commission asked MSPGCL to submit the impact of the ATE Judgment for each year separately along with appropriate reasons and justification as follows: Impact on Truing up of Revenue and Expenses for FY 2005-06 Impact on Truing up of Revenue and Expenses for FY 2006-07 Impact on Revised estimates of expenses for FY 2007-08 Impact on Projected Expenses for FY 2008-09 The Commission, in the APR Order for FY 2007-08 in Case No. 71 of 2007, has ruled as under:
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The Commission is of the view that as the Orders of the Commission have been set aside and the ATE in its Order has directed the Commission to re-determine the tariff, and as the original Orders in both the cases, i.e., ARR and Tariff Determination for FY 2006-07 and MYT Order for the first Control Period, i.e., FY 2007-08 to FY 2009-10 were issued after following the due public process including public hearing, the re-determination of ARR and tariff for MSPGCL needs to be undertaken after following the due public process including public hearing. The Commission will initiate a separate process for redetermination of tariff for MSPGCL for FY 2005-06, 2006-07 and FY 2007-08. However, this Order has to be issued, since the tariff payable to MSPGCL is a major input cost to MSEDCL, and the Order of MSEDCL cannot be delayed till such time the complete data is submitted by MSPGCL and the due regulatory process is followed to revise the tariff of MSPGCL. As regards norms for performance parameters, viz., transit loss of coal, station heat rate, auxiliary consumption, and specific oil consumption of MSPGCLs generating stations, ATE directed the Commission to undertake an independent study, either through MSPGCL or on its own, and reset the operating parameters and align its Regulations by prescribing achievable norms and not merely ideal norms after taking into consideration the results of such independent study. ATE, in its Order, has also mentioned that till such time the Commission re-determines the Station Heat Rate, MSPGCL may continue with the pre-existing tariff, subject to truing up when revised Station Heat Rates when available. The Commission, abiding by the directions of ATE, will engage an appropriate independent agency to carry out independent study to reasonably assess the achievable performance of MSPGCL stations and to suggest the measures to improve the performance over a period of time. Based on the outcome of the study, the Commission will re-determine the performance parameters of MSGPCL's generating stations, whether higher or lower than the norms stipulated in the Tariff Regulations and norms approved in the Tariff Orders, and will carry out the truing up of MSPGCL's expense and revenue based on re-determined performance parameters. Further, the impact of directions of ATE in respect of following heads of expenses and revenue needs to be assessed based on additional information/clarifications: A&G Expenses Truing up of Depreciation for FY 2005-06
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Truing up of Other Debits for FY 2005-06 Truing up of Interest and Finance Charges for FY 2005-06 Truing up of Revenue earned in FY 2005-06 Truing up of non-tariff income earned in FY 2005-06 and FY 2006-07 Compensation for Reactive Energy generation. The Commission, in its Order dated April 25, 2007 on MYT Petition for the first Control Period, has already undertaken the final truing up of expenses and revenue for FY 2005-06. However, consequent to ATE Order, the truing up of expenses and revenue for FY 2005-06 will have to be undertaken again considering the ATEs directions and based on impact and additional information/clarifications submitted by MSPGCL. The Commission is of the view that it will be preferable to carry out the truing up of all elements of expenses and revenue for FY 2005-06 once again based on impact of truing up and additional information/clarifications from MSPGCL and after following due public process. The Commission has therefore not undertaken the truing up of expenses and revenue for FY 2005-06 again in this Order. The Commission, after following the due public process, will issue an Order which will deal with the truing up of all the elements of expenses and revenue for FY 2005-06. The truing up of expenses and revenue for FY 2005-06 will have certain implications on ARR for FY 2006-07 and for subsequent years. The O&M expenses for FY 2005-06 approved after truing up, will have a bearing on allowable O&M expenses in subsequent years. Similarly, the truing up of depreciation for FY 2005-06 may have effect on depreciation expenses to be allowed for FY 2006-07 and subsequent years. As regards truing up of fuel expenses for FY 2006-07, the Commission is of the view that MSPGCL has already recovered variation in fuel prices through the FAC mechanism and truing up of fuel expenses on account of variation in performance parameters has to be examined based on approved performance parameters upon completion of study by independent agency. The Commission, in this Order, has therefore undertaken the truing up of certain expenses and revenue for FY 2006-07. The Commission will undertake the final truing up of expenses and revenue for FY 2006-07 along with truing up of expenses and revenue for FY 2005-06 and re-determination of performance parameters."
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Subsequently, the Commission appointed M/s Central Power Research Institute (CPRI) to carry out a detailed study of the various performance parameters in accordance with the Honble Tribunals Judgment in Appeal Nos. 86 and 87 of 2007. Based on the draft report submitted by CPRI, the Commission observed certain differences in the figures of actual station heat rate and other performance parameters as provided by MSPGCL to CPRI and as submitted by MSPGCL under its APR Petitions under affidavit. The Commission, vide its letter dated December 30, 2009, asked MSPGCL to submit the reasons for the differences between the actual performance parameters as recorded by CPRI based on the station records and as submitted by MSPGCL for selected Stations under its APR Petitions. MSPGCL submitted its replies vide its letter dated January 5, 2010. Further, the Commission, vide letter dated January 5, 2010 asked MSPGCL to submit the impact of the Honble Tribunals directives and the CPRIs report, which was submitted by MSPGCL on January 8, 2010.
1.6
COMMISSION'S ORDER IN THE MATTER OF TRUING UP PROCESS FOR MSPGCL FOR FY 2005-06, FY 2006-07 & FY 2007-08 BASED ON APPELLATE TRIBUNALS JUDGMENT AND CPRI REPORT. For undertaking the final truing up of expenses and revenue, the Commission asked MSPGCL to submit the impact of the ATE Judgment and accordingly submit the year-wise truing up requirement from FY 2005-06 onwards. MSPGCL submitted the year-wise truing up requirement from FY 2005-06 onwards considering the impact of the ATE Judgment and CPRI Report, on January 8, 2010. The Order in Case No. 16 of 2008 was issued on March 5, 2010 based on Appellate Tribunals Judgment in Appeal No. 86 and 87 of 2007 and CPRI Report. The Commission, in its Order dated March 5, 2010 approved the truing up of expenses and revenue for MSPGCL for FY 200506, FY 2006-07 and FY 2007-08 and provisional truing up of certain elements of the Annual Fixed Cost and variable charges for FY 2008-09, considering the re-setting of norms of various performance parameters and change in the normative expenses, if any, for FY 2008-09.
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1.7
PETITION FOR ANNUAL PERFORMANCE REVIEW FOR FY 2009-10 AND DETERMINATION OF TARIFF FOR FY 2010-11 In accordance with Regulation 9.1 of the MERC Tariff Regulations, the application for the determination of tariff has to be made to the Commission not less than 120 days before the date from which the tariff is intended to be made effective. Further, the first proviso to Regulation 9.1 states that the date of receipt of application for the purpose of this Regulation shall be the date of intimation about the receipt of a complete application in accordance with Regulation 8.4 above: MSPGCL submitted its Petition for APR for FY 2009-10 and tariff determination for FY 201011 on December 31, 2009, based on actual audited expenditure for FY 2008-09, actual expenditure for first half of FY 2009-10, i.e., from April to September 2009 and revised estimated expenses for October 2009 to March 2010, and projections for FY 2010-11. MSPGCL, in its Petition, requested the Commission to Undertake truing up for FY 2008-09 based on actual audited data and normative parameters as applicable for various heads of expenditure; Approve the revised ARR for FY 2009-10 and FY 2010-11 in accordance with the submissions and rationale given in the Petition; Approve the tariff of its generating stations for FY 2010-11; Allow MSPGCL to apply the tariff approved by the Commission from the beginning of FY 2010-11. Subsequently, MSPGCL in its additional submission dated April 8, 2010 requested the Commission to approve provisional tariff for Paras Unit4 and Parli Unit-7. The Commission, vide its letter dated January 29, 2010, forwarded the preliminary data gaps and information required from MSPGCL. MSPGCL submitted its replies to preliminary data gaps and information requirement on February 11, 2010 and March 4, 2010. The Commission held a Technical Validation Session (TVS) on MSPGCLs Petition for approval of APR for FY 200910 and Tariff for FY 2010-11, on February 15, 2010 in the presence of Consumer Representatives authorised under Section 94(3) of the EA 2003 to represent the interest of consumers in the proceedings before the Commission.
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The list of individuals, who participated in the TVS, is provided at Appendix-1. During the TVS, the Commission directed MSPGCL to provide additional information and clarifications on the issues raised during the TVS. The Commission also directed MSPGCL to submit the draft Public Notice in English and Marathi in the format prescribed by the Commission.
1.8 ADMISSION OF PETITIONS AND PUBLIC PROCESS MSPGCL submitted its responses to the queries raised during the TVS on February 15, 2010. MSPGCL submitted the replies to queries raised during TVS on March 22, 2010 and the Commission admitted the APR Petition of MSPGCL on April 8, 2010. MSPGCL also submitted supplementary petition dated April 08, 2010 submitting impact of additional import of coal and asking for provisional true up for Paras unit 4 and Parli unit 7. In accordance with Section 64 of the EA 2003, the Commission directed MSPGCL to publish its application in the prescribed abridged form and manner, to ensure adequate public participation. The Commission also directed MSPGCL to reply expeditiously to all the suggestions and comments received from stakeholders on its Petition. MSPGCL published the Public Notice in Business Standard, Indian Express, Sakal and Maharashtra Times newspapers on April 12, 2010, inviting suggestions and objections from stakeholders on its APR Petition. The copies of MSPGCL's Petition and its Executive Summary were made available for inspection/purchase to members of the public at MSPGCL's offices and on MSPGCL's website (www.mahagenco.in). The copy of the Public Notice and the Executive Summary of the Petition was also uploaded on the website of the Commission (www.mercindia.org.in) in downloadable format. The Public Notice specified that the suggestions and objections, either in English or Marathi, may be filed in the form of affidavit along with proof of service on MSPGCL. The Commission received written suggestions and objections expressing concerns on O&M expenses, performance parameters, fuel expenses, etc. The Public Hearings were held at the following six locations across the State as per the given schedule: Sl. Place/Venue of Public Hearing Time 11.00 hours Date of Hearing Friday, May 14, 2010
1 Amravati: Hall No. 1, Divisional Commissioner's Office Camp, Amravati, District - Amravati
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Sl.
Place/Venue of Public Hearing
Time 11.00 hours 11.00 hours 11.00 hours 11.00 hours 11.00 hours
2 Nagpur: Vanamati Hall, V.I.P Road, Dharampeth, Nagpur, District - Nagpur 3 Nashik: Office of the Commissioner, Niyojan Bhavan, Nasik Revenue Division, Nashik Road, Nashik - 422101 4 Pune : Council Hall, Office of the Divisional Commissioner, Pune, District - Pune - 411011 5 Aurangabad: Meeting Hall, Office of the Divisional Commissioner, Aurangabad, District - Aurangabad 6 Navi Mumbai: Conference hall, 7th Floor, CIDCO Bhavan, CBD, Belapur, Navi Mumbai - 400614
Date of Hearing Saturday, May 15, 2010 Monday, May 17, 2010 Wednesday, May 19, 2010 Friday, May 21, 2010 Saturday, May 22, 2010
The list of objectors, who participated in the Public Hearing, is provided in Appendix- 2. The Commission has ensured that the due process, contemplated under law to ensure transparency and public participation, has been followed at every stage meticulously and adequate opportunity was given to all the persons concerned to file their say in the matter. This Order deals with the truing up for FY 2008-09, APR of FY 2009-10 and determination of tariff of MSPGCL for FY 2010-11. Various suggestions and objections that were raised on MSPGCLs Petition after issuing the Public Notice, both in writing as well as during the Public Hearing, along with MSPGCLs response and the Commissions rulings have been detailed in Section 2 of this Order.
1.9 ORGANISATION OF THE ORDER This Order is organised in the following six Sections: Section 1 of the Order provides a brief history of the quasi-judicial regulatory process undertaken by the Commission. For the sake of convenience, a list of abbreviations with their expanded forms has been included.
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Section 2 of the Order lists out the various objections raised by the objectors in writing as well as during the Public Hearing before the Commission. The various objections have been summarized, followed by the response of MSPGCL and the rulings of the Commission on each of the issues. Section 3 of the Order details the Commission's analysis and ruling on MSPGCLs proposal for final truing up of expenses and revenue for FY 2008-09. Section 4 of the Order details the performance parameters as approved by the Commission in MYT Order for first Control Period, MSPGCLs proposal for performance parameters during FY 2009-10 and FY 2010-11 and the Commissions approved performance parameters for FY 201011. Section 5 of the Order comprises the review of performance for FY 2009-10 (including provisional truing up) and the Commission's analysis of various components of Energy Charges and Annual Fixed Charges of MSPGCLs Stations for FY 2010-11. Section 6 of the Order details the tariff design for MSPGCLs Stations and the approved Annual Fixed Charges and Energy Charges for FY 2010-11.
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OBJECTIONS RECEIVED, MSPGCLS RULING
RESPONSE AND COMMISSIONS
2.1 Non Compliance to MYT framework M/s Vidarbha Industries Association and M/s ISPAT Industries Limited submitted that the Petition filed by MSPGCL should be filed under Multi Year Tariff. MSPGCL had to file Petition for 5 years based on future projections; however, they have filed for FY 2010-11 only. MSPGCLs Response MSPGCL submitted that it did not file a MYT Petition, as the first Control Period under MYT framework was pertaining to the period from FY 2007-08 to FY 2009-10. The new MYT Regulations are yet to be finalized by the Commission. Moreover, the single year APR Petition for FY 2010-11 was filed based on the directive of the Commission. Commissions Ruling The Commission has initiated the process of framing new MYT Regulations for the next Control Period. In the meantime, the Commission directed the Generating Companies and Utilities to file ARR and Tariff Petition for FY 2010-11 and accordingly, MSPGCL has filed a single year Petition for approval of Annual Performance Review for FY 2009-10 and tariff for FY 2010-11.
2.2 Inadequate Time for Filing Suggestions and Objections M/s Vidarbha Industries Association and ISPAT Industries Limited submitted that the Petitioner has failed to comply with the requirement of timely submission of its filings. The analysis of Petition and its implications on the consumers requires substantial amount of time and effort and adequate time has not been provided to the public for filing their comments. MSPGCLs Response MSPGCL submitted that it was awaiting the finalization of the MYT Regulations for the next Control Period, under which, an MYT Petition was envisaged to be filed during the year. However, pending finalization of the same, based on the directive of the Commission, MSPGCL has met the deadline for December 31, 2009 for filing the said Petition. Commissions Ruling
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As mentioned in Section 1 of the Order, MSPGCL submitted its Petition for approval of Annual Performance Review for FY 2009-10 and tariff determination for FY 2010-11 on December 31, 2009. The Commission communicated the data gaps in the Petition and held a Technical Validation Session on MSPGCLs Petition, in the presence of authorised Consumer Representatives. Upon submission of revised Petition by MSPGCL incorporating the additional information and replies to queries raised by the Commission, the Petition was admitted for further public process on April 8, 2010. The Commission directed MSPGCL to host the detailed Revised APR Petition and formats in MS Excel on its website for easy download by interested stakeholders.
The Public Notice was published on April 12, 2010 in leading newspapers and the public hearings were scheduled from May 14, 2010 to May 22, 2010. Thus, adequate time, as envisaged under the Regulations has been provided to stakeholders to submit their views/suggestions before the Public Hearing, and additional time of 7 days was also provided to file rejoinders. In any case, since tariff determination is a time bound exercise under Section 64 of the EA 2003, no further relaxation of time could be made for submission of suggestions and objections by the public in the interests of consumers as the same would have resulted in delay in issuing of the Tariff Order.
2.3 Capital Expenditure and Capitalisation M/s ISPAT Industries Limited, M/s Vidarbha Industries Association and others submitted that actual Capital Expenditure (capex) incurred in FY 2008-09 is higher than that approved by the Commission, whereas, the estimated figures for capex for FY 2009-10 have been doubled as compared to approved MYT Petition. MSPGCL should submit the reasons behind delayed capitalisation of expenses and to submit the reasons behind considerable increase in the capital expenditure in FY 2010-11. M/s Vidarbha Industries Association, M/s ISPAT Industries Limited and others submitted that there is a gap between the actual capitalisation provided in the workings and the amount approved by the Commission. For FY 2007-08, the audited capitalisation figures are lower than approved amount, whereas in FY 2008-09, the audited capitalisation is higher than that approved by the Commission.
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Further, the non-capitalisation of certain projects leads to non-accrual of benefits and affects the performance of the Utility. The excess capitalisation over approved amount has not been justified by any description of physical progress. Hence, they requested the Commission to direct MSPGCL to provide the justification on physical progress of projects and justification of projections for FY 2010-11. MSPGCLs Response MSPGCL submitted that there are several schemes that are currently being implemented in various power stations. It may be appreciated that at times, the parts for such old generating assets are not readily available and therefore, need to be manufactured using reverse engineering techniques. This sometimes leads to delay in ordering, causing spillover of the schemes to the next financial year. Regarding the increase in projected Capex for FY 2010-11, MSPGCL submitted that it is in the process of implementing the recommendations made by M/s CPRI for bringing in technical improvements in the stations. MSPGCL is preparing the DPRs for such schemes, which will be submitted to the Commission for approval shortly. MSPGCL submitted that the consumer has produced tables, which represent that the actual capitalization is either lower than the approved capitalization or vice versa. In this regard, MSPGCL submitted that the capitalization of a scheme depends upon the month in which the scheme is implemented. A scheme, if started in May (say) may get capitalized in the month of November (assuming that the implementation period is around 6 months). However, in case due to some practical difficulties, the scheme gets started in the month of December, it will get capitalized only in the next financial year even if the implementation period remains the same. In certain cases, the requirement of reverse engineering for very old assets may require complete spillover of the scheme to the next financial year. Besides, spillover may also happen in case adequate time for shut down of Units is not available on account of persistent grid shortages. Under such cases, the schemes are bundled to be undertaken as soon as MSPGCL gets an opportunity in the planned overhauls. Due to such practical reasons, the actual capitalization of the scheme may deviate from the approved capitalization. MSPGCL has transparently submitted the details of capex incurred during the previous year, expected capex during the current year and likely capital expenditure in the ensuing year. All such details have been provided in Forms F5.3 and F5.4 of the main submission. MSPGCL
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submits that apart from the DPR schemes, which are examined in detail by the Commission, bulk of the capital expenditure comprises of small schemes, which do not have much scope of cost overrun. However, with the recent directive of the Commission, even such small schemes are to be clustered and will get classified into the DPR schemes, which will also get monitored by the Commission in the long run. With such regulatory arrangements in place, it is expected that the apprehensions of the consumers will get answered more explicitly. As far as projection of capex and capitalisation during FY 2010-11 is concerned, MSPGCL submitted that the capex is based on the recommendations of M/s CPRI and subject to approval of the Commission, the projected capex may get capitalised to a large extent. The capex planned in FY 2010-11 is subject to approval of the Commission and the actual progress will be submitted in the subsequent Petition of MSPGCL. Commissions Ruling The Commission has taken note of the concerns raised by several stakeholders regarding the capital expenditure being undertaken by MSPGCL, and the impact of the same on the tariff. The Commission has carried out a detailed analysis of the capital expenditure and capitalisation and the treatment of the same on tariff in Section 5 of this Order. The Commissions computations in this regard have been elaborated subsequently in Section 3 on truing up of expenses and revenue for FY 2008-09 and in Section 5 while approving the revised revenue requirement for FY 200910 and FY 2010-11.
2.4 Interest Expenses M/s ISPAT Industries Limited, M/s Vidarbha Industries Association and others submitted that the interest expenses shown are very high (the interest rate for some of the loans is as high as 1517%), and MSPGCL should submit the reasons behind the high interest bearing loans along with loan drawal and repayment information. MSPGCLs Response MSPGCL submitted that there had been a levy of Debt Restructuring premium charged to revenue. On addition of such premium, the net interest expenses appears to be on the higher side. The actual interest rates are not higher than 13-14% in any case. Further, MSPGCL has been submitting copies of loan agreements to the Commission as and when required, for prudence check by the Commission. MSPGCL understands that the
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Commission will undertake the necessary prudence check before allowing such interest expenses as part of the tariff.
Commissions Ruling The Commission has examined the interest expenses for FY 2008-09 in Section 3 while carrying out the truing up, and for FY 2009-10 and FY 2010-11 in Section 5 of the Order. The Commission has considered the addition to the loans corresponding only to the schemes approved by the Commission and hence, the interest expenses as approved by the Commission have reduced substantially as compared to interest expenses projected by MSPGCL.
2.5 Depreciation Including Advance Against Depreciation M/s Vidarbha Industries Association, M/s ISPAT Industries Limited and others submitted that MSPGCL has not followed the MERC Tariff Regulations for computing depreciation including AAD. MSPGCL has stated that the apportionment has been done on the basis of capacity of individual plants. It is inappropriate for the Utility to carry out such segregation based on capacity of the plant. Further, it is observed that the depreciation projected by MSPGCL is around Rs. 341.18 crore, which is much higher than the actual loan repayment of Rs. 199.84 crore in FY 2008-09 as per audited accounts. Therefore, MSPGCL should submit the reasons behind AAD sought by MSPGCL. MSPGCLs Response MSPGCL submitted that the issue of AAD is sub-judice in Appeal 191 of 2009 and MSPGCL will abide by the decision of the ATE. However, MSPGCL has submitted the entire rationale for asking AAD in its Petitions. MSPGCL has been requesting the Commission to work out appropriate methodology for rational allocation of loan.
Commissions Ruling The Commission, in accordance with the treatment in previous Orders, has not computed the advance against depreciation by allocating loans to various stations as the basic objective of the advance against depreciation is to provide cash shortfall for meeting the repayment obligations,
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and for the Company as a whole, the total depreciation allowed by the Commission is much higher than the total repayment.
2.6 O&M Expense Projections M/s Vidarbha Industries Association, M/s ISPAT Industries Limited and others submitted that the MERC Tariff Regulations clearly stipulates the methodology for calculating O&M expenditure, and projections made by MSPGCL are not in line with the specified methodology. The Commission adopted a different methodology to arrive at the escalation rate of 5.38% whereas; MSPGCL has varied even from this, to arrive at the escalation rate of 6.1%. In the APR Petition, MSPGCL has pointed out that barring the new items in FY 2008-09 the base O&M expense has actually increased by 2.88%. The purpose of allowing an escalation was to enable the Petitioner to create provisions for future liabilities that might occur. The actual escalation in base O&M expense by MSPGCL was only 2.88%, thus, the additional escalation being allowed should have been used to meet future liabilities. MSPGCLs Response MSPGCL submitted that the base expenses of FY 2006-07 have been considered for the purpose of estimation of approved O&M expenses from FY 2007-08 onwards. The Commission agreed to the rationale submitted by MSPGCL that the O&M expenses on generation assets during the erstwhile MSEB period were on the lower side. Further, the escalation rates have been worked out by the Commission based on CPI and WPI indices in the MYT Order. MSPGCL submitted that the base expenses of FY 2006-07 have been considered for the purpose of estimation of approved O&M expenses from FY 2007-08 onwards. MSPGCL submitted that the escalation rate has been computed correctly. However, the same may be examined by the Commission for prudence. Escalation rates are applied to cover the expenses envisaging certain increase in base year expenses. Working out such expenses on the conservative side may have financial impact on the working of the Utility. In any case, MSPGCL understands that such charges are subject to true-up and are not entirely retained by the Utility. MSPGCL submitted that the actual increase in O&M expenses, excluding expenses that result in an increase in the base year expenses (viz., leave encashment, etc.) is around 2.88%.
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MSPGCL submitted that for FY 2008-09, the impact of pay revision arrears has been considered as Rs 95 Crore. MSPGCL submitted that the items considered under Repairs and Maintenance expenses are recurring in nature and are essentially consumable items. The one-time expenses are largely considered as part of the capex schemes for which, a separate claim is being placed. MSPGCL submitted that the annual accounts are verified by statutory auditors and are also subject to prudence check by the Commission. Being a public Company, MSPGCL is following all accounting practices as per the applicable laws/rules. MSPGCL is open to share the details of the accounts in case required by the Commission for undertaking any prudence check of the same. Commissions Ruling The Commission, in its Order dated March 5, 2010 in Case No. 16 of 2008 carried out the truing up of O&M expenses for FY 2005-06 and FY 2006-07. In accordance with the ATE Judgment in Appeal No. 86 and 87 of 2007, the Commission in its Order dated March 5, 2010 considered the actual expenses for FY 2006-07 as base expenses and revised the O&M expenses for the first Control Period i.e., from FY 2007-08 to FY 2009-10. The Commission, in this Order, for carrying out the truing up of O&M expenses for FY 2008-09 has considered the revised O&M expenses approved in its Order dated March 5, 2010 as base O&M expenses. The Commission has also considered the pay revision arrears as submitted by MSPGCL. The details of O&M expenses approved by the Commission for FY 2008-09 after sharing of gains and losses as per provisions of MERC Tariff Regulations are discussed in Section 3 of the Order.
2.7 Earned Leave Encashment M/s Vidarbha Industries Association, M/s ISPAT Industries Limited and others submitted that allowing escalation in cost is to enable the MSPGCL to make yearly provisions for future costs including pay revision. However, MSPGCL has asked for Rs. 35.47 Crore additional cost for earned leave encashment amortisation over and above the escalation. MSPGCLs Response The Commission, in its APR order dated August 17, 2009, had allowed Rs 177.37 Crore towards provisioning for earned leave encashment liability towards existing power stations of MSPGCL,
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but had stipulated that such expense would be spread over five years starting from FY 2007-08. Accordingly, the Petitioner has added the impact of earned leave encashment liability for FY 2009-10 and FY 2010-11 at Rs 35.47 Crore each year. Commissions Ruling The Commission agrees with the MSPGCLs reply in the matter and the Commission has also considered the same while approving the O&M expenses for FY 2009-10 and FY 2010-11.
2.8 Material Cost Variance M/s ISPAT Industries Limited and others submitted that the primary expense on this account has been incurred for recognising loss on account of old stores. The amount of Rs. 59.23 Crore cannot be established from annual accounts provided along with the Petition. Holding obsolete stock to an extent of Rs. 59.23 Crore signifies that the management is unable to utilise the stock in an efficient manner leading to deterioration of assets. Further, MSPGCL has requested for a true up of Rs. 0.10 crore on account of bad debts written off. In FY 2008-09 MSPGCL also incurred additional O&M and Coal cost. Therefore, the Objectors requested the Commission to direct MSPGCL to undertake proper steps to avoid additional expenditure and disallow the same.
MSPGCLs Response MSPGCL submitted that material cost variance is an integral part of the core business of the Company, and therefore, any such incidental expenses needs to be allowed in the tariff. There is significant expense on account of recognition of loss on obsolescence of old stores. The statutory auditors of MSPGCL had observed that the company had not made any provision on slow moving, non-moving, obsolete and damaged items of stock". Accordingly MSPGCL has made a provision equivalent to 100% value of obsolete stock, 60% value of non-moving stock and 30% value of slow-moving stock in its audited accounts amounting to Rs 57.64 crore. MSPGCL submitted that such items were procured earlier for safe and smooth operations of plants, however, the same were not required during the life of such equipments. MSPGCL quoted from the Judgment of ATE in Appeal No.s 86 and 87 of 2007 regarding recovery of bad and doubtful debts pertaining to MSEB period. ATE had ruled that It can reasonably be inferred that had MSEB continued in its earlier form, the Commission would have
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taken a decision on the basis of actual facts of the matter but at the same time delay in claiming such irrecoverable sums and then passing on the same to paying consumers results into greater uncertainties for the consumers. Disallowing any pass through in the form of tariff would have an adverse impact of the financial position of the Appellant on the one hand and passing on entire non-recovered amount after such a long period to the consumers would not be fair from the consumers point of view on the other. Hence, under the circumstances we feel it to be reasonable that both, the Appellant and the consumers may bear the burden on this account. The sum to be recovered from the consumers may be spread over a period of three years, without any interest, to lessen the burden on the consumers.
In view of the above, MSPGCL should be allowed to recover the bad and a doubtful debt, which in this case, generally pertains to advances made to suppliers for implementing various contracts. MSPGCL submitted that such costs are incidental to the core business of the Company. Moreover, such cost is not even 0.05% of the total ARR of the Company. However, MSPGCL endeavours to ensure that there is no such incidence that unnecessarily inflates the cost of its operations. Commissions Ruling The Commission has deliberated on this issue in detail in its Order dated March 5, 2010 in Case No. 16 of 2008 while carrying out the truing up of ARR for FY 2005-06, FY 2006-07 and FY 2007-08 in accordance with the ATE Judgment in Appeal No. 86 and 87 of 2007.
2.9 Performance Parameters and Variable Cost M/s ISPAT Industries and others submitted that in the true up Petition for FY 2008-09, MSPGCL projected fuel cost of Rs. 6952.32 crore against the Commissions approved amount of Rs. 6223.15 crore. The reasons provided by MSPGCL are, decrease in gross generation, change in GCV and price of the fuel, change in imported coal and washed coal quantities, and deviation in technical parameters. Based on the previous submissions made by MSPGCL, one of the recurring reasons for increase in fuel cost was higher secondary fuel oil consumption due to wet coal related issues during rainy season. Since this is a repetitive situation leading to increase in fuel expenses, they requested the Commission to direct MSPGCL to provide information on steps taken to overcome this issue.
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M/s ISPAT Industries Limited and others submitted that all the actual performance parameters of the plant in FY 2008-09 were below approved values, which resulted in increase in variable cost by 46% against approved values. They requested the Commission to direct MSPGCL to provide reasons for the significant gap between actual PLF and target PLF during AprilSeptember 2009. Further, in compliance with the ATE Judgment, the Commission appointed CPRI to carry out a comprehensive study of the operational parameters for variable expenses. Based on CPRI Report, MSPGCL has requested to allow the recovery of normative fuel cost of Rs. 6267 crore. They requested the Commission to not take the results of the Report and to adhere to the existing normative parameters, which are the reflection of the cost and operational effectiveness of MSPGCL. MSPGCLs Response MSPGCL submitted that it has no control on coal getting wet during rail route transportation. However, on receipt, MSPGCL is taking all possible measures to retain the quality of coal. The stacked coal is covered with tarpaulin in rainy season to avoid deterioration of quality of coal. MSPGCL highlighted that in FY 2008-09, on account of the coal shortages, where barely 1-2 days of coal stock was available with the stations, the quality of coal as received was directly fed to the boilers. The problem aggravates during rainy season when wet and sticky coal is directly fed for power generation. Such issues with coal cannot be overcome by any power plant operator. MSPGCL submitted that the Terms of Reference for the appointment of M/s CPRI were decided by the Commission. The agency had submitted its report to the Commission and the Commission has already been apprised of the key findings of the report. The report prescribes implementation of certain schemes for improvement in the technical performance. MSPGCL is religiously pursuing implementation of such schemes for which detailed DPRs will be submitted to the Commission shortly. MSPGCL understands that the performance parameters suggested by CPRI adequately address the practical difficulties of MSPGCL and the recommendations of such a third party report need to be taken into consideration while deciding on the normative performance parameters. It may be highlighted that setting up of optimistic performance parameters without taking into cognizance the actual ground conditions has led to significant disallowance of fuel cost in the past. The same were however, allowed later, pursuant to the
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findings of the CPRI study. It may therefore, be prudent that any decision on the normative performance of the Units takes into cognizance the detailed findings of the CPRI report. MSPGCL submitted that the approved norms of PLF and availability were based on submission of MSPGCL in the MYT Petition, which were calculated as per CEA methodology. The Commission has approved an almost similar norm, however, as per MERC Tariff Regulations. MSPGCL has been submitting that such normative parameters are not practically achievable. MSPGCL has submitted the achievable performance parameters (SHR, Auxiliary Consumption, and Secondary Fuel Oil Consumption) along with the rationale for the same in the APR Petitions. MSPGCL expects that the Commission will accept the rationale and approve such norms, which reflect a more realistic scenario as per the CPRI report.
Commissions Ruling For assessment of actual and achievable performance parameters, the Commission appointed M/s Central Power Research Institute (CPRI) to carry out a detailed study of the various performance parameters and based on the findings of the study and after due regulatory process, the Commission in its Order dated March 5, 2010 in Case No. 16 of 2008 has re-set the performance parameters considering the CPRI recommendations. The details of performance parameters approved by the Commission for FY 2009-10 and FY 2010-11 are discussed in Section 4 of this Order.
2.10 Coal Price M/s ISPAT Industries Limited and others submitted that MSPGCL has projected imported coal price at around Rs. 6717/MT. They submitted that for FY 2010-11, imported coal price of about 4600/MT may be considered considering the trends in imported coal prices. They further submitted that the long-term rates are generally expected to be lower than the spot purchase rates and hence, they asked MSPGCL to provide information on the actions taken to arrive at a competitive contractual price for import of coal. MSPGCLs Response International coal prices have been experiencing wide fluctuations over the past several years. Besides the volatility in prices, there are several other factors like ocean freight, handling charges. and inland transportation charges that need to be considered for procurement of
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imported coal. The escalation rates for these sub components as considered by CERC for release of payments to the generators show that the escalation in price of coal sub component had been as high as 112% during April 2008-Septemeber 2008. In order to avoid such risks in the overall process, for procuring its small quantity of imported coal, MSPGCL prefers to enter into short term firm price contracts for one year. MSPGCL furthers submitted that the procurement of imported coal even for the period less than one year, is done through a competitive bidding process. Considering the increasing requirement of imported coal, MSPGCL is exploring options to procure imported coal on long-term basis and is planning to appoint a Consultant to explore different possible options of procurement/tie up of imported coal on long-term basis and cost benefit and feasibility study of options.
Commissions Ruling The Commission has addressed the issue of coal prices in Section 5 of the Order while determining the Energy Charges. As regards reduction in fuel prices, the Commission has obtained and analysed the month-wise actual fuel prices for the period from January 2010 to March 2010 and has considered the same for projecting the fuel costs for FY 2009-10.
2.11 Renovation & Modernisation Schemes M/s Vidarbha Industries Association, M/s ISPAT Industries Limited and others submitted that one of the reasons for non-achievement of norms as submitted by MSPGCL was vintage of power plants. They requested the Commission to direct MSPGCL to provide the details of Renovation & Modernisation schemes.
MSPGCLs Response MSPGCL submitted that several Renovation & Modernization schemes have been planned though the aid of World Bank in the XIth Plan and the details of the schemes are as follows: 1. Koradi TPS 210 MW Unit No.6 2. Chandrapur STPS 210 MW Unit No.1 and 2 3. Bhusawal TPS 210 MW Unit No.2
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4. Parli TPS 210MW Unit No.3
Besides, MSPGCL is implementing the recommendations of CPRI and for this purpose the capex schemes are detailed out in form 5.3 of the petition. Commissions Ruling The Commission has taken note of Renovation & Modernization schemes planned by MSPGCL and the Commission directs the MSPGCL to submit the detailed status of R&M schemes planned by it within one month from the date of issue of this Order.
2.12 Comparative Analysis of MSPGCL and NTPC Plants M/s Vidarbha Industries Association and M/s ISPAT Industries Limited provided the comparison of performance of MSPGCL's stations with NTPC Korba, which is the oldest power plant of NTPC commissioned in 1983 and Badarpur, which was commissioned in 1973. They submitted that the fixed cost of generation for Paras and Khaperkheda stations are higher than that of the NTPC plants. The per unit O&M costs of these plants are also high as compared to the same parameters of the NTPC stations.
MSPGCLs Response MSPGCL submitted that the consumers have given a comparison of Paras with that of other Units. In this regard, MSPGCL submitted that Paras Unit is under consideration for scrapping and the Unit is being run with bare minimum R&M expenses, in order to mitigate the grave power shortages in the State. Besides, MSPGCL submitted that it is not correct to compare fixed cost per unit or O&M cost per unit of two stations of different capacities. The comparison of fixed cost per unit itself holds no meaning because the fixed cost does not increase in proportion to the capacity of a station. It is obvious that a 2100 MW Korba Station is likely to produce more units. Dividing the fixed cost with such high generation will obviously reduce the per unit fixed cost. However, it cannot be used to say if any one of the plants is operating efficiently or not. For example, it may be observed that Khaperkheda plant in absolute terms is getting just half the O&M expenses in comparison to Korba units. However, in per unit terms, the expenses of
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Khaperkheda are relatively higher. Therefore, such comparison may be inconclusive for the purpose of comparing the technical performance. Commissions Ruling The tariff for the generating stations of MSPGCL has been determined in accordance with the MERC Tariff Regulations. Further, while inter-Utility comparison has its advantages, there are certain disadvantages too, and comparison has to be done between Plants of similar capacity and vintage.
2.13 Lease Rent Shri N. Ponrathnam, an authorised Consumer Representative, submitted that the concept of Hydro Power Generating Stations paying rent to State Government or State Government collecting money as lease rent from MSPGCL in any form is illegal and should not be approved. Commission Ruling The Commission does not find any merit in the objection, as lease rentals are charges to be paid by MSPGCL to GoM, as the hydel generating stations are owned by GoM which has given these stations on lease to MSPGCL for power generation.
2.14 Power Purchase Agreement Shri N. Ponrathnam submitted that the Power Purchase Agreement (PPA) between MSPGCL and MSEDCL should be approved by the Commission. The total generation of MSPGCL is purchased by MSEDCL as on date. PPA should be executed to fix the price of electricity and to ensure the availability of electricity in the time of shortage. The Fuel Adjustment Cost (FAC) Charges should be specified separately in PPA and it should be transparent to the public.
Commissions Ruling As regards the issue of FAC computations, it is clarified that the FAC computations are being carried out by Utilities and being vetted on post-facto basis by the Commission in accordance with the MERC Tariff Regulations. It is also clarified that the PPA between MSPGCL and
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MSEDCL has been approved by the Commission after following the due regulatory process, including Public Hearing.
2.15 Uniform Tariff for all Generating Stations Shri. N. Ponrathnam submitted that the electricity is produced by various means such as Hydro Power, Thermal Power, Wind Energy, Nuclear Power, Geothermal Energy, Solar Energy, etc., and the cost of generation varies with size of the generating station and the fuel. He suggested that the energy produced by coal should be taken as the benchmark tariff (cost of generation of electricity supply) and the units generated by all power stations with similar generation profile should be charged the same.
Commissions Ruling As regards the suggestion of uniform tariff for all generating stations, the Commission does not find any merit in the suggestion, as each generating station has different capital cost based on the capacity of the plant and vintage of station, the fuel mix at each generating station is different, and landed fuel cost at each generating station varies depending upon the fuel mix and source of fuel. In such circumstances, it is not possible to approve uniform tariff across all the generating stations, as the generation tariff has to reflect the cost of generation of the respective generating station.
2.16 ARR for Ensuing Year Maharashtra Rajya Veej Grahak Sangathana submitted that approved ARR for FY 2009-10 was Rs 9812.29 Crore. For FY 2010-11, the total ARR is estimated at Rs. 11175.34 Crore which is higher by Rs.1000 Crore, as compared to ARR approved by the Commission for FY 2009-10. Therefore, ARR for FY 2009-10 and 2010-11 should be kept same as that in FY 2008-09, and the Commission should not approve inappropriate reduction in generation and inappropriate increase in expenditure.
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Commissions Ruling The Commission does not find any merit in the objection as input cost and other costs are bound to vary year on year. Further, the total ARR also depends upon the quantum of power generation and if the power generation increases, the ARR is bound to increase. It is clarified that the ARR for the generating stations of MSPGCL has been determined in accordance with the MERC Tariff Regulations.
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TRUING UP OF REVENUE REQUIREMENT FOR FY 2008-09
MSPGCL, in its Petition for Annual Performance Review for FY 2009-10 and determination of tariff for FY 2010-11, has included a Section on the final truing up of expenditure and revenue for FY 2008-09 based on actual expenditure as per audited accounts. MSPGCL has provided the comparison of actual expenditure with the expenditure approved by the Commission along with the reasons for deviations. The Commission, in its MYT Order in Case No. 68 of 2006 dated April 25, 2007 stipulated that the gains and losses on account of controllable and uncontrollable factors will be shared between the Generating Company and the Licensee at the time of truing up of ARR based on actuals, in accordance with Regulation 19 of the MERC Tariff Regulations. 3.1 PERFORMANCE PARAMETERS AND FUEL COSTS MSPGCL, in its Petition, submitted that the total actual fuel cost for FY 2008-09 as per Audited Accounts for the existing stations (excluding Paras Unit-3 and Parli Unit-6) was Rs. 6953.32 Crore (including other fuel related costs of Rs. 270.66 Crore) as against the approved amount of Rs. 6223.15 Crore (including other fuel related costs of Rs. 184.82 Crore). MSPGCL submitted the key reasons for the deviation in fuel cost as follows: Decrease in gross generation, Change in GCV and price of fuel, Change in quantities of imported coal and washed coal, and Deviation in technical parameters. MSPGCL provided the financial impact of each of the above mentioned aspects as given in Table below: Table: Element-wise impact of deviation on Actual Fuel Cost for FY- 2008-09 (Rs Crore) Particulars Decrease in gross generation Change in GCV and Price of fuel Change in Imported coal and washed coal quantities
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Impact -557 318 -71

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Particulars Deviation in technical parameters Change in Gas Quantity & price at Uran Total Impact In this regard MSPGCL, submitted as follows:
Impact 710 244 644
a. Decrease in Generation MSPGCL submitted that the decrease in generation led to a reduction in the overall fuel cost by Rs 557 Crore. MSPGCL further submitted that one of the key reasons for reduction in generation is because the Commission has considered a PLF of 80% for the purpose of projecting the gross generation, however, the actual PLF is significantly lower than the normative PLF for 2008-09. MSPGCL submitted that the major reason for reduction in PLF is the increased planned and forced outages of the Units. MSPGCL added that that the reduction in PLF results in an increase in auxiliary consumption and secondary fuel oil consumption, which eventually increases the effective SHR of the station. MSPGCL further submitted that besides the above mentioned reasons, the generation was further reduced on account of backing down of stations due to non-availability of transmission lines or due to reduction in demand from the system. On this account, MSPGCL was not able to supply around 67.39 MU in 2008. MSPGCL submitted that such grid issues not only reduce the net generation of the stations, but also lead to significant increase in fuel oil consumption (required for flame stability) thereby increasing the Station Heat Rate of the station. b. Change in CV and Price of the fuel MSPGCL submitted that the other important factor that led to deviation in fuel cost is the variation in fuel price and calorific value of fuel. MSPGCL submitted a comparison of the actual price and GCV of the fuel vis--vis that considered by the Commission. MSPGCL submitted that the change in calorific value and price of the fuel has led to an increase in fuel cost by approximately Rs. 318 Crore. c. Change in quantum of imported and washed coal
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MSPGCL submitted the actual quantum of imported and washed coal vis--vis the consumption considered by the Commission and submitted that that the impact of change in quantity of washed coal and imported coal is around Rs. 71 Crore. d. Deviation in Performance Parameters of the stations MSPGCL submitted that the normative performance parameters approved by the Commission for the purpose of deriving the variable cost of generation were very optimistic MSPGCL submitted that it had contested such optimistic performance parameters before the ATE and as per the directions of the ATE, the Commission had appointed M/s CPRI for estimating the current level of performance of the stations of MSPGCL and recommend the investments required to improve the performance of the Units. CPRI has determined the current level of performance of the stations by operating the Units at a load factor of 80% and have considered other factors influencing the performance of the Units. Accordingly, CPRI has suggested the current level of performance for such Units, viz., the current SHR and auxiliary consumption and has also given an estimate of the stacking losses prevalent at the stations. MSPGCL highlighted that if the parameters as derived by CPRI are applied to the actual consumption of imported and washed coal and further considering the actual price and CV of fuels, the cost as per CPRI parameters is higher than the actual cost of generation as per the books of accounts. MSPGCL further submitted that the Report submitted by M/s CPRI defined the current state of operations of the stations duly taking into account the operational constraints and other ground realities. MSPGCL submitted that considering such realistic operational parameters as demonstrated in the CPRI report, MSPGCL understands that its claim for true-up in fuel cost may be approved by the Commission. However, the above true-up amount pertaining to price of the fuel is already recovered in the FAC claims and such recovery of cost will be considered in the revenue side true-up and therefore, no separate treatment has been considered by MSPGCL.
Gross Generation
The actual gross generation achieved by MSPGCL during FY 2008-09 is 44506 MU as compared to gross generation of 48194 MU approved by the Commission in APR Order.
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The summary of station-wise gross generation as approved by the Commission in its APR Order for FY 2008-09 and actual achieved during FY 2008-09 is given in the Table below:
Stations Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Total
Gross Generation (MU) APR Order Actual 5993 385 3329 6167 4695 7288 16399 3938 48194 6320 341 3042 5698 3919 5744 15004 4438 44506
For the purpose of truing up of expenses and revenue for FY 2008-09, the Commission has considered the actual gross generation. The Commission approved the Station-wise Availability in its MYT Order for each year of the Control Period. The Stations for which MSPGCL projected the availability lower than 80% (i.e., Bhusawal and Parli); the Commission approved the availability of 80%. However, for Uran Gas based station, considering the short supply of gas, in its MYT Order, the Commission approved the availability as projected by MSPGCL for recovery of full fixed charges. For the Control Period, the Commission approved the Station-wise PLF considering the PLF projections of MSPGCL, and for stations for which MSPGCL projected PLF lower than 80%, the Commission considered the PLF of 80%, since in times of severe supply shortage, the PLF will be equal to Availability, and full recovery of fixed costs is possible only when the normative availability of 80% is achieved. The Commission, in its Order dated March 5, 2010 in Case No. 16 of 2008, considered the actual availability and PLF from FY 2005-06 to FY 2007-08 and did not disallow any amount pertaining to Annual Fixed Charges for existing stations on account of lower availability. Further
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the Commission in the said Order stated that From FY 2008-09 onwards, the Commission would consider the targets for Unit-wise availability and PLF based on CPRI recommendations. As regards the availability and PLF, the recommendations made by CPRI in its reports are as follows: Koradi units (1-4) have never exceeded 80 % PLF in their lifetime in spite of de-rating. As per steady trends in Figure 3, the Units the achievable PLFs are around 65 %. As per the trends Nasik units (1-2) are capable of achieving PLFs of around 75 % after de-rating. Bhusawal (Unit 1), Paras (Unit 2) and Parli units (1 & 2) are capable of achieving PLF of 80 %. Units of 210 MW and above can easily achieve the PLF of 80 % with focused attention on coal quality, R & M programs, adherence to planned maintenance schedule, leakage control, operational optimization, etc. Accordingly, as may be observed from the above recommendations of CPRI, except for some of the Units of generating stations, other Units are capable of achieving 80% Availability and PLF. For Koradi and Nasik Units for which CPRI has recommended lower PLF, the Commission has considered the recommended values and in order to derive the station wise Availability and PLF, weighted average Availability and PLF has been considered by the Commission. The Commission has considered the actual station-wise availability as certified by Maharashtra State Load Despatch Centre. As the availability figures provided by MSLDC are equivalent to PLF, the Commission has considered loss of generation on account of non availability of transmission lines or due to reduced demand. MSPGCL submitted the quantum of loss of generation duly certified by SLDC and the Commission has added the same for arriving at the actual availability of the station. The comparison of actual availability and revised availability approved by the Commission for FY 2008-09 considering the CPRI recommendations is given in following Table:
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Table: Availability for FY 2008-09 (%) Stations Availability (%) Approved after Truing Actual up 87.50% 87.50% 72.7% 74.29% 72.15% 66.83% 62.42% 73.25% 60.33% 80% 80% 78.58% 80% 73.94% 80% 60.33%
Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran
As may be observed from the above Table, the actual availability for some of the Stations is lower than the revised normative availability after considering the CPRI recommendations. For such stations, the Commission has reduced the recovery of Annual Fixed Charges for FY 200809 on pro-rata basis as discussed in Section 3.11 of the Order, except for Uran Station as the availability of Uran was lower due to gas availability constraints.
Auxiliary Consumption
The Commission, in its Order dated March 5, 2010 in Case No. 16 of 2008, observed that the Auxiliary Consumption norm suggested by CPRI for FY 2008-09 for some of the stations was substantially higher than the actual auxiliary consumption, which were already higher than the normative auxiliary consumption, and hence, the Commission approved the actual Auxiliary Consumption for FY 2008-09. Accordingly, for carrying out the truing up of expenses and revenue for FY 2008-09, the Commission has considered the actual auxiliary consumption for FY 2008-09.
Station Heat Rate (SHR)
The Commission, in its Order dated March 5, 2010 in Case No. 16 of 2008, has approved the Station Heat Rate for FY 2008-09 as per CPRI recommendations for carrying out the provisional truing up of fuel expenses. Accordingly, the Commission, for carrying out the final truing up of fuel expenses in this Order, has considered the station wise heat rate as approved by the
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Commission for FY 2008-09 in its Order dated March 5, 2010 in Case No. 16 of 2008.The summary of Station-wise heat rate approved in the APR Order, actual heat rate for FY 2008-09 and heat rate approved by the Commission for truing up is given in the following Table: Table: Station Heat Rate for FY 2008-09 (kCal/kWh) Station APR Order Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran 2561 3105 2654 2653 2657 2792 2551 1980 2008-09 Actual 2806 3255 2920 2984 3049 3189 2705 1984 Approved after Truing up 2653 3310 2856 2833 2919 3043 2759 1980
Secondary Fuel Oil Consumption
The Commission, in its Order dated March 5, 2010 in Case No. 16 of 2008 has approved the Secondary Fuel Oil Consumption for FY 2008-09 as per CPRI recommendations for carrying out the provisional truing up of fuel expenses. Accordingly, the Commission, for carrying out the final truing up of fuel expenses in this Order, has considered the station-wise secondary fuel oil consumption as approved by the Commission for FY 2008-09 in its Order dated March 5, 2010 in Case No. 16 of 2008.The summary of Station-wise Secondary Fuel Oil consumption approved in the APR Order, actual secondary fuel oil consumption for FY 2008-09 and secondary fuel oil consumption approved by the Commission for truing up is given in the following Table:
Table: Secondary Fuel Oil Consumption for FY 2008-09 (ml/kWh) Station APR Order Khaparkheda Paras Bhusawal Nasik
MERC, Mumbai
2008-09 Actual 0.85 3.03 5.52 4.28 2.00 2.00 2.00 3.00
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2.00 2.00 2.00 2.00
Parli Koradi Chandrapur
2.00 2.00 2.00
7.51 7.01 1.57
2.00 2.81 2.00
Transit Loss
MSPGCL submitted that the actual transit loss for some of the stations during FY 2008-09 was higher than the normative levels. The Commission, in its Order dated March 5, 2010 in Case No. 16 of 2008, has approved the transit loss for FY 2008-09 as 0.8% in accordance with the CPRI recommendations, for carrying out the provisional truing up of fuel expenses. Accordingly, the Commission, for carrying out the final truing up of fuel expenses in this Order, has considered the normative transit loss of 0.8%.
Fuel Price, Fuel Mix and Calorific Value
The Commission, for carrying out the truing up of fuel expenses for FY 2008-09, has considered the actual fuel price, actual calorific value and actual proportion of domestic, washed and imported coal for each station as submitted by MSPGCL.
Other Variable Charges
MSPGCL submitted that the Commission, in the MYT Order, had included the cost of these other charges, viz., lubricants, chemicals and water charges, etc., as part of variable costs while estimating the energy charges and accordingly estimated such expenses at Rs 184.82 Crore for FY 2008-09. However, the actual amounts of such other variable charges for FY 2008-09, based on audited accounts are Rs 271.98 crore. A comparison of the plant-wise approved and actual other variable charges is provided in the table below: Table: Comparison of Approved Vs Actual Other Variable Charges for FY 2008-09 as submitted by MSPGCL (Rs. Crore) Station Khaparkheda Paras Bhusawal Nasik Parli
MERC, Mumbai
Approved (Rs Crore) 13.77 2.53 18.50 48.22 40.99
Actual (Rs Crore) 26.13 3.23 35.68 54.59 38.71

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Koradi Chandrapur Uran Hydel Total
29.52 30.57 0.72 0.00 184.82
36.26 75.32 1.14 0.92 271.98
MSPGCL submitted the further breakup of other fuel related expenses as shown under: Table: Breakup of other fuel related expenses as per Audited Accounts (2008-09) as submitted by MSPGCL (Rs Crore)
S. No. Particulars 1 Other Fuel Related Costs 2 Verification of Coal Stock 3 Stock Shortages on Physical Verification of Oil Stock 4 Cost of Water 5 Lubricants and consumables 6 Station Supplies Total Less: Other Fuel related expenses of New Parli Unit 1 and New Paras Unit 1 Net Other Fuel Related Expenses for existing plants
Accounting Code 71.2 71.41 71.42 71.5 71.6 71.7
Rs. Crores 107.05 23.16 0.92 119.4 33.12 3.38 287.02 15.04 271.98
The Commission observed that the other fuel related charges is considerably higher in case of Bhusawal, Chandrapur and Khaparkheda as compared to approved values. The Commission, in its preliminary data gaps, asked MSPGCL to submit specific reasons (i.e., under various sub-heads of other variable charges) for the increase in other variable charges for Khaparkheda, Bhusawal and Chandrapur stations. MSPGCL, in its reply dated February 11, 2010 submitted that the key reasons for the significant increase in the other variable costs were: Increase in demurrage charges by Railways from Rs 75/Wagon/Hr to Rs 100 /Wagon/Hr. Increase announced by the Government in the minimum wage rate. Significant increase in the prices of ammonia gas. MSPGCL also submitted station-wise specific reasons for the increase in other variable charges. The Commission also asked MSPGCL to submit the reasons for increase in the expenses shown
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under sub-head verification of coal stock and cost of water as compared to actual expenses of FY 2007-08 and to further submit the details of expenses shown under sub-head other fuel related cost under various items such as charges for coal handling contract charges, demurrage on coal wagons, siding charges, etc. In this regard MSPGCL submitted that coal supplies are pilfered, which has resulted in shortages. MSPGCL submitted that the cost of water has increased considerably in some stations due to settlement of arrears pertaining to previous years in FY 2008-09. Such cost was not charged in previous years and has therefore, been charged to profit and loss account of FY 2008-09. As regards the other variable charges for FY 2008-09, the Commission has undertaken the truing up and has considered the actual charges of Rs. 271.98 Crore for truing up purposes.
Total Variable Costs
Based on various parameters as discussed above, the total variable costs i.e., fuel cost and other variable charges approved by the Commission for FY 2008-09 works out to Rs 6581.20 Crore as against the actual costs of Rs 6953.32 Crore. The variation in fuel costs approved by the Commission with respect to actual fuel costs is on account of difference in performance parameters as approved by the Commission based on the CPRI recommendations and actual performance parameters. As the actual variable expenses including fuel and other variable costs for FY 2008-09 are higher than the expenses approved by the Commission after truing up, the Commission has considered the variation in actual and approved expenses as efficiency loss and has carried out the sharing of losses as detailed in Section 3.12 of the Order.
3.2 OPERATION & MAINTENANCE (O&M) EXPENSES MSPGCL submitted that in the MYT Order, the Commission had approved the O&M expenses for FY 2007-08, FY 2008-09, and FY 2009-10 by escalating the approved O&M expenses for FY 2006-07 by an escalation factor of 5.38% per annum. However, at that time, the FY 2006-07 expenses were not audited and the Petitioner had observed that the O&M expenses for FY 200607 were estimated to be higher than the O&M expenses approved by the Commission The Commission in Para 3.12 of the MYT order had stated that it would consider truing up of actual expenses for FY 2006-07 based on audited accounts. In the APR order for FY 2008-09 dated
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May 31, 2008, the Commission had not considered the audited accounts for FY 2006-07 for revision of the O&M expenses approved in the MYT Order for base year of FY 2006-07. However, according to the ATE Judgment in Appeal No.s 86 and 87 of 2007, the Commission has been directed to allow truing-up for FY 2006-07 based on the audited accounts for FY 200607 and in effect the MSPGCL expects the Commission to revise the allowable O&M expenses for the base year and project the allowed expenditure for the Control Period accordingly. MSPGCL submitted the details of approved and actual O&M expenses as follows:
Table: Comparison of Approved and Actual O&M Expenses (Rs Crore) Particulars FY 2005-06 FY 2006-07 FY 2007-08 Approved O&M expenses 779.20 817.58 861.6 Actual O&M expenses 791.87 854.45 967.65 Shortfall (Actual - Approved) 12.67 36.87 106.05 MSPGCL submitted that as can be observed from the above table, the actual O&M expenses are significantly higher than the normative O&M expenses approved by the Commission. This is because the base O&M norms allowed by the Commission over the years were considerably lower than the actual O&M of the corresponding period. In fact, the approved O&M norms in Rs. lakh per MW is very low as compared to other private generation companies in the State, like Tata Power Company Limiteds Generation Business (TPC-G) and Reliance Infrastructure Ltd (R-Infra). MSPGCL further submitted the reasons for increase in various components of O&M Expenses as follows:
Establishment Expenses
a. MSPGCL submitted that it has finalised Pay Revision for its employees and it would be applicable retrospectively from April 1, 2008. The effect of such pay revision is expected to be Rs 96.00 crore and accordingly it has been provided for in the audited accounts for FY 2008-09. The impact of pay revision is a new addition to the cost and the escalation methodology may not be applicable when considering the allowance of such item. b. MSPGCL submitted that it has allowed increase in Dearness Allowance to its employees in line with the announcement by Central and State Government.
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Normally, DA is increased by around 5%-6% semi-annually. The DA rate in force in April 2008 was 16% and was increased to 22% in January 2009. Currently, it is at 27% w.e.f July 2009. c. During FY 2007-08, in compliance with Accounting Standard-15 Accounting for Retirement Benefits in the financial statements of Employers, MSPGCL had changed its accounting policy for accounting of leave benefits and had accounted for compensated absences on accrual basis as against accounting for the same on cash basis in earlier years. MSPGCL had made a provision for leave encashment of Rs 192.61 Crore in FY 2007-08 as per audited accounts. MSPGCL has made such provision in accordance with the recommendations of actuarial valuation report/study conducted by M/s K. A. Pandit. MSPGCL submitted that the Commission in the APR Order for FY 2008-09 dated August 17, 2009 had approved Rs 177.37 Crore of such provision in true-up for FY 2007-08 for existing stations of MSPGCL except Paras and Parli (recently commissioned Units). d. Para 78 of AS-15 prescribes that the rate used to discount post-employment benefit obligations should be determined by reference to market yields at the balance sheet date on Government bonds. As the bond yields and interest rates have undergone tremendous change between the start and end of FY 2008-09, the change in Government bond yields required MSPGCL to provide a further liability of Rs 28.04 Crore in the financial statements of FY 2008-09. Accordingly, based on the actuarial report by M/s K.A Pandit, Consultants and Actuaries, MSPGCL has provided a leave encashment liability of Rs 28.04 Crore in the audited accounts of FY 2008-09. e. Similarly, Gratuity Provision had to be re-visited to ensure compliance with AS-15 due to the change in the Government bond yields. As a result, MSPGCL has provided Rs 8.08 Crore in the audited accounts for FY 2008-09. f. The Board of Directors of MSPGCL has approved a scheme of annual Bonus to its employees from FY 2008-09 and onwards. The financial impact of such item is Rs 9.75 Crore in the audited accounts for the FY 2008-09. MSPGCL submitted that it is a recurring expense and would be incurred in ensuing years also.
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Administrative & General Expenses
a. MSPGCL submitted that the GoM vide Order dated October 12, 2006 had amended schedule D, part II of Maharashtra Electricity Reform Transfer Scheme dated June 4, 2006 and had directed that the immovable assets under Head Office shall be owned by MSEB Holding Company Limited (MSEBHCL) and the subsidiary Companies shall pay rent to MSEBHCL for use of these assets. The share of MSPGCL for payment of lease rent of office buildings, residential buildings and guest houses under H.O. is Rs 8.91 Crore, which has been provided in the audited accounts for FY 2008-09. b. The Water Resources Department of Govt of Maharashtra (GoM-WRD) has proposed to levy charges in respect of Civil O&M charges and Water Royalty charges in additional to the lease rentals for FY 2009-10 and onwards. The financial burden on the Petitioner due to O&M charges for Civil works at the rate of Rs 60,000 per MW per year, water royalty charges at the rate of 5 paise per unit and land lease at the rate of Rs 1,000 per MW per year has been proposed. The estimated liability of such items would work out to Rs 40 Crore per annum if imposed and such liability would be over and above the base O&M cost approved for tariff purposes.
Repair & Maintenance Expense
a. MSPGCL submitted that it may not be possible to restrict R&M expense within the escalation factor, as R&M expenses are dependent on the age of the Units. In view of the above facts, MSPGCL submitted that there are many new recurring expense items, which have caused the O&M expense to increase beyond the projected O&M expenses. MSPGCL submitted that it has no control in restricting these expenses as they are prudently incurred. MSPGCL submitted that if the impact of such items is removed then the increase in O&M expense is well within the escalation factor prescribed by the Commission. MSPGCL further submitted that while determining the tariff for FY 2008-09 in the APR Order for FY 2007-08, the Commission had approved O&M expenses of Rs 907.89 Crore for the existing stations of MSPGCL. The Commission had not provided the break-up of O&M expenses as Employee expenses, Administration & General expenses and Repairs and Maintenance Expenses. However, as per the audited accounts for FY 2008-09, the actual
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expenditure on O&M for existing stations (excluding New units of Paras and Parli) is Rs 1,137.35 Crore. The Commission, in its Order dated March 5, 2010 in Case 16 0f 2008, approved the O&M expenses by revising the base O&M figures for FY 2006-07 and has approved the O&M expenses for FY 2008-09 as Rs 948.05 Crore. Accordingly, the Commission has considered the base O&M expenses for truing up of O&M expenses for FY 2008-09 as Rs 948.05 Crore. In addition to these expenses, the Commission has also considered the impact of pay revision (Excluding Paras Unit 3 and Parli Unit 4) of Rs. 90.55 Crore and provision for Earned Leave encashment of Rs 35.47 Crore. Accordingly, the Commission allows total O&M expenses for MSPGCL for FY 2008-09 as Rs 1074.07 Crore. As the actual O&M expenses for FY 2008-09 are higher than the O&M expenses approved by the Commission after truing up, the Commission has considered the variation in actual and approved O&M expenses as efficiency loss and has carried out the sharing of losses as detailed in Section 3.12 of the Order.
3.3 CAPITAL EXPENDITURE (CAPEX) AND CAPITALISATION The Commission asked MSPGCL to submit a detailed note on the actual Capital Expenditure (capex) and Capitalisation for FY 2007-08 along with the reasons for deviation between actual capex and capitalisation vis--vis the approved capex and capitalisation. MSPGCL, in its response to the preliminary data gaps raised before TVS, submitted the comparison of actual capitalization vis--vis the approved capitalization for FY 2008-09 as below: Table: Capital Expenditure and Capitalisation for FY 2008-09 (Rs. Crore) Approved Capitalisation 4.96 0.85 9.84 10.29 14.54 27.43 42.61 Actual Capital Expenditure 4.43 1.49 4.27 49.99 5.04 41.47 33.62 Actual Capitalisation 2.6 1.49 5.11 24.67 9.07 44.31 50.35
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Station Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur

MERC, Mumbai
Station Uran Hydel Total
Approved Capitalisation 3.78 10.31 124.61
Actual Capital Expenditure 5.01 17.79 163.11
Actual Capitalisation 1 17.79 156.39
MSPGCL also submitted that in the previous year (FY 2007-08), the actual capitalization had been far lesser than the approved capitalization, while in FY 2008-09, the same has been higher than the approved capitalisation. MSPGCL stated that the capex is based on the schemes formulated and submitted in the ARR. However, there may be delay in implementation of some of the schemes during the year on account of non availability of shutdown, grid conditions and availability of raw materials. On account of such difficulties, the proposed capex may not materialize and there are bound to be variations between the projected capex and capitalization. The Commission notes that as against permitted capitalisation of Rs. 124.61 Crore during FY 2008-09 actual capitalization was Rs. 156.39 Crore. The Commission has verified the actual capitalisation claimed by MSPGCL as against the capex schemes already approved by the Commission. The Commissions rationale for approving the capitalisation for FY 2008-09 in this Order is discussed below: The Commission observes that MSPGCL has incurred capitalisation only towards the Non-DPR schemes. The Commission, for approving capital expenditure and capitalization for Renovation and Modernisation schemes of Generating Companies, has instituted a process of giving inprinciple approval for the capital expenditure schemes costing above Rs. 10 Crore (together known as DPR Schemes), wherein the Utility has to submit Detailed Project Report (DPR) as well as the expected cost-benefit analysis, payback period, etc., as per well laid out guidelines. Schemes costing less than Rs. 10 Crore are considered as non- DPR schemes and the Utilities are not required to submit any DPR for the approval of the same. It is often observed that at the time of obtaining in-principle approval of the Commission for the DPR schemes, the Utilities indicate several quantifiable benefits and a short payback period. However, the Utilities are not able to substantiate the benefits once the capital investment is actually undertaken and the assets are added to the Gross Fixed Assets (GFA). As a result, the costs and hence, the tariffs are increased, but the expected benefits to the system do not accrue.
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In view of the above, the Commission has decided that the total capital expenditure and capitalisation on non-DPR schemes in any year should be restricted. To achieve the purpose, the non-DPR schemes should be packaged into larger schemes by combining similar or related nonDPR schemes together and converted to DPR schemes, so that the in-principle approval of the Commission can be sought in accordance with the guidelines specified by the Commission. Further, in the absence of documentary evidence that the stated purpose and objective of the capex schemes have been achieved, the Commission has restricted the capitalization for NonDPR schemes equivalent to 50% of the capitalisation proposed by MSPGCL towards Non DPR schemes. The summary of actual capitalisation and capitalisation considered by the Commission for truing up is given in Table below:
Table: Actual and Approved Capitalisation for FY 2008-09 (Rs Crore) Station Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Hydel Total Actual Approved 2.6 1.3 1.49 0.745 5.11 2.27 24.67 12.34 9.07 4.535 44.31 22.15 50.35 25.17 1 0.5 17.79 156.39 8.9 77.91
3.4 DEPRECIATION AND ADVANCE AGAINST DEPRECIATION (AAD) MSPGCL submitted that the Commission in its APR Order for FY 2007-08 had approved the total depreciation of Rs 357.71 Crore for FY 2008-09. MSPGCL submitted that according to the depreciation rates specified in the MERC Tariff Regulations, the eligible Depreciation and AAD for FY 2008-09 works out to Rs 362.11 Crore. MSPGCL further submitted that MSPGCL has been asking for allowance of such AAD as per the Regulations wherein AAD is allowed in case the loan repayment in a particular year exceeds
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the depreciation. However, the Commission has not been considered such claims of the Petitioner and not allowed AAD for individual plants as the Commission had considered the loan repayment schedule for MSPGCL as a whole and hence, considered AAD for MSPGCL as a whole. MSPGCL submitted that the Commission in the APR Order dated May 31, 2008 had stated the following: The Commission opines that Advance against depreciation is intended to meet shortfall in meeting loan repayment obligations of the Generating Company. In the absence of proper accounting of outstanding loans, apportionment of existing loans to various stations on certain basis (say, NFA) is desirable. However, it needs to be ensured that it does not result in unjust enrichment of the Generating Company at the cost of consumers on account of its claim on AAD MSPGCL further submitted that with reference to the Commissions observations regarding allowance of AAD on individual station basis, MSPGCL had submitted the segregation of generic loans, which was later disapproved by the Commission. MSPGCL, in its Petition, requested MERC to devise a mechanism to segregate the generic loans on individual station wise so that AAD on individual station wise can be claimed. However, in APR Order for FY 2007-08 the Commission opined that Advance against depreciation is intended to meet shortfall in meeting loan repayment obligations of the Generating Company. At the same time, it needs to be ensured that allowing advance against depreciation does not result in unjust enrichment of the Generating Company at the cost of consumers on account of its claim on AAD. In the APR Order FY 2008-09, the Commission stipulated that the AAD is a special provision, which enables the Utility to meet its loan repayment obligations as a whole rather than for each Station. Giving AAD on a station-wise basis may result in a situation, where the generation tariffs are determined higher to account for the component of AAD, even though the Company has enough funds to meet its loan repayment obligations. MSPGCL submitted that it has been claiming the depreciation at the rates specified in the Tariff Regulations subject to a maximum of 90% of the cost of the asset. Therefore, by allowing AAD, the only factor that effectively changes is the rate of depreciation and not the total amount of depreciation which is based on the maximum limit set by the Commission. Any AAD therefore, provided by the Commission simply leads to front loading of depreciation in the tariff, which is bound to happen in case the tariff is determined for individual stations in case loan repayment exceeds the depreciation during the year. However, as
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an outcome of allowing AAD, MSPGCL would charge less depreciation during the later life of the plant when the entire loan amount is repaid. MSPGCL therefore, submitted that allowance of AAD does not lead to unjust enrichment of the Generating Company. MSPGCL submitted that the loan repayment exceeds the depreciation as per MERC norms by Rs 20.93 Crore in cases of Koradi and Hydro plants. The overall comparative summary of revised estimates of depreciation along with advance against depreciation for individual plants vis--vis the amounts determined by the Commission as submitted by MSPGCL is given in the following Table: Table: Depreciation and AAD for FY 2008-09 (Rs Crore) Parameter Amount Parameter Depreciation (Thermal) AAD Depreciation (Hydel) Amount 354.34 3.37 357.71
Loan repayment
182.49
Total
182.49
MSPGCL requested the Commission for truing up of Rs 4.40 Crore for variation in Depreciation (including AAD) allowed in its Order vis--vis the actual depreciation (including AAD for individual plants) as per MERC Tariff Regulations. The Commission has examined the depreciation claimed by MSPGCL in detail. Further, MSPGCL, in its additional submissions, confirmed that depreciation has not been claimed beyond 90% of the asset value in accordance with the MERC Tariff Regulations. However, it was observed that the cumulative depreciation for some categories of assets in case of some of the stations exceeds the permissible level of 90% of GFA and in such cases; the Commission has restricted the depreciation in such a manner to have cumulative depreciation of 90%. As regards advance against depreciation, the Commission observed that actual loan repayment of Rs 199.86 Crore for FY 2008-09 does not exceed the depreciation amount of 339.41 Crore for the year for MSPGCL as a whole. As elaborated in previous Orders, the Commission is of the view that Advance Against Depreciation is intended to meet shortfall in meeting loan repayment
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obligations of the Generating Company, and is not intended to provide additional cash flow to the Generation Company. Accordingly, the Commission has not allowed any advance against depreciation for FY 2008-09. The summary of depreciation approved by the Commission for FY 2008-09 is given in following Table: Table: Depreciation for FY 2008-09 (Rs Crore) Stations Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Hydel Total Approved 82.42 1.33 13.37 20.67 12.78 29.46 116.92 57.06 5.39 339.41
3.5 INTEREST EXPENSES AND FINANCE CHARGES MSPGCL submitted that the Commission, in the APR Order dated May 31, 2008 for MSPGCL, had approved net interest expense of Rs 86.50 Crore for FY 2008-09 after considering the interest expenses pertaining to long term loans only. However, the actual gross long term interest expenses for FY 2008-09 are Rs 536.73 Crore for MSPGCL as an entity. MSPGCL submitted the details of loans with allocation of loans to various stations. MSPGCL has considered capitalization of interest expenses for loans pertaining to upcoming Units, separately. After considering the capitalization of long-term interest expenses for new projects, the actual interest on long term loans for existing stations works out to Rs 83.95 Crore. Accordingly, MSPGCL requested the Commission to true-up the variation of Rs 2.55 Crore of long term interest expense on existing stations based on audited accounts vis--vis such expenses approved in the APR Order for FY 2008-09, which has been approved by the Commission. Other Financing Charges for FY 2008-09
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In the APR Order for FY 2008-09 dated May 31, 2008, the Commission had allowed Rs 35.95 Crore of other finance charges for the existing stations of MSPGCL for FY 2008-09. MSPGCL in its Petition submitted that the actual financing charges incurred during FY 2008-09 were Rs 15.96 Crore. Based on the analysis of station wise loan and interest details submitted by MSPGCL, the Commission observed that the loan drawal during FY 2008-09 considered by MSPGCL is less than the capitalization amount for the year for all the stations except in case of Nasik and Parli Stations. Further, MSPGCL has also not shown any equity addition during FY 2008-09. Based on details submitted by MSPGCL, the source of fund for capitalisation figures could not be established and therefore, the Commission has assumed the total capitalization to be funded through debt. Therefore, the Commission has considered new loans with interest rates calculated on the basis of weighted average interest rates of total loans for that station. For Nasik and Parli stations, the loan drawal during the year exceeded the values of capitalization amount and therefore, for these Stations, the Commission has disallowed the loan values exceeding the capitalization amount. The total interest and finance charges for FY 2008-09 as approved by the Commission after truing up works out to Rs 99.29 Crore as against 99.91 Crore submitted by MSPGCL.
3.6 Return on Equity MSPGCL submitted that it has computed return on equity in accordance with principles outlined in the MERC (Terms and Conditions of Tariff) Regulations, 2005. The decrease in the claim for RoE is on account of the deferred tax asset, which MSPGCL has recognized in its audited accounts for FY 2008-09 in pursuance of compliance with AS-22 on Accounting for Taxes on Income issued by Accounting Standards Board of Institute of Chartered Accountants of India (ICAI). MSPGCL submitted that it is pertinent to note that the amount reflected in books of accounts as deferred tax asset is to be deducted from the amount of equity capital as per Explanation 1 to Regulation 31.1.1 (b) of Maharashtra Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations 2005 which reads as follows: Explanation for the purpose of this Regulation, equity capital shall be the sum total of paid-up equity capital, preference share capital, fully/compulsorily
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convertible debentures (or other financial instruments with equivalent characteristics), foreign currency convertible bonds, share premium account and any reserves, available for distribution as dividend or for capitalization by way of issue of bonus shares, which have been invested in the Generation Business. The amount of any grant, revaluation reserve, development reserve, contingency reserve and contributions from customers shall not be included in the equity capital. The amount reflected in the books of account as deferred tax liability or deferred tax asset of the Generation Business shall be added or deducted, as the case may be, from the amount of equity capital. Accordingly, MSPGCL claimed return on equity as Rs 357.24 Crore for FY 2008-09. The Commission has computed the return on equity on the opening level of equity of Rs. 2563.41 Crore at the rate of 14%. The Commission observes that MSPGCL has relied only on the explanation to the Regulation 31.1.1 (b), however, the Regulation 31.1.1 (b) stipulates as follows: " The amount of equity capital shall be equal toEquity capital as at April 1, 2004 as determined by the Commission in accordance with the Explanation below; plus Equity component of approved capital expenditure for the financial year ending March 31, 2005: Provided that in case of a Generating Company formed as a result of a transfer scheme under Section 131 of the Act, the date of the said transfer scheme shall be the effective date instead of April 1, 2004 for determination of equity capital under clause (b) above. Explanation for the purpose of this Regulation, equity capital shall be the sum total of paid-up equity capital, preference share capital, fully/compulsorily convertible debentures (or other financial instruments with equivalent characteristics), foreign currency convertible bonds, share premium account and any reserves, available for distribution as dividend or for capitalization by way of issue of bonus shares, which have been invested in the Generation Business. The amount of any grant, revaluation reserve, development reserve, contingency reserve and contributions from customers shall not be included in the equity capital. The
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amount reflected in the books of account as deferred tax liability or deferred tax asset of the Generation Business shall equity capital be added or deducted, as the case may be, from the amount of equity capital. The Commission in its Order in Case No. 115 of 2008 has stipulated as under: The Commission is of the view that the objective of this Explanation in the MERC Tariff Regulations is to cover the various elements that can be considered as opening equity and this Explanation is not applicable for the deferred tax liability created in the accounts subsequently. Considering the above provisions of the Regulation 31.1.1 (b), it is obvious that MSPGCL is a Generation Company formed as a result of transfer scheme under Section 131 of the EA 2003, therefore, for MSPGCL, the effective date would be the date of the Transfer Scheme. Since, the provisional Transfer Scheme was notified under Section 131(5)(g) of the EA 2003 on June 6, 2005, which resulted in the creation of following four successor companies and MSEB Residual Company, to the erstwhile Maharashtra State Electricity Board (MSEB), namely, MSEB Holding Company Ltd., Maharashtra State Power Generation Company Ltd., Maharashtra State Electricity Transmission Company Ltd. And Maharashtra State Electricity Distribution Company Ltd Therefore, any deferred tax liability reflected in FY 2007-08 would not be entitled for inclusion in the equity, unless the same was also reflected in the opening Balance Sheet under the provisional Transfer Scheme. Hence, the Commission has not considered MSPGCLs request in this regard and has not computed any return on such deferred tax liability. Accordingly, the Commission has not considered the impact of deferred tax asset and liability on the equity capital and has allowed return on equity without the impact of deferred tax asset and liability. Station wise return on equity capital as submitted by MSPGCL and as allowed by the Commission is as shown in the table below. Table: Return on Equity for FY 2008-09 (Rs Crore)
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Actuals Stations Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Hydel Total 2008-09 125.92 1.19 13.62 27.53 19.31 23.09 107.05 39.53 0 357.24
Allowed 126.11 1.2 13.73 27.728 19.46 23.33 107.58 39.73 0 358.88
3.7 Income Tax The Commission, in the APR Order for FY 2008-09, had allowed Rs 40.66 Crore on account of income tax. MSPGCL has submitted that an amount of Rs 35.98 Crore has been paid towards income tax and Rs 1.55 Crore towards fringe benefit tax for FY 2008-09. MSPGCL requested the Commission for truing up the variation of Rs 3.13 Crore on account of Income tax and fringe benefit tax based on audited accounts vis--vis income tax expenses approved in the APR Order for FY 2008-09. MSPGCL submitted that the Commission in the APR Order for FY 2008-09 dated August 17, 2009 had stated that ..the Commission has considered the actual income tax paid during FY 2007-08, the Commission directs that as per the ITR-V, MSPGCL is entitled for a refund of Rs 25.55 crore and it should be ensured that such refunds are availed at the earliest and the exact amount of such refund should be incorporated during the truing up for FY 2008-09 MSPGCL submitted that it is pertinent to mention that MSPGCL is in the process of filing an Appeal with the Income Tax Appellate Tribunal (ITAT) against the Assessment Order by Commissioner of Income Tax (Appeals) for Assessment Year 2006-07. The proceedings for the Assessment Year 2007-08 are underway. Accordingly, it will take a while before Assessment Order for FY 2007-08 is finalized and refund materialized. Hence, MSPGCL requested the
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Commission to abstain from incorporating the refund of Rs 25.55 Crore in the true-up for FY 2008-09 as it has not been materialized and credited to the account of MSPGCL and would suitably approach the Commission whenever the refund orders are materialized. The Commission asked for updated information regarding the refunds in the previous period. MSPGCL in its reply has provided the necessary details as under:
The Commission has considered actual income tax of Rs 37.53 Crore for FY 2008-09 as claimed by MSPGCL and has not considered the refund of Rs 25.55 Crore in the true-up for FY 2008-09 as it has not materialized and credited to the account of MSPGCL yet, and shall be suitably considered once MSPGCL gets the refund. 3.8 Interest on Working Capital In its APR Order for FY 2008-09 dated May 31, 2008, the Commission had approved Rs 262.46 Crore as interest on working capital for FY 2008-09. MSPGCL submitted that interest on working capital has been computed based on the MERC Tariff Regulations and accordingly normative interest rate of 12.75% has been considered for estimating interest on working capital. The Commission has estimated the normative working capital requirement and interest thereof for FY 2008-09 based on the revised expenses approved in this Order after truing up. However, interest on working capital is a controllable parameter as defined under the MERC Tariff
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Regulations and the Commission has therefore, computed the sharing of gains/losses on the basis of normative working capital interest and the actual working capital interest incurred. Further, the MERC Tariff Regulations stipulate that rate of Interest on Working Capital shall be considered on normative basis and shall be equal to the short-term Prime Lending Rate of State Bank of India as on the date on which the Application for determination of tariff is made. As the short-term Prime Lending Rate of State Bank of India at the time when MSPGCL filed the Petition for tariff determination for FY 2008-09 was 12.75%, the Commission has considered the interest rate of 12.75% for estimating the normative Interest on Working Capital. The station wise interest on working capital as claimed by MSPGCL and as approved by the Commission is as shown in the table below. Table: Interest On Working Capital FY 2008-09 (Rs Crore) Station Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Hydel Total FY 2008-09 MSPGCL 41.77 2.72 25.79 49.31 31.09 38.67 76.19 24.05 4.58 294.17 Approved
39.29 2.78 23.52 47.09 26.11 35.38 75.54 20.88 2.9
273.47
3.9 Other Debits MSPGCL submitted that the Commission had allowed coal cost variance at the time of true-up for FY 2006-07. Regarding other debits, the Honble ATE in its Judgment on Appeal No.s 86 and 87 of 2007 had observed the following: Appellant had also submitted for truing on account of Miscellaneous losses & write off, Sundry expenses, intangible assets written off and Intangible assets interest charges for HVDC. We do not find any reason in the order of the Commission while
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disallowing such expenses. The Commission is directed to examine the claim of the Appellant and decide the admissibility after a prudence check In this regard, MSPGCL submitted that the audited expenses for FY 2008-09 under the head other debits are Rs 64.07 Crore as detailed in the Table below: Table: Other Debits as submitted by MSPGCL for FY 2008-09 (Rs Crore) Particulars Material Cost Variance (O&M) Coal Cost Variance Accounts Bad and Doubtful Debts written off/provided for Miscellaneous Losses and writeoff Sundry Expenses Intangible Assets written off Total Actuals 0.03 3.84 0.10 59.23 0.52 0.35 64.07 Approved 3.84 0.10 59.23 0.52 0.35 64.04
The Commission in its Order dated March 5, 2010 in Case No. 16 of 2008 has dealt with the issue of other debits while carrying out the truing up for previous years in accordance with the ATE Judgment in Appeal No. 86 and 87 of 2008 and the Commission has not allowed the Material Cost Variance. Accordingly, for FY 2008-09, the Commission has not considered Rs 0.03 Crore on account of material cost variance for truing up and therefore, allows Rs. 64.04 Crore towards other debits for FY 2008-09.
3.10 Prior Period Items MSPGCL submitted that the financial statements of MSPGCL are prepared in compliance with Generally Accepted Accounting Principles (GAAPs) and Accounting Standards issued by Accounting Standards Board of Institute of Chartered Accountants of India There are certain prior period items, which have been identified and incorporated in the audited financial statements for FY 2008-09. Accounting Standards (AS 5) (Revised) on Net Profit or Loss for the Period, Prior Period Items and Changes in Accounting Policies states:
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Prior period items are income or expenses which arise in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods MSPGCL submitted that in the audited financial statements for FY 2008-09, there has been recognition of Rs 33.36 Crore of prior period income and prior period expenses of Rs 22.11 Crore, thereby reducing the true-up by Rs 11.25 Crore. In the true-up order for FY 2007-08, the Commission had approved a true-up of Rs 177.37 Crore in the prior period gross establishment expense attributable to the impact of provisioning for leave encashment liability on the basis of actuarial valuation in compliance with Accounting Standard-15 Accounting for Retirement Benefits in the financial statements of Employers. The Commission in the APR Order for FY 2008-09 dated August 17, 2009 was of the view that such a huge impact on account of change in the accounting policy, should not be passed on to the consumers in one financial year and should be spread over five years starting from FY 2007-08. Accordingly, MSPGCL has added Rs 35.47 Crore eligible component of provision for leave encashment for FY 2008-09 in the true-up for FY 2008-09. MSPGCL further submitted that the Commission had allowed true-up of actual prior-period expenses of Rs 24.05 Crore for FY 2007-08. However, the impact of true-up of prior period expenses was inadvertently not considered by the Commission in the final true-up summary given in the Order. The Petitioner has already intimated this error to the Commission by a separate letter (no. RCD/13E/L244/12849 dated 23-09-2009). The effect of all such items is tabulated below: The Commission has allowed the prior period expenses and income for FY 2008-09. As regards actual prior period expenses of Rs 24.05 for FY 2007-08 and provision of Rs 35.47 Crore towards earned leave encashment, the Commission in its Order dated March 5, 2010 in Case No. 16 of 2008 has allowed these amounts while carrying out the provisional truing up for FY 200809. Accordingly, the Commission allows the entire amount of prior period true up as claimed by MSPGCL. 3.11 Revenue side Truing-up computation MSPGCL submitted a comparison of approved revenue vis--vis the actual revenue earned during the year as given in the Table below:
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Table: Revenue-side True-up as submitted by MSPGCL for FY 2008-09 (Rs. Crore) Revenue Side True-up Revenue NTI Less: Revenue from Parli Unit-6 Less: Revenue from Paras Unit-3 Less: Provision for Incentives Total Approved Actual True-Up (A) (B) (B-A) 8566.85 9346.49 779.65 112.93 131.04 18.11 0 513.13 513.13 0 393.97 393.97 0 20.85 20.85 8679.78 8549.58 130.19
MSPGCL requested the Commission to consider the revenue side true-up of Rs 130.20 Crore and expense side true-up of Rs. 1,063.79 Crore thereby aggregating to Rs 1193.99 Crore for FY 2008-09. The Commission has considered the actual revenue submitted by MSPGCL for FY 2008-09 while carrying out the truing up of expenses and revenue.
3.12 Reduction in Annual Fixed Charges on account of Reduction in Availability As discussed in Section 3.1.1, the actual availability for some of the Stations is lower than the revised normative availability approved by the Commission after considering the CPRI recommendations. For such stations, the Commission has reduced the recovery of Annual Fixed Charges for FY 2008-09 on pro-rata basis. For calculation of AFC, the Commission has considered loss of generation on account of non availability of transmission lines or due to reduced demand. MSPGCL submitted the quantum of loss of generation duly certified by SLDC. Accordingly, the Commission has incorporated the same while calculating the values of PLF to be considered. The calculation of AFC, and AFC disallowed by the Commission is shown in the table below.
Table: Reduction in Annual Fixed Charges (Rs. Crore)

Particulars Approved AFC after Truing up Actual Normative Availability Availability Reduced AFC AFC to be disallowed
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Particulars
Approved AFC after Truing up 354.19 30.64 141.53 239.79 176.96 292.16 584.52 189.48 2009.28
Actual Normative Availability Availability
Reduced AFC
AFC to be disallowed
Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Total
87.50% 72.70% 74.29% 72.15% 66.83% 62.42% 73.25% 60.33%
80% 80% 80% 78.58% 80% 73.94% 80% 59.46%
354.19 27.84 131.43 220.17 147.82 246.64 535.24 189.48 1852.81
0.00 2.80 10.11 19.62 29.14 45.52 49.29 0.00 156.47
3.13 Sharing of Gains and Losses MSPGCL submitted that the MERC Tariff Regulations have stipulated a mechanism of classification of controllable and uncontrollable expenses and treatment of sharing of gains and losses thereof. MSGPCL submitted that it has been facing serious cash flow issues and requested the Commission to allow the entire true-up as most of the expenses are incidental to operation of old vintage Units and a Generating Company, which is the source of cheapest power in the State should be allowed to recover the actual cost of its operations. As regards MSPGCLs submission on old vintage Units, the Commission would like to highlight that this aspect has already been considered by CPRI in its report and the Commission has already re-set the performance parameters based on CPRI recommendations. After going through the detailed process of appointing CPRI and detailed study carried out by CPRI, it will not be appropriate to ignore the recommendations given by CPRI and allow the actual expenses to MSPGCL.
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The Commission, therefore, in accordance with the provisions of MERC Tariff Regulations has allowed the expenses for FY 2008-09 based on revised performance parameters approved in this Order and has carried out the sharing of gains and losses under following heads: Sharing of losses in fuel expenses, as actual expenses are higher than the normative expenses Sharing of losses in O&M expenses, as actual expenses are higher than the normative expenses Sharing of Gains towards Interest on Working Capital, as actual Interest on Working Capital is lower than the normative Interest on Working Capital In accordance with the MERC Tariff Regulations, the Commission has shared 1/3rd of the gains and losses with the Distribution Licensees, while 2/3rd of gains are allowed to be retained by MSPGCL and 2/3rd of losses are to be borne by MSPGCL. The summary of truing up for FY 2008-09 considering sharing of gains and losses is given in following Table: Table: Summary of Truing up for FY 2008-09 (Rs Crore)
Particulars Approved Actual Allowed After Truing up Cost of Generation Lease Rentals O&M Expenses Depreciation including AAD Interest & Finance Charges on Long Term loans Interest on working capital Income Tax Other Expenses Prior period true-up incl. migration entries Amortisation of Bad Debts pertaining to FY 05-06 Aggregate Revenue Requirement Return on Equity MERC, Mumbai 8001.03 8895.92 8602.28 8700.76 6223.15 85.00 907.89 357.71 122.45 262.44 42.39 0.00 0.00 6953.32 85.00 1131.90 362.11 99.91 113.84 37.53 64.04 48.27 6581.20 85.00 1074.08 339.41 99.29 273.47 37.53 64.04 48.27 159.63 53.21 -57.82 -19.27 -372.12 Deviation Efficiency Gain/Loss shared with Distribution Licensees -124.04 6705.24 85.00 1093.35 339.41 99.29 220.26 37.53 64.04 48.27 8.37 Net Entitlement
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Particulars
Approved
Actual
Allowed After Truing up
Deviation
Efficiency Gain/Loss shared with Distribution Licensees
Net Entitlement
Return on Equity Total ARR Total Revenue Gap/(Surplus) Reduced AFC on account of lower availability Net Gap/(surplus)
374.15 8375.18 8679.78
357.24 9253.16 10363.78 -1467.86
358.88 8961.16 8549.58
358.88 9059.63 8549.58 510.05 156.47 353.58
3.14 Provisional Truing up for FY 2008-09
The Commission in its Order dated March 5, 2010 in Case No. 16 of 2008 has carried out the provisional truing up of expenses for FY 2008-09 and has approved an amount of Rs 664.58 Crore to be recovered by MSPGCL separately. The total gap after carrying out the final truing up for FY 2008-09 works out to Rs 353.58 Crore. As the amount allowed by the Commission during provisional truing up is higher than the gap of Rs 353.58 Crore based on final truing up for FY 2008-09, the Commission has adjusted the net surplus amount of Rs 311 Crore while computing the Annual Fixed Charges for FY 2010-11.
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4 PERFORMANCE PARAMETERS Regulation 16.1 of the MERC Tariff Regulations, 2005, stipulates as follows, The Commission may stipulate a trajectory, which may cover one or more control periods, for certain variables having regard to the reorganization, restructuring and development of the electricity industry in the State. Provided that the variables for which a trajectory may be stipulated include, but are not limited to, generating station availability, station heat rate, transmission losses, distribution losses and collection efficiency. (Emphasis added) The Commission, in its MYT Order dated January 2, 2007 in Case No. 68 of 2006 for MSPGCL had approved the trajectory of following performance parameters: Availability Heat Rate Auxiliary Consumption Transit Loss Secondary Fuel Oil Consumption.
4.1 GENERATING STATIONS OF MSPGCL The Commission, in its above-said MYT Order, considered the total installed capacity of MSPGCL as 9510 MW. The Commission had not considered the derated capacity as projected by MSPGCL in its MYT Petition for some of its stations, as the application for deration of the installed capacity was pending with Central Electricity Authority (CEA) for approval. Subsequently, in the APR Order for FY 2007-08 dated June 1, 2008 in Case No. 71 of 2007, the Commission accepted the derated capacity for Nasik, Koradi, Bhusawal, Paras and Parli TPS in accordance with the approval granted for the same by the CEA dated April 20, 2007. Also, as per CEA approval, Unit 1 of Bhusawal has been derated to 50 MW with effect from August 2009.
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The derated capacity of MSPGCLs existing generating stations is 9467 MW, comprising 2320 MW of hydel generation capacity, 6325 MW of coal based thermal generation capacity and 852 MW of gas based thermal generation capacity. The station-wise and Unit-wise break up of total capacity of MSPGCLs existing stations is given in the following Table:
Table: Summary of Existing Generation Capacity of MSPGCL (MW)

Approved in MYT Order Station/Unit Nos. Of Capacity of Total Derated Capacity Derated Total Units each Unit in Capacity in of each Unit in Capacity in MW MW MW MW 852 852 3 4 2 120 180 108 240 840 4 1 1 2 2 3 2 4 4 210 58 58 210 140 210 30 210 115 840 58 478 58 420 910 280 630 690 60 630 1080 460 210 55 50 210 125 210 20 210 105 60 432 120 180 108 240 840 840 55 470 50 420 880 250 630 670 40 630 1040 420 Page 67 of 121 Considering De-rated Capacity
Uran Unit 2,3,4 Unit 5,6,7,8 WHR_AO, WHR_BO Khaparkheda Unit 1,2,3,4 Paras Bhusawal Unit 1 Unit 2,3 Nasik Unit 1,2 Unit 3,4,5 Parli Unit 1,2 Unit 3,4,5 Koradi Unit 1,2,3,4
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Approved in MYT Order Station/Unit
Considering De-rated Capacity
Unit 5 Unit 6,7 Chandrapur Unit 1,2,3,4 Unit 5,6,7 Sub-Total Hydel Koyna Vaitarna Bhira Tillar Others Sub Total Total
Nos. Of Capacity of Total Derated Capacity Derated Total Units each Unit in Capacity in of each Unit in Capacity in MW MW MW MW 1 200 200 200 200 2 4 3 210 210 500 420 2340 840 1500 7248 1956 1 2 1 60 40 66 60 80 66 158 2320 9568 60 40 66 210 210 500 420 2340 840 1500 7147 1956 60 80 66 158 2320 9467
As MSPGCL has filed a separate Petition for Annual Performance Review of Parli Unit-6 of 250 MW and Paras Expansion Unit-3 of 250 MW, the Commission has not approved the performance parameters and tariff for these two Units in this Order. MSPGCL, in its subsequent submission dated April 8, 2010, requested the Commission to approve the provisional tariff for Parli Unit-7 and Paras Unit-4 as both these Units are likely to be commissioned in FY 2010-11. The Commission in this Order has approved the provisional tariff for these two Units. MSPGCL in its Petition submitted that it contested the performance parameters approved by the Commission before the ATE. The ATE, in its Judgment dated April 10, 2008 in Appeal Nos. 86 and 87 of 2007, directed the Commission to appoint an independent consultant to practically assess the performance levels of the generating stations and as per direction of ATE, the Commission appointed M/s CPRI for estimating the current level of performance of the stations of MSPGCL and recommend the investments required to improve the performance of the Units.
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In this respect, MSPGCL submitted that CPRI has determined the current level of performance of the stations and suggested current level of performance accordingly, viz., the current SHR and auxiliary consumption along with stacking losses prevalent at the stations. The CPRI recommendations are as follows:
Stations Average Age CPRI Test Findings % Auxiliary Heat Rate Consumption Degradation Factor 10.29 9.48 8.77 10.74 10.35 12.94 11.39 0.55 0.99 0.63 0.42 0.32 0.38 0.39
SHR (kcal/kWh) 3043.4 2653.1 2759.1 2832.7 2855.5 3309.6 2919.4
Stacking Loss (%) 2.65 2.65 0 2.65 2.65 0 2.65
Koradi Khaperkheda Chandrapur Nasik Bhusawal Paras Parli
31 14 21 33 33 42 30
The degradation factor is taken into account for the annual deviation due to ageing of the Unit or number of operating years of service of the plant and is defined as % change in the heat rate between two points measured in terms of kcal/kWh/Year. Stacking losses of coal are losses of coal in between tippler or receipt point of the TPS and the bunkers and has been considered by MSPGCL on weight basis. In this regard, MSPGCL submitted as follows. a. Stacking losses The Petitioner has itself constituted an in-house two member Committee to assess the stacking losses at all MSPGCL stations. The committee has analyzed that that there is a loss of around 250 kcal/kWh on account of stacking losses, on account of the following: 50 kcal/kWh: on account of increase in moisture content in the coal by around 1% during the average stacking period of around 8-10 days. 200 kcal/kWh: for decrease in volatile matter by around 2 to 3% during the average stacking period of 8 to 10 days
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b. Investments for Improvement in SHR Trajectory MSPGCL submitted that CPRI has identified the SHR trajectory and improvement in auxiliary consumption considering that the suggested recommendations will be implemented during the stipulated period starting from FY 2009-10. MSPGCL submitted that the improvements in the performance parameters will result only after the capitalization of investments suggested by CPRI is achieved. MSPGCL is in the process of preparing the DPRs based on the recommendations of CPRI and directions of the Commission to bundle small capex schemes into large schemes to the extent possible. MSPGCL envisages submission of such details to the Commission for in-principle approval shortly. MSPGCL understands that the investments are likely to happen in FY 2010-11 and the positive results from the investment can only be realized from FY 2011-12 onwards. MSPGCL further submitted that another significant point to highlight here is that although the MSPGCL envisages implementation of schemes in a planned manner, however there might be circumstances or grid conditions which may prohibit the MSPGCL to take planned shutdowns of the Units for undertaking such capital works. The deferment of implementation program envisaged by the MSPGCL may result in under-achievement of perceived improvements which needs to be considered by the Commission on grounds of merit.
c. Degradation factor Considering the envisaged implementation of schemes, MSPGCL does not envisage any improvement in the performance of the Units at least till FY 2010-11. Therefore, while the auxiliary consumption is assumed to be equal to the test consumption as per the CPRI Report, MSPGCL has considered a degradation factor of 0.7% for projecting the SHR for 2009-10 (OctMar) and 2010-11 on the base SHR worked out by CPRI. The degradation factor is based on the findings of the study conducted by M/s MECON for assessment of performance of the stations of MSPGCL. d. Impact of PLF MSPGCL submitted that the CPRI study has been conducted at a PLF of 80% and the PLF, Station Heat rate and auxiliary consumption have a negative correlation with each other.
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MSGPCL submitted that the average PLF for most MSPGCL stations is below 80%. Various factors attributable to low PLF are shortage in supply of coal, deferred maintenance due to adverse demand supply position, forced back-down of the units on account of SLDC directives and/or non-availability of transmission line due to technical issues. MSPGCL submitted that on account of the above, suitable adjustment in the normative/test SHR of CPRI needs to be considered for ascertaining the achievable SHR of the stations operating at lower PLF of 80%. In this regard, the Commission would like to highlight that the CPRI Report specifically mentions that there is no methodology for computing stacking loss and the best available as on date is the CERC/MoP norm of reducing received coal GCV by 150 kcal/kg (100 kcal/kg + 1 % moisture). CPRI has added that the stacking loss is recommended to be reflected in GCV of receipt coal only and is not to be loaded or factored in SHR. The SHR reported will remain unchanged. There is only one SHR and no loading of stacking loss into SHR is permissible, as these losses do not add to the conversion of coal into electric power. Further, the transit losses in coal are already being allowed separately, in accordance with the MERC Tariff Regulations and recommendations of CPRI, and there is no scope for allowance of any additional stacking loss.
4.2 STATION-WISE PERFORMANCE PARAMETERS AND TARIFF The Commission, in its MYT Order for MSPGCL, had approved the performance of individual generating stations, as under.
4.2.1 Availability and PLF of MSPGCLs Generating Stations The Commission, in its MYT Order, had approved the availability of generating stations over the Control Period considering the availability projections of MSPGCL and approved the availability of 80% for such stations where MSPGCL had projected availability lower than 80%. As the approved availability of all the generating station was either more than normative availability of 80% or equal to the normative availability of 80%, the Commission allowed the full recovery of annual fixed charges approved by the Commission. However, for Uran Gas based station, the Commission approved the availability as projected by MSPGCL for recovery of Annual Fixed Charges, considering the shortage in supply of gas.
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MSPGCL submitted that the fixed charges are contracted capacity charges payable to the Generating Company based on normative availability, irrespective of actual generation from the plants. MSPGCL highlighted that the availability projections submitted by MSPGCL in the MYT Petition were based on the methodology adopted by CEA and involved the concept of loadability. The availability had thus been projected at a higher level for all the stations. However, in this APR Petition, MSPGCL had provided the availability in accordance with the methodology stipulated in the MERC Tariff Regulations. Under this methodology, the availability of most of the stations is lower than the normative levels approved by the Commission. MSPGCL requested the Commission that the norm of availability in accordance with the MERC Tariff Regulations should be made applicable for the new stations only and that the same criteria should not be applied to the vintage stations owned by it. MSPGCL submitted that there are serious constraints in increasing the loadability of the stations while at the same time preventing breakdowns and avoiding shutdowns. MSPGCL submitted that the reasons for lower availability are beyond its control and are primarily attributable to the deteriorated performance of the vintage Units, which are due for replacement. MSPGCL has undertaken only bare minimum R&M expenditure on such Units just to keep them under running condition. MSPGCL highlighted that considering the acute shortage of power in the State of Maharashtra, it is still in the interest of the consumers of the State to operate these vintage stations even at their deteriorated performance. Accordingly, MSPGCL requested the Commission to consider its submission with regard to lower availability and allow MSPGCL to fully recover the fixed charges of these Stations, even though they may not have achieved the normative availability levels required for full recovery of fixed charges. MSPGCL, in its Petition, submitted the revised estimates for availability and PLF for FY 2009-10, based on the actual availability and PLF for the first six months and projected for the remaining six months of FY 2009-10. MSPGCL submitted that the planned R&M of the stations has a direct bearing on the availability of thermal power stations. MSPGCL submitted that considering the age of the plants and increased pressure on the stations owing to the burgeoning demand-supply gap in the State, it understands the importance of maintaining at least the current performance level of its plants, if not improving on the same. MSPGCL has made the following submissions with respect to the revised projections of Station-wise availability and PLF during FY 2009-10 and FY 2010-11. Uran Plant
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MSPGCL submitted that it has signed a Gas Supply Agreement with GAIL on July 01, 2006 for gas linkage of 3.5 Million Metric Standard Cubic Meters per day (MMSCMD) up to March 31, 2011 for its Uran gas plant. However, the average availability of gas has been varying between 2.2-2.5 MMSCMD. RLNG gas skid was commissioned by M/S. GAIL in the month of April 2008. In order to make up the shortfall of 1.1 to 1.3 MMSCMD, MSPGCL started procuring RLNG gas from spot market as per requirement and availability since April 2008. Further, Uran has been allocated 1 MMSCMD gas from Reliance D6 field from KG basin by MoPNG for existing capacity from the month of April 2009. Since then, the purchase from spot market has stopped. MSPGCL submitted that considering these factors, projected availability has been kept as 78.87% for FY 2009-10. In the first half of FY 2009-10, the actual PLF was 71.18% and MSPGCL projected the PLF as 58.73% in the second half of FY 2009-10. For FY 2010-11, MSGPCL projected the availability and PLF at 78.87%. MSPGCL submitted that the availability and corresponding PLF of the Units are subject to availability of gas.
Bhusawal Thermal Plant MSPGCL filed a Petition for derating of Bhusawal Unit 1 from 55 MW to 50 MW. MSPGCL informed the Commission that the CEA in response has approved the derated capacity of the Unit with effect from August 2009 through letter dated Ref No: RCD10/4/L514/10780. For FY 2009-10, the Commission in its MYT Order, approved the availability of 80%. MSPGCL highlighted that in its MYT Petition, MSPGCL projected an availability of around 74.9%; however, the Commission has approved normative availability of 80%. MSPGCL submitted that the availability for FY 2009-10 for first half was 70.93% and availability during second half is estimated to be 81.6%. The overall availability estimated by MSPGCL for FY 2009-10 is 76.25%. MSPGCL also submitted that it has planned annual overhauling of boilers of all the Units. The details of planned outages are as shown in the table below:
Table : Details of Planned Outages Unit 1

MERC, Mumbai
Oct to March (2009-10) 12 Days (AOH)
2010-11 12.5 Days AOH Blr-II

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Unit 2 Unit 3
9 Days (AOH) 25 Days (AOH)
62 Days COH for DCS Works -
MSPGCL estimated the PLF for FY 2009-10 at 75.16%. For FY 2010-11, MSPGCL has projected a PLF of around 76.9% on account of the planned outages during the year as shown in the table above. Chandrapur Thermal Plant For FY 2009-10, the Commission in its MYT Order, had approved an availability of 86.16%. MSPGCL highlighted that in its MYT Petition, MSPGCL projected an availability of around 85.81% based on CEA methodology; however, the Commission has approved the same availability in accordance with the methodology specified in MERC Tariff Regulations. MSPGCL submitted that the availability in accordance with MERC Tariff Regulations for the first half of FY 2009-10 has been 72.10% and for second half of FY 2009-10, MSPGCL estimated an availability of 76.50% and hence, estimated overall availability of 72.51% for FY 2009-10. MSPGCL submitted that it plans to undertake annual overhauling of boilers of all its Units in the station during the second half as per the details given below.
Table: Details of Planned Outages Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Unit 7 Oct to March (2009-10) 25 Days 5 Days 25 Days 30 Days 2010-11 25 Days (AOH) 25 Days (AOH) 25 Days (AOH) 25 Days (AOH) 30 Days (AOH) 30 Days (AOH) 25 Days (AOH)
MSPGCL, in its APR Petition for FY 2009-10, has estimated the PLF for FY 2009-10 as 72.51%. For FY 2010-11, MSPGCL has projected availability and PLF of around 74.86% considering the planned outages. Nasik Thermal Power Station
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For FY 2009-10, the Commission in its MYT Order, has approved an availability of 86.41%. MSPGCL highlighted that in its MYT Petition, MSPGCL projected an availability of 86.41% based on CEA methodology; the Commission has approved the same as 86.41%. MSPGCL submitted that the availability in accordance with MERC Tariff Regulations for the first half of FY 2009-10 has been 66.15%, on account of COH of Unit-3 and AOH of Unit-1 besides other forced outages as provided in Form 2.6. MSPGCL also submitted that AOH of Unit-1 took 83 days as compared to the anticipated time of 25 days of planned outage because of overhauling of generator rotor work. MSPGCL submitted that it plans to undertake AOH of its Units during the second half of FY 2009-10 as per the details provided below. Table: Details of Planned Outages in (Oct-Mar) 2009-10. Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Oct to March (2009-10) 25 Days(COH) 5 Days (Misc Planned Outages) 7 days (Short term Overhaul) 25 days (AOH) 2010-11 35 Days (AOH) 45 Days (AOH) 35 Days (AOH) 35 Days (AOH) 45 Days (AOH)
For second half of FY 2009-10, MSPGCL estimated an availability of 75.13%, and hence, estimated overall availability of 70.49% for FY 2009-10. MSPGCL estimated the PLF for FY 2009-10 at the same level, i.e., 70.49%. For FY 2010-11, MSPGCL has projected availability and PLF of around 75.42% on account of annual overhauling of Units in accordance with the schedule and considering a margin for forced outage. Khaperkheda Thermal Power Station As against the approved availability of 85.04%, the actual availability achieved during first half of FY 2009-10, i.e., April 2009 to September 2009, is 83.01%. The details of planned outage of the Units are given in the table below: Table: Details of Planned Outages Units Unit 1 Unit 2 Unit 3
MERC, Mumbai
Oct to March (2009-10) 25 Days (AOH) 35 Days(AOH) 25 Days (AOH Completed)
2010-11 26 Days (AOH)
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Unit 4
85 Days (AOH)
For the second half of FY 2009-10, MSPGCL has estimated availability of 77.54%. Accordingly, the overall availability has been estimated to be around 80.92% for FY 2009-10. MSPGCL estimated the PLF for FY 2009-10 at the same level, i.e., 80.92%. For FY 2010-11, MSPGCL has projected availability and PLF of around 82.19% on account of annual overhauling of Units in accordance with the above schedule and considering a margin for forced outage for reasons not attributable to it. Paras Thermal Power Station For FY 2009-10, the Commission in its MYT Order, approved an availability of 86.41%. MSPGCL highlighted that in its MYT Petition, MSPGCL projected an availability of around 86.41% based on CEA methodology; however, the Commission has approved the same availability in accordance with the methodology specified in MERC Tariff Regulations. MSPGCL submitted that the availability in accordance with MERC Tariff Regulations for the first half of FY 2009-10 has been 52.58%. For second half of FY 2009-10, MSPGCL estimated an availability of 69.98%, and hence, estimated overall availability of 62.90% for FY 2009-10. MSPGCL estimated the PLF for FY 2009-10 at the same level, i.e., 62.90%. For FY 2010-11, MSPGCL has projected availability and PLF of around 68.89%, on account of annual overhauling of 25 days. Parli Thermal Power Station For FY 2009-10, the Commission in its MYT Order, had approved availability of 80%. MSPGCL highlighted that in its MYT Petition, MSPGCL projected an availability of around 77.43% based on CEA methodology; however, the Commission has approved 80% availability in accordance with methodology specified in MERC Tariff Regulations. MSPGCL submitted that the availability in accordance with MERC Tariff Regulations for the first half of FY 2009-10 has been 69.04%. For second half of FY 2009-10, considering the planned outages towards COH/AOH for some of the Units, MSPGCL estimated availability of 70.55%, and hence, estimated overall availability of 69.59% for FY 2009-10. MSPGCL estimated the PLF for FY 2009-10 at the same level, i.e., 69.59%. For FY 2010-11, MSPGCL has projected availability
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and PLF of around 68.89% on account of annual overhauling of Units in accordance with schedule and considering a margin for forced outage for reasons not attributable to it.
Koradi Thermal Power Station For FY 2009-10, the Commission in its MYT Order, approved availability of 81.31%. MSPGCL highlighted that in its MYT Petition, MSPGCL projected availability of around 81.31% based on CEA methodology; however, the Commission has approved the same availability in accordance with methodology specified in MERC Tariff Regulations. MSPGCL submitted that the availability in accordance with MERC Tariff Regulations for the first half of FY 2009-10 has been 52.39%. For second half of FY 2009-10, MSPGCL estimated availability of 66.65%, and hence, estimated overall availability of 58.63% for FY 2009-10. MSPGCL estimated the PLF for FY 2009-10 at the same level, i.e.,58.63%. For FY 2010-11, MSPGCL has projected availability and PLF of around 63.69% account of annual overhauling of Units in accordance with the following schedule: Table : Details of Planned Outages in (Oct-Mar) 2009-10. Units Unit 1 Unit 2 Unit 3 Unit 4 Unit 5 Unit 6 Unit 7 Oct to March (2009-10) 70 Days (COH) 25 Days (AOH) 2010-11 70 Days (AOH) 25 Days (AOH) 25 Days (AOH) 25 Days (AOH) 45 Days (AOH) 45 Days (AOH) 25 Days (AOH)
Commissions Ruling on Availability and PLF The Commission approved the Station-wise Availability in its MYT Order for each year of the Control Period. The Stations for which, MSPGCL projected the availability lower than 80% (i.e., Bhusawal and Parli), the Commission approved the availability of 80%. However, for Uran Gas based station, considering the short supply of gas, in its MYT Order, the Commission approved the availability as projected by MSPGCL for recovery of full fixed charges. For the Control
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Period, the Commission approved the Station-wise PLF considering the PLF projections of MSPGCL, and for stations for which MSPGCL projected PLF lower than 80%, the Commission considered the PLF of 80%, since in times of severe supply shortage, the PLF will be equal to Availability, and full recovery of fixed costs is possible only when the normative availability of 80% is achieved. The Commission, in its Order dated March 5, 2010 in Case No. 16 of 2008, considered the actual availability and PLF from FY 2005-06 to FY 2007-08 and did not disallow any amount pertaining to Annual Fixed Charges for existing stations on account of lower availability. Further the Commission is the said Order stated that From FY 2008-09 onwards, the Commission would consider the targets for Unit-wise availability and PLF based on CPRI recommendations. Accordingly, the Commission while approving availability and PLF for FY 2009-10 and FY 2010-11 has considered the recommendations made by CPRI in its reports as follows: Koradi units (1-4) have never exceeded 80 % PLF in their lifetime in spite of de-rating. As per steady trends in Figure 3, the Units the achievable PLFs are around 65 %. As per the trends Nasik units (1-2) are capable of achieving PLFs of around 75 % after de-rating. Bhusawal (Unit 1), Paras (Unit 2) and Parli units (1 & 2) are capable of achieving PLF of 80 %. Units of 210 MW and above can easily achieve the PLF of 80 % with focused attention on coal quality, R & M programs, adherence to planned maintenance schedule, leakage control, operational optimization, etc. Accordingly, as may be observed from the above recommendations of CPRI, except for some of the Units of generating stations, other Units are capable of achieving 80% Availability and PLF. For Koradi and Nasik Units for which CPRI has recommended lower PLF, the Commission has considered the recommended values and in order to derive the station wise Availability and PLF, weighted average Availability and PLF has been considered. In case of Uran Plant, due to gas shortage, the achievable PLF was lower in previous years. However, MSPGCL has submitted that the supply of 1 MMSCMD KG basin gas has
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commenced since April 2009 and accordingly, for Uran Station, the Commission has approved the availability and PLF as estimated by MSPGCL. Also, for those Units for which MSPGCL has projected higher PLF than that recommended by CPRI, the Commission has considered the higher value for provisional true up purpose. As shown in the table, the Commission has approved availability and PLF for all the stations, however, the Commission would consider the deviations in actual availability during truing up exercise along with the reasons for deviations. The Commission directs MSPGCL to submit the Station-wise actual availability and PLF figures to the Commission on a monthly basis, strictly in accordance with the provisions of MERC Tariff Regulations along with reasons for variation in Availability and PLF duly certified by Maharashtra State Load Despatch Centre (MSLDC). The station-wise availability and PLF as approved by the Commission in the MYT Order, projected by MSPGCL in the APR Petition, and approved by the Commission for FY 2009-10 and FY 2010-11 is given in the following Table. Table: Availability (%) MYT Order 85.04% 86.41% 80.00% 86.41% 80.00% 81.31% 85.81% 53.22% FY 2009-10 Revised Estimate 80.92% 62.90% 76.25% 70.49% 79.80% 58.63% 72.51% 64.14% FY 2010-11 Revised Estimate Approved 82.19% 82.19% 68.89% 80.00% 76.90% 80.00% 75.42% 78.58% 80.01% 80.01% 63.39% 73.94% 74.86% 80.00% 78.87% 78.87%
Particulars Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran
Approved 80.92% 80.00% 80.00% 78.58% 80.00% 73.94% 80.00% 78.87%
Table: PLF (%) MYT Order 80.79% 80.00% FY 2009-10 Revised Estimate 80.92% 62.90% FY 2010-11 Revised Approved Estimate 80.92% 80.00% 82.19% 68.89%
Particulars Khaparkheda Paras

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Approved 82.19% 80.00%

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Bhusawal Nasik Parli Koradi Chandrapur Uran
80.00% 80.00% 80.00% 80.00% 80.00% 52.77%
75.16% 70.49% 69.27% 58.63% 72.51% 64.14%
80.00% 78.58% 80.00% 73.94% 80.00% 78.87%
76.90% 75.42% 80.01% 63.39% 74.86% 78.87%
80.00% 78.58% 80.01% 73.94% 80.00% 78.87%
The Commission will review the actual availability and PLF for each station at the end of the year, and in case the availability achieved for thermal stations is lower than that approved, then the Commission will examine the reasons for such deviation.
4.2.2 Auxiliary Consumption MSPGCL, in its Petition, submitted that the auxiliary consumption for hydro and thermal generation Units for FY 2009-10 is based on the actual auxiliary consumption for the first six months and projected performance for the remaining six months of FY 2009-10. MSPGCL made the following submissions with respect to the revised projections of auxiliary consumption during FY 2009-10 and FY 2010-11. Uran Plant The Auxiliary Consumption for the first six months of FY 2009-10 for Uran Plant was 1.94%, which is better than the target of 2.4% approved by Commission in its MYT Order. MSPGCL projected a consumption of 2.95% for the remaining six months of the FY 2009-10. Accordingly, an auxiliary consumption of 2.40% has been projected by MSPGCL for FY 2009-10. MSPGCL has been maintaining auxiliary consumption at about 2.40% and envisaged the auxiliary consumption at the level of 2.40% for FY 2010-11. Bhusawal TPS MSPGCL, in its Petition, submitted that the actual Auxiliary Consumption for the first six months of FY 2009-10 for Bhusawal TPS (BTPS) was 10.97%, which is higher than the target approved by the Commission (9.75%) for FY 2009-10. MSPGCL has projected 11% for second half of the year and estimated the overall auxiliary consumption of around 10.99% for the entire FY 2009-10. MSPGCL submitted that due to poor quality of coal, one additional coal mill as compared to designed number of operating mills, is being operated in all the three Units, which
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causes not only additional consumption of auxiliary energy by the mills but also enhanced loads on the fans contributing to further consumption of auxiliary energy. Due to ageing of the Stage-1 Units, the leakages in these boilers are higher, resulting in further overloading of Induced Draft (ID) fans, which leads to a higher auxiliary consumption as compared to the normative levels approved by the Commission. Due to these reasons, MPSGCL has projected the auxiliary consumption of BTPS to be around 10.99% for FY 2010-11. MSPGCL also submitted that the auxiliary consumption as per CPRI report has been considered for the second half of the year. Chandrapur TPS MSPGCL submitted that the Auxiliary Consumption for the first six months of FY 2009-10 for Chandrapur Plant was 8.54%, which is higher than the approved auxiliary consumption of 7.80%, and submitted the reason for deviation as poor quality of coal, which leads to more coal mill operations, increased air flow, and flue gas losses, which increase the auxiliary consumption. MSPGCL projected an improvement in the same in the remaining half of the year as 8.5%, and estimated the auxiliary consumption for FY 2009-10 to be around 8.52% and also projected the auxiliary consumption for FY 2010-11 at 8.5%. Nasik TPS MSPGCL submitted that the Auxiliary Consumption for first six months of FY 2009-10 for Nasik Plant was 10.22% and estimated the same as 11.51% for the second half, which is higher than the approved auxiliary consumption of 9.00% and submitted the reasons for deviation as inferior quality of coal in terms of Gross Calorific Value (GCV), ash content, volatile matter and moisture as received from mines as compared with designed quality of coal. MSPGCL further explained that in order to meet the rated load of the Units, one additional coal mill is always taken into service leading to increased loading on draft fans. MSPGCL further submitted that the capacity of Units 1 and 2 have been derated w.e.f. April 2007 and therefore, the auxiliary consumption for the Units has further increased. On account of the above reasons, MSPGCL projected auxiliary consumption of 10.91% for FY 2009-10 and 11.51% for FY 2010-11. Khaperkheda TPS MSPGCL submitted that the Auxiliary Consumption for the first six months of FY 2009-10 for Khaperkheda Plant was 9.56% and projected an auxiliary consumption of 9.95% for the second half, which is higher than the approved auxiliary consumption of 8.5%, and submitted the
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reasons for deviation as increase in plant auxiliary load due to commissioning of Ammonia Plant (30 kW) in 2005 and commissioning of Ozone Dosing plant (500 kW) in 2006. Further, MSPGCL explained that the Units are supposed to run with 4 coal cycles with designed GCV coal, but due to poor quality of coal, Khaperkheda TPS has to practically run with 5 coal cycles for full load operation. These two factors primarily contribute to increase in auxiliary consumption. MSPGCL projected the auxiliary consumption as 9.75% for FY 2009-10 and 9.95% for FY 2010-11. Paras TPS MSPCGL submitted that the Auxiliary Consumption for the first six months of FY 2009-10 for Paras was 15.00%, and projected Auxiliary Consumption of 13.38% for second half of the year, which is considerably higher than the approved auxiliary consumption of 9.70% in FY 2009-10, on account of the vintage of the stations and poor quality of coal. MSPGCL further submitted that the capacity of Unit-2 has been derated w.e.f. April 2007 and therefore, the auxiliary consumption for the Unit has increased. The other factors that are responsible for such increase is the partial loading due to inferior quantity of coal and supply of wet coal in the rainy season. MSPGCL has projected the auxiliary consumption of 14.10% for FY 2009-10 and 13.38% for FY 2010-11. It is also observed that there has been a considerable increase in the auxiliary consumption as compared to previous year's 12.18%. Parli TPS MSPGCL submitted that the Auxiliary Consumption for the first six months of FY 2009-10 for Parli Plant was 11.41%, which is higher than the approved auxiliary consumption of 9%. MSPGCL further submitted that the capacity of Units 1 and 2 have been derated w.e.f. April 2007 and therefore, the auxiliary consumption for the Units has further increased. MSPGCL projected an improvement in the same in the remaining half of the year and estimated auxiliary consumption of 10.43% during the period from October 2009 to March 2010. Accordingly, MSPGCL projected overall auxiliary consumption of 11.71% for FY 2009-10 and 11.99% for FY 2010-11. Koradi TPS MSPGCL, in its Petition, submitted that the Auxiliary Consumption for the first six months of FY 2009-10 was 12.92% and projected the same as 11.55% for the rest of the year, which is
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higher than the target of 9.80% approved by the Commission in its MYT Order. The overall auxiliary consumption is estimated at 12.14% for FY 2009-10. MSPGCL submitted the following reasons for deviation in the auxiliary consumption: Plant load factor dropped due to the coal handling problems, which is the major reason for increased auxiliary consumption as it has inverse relationship with Auxiliary consumption. Unit No. 5 is designed with open cycle condenser cooling system and the water circulation system as designed calls for two stage pumping of water, which adds to the working drives to the extent of about 1240 kW. Units 5 & 6 are fitted with bag filters, which have added compressors for bag filters, spray, etc. into the circuit. Over and above these, the ID fans are of higher design to take care of higher DP across the bag filters adding about 1800 kW of auxiliary power consumption of these Units. This adds about 0.9% increase in auxiliary power consumption of these two Units. In case of Stage 1 Unit, it has been noticed that even if the power plant receives coal of desired size, the feeding to boilers will be always through crushers only. This causes unnecessary loading on the crushers and adding to the auxiliary power consumption. If the above additional loads are added, it is noted that about 10% to 15% increase in aux. power consumption is expected as compared to the normative value of 9%. Capacity of the plant has been derated from 1100 MW to 1040 MW (w.e.f. from Apr 2007). Hence, ratio of auxiliary consumption has also increased. For remote auxiliaries supply is given through MSEDCL, which accounts for increase in the consumption. Besides, partial loading and shut downs are due to inferior quality coal and wet coal are other factors leading to increased auxiliary consumption. The auxiliary consumption as per the CPRI Report has been considered over the period from October 2009 to March 2010, and also in the ensuing year. The Petitioner envisages that the likely investments happening during FY 2010-11 will start showing the benefits only from FY 2011-12 onwards. MSPGCL requested the Commission to approve the Auxiliary Consumption for FY 2010-11 as 11.90%.
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The Commission in its Order dated March 5, 2010 in Case No. 16 of 2008 observed that the Auxiliary Consumption norm suggested by CPRI for FY 2008-09 for some of the stations was substantially higher than the actual auxiliary consumption and hence, the Commission approved the Auxiliary Consumption norm for FY 2009-10 based on actual auxiliary consumption for FY 2008-09. The Commission at this stage has not revised the auxiliary consumption norm for FY 2009-10. For FY 2010-11, the Commission has considered the norms suggested by CPRI. The summary of auxiliary consumption as approved in MYT Order, proposed by MSPGCL in the APR Petition and values approved by the Commission for FY 2009-10 and FY 2010-11 is given in the following Table: Table: Auxiliary Consumption for FY 2009-10 & FY 2010-11 (%) FY 2009-10 Station Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran MYT Order 8.50% 9.70% 9.75% 9.00% 9.00% 9.80% 7.80% 2.40% MSPGCL 9.75% 14.10% 10.99% 10.91% 11.71% 12.14% 8.52% 2.40% CPRI 9.17% 12.18% 10.74% 9.74% 10.93% 10.74% 8.18% N.A. Approved 9.17% 12.18% 10.74% 9.74% 10.93% 10.74% 8.18% 2.40% MSPGCL 9.95% 13.38% 11.00% 11.51% 11.99% 11.90% 8.50% 2.40% FY 2010-11 CPRI 9.74% 12.45% 10.55% 10.95% 11.15% 10.70% 9.15% N.A. Approved 9.74% 12.45% 10.55% 10.95% 11.15% 10.70% 9.15% 2.40%
4.2.3 Heat Rate MSPGCL submitted that the Commission appointed M/s CPRI to undertake a study to assess the technical performance of the stations operated by it. MSPGCL requested the Commission to consider the variation in performance of the stations in light of the technical report by M/s CPRI and approve such revised norms that adequately represent the state of affairs of the plants. The submissions made by MSPGCL in this regard and CPRI recommendations have been discussed in detail in Section 3 of the Order. For FY 2009-10 and FY 2010-11, the Commission has considered heat rate as per CPRI report and not the values projected by MSPGCL. The
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summary of heat rate approved in MYT Order, heat rate proposed by MSPGCL in the APR Petition and CPRI recommendations, and as approved by the Commission for FY 2009-10 and FY 2010-11 is given in the following Table:
Table: Station Heat Rate for FY 2009-10 & FY 2010-11 (kcal/kWh) 2009-10 Station Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran MYT Order 2566.0 3105.0 2652.0 2642.0 2660.0 2797.0 2556.0 1980.0 MSPGCL 2862.0 3759.0 3074.0 3107.0 3205.0 3364.0 3030.0 2025.0 CPRI 2612.2 3223.8 2784.3 2774.3 2796.1 3014.9 2664.4 N.A. Approved MSPGCL 2612.2 3223.8 2784.3 2774.3 2796.1 3014.9 2664.4 1980 2966.0 3610.0 3149.0 3126.0 3214.0 3340.0 3051.0 2025.0 2010-11 CPRI 2559.9 3186.5 2733.9 2721.9 2744.6 2964.8 2617.0 N.A. Approved 2559.9 3186.5 2733.9 2721.9 2744.6 2964.8 2617.0 1980.0
4.2.4 Transit Loss MSPGCL submitted that the transit loss in FY 2009-10 has been higher as compared to that in FY 2008-09 for the following reasons: In view of Judgment of Honourable Supreme Court of India against contempt petition No. 245 of 2007 dated 19.12.2008, MSPGCL allocated the contract of liaisoning work to M/s B.S.N. Joshi & Sons Ltd. The tender document of this contract was published in Feb. 2005 based on coal supply and regulatory scenario at that time. However, MSPGCL had to operate this contract as it was, in the year 2009 in the changed coal supply and regulatory scenario. MSPGCL has incurred heavy financial loss due to transit loss. As this contract became detrimental to MSPGCL due to poor performance, the contract was therefore terminated on 12.09.2009. As a stop gap arrangement, MSPGCL allocated liaisoning contract to M/s Nair coal Services, M/s Naresh Kumar & Co., M/s KCT & Brothers on 25.09.2009. In this
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contract, penalty of transit loss is included keeping all the rates, terms & conditions as per M/s B.S.N.Joshi & Sons Contract. Heavy transit loss observed during the Liaisoning period of M/s BSNJ from March 2009 to Sep.2009 is because of the fact that penalty clause on transit loss was not included in Feb. 2005 tender. However, from the beginning of new liaisoning contract, for stop gap arrangement, the transit loss is within limit of 0.8 % as decided by MERC. MSPGCL submitted that it has always maintained that transit losses is an uncontrollable parameter and that MSPGCL has no direct control over the same. While the losses had been lower during the previous year, however, the same has increased significantly during the current year. While MSPGCL believes that going forward, the said losses would be controlled, however, MSPGCL requested the Commission to consider such uncontrollable factors during the first half of the year. The transit loss values as submitted by MSPGCL for FY 2009-10 are based on actual figures for six months and estimated figures for six months. The Commission at this stage has not carried out any provisional truing up for transit losses for FY 2009-10 and the Commission will consider the actual transit losses at the time of truing up for FY 2009-10 subject to prudence check. The Commission at this stage has therefore, considered the transit loss as recommended by CPRI for all the coal based stations for FY 2009-10 and FY 2010-11. The summary of transit loss approved in MYT Order, transit loss proposed by MSPGCL in the APR Petition and as approved by the Commission for FY 2009-10 and FY 2010-11 is given in the following Table:
Table: Transit Loss FY 2009-10 & FY 2010-11 Station MYT Order 0.8% Khaparkheda 0.8% Paras 0.8% Bhusawal
MERC, Mumbai
2009-10 MSPGCL 4.76% 2.49% 4.53%
Approved 0.80% 0.80% 0.80%
2010-11 MSPGCL Approved 2.00% 0.80% 0.80% 0.80% 1.60% 0.80%

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Station Nasik Parli Koradi Chandrapur
MYT Order 0.8% 0.8% 0.8% 0.8%
2009-10 MSPGCL 3.40% 0.78% 0.71% 0.36%
Approved 0.80% 0.80% 0.80% 0.80%
2010-11 MSPGCL Approved 2.00% 0.80% 0.80% 0.80% 0.80% 0.80% 0.36% 0.80%
4.2.5 Secondary Fuel Oil Consumption MSPGCL, in its Petition, submitted that secondary oil consumption is on the higher side and submitted the following reasons for the deviation: Wet Coal related issues during rainy season On account of the persistent shortfall of coal, the coal as received at the stations was directly fed into the bunkers for generation of electricity and feeding wet coal directly to the boilers lead to excessive consumption of secondary oil during the monsoon season. Impact of Shortages of Coal Supply on secondary oil consumption During the first half of 2009-10, there had been a persistent shortage of domestic coal due to which the Units had to be operated on partial load with oil support for flame stabilization. The Commission, in its Order in Case No. 16 of 2008, has approved secondary fuel oil consumption in accordance with the findings of CPRI as under: Table: Secondary Fuel Oil Consumption
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The Commission has therefore, considered the CPRI recommended secondary fuel oil consumption as shown in the table above, for FY 2009-10 and FY2010-11. The summary of secondary fuel oil consumption as approved in MYT Order, proposed by MSPGCL in the APR Petition, and as approved by the Commission for FY 2009-10 and FY 2010-11 is given in the following Table: Table: Secondary Fuel Oil Consumption (ml/kWh) for FY 2009-10 & FY 2010-11 2009-10 Station Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur MYT Order 2.00 2.00 2.00 2.00 2.00 2.00 2.00 MSPGCL 1.47 7.03 3.71 5.23 3.55 9.94 1.95 Approved 2.00 2.00 2.00 3.0 2.00 2.81 2.00 2010-11 MSPGCL 2.00 2.95 3.80 3.95 2.60 3.00 2.00 Approved 2.00 2.00 2.00 3.0 2.00 2.81 2.00
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ANALYSIS OF ENERGY AVAILABILITY, ENERGY CHARGE AND ANNUAL FIXED CHARGES FOR FY 2009-10 AND FY 2010-11
MSPGCL, in its APR Petition for FY 2009-10 and Tariff Petition for FY 2010-11, submitted the performance for FY 2009-10 based on actual performance for the first half of the year, i.e., April to September 2009, and revised estimate of performance for the second half of the year, i.e., October 2009 to March 2010. MSPGCL submitted the comparison of each element of cost for FY 2009-10 with that approved by the Commission in its Order dated August 17, 2009 on MSPGCLs APR Petition for FY 2008-09 and tariff determination for FY 2009-10 in Case No. 115 of 2008. The Commission will undertake the truing up of expenses and revenue for FY 2009-10 only after the audited accounts of MSPGCL for FY 2009-10 are available subject to prudence check. However, in this Order on APR for FY 2009-10 and tariff determination for FY 2009-10, the Commission has considered provisional truing up of certain elements of ARR of FY 2009-10 due to revision in performance parameters as approved by the Commission in its Order dated March 5, 2010 in Case 16 of 2008 and revision in capital expenditure/capitalisation figures.
5.1 ENERGY AVAILABILITY DURING FY 2009-10
The summary of actual gross generation during FY 2009-10, gross generation approved by the Commission in its APR Order for FY 2009-10, and revised estimates of gross generation for FY 2009-10 are given in the following Table: Table: Gross Generation for FY 2009-10 (MU) S.No 1 2 3 4 5 6 7 8 Station Khaparkheda Paras (excluding Unit 3) Bhusawal Nasik Parli (excluding Unit 6) Koradi Chandrapur Uran Sub Total - Thermal 9 Hydel Generation
APR Order 5448 385 3329 6167 4695 7288 16399 5745 MSPGCL 5374 303 3127 5434 4077 5341 14863 4685
49456
3934
43204
4149 Page 89 of 121
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Total Thermal & Hydro
53390
47353
The Commission, in its APR Order in Case No. 16 of 2008, has accepted the de-rated capacity as submitted by MSPGCL for its generating stations at Nasik, Koradi, Bhusawal, Paras and Parli TPS as approved by CEA and accordingly has considered the derated capacity of these stations for working out the revised gross generation. As discussed in the previous paragraph, the Commission has only undertaken the provisional truing up of certain elements of ARR. As discussed in Section 4, the Commission for FY 2009-10 has approved the Availability and PLF based on CPRI recommendations and accordingly, the gross generation approved by the Commission for FY 2009-10 is given in Table below: Table: Gross Generation in FY 2009-10 (MU) S.No 1 2 3 4 5 6 7 8 9 Station Khaparkheda Paras (excluding Unit 3) Bhusawal Nasik Parli (excluding Unit 6) Koradi Chandrapur Uran Sub Total - Thermal Hydel Generation Total Thermal & Hydro
Approved 5954 385 3329 6058 4695 6736 16399 5886 49442 3934 53376
The Commission will undertake the final truing up of gross generation for FY 2009-10 based on actual performance for the entire year along with the reasons for variation in actual generation.
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5.2 5.2.1
ENERGY AVAILABILITY AND GROSS GENERATION DURING FY 2010-11 Generation from Hydel Stations
As regards the generation from hydel generating stations for FY 2010-11,MSPGCL has projected total net generation of 3877 MU. The Commission, in its MYT Order, approved the generation from hydel stations considering the actual generation during last ten years, excluding FY 2005-06 and FY 2006-07, as in these two years the rainfall was much higher than the average rainfall. Accordingly, in Case No. 115 of 2008, the Commission approved net generation of 3934 MU for FY 2009-10. The actual generation from hydel stations will depend upon the monsoon during FY 2009-10. The Commission has therefore, considered the approved generation of 3934 MU (net generation) from hydel stations for FY 2010-11. The Commission will consider the variation in actual generation while truing up the expenses and revenue for FY 2009-10.
5.2.2 Generation from Thermal Stations
MSPGCL projected net generation from its existing stations for FY 2010-11 based on the projected PLF and Auxiliary Consumption for each generating station. The Commission has considered net generation from existing thermal generating stations of MSPGCL for FY 200910, based on Station-wise PLF and Auxiliary Consumption as approved based on the CPRI recommendations as elaborated in Section 4 of the Order. The summary of net energy availability from existing thermal stations as projected by MSPGCL and as considered by the Commission for FY 2010-11 is given in the following Table: Table: Net Generation for FY 2010-11 (MU)
S.No 1 2 3 4 5 6 7 8 9 Station Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Hydel FY 2010-11 MSPGCL Approved 5446 5459 288 337 2848 2946 4845 5394 4133 4172 5112 6016 14041 14898 4531 5745 3877 3934 Page 91 of 121
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Total
45120
48902
5.3 5.3.1
VARIABLE COSTS OF THERMAL GENERATING STATIONS Fuel Costs for FY 2009-10
MSPGCL, in its Petition, submitted that the total fuel cost for FY 2009-10 is estimated to be Rs. 7878.99 Crore (excluding other variable charges). MSPGCL submitted that the increase in fuel costs is largely on account of the increase in prices of coal and oil during FY 2009-10 and also variation in calorific value. MSPGCL estimated the fuel prices for second half of FY 2009-10, considering the actual fuel prices during H1 of FY 2009-10. As the impact of variation in fuel prices is allowed as pass through under the FAC mechanism, in this Order, the Commission has not considered any revision in fuel prices for FY 2009-10. However, for FY 2009-10, the Commission has re-estimated the total fuel costs considering the revised performance parameters as approved in Section 4 of the Order based on CPRI recommendations. The Commission will undertake the final truing up of fuel costs based on actual fuel costs during the entire year, subject to prudence check. The summary of station-wise variable costs as estimated by MSPGCL and as approved by the Commission for FY 2009-10 is given in following Table: Table: Variable Costs for FY 2009-10 (Rs Crore)
MSPGCL Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Total 980 66 742 1436 1010 1018 2283 627 8162 Approved 978 67 716 1394 956 991 1940 703 7745
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5.3.2
Fuel Price and Fuel Calorific Value for FY 2010-11
MSPGCL, in its Petition, has projected the cost of domestic coal, imported coal and secondary oil by assuming the actual price of fuel prevailing during the period from April to September 2009. MSPGCL in its supplementary submission, submitted revised fuel expenses for FY 200910 and FY 2010-11. MSPGCL in its supplementary submitted that; MSPGCL had received a letter Ref No 19/4/2010-OM/59 dated January 11, 2010, from Ministry of Power (MoP), Government of India on the matter of Import of Coal by Power utilities during 2010-11. In the said letter, MoP stated that against the anticipated requirement of 442 MMT coal for power utilities, the estimated availability of coal is around 388 MMT from the domestic sources. Accordingly, to bridge the gap, the Utilitywise distribution of coal import target for MSPGCL as worked out by CEA is 3.35 MMT for FY 2010-11.
MSPGCL, vide its letter Ref No MD/Mahagenco/FMC/194 dated Feb 11, requested the MoP to revise the target for import of coal for FY 2010-11. MSPGCL stated that the Import of coal target as specified by CEA as 3.35 MMT is too high as compared to the previous year target of 2.44 MMT. MSPGCL further submitted that the Petition for approval of tariff considering a smaller quantum of imported coal (as against the suggested target of 3.35 MMT) had already been submitted to the Commission and that such additional procurement of imported coal would lead to higher generation tariffs. However, in the absence of any further consideration by MoP towards revision in procurement targets, MSPGCL considered this aspect in its Board meeting held on Feb 25, 2010 in order to avoid loss of generation on account of non-availability of coal. In its resolution Ref No MSPGCL/BM-66/Item-66.1.4 dated March 11, 2010, the Board accorded its approval for import of 3.35 MMT of bituminous coal of foreign origin.
In the subsequent meeting held on March 6, 2010, the Board accorded approval for procurement of imported coal and provided further directions on the criteria for such procurement, delivery aspects and price indexation (considered in line with the methodology adopted by CERC for Central Generating Stations).
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Based on the aforementioned developments, MSPGCL accordingly submitted the revised quantity of imported and washed coal together with envisaged GCVs and landed price of these fuels for FY 2010-11. MSPGCL also submitted that the change in landed prices of coal and consumption of different coal and the derived impact on the fuel cost for each station as below: Table: Revised Fuel cost (Rs Crore) Power Station Bhusawal Chandrapur Nasik Koradi Paras Parli Khaperkheda Mahagenco Fuel Cost as per original submission 730.96 2,108.41 1,367.14 851.20 67.18 967.18 989.82 7,081.88 Revised Fuel Cost 768.77 2,499.25 1,254.45 854.21 70.49 1,030.71 1,072.32 7,550.21
MSPGCL also submitted the revised formats incorporating changes of quantity and price for each station. MSPGCL submitted that the methodology adopted for procurement of coal has been modified this year in comparison to the earlier practice of procuring coal at constant prices for the entire year. The methodology adopted is in line with that adopted by Central Stations based on the escalation rates approved and notified by CERC (based on price indexation). In this regard, MSPGCL requested the Commission to consider this aspect in the FAC determination process and allow such movement of indexed price to be recovered in the tariff. The Commission has taken note of the submissions made by MSPGCL. The Commission is of the view that as MSPGCL is yet to make arrangements for procurement for enhanced quantity of imported coal, it would not be appropriate to determine the fuel costs for FY 2010-11 based on increased quantity of imported coal, since the cost is not known. The Commission, therefore, for approving the fuel costs and energy charges for FY 2010-11 has considered the blending of raw
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coal, washed coal and imported coal in the same proportion as proposed by MSPGCL in its Petition. The impact of increase in fuel cost on account of additional imported coal procurement will be recovered through the FAC mechanism. As regards MSPGCL's request for modifying the FAC mechanism, the Commission clarifies that the specified FAC mechanism is the standard mechanism applicable for all the Generating Companies in the State and cannot be modified for each Generating Company. Further, the prevalent FAC mechanism already provides for adjustment in fuel prices and hence, there is no need to modify the mechanism. For FY 2010-11, in accordance with the practice adopted in previous Tariff Orders, the Commission has considered the actual price of fuel equivalent to average actual fuel price for the latest period, i.e., from January 2010 to March 2010. The Commission has considered the average calorific value of fuel for the period from January to March 2010. The Commission has not considered any escalation in fuel prices as the adjustments for variation in fuel prices is allowed as part of FAC mechanism. The summary of fuel prices and calorific value as considered by the Commission for FY 2010-11 is given in the Tables below: Table: Summary of Fuel Price and Calorific Value of Coal Domestic Washed Imported CV CV CV Rs/MT (kcal/Kg) Rs/MT (kcal/Kg) Rs/MT (kcal/Kg) 1651 3279 1707 3411 6709 6006 1933 3983 1881 3359 2122 3573 6451 6512 2080 3878 2252 3729 6381 6615 1869 3291 2270 3410 6767 6149 1750 3731 1634 3646 6503 6139 1609 3124 1843 3401 6148 5969
Stations Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur
As regards the secondary oil consumption, the average fuel prices and calorific value for the period January to March 2010 has been considered. The same is shown in the table below. Table: Summary of Fuel Price and Calorific Value for Secondary Fuels as approved by the Commission
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FO Stations Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Rs/MT 27912 28216 27621 28001 28488 29109 28078
LDO
CV CV (kCal/Kg) Rs/MT (kCal/Kg) 10776 37131 10142 10747 37488 10470 10862 37472 10260 10646 37179 10168 10475 38181 10180 10642 37765 10275 10564 37523 10042
5.3.3
Cost of Lubricants, Other Consumables and Water Charges, etc.
MSPGCL, in its Petition, submitted that it has considered the cost of lubricants, chemicals and water charges, etc., as part of energy charge. The Commission has included the cost of these other items, viz., lubricants, chemicals and water charges, etc. as part of variable costs while estimating the energy charges. The Commission has considered these costs for each station based on actual costs incurred during FY 2008-09. The summary of station-wise cost of these other charges considered by the Commission is given in the following Table: Table: Summary of Other Variable Costs and Adjustments for FY 2010-11 (Rs Crore) Stations Bhusawal Chandrapur Nasik Koradi Paras Parli Uran K'kheda Total Rs Crore 35.68 75.32 54.59 36.26 3.23 38.71 1.14 26.13 269.74
5.3.4
Rate of Energy Charge
Based on performance parameters, i.e., heat rate and auxiliary consumption approved for FY 2010-11, and considering the fuel prices and fuel calorific value as discussed in above paragraphs, the rate of energy charge for each thermal generating station for FY 2010-11 as
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approved by the Commission is given in the Table below. The summary of the total variable cost and rate of energy charge as approved by the Commission for FY 2010-11 is shown in the Table below: Table: Total Variable Cost (Rs Crore) and Rate of Energy Charge per unit FY 201011(Rs/kWh)
S.No 1 2 3 4 5 6 7 8 Station Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Total Total Variable Cost (Rs Crore) 996 65 653 1249 835 1006 2399 968 8170 Rate of Energy Charge 1.82 1.92 2.22 2.32 2.00 1.67 1.61 1.68
5.4
LEASE RENT FOR HYDEL STATIONS
MSPGCL submitted that the Commission in its Order dated October 27, 2008 in Case No 17 of 2007 had approved the revised lease rentals of Rs 230.80 Crore and Rs 314.84 Crore for FY 2009-10 and FY 2010-11, respectively, for the hydro stations operated by MSPGCL, and the revised lease rentals were effective from FY 2009-10 onwards. MSPGCL submitted that based on the revised estimates for FY 2009-10 and projections for FY 2010-11, MSPGCL seeks recovery of lease rentals to the tune of Rs 217.56 Crore and Rs 301.77 Crore, respectively as MSPGCL has not considered the lease rentals against Paithan and Ujjani pump storage schemes as a separate Petition will be filed. The Commission has considered the lease rent as approved in the Case No. 17 of 2007 Accordingly, for FY 2009-10 and FY 2010-11, the Commission has considered the lease rent of Rs 230.8 Crore and Rs 314.84 Crore, respectively, including the lease rent for Ujjani and Paithan pumped storage stations.
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5.5
OPERATION & MAINTENANCE (O&M) EXPENSES
MSPGCL, in its Petition, submitted that for projecting the revised O&M expenses for FY 200910 and FY 2010-11, it has considered the methodology suggested by the Commission in the MYT Order. MSPGCL has calculated the inflation index based on the average of the year on year increase in Wholesale Price Index (WPI) and Consumer Price Index (CPI) after considering a weight of 60% to WPI and 40% to CPI. The WPI numbers are as per Office of Economic Advisor of Govt. of India and CPI numbers for Industrial Workers are based on All-India national average notified by Labour Bureau, GoI. The escalation rate has been worked out as 6.10%. Impact of Pay Revision in FY 2009-10 and onwards MSPGCL submitted that it has finalised the pay revision for its employees in FY 2009-10, which is applicable retrospectively from April 1, 2008. The effect of such pay revision is expected to be around 22.5% increase in establishment cost in FY 2008-09 over FY 2007-08 levels. Such increase was over and above the escalation factor and has been discussed in the true-up section. MSPGCL submitted that for the purpose of projecting the O&M expenses for FY 2009-10 and FY 2010-11, the increased pay scales and allowances have been factored in and an escalation rate of 6.10% has been considered to consider the normal increase in the O&M expenses. MSGPCL further submitted that though there is merit in projecting the O&M expenses for ensuing year by using escalation factor for the purpose of determination of tariff, however, for the purpose of true-up, the Commission should approve the actual O&M expenses incurred by the Petitioner after prudence check. The Petitioner would approach the Commission to true-up its actual O&M expenses based on audited accounts. Impact of Earned Leave Encashment MSPGCL submitted that the Commission in its APR order dated August 17, 2009, had allowed Rs 177.37 Crore of provision of earned leave encashment liability towards existing power stations of MSPGCL but had stipulated that such expense would be spread over five years starting from FY 2007-08. Accordingly, the Petitioner has added the impact of earned leave encashment liability for FY 2009-10 and FY 2010-11 at Rs 35.47 Crore for each year. Such expenditure has been allocated to the power stations in the ratio of their capacity.
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The Commission in its Order dated March 5, 2010 in Case 16 of 2008 approved the O&M expenses by revising the base O&M figures for FY 2006-07 and has approved the O&M expenses as Rs 948.05 Crore for FY 2008-09. For the purpose of projecting O&M expenses, the Commission has considered the values as allowed for FY 2008-09 and escalating it by 5.48% and 7.02% for FY 2009-10 and FY 2010-11, respectively. As regards the impact of pay revision, the Commission asked MSPGCL to clarify the treatment of the provisioning and actual payments towards pay revision in the Accounts including treatment of arrears for each year, separately. MSPGCL, in its reply, submitted that as per the memorandum of settlement signed between MSPGCL and employees, it has been agreed to pay the impact of pay revision w.e.f 1st April 2008 in three instalments, which have already been made to the staff latest by April 2010. MSPGCL further submitted that as the actual payment made by the Stations against the pay revision has been more than the provision of Rs 95 Crore, additional provision will be made in the books of Accounts for FY 2009-10 before completion of statutory audit. As the MSPGCL has not separately submitted the impact of pay revision for FY 2009-10 and FY 2010-11, the Commission, at this stage, has therefore, not considered the impact of pay revision while computing the O&M expenses for FY 2009-10 and FY 2010-11. The Commission will consider the impact of pay revision while carrying out the truing up based on actual expenses. The Commission has considered the provision of earned leave encashment while projecting O&M expenses for FY 2009-10 and FY 2010-11. The summary of O&M expenditure as approved by the Commission in the APR Order, projected by MSPGCL and that allowed by the Commission for FY 2009-10 and FY 2010-11 are as given below: Table: O&M Expenditure allowed for FY 2009-10 and FY 2010-11 (Rs Crore) Particulars MSPGCL APR Order Revised 2009-10 Estimates Allowed Revised Allowed FY 2009-10 FY 2010-11 998.21 1206.72 1035.48 1280.34 1105.68
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5.6
CAPITAL EXPENDITURE AND CAPITALISATION
Capital expenditure and capitalisation are two important variables that influence computation of various critical parameters such as depreciation, advance against depreciation, interest on long term debt and return on equity. Accordingly, variation in approved values of these variables over the Control Period needs to be evaluated carefully during Annual Performance Review along with scrutiny of reasons necessitating such review. The summary of the approved capitalization and revised estimated capitalization as submitted by MSPGCL is given in following Table:.
Table: Capital Expenditure and Capitalisation detail (Rs.Crore) Approved Capitalisatio n in APR Order 12.62 0.00 1.05 26.94 7.70 21.73 34.07 10.51 114.62 11.99 Revised Estimated Capital expenditure FY 2009-10 11.81 0.00 10.08 106.98 16.71 21.68 58.35 3.65 229.26 12.39 Revised Estimated Capitalisation 13.65 0.00 10.13 139.74 18.63 25.66 69.98 4.07 281.86 13.14 Estimated Capital Expenditure for FY 2010-11 Estimated Capitalisa tion
Station Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Sub Total (Thermal) Hydel Grand Total (Thermal + Hydel)
FY 2010-11 151.46 151.46 0.00 17.47 414.82 29.20 34.36 645.96 0.00 1293.27 39.90 0.00 18.98 414.82 29.20 34.36 645.96 13.56 1308.34 39.90
126.61
241.65
295.00
1333.17
1348.24
The Commission, in its MYT Order, has approved capitalisation of Rs 126.61 Crore for FY 2009-10. In the APR Petition for FY 2010, MSPGCL has estimated total capital expenditure as Rs 241.65 Crore for FY 2009-10 and has projected the capital expenditure of Rs 1333.17 Crore for FY 2010-11. MSPGCL was asked to submit a detailed note on the capital expenditure and
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capitalization for FY 2009-10 and FY 2010-11 and submit justification for deviation between revised estimated capital expenditure and capitalization as against the approved capital expenditure. In reply to the Commission's query, MSPGCL submitted that the Commission appointed M/s CPRI to carry out a detailed study of performance parameters on November 4, 2008. Based on detailed energy audit of the Plants, CPRI has suggested the improvement plans under: Immediate Measures. Medium Term Measures Long Term Measures. MSPGCL submitted that it has accordingly envisaged the Capital expenditure plans in line with the recommendations of CPRI. MSPGCL is in the process of formulating the DPRs for the same and will submit the same along with changes in the capex plans (if any) to the Commission. The Commission appreciates that the investment on capex schemes is an ongoing process for any Utility/Licensee, which is required for healthy system development with tangible and intangible benefits. The scope, objective and benefits are identified while formulating project reports. After implementation of the scheme, before capitalisation, the benefits are to be demonstrated by the Utility. The Utility is required to execute the capital expenditure schemes in a phased manner so as to minimise tariff shock attributable to capital expenditure implementation. The Commission can permit capital expenditure in the ARR only after prudence check as there is an impact on tariff. The Commission has dealt with the issue of Capital Expenditure and Capitalisation in detail in its Order dated August 17, 2009 in Case No. 115 of 2008. As per Regulation 30.1 of the MERC Tariff Regulations, subject to prudence check by the Commission, actual capital expenditure incurred on completion of the project shall form the basis for determination of original cost of the project. For the purpose of APR exercise for FY 2009-10 and revised projection for FY 2010-11, the Commission has considered capitalisation as projected by MSPGCL for DPR schemes already approved by the Commission. However, the Commission has not considered any capitalisation of such DPR schemes where in-principle approval of the Commission is yet to be accorded.
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For Non-DPR schemes, the Commission has considered 50% of the proposed capitalisation by MSPGCL on ad-hoc basis, as very few DPR schemes have been submitted by MSPGCL and approved by the Commission, and any linkage of non-DPR schemes as a percentage of approved DPR schemes may not be appropriate at this stage. Further, the Commission is of the view that until it is ascertained that the projected benefits have actually accrued for the benefit of the consumers, it would not be appropriate to allow the entire expenses. Accordingly, approved capitalisation for FY 2009-10 and FY 2010-11 is summarised in the following table: Table: Approved Capitalisation for FY 2009-10 and FY 2010-11 (Rs Crore)
Stations FY 2009-10 Revised Approved Estimate
13.65 0.00 10.13 139.74 18.63 25.66 69.98 4.07 13.14
FY 2010-11 Estimated Approved

151.46 0.00 18.98 414.82 29.20 34.36 645.96 13.56 39.90
Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Hydel Total
6.82 0.00 5.06 41.95 9.31 12.83 34.99 2.04 6.57 119.57
32.41 0.00 9.49 12.39 14.60 17.18 67.88 0.00 14.95 168.9
295
1348.24
5.7 DEPRECIATION The Commission, in its APR Order, had permitted depreciation to the extent of Rs 354.92 Crore for FY 2009-10. MSPGCL has projected depreciation of Rs 294.85 Crore for FY 2010-11. The depreciation rates were considered as prescribed under the MERC Tariff Regulations, 2005. The station-wise depreciation expenditure approved by the Commission for FY 2009-10 in APR Order and claimed by MSPGCL for FY 2009-10 and FY 2010-11 is summarised in the following Table.
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Table: Summary of Depreciation (Rs. Crore) Stations Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Hydel Total Revised APR Order Estimate Projections FY 2009-10 FY 2010-11 82.51 82.31 82.73 1.37 1.38 1.36 13.75 9.24 10.88 21.01 21.42 26.77 23.48 11.74 17.78 30.99 47.32 48.02 118.38 112.26 76.8 56.42 55.67 22.7 7.01 8.38 7.81 354.92 349.72 294.85
The Commission has examined the capitalisation and depreciation claimed by MSPGCL in detail as against the various capex schemes approved by the Commission. Further, MSPGCL in its additional submissions confirmed that depreciation has not been claimed beyond 90% of the asset value in accordance with the MERC Tariff Regulations. However, it was observed that considering the capitalisation figures for FY 2008-09 and FY 2009-10 as approved by the Commission, the cumulative depreciation in case of some of the stations exceeds the permissible level of 90% of GFA and in such cases, the Commission has restricted the depreciation in such a manner to have cumulative depreciation of 90%. The Station-wise approved depreciation expenditure for FY 2009-10 and FY 2010-11 is summarised in the following table. Table: Summary of Depreciation (Rs. Crore) Stations Khaparkheda Paras Bhusawal Nasik Parli Koradi
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APR Order 82.51 1.37 13.75 21.01 23.48 30.99
Revised Estimate FY 2009-10 82.31 1.38 9.24 21.42 11.74 47.32
Approved 82.2 1.35 6.49 21 5.51 30.01
Revised Projections Approved FY 2010-11 82.73 82.44 1.36 1.34 10.88 6.03 26.77 22.49 17.78 5.25 48.02 30.89
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Chandrapur Uran Hydel Total
118.38 56.42 7.01 354.92
112.26 55.67 8.38 349.72
68.52 55.64 4.8 275.52
76.8 22.7 7.81 294.85
33.62 16.13 4.71 202.90
The Commission will undertake the truing up of Depreciation for FY 2009-10 considering the actual capitalisation figures subject to prudence check. 5.8 ADVANCE AGAINST DEPRECIATION MSPGCL submitted that in the APR Order (FY 2008-09) and MYT Order (FY 2007-08 to FY 2009-10), the Commission had not allowed AAD for individual plants. The Commission at that time had considered the loan repayment schedule for MSPGCL as a whole and hence, considered AAD for MSPGCL as a whole. The views of the Commission in the MYT Order and APR Order, submitted as part of the Petition by MSPGCL are reproduced below: The Commission observes that it would be futile to undertake such exercise on station-wise basis unless MSPGCL undertakes apportionment of loan and equity across all the stations on rational basis. Further, the Commission observes that MSPGCL is yet to tie-up its funding source for the capex plans to be undertaken over the Control Period. In view of above, the Commission has considered requirement of AAD at generating company level instead computing the same at generating station level. The Commission in the APR Order in Case No. 71 of 2007 had stated as follows: The Commission opines that Advance against depreciation is intended to meet shortfall in meeting loan repayment obligations of the Generating Company. In the absence of proper accounting of outstanding loans, apportionment of existing loans to various stations on certain basis (say, NFA) is desirable. However, it needs to be ensured that it does not result in unjust enrichment of the Generating Company at the cost of consumers on account of its claim on AAD.
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With reference to the Commissions observations regarding allowance of AAD on individual station basis, MSPGCL submitted the segregation of generic loan and total loan repayment along with the fraction of generic loans to that of the total loan repayment as 26.75% and 26.87% for FY 2009-10 and FY 2010-11, respectively. MSPGCL further requested the Commission to devise a mechanism for allocation of such loans and thereby provide for AAD on individual plant basis. MSPGCL further submitted that allowance of AAD does not lead to unjust enrichment of the Generating Company. In support to the same, MSPGCL submitted that it has been claiming the depreciation at the rates specified in the MERC Tariff Regulations subject to a maximum of 90% of the cost of the asset. Therefore, by allowing AAD, the only factor that effectively changes is the rate of depreciation and not the total amount of depreciation, which is based on the maximum limit set by the Commission. The total depreciation and loan repayment considered by the Commission during FY 2009-10 and FY 2010-11 is as shown in the table. Table: Loan Repayment as Against Depreciation allowed (Rs. Crore) Particulars Depreciation Repayment FY2009-10 275.52 179.69 FY 2010-11 202.9 185.63
The Commission observes that revised estimate of loan repayment of 170.91 Crore for FY 200910 is far lower than estimated depreciation of Rs 275.52 Crore for MSPGCL as a whole. Also, for FY 2010-11, the projected loan repayment of Rs 185.63 Crore is lower than approved depreciation of Rs 202.9 Crore for MSPGCL as a whole. The Commission is of the view that Advance Against Depreciation is intended to meet shortfall in meeting loan repayment
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obligations of the Generating Company, and is not intended to provide additional cash flow to the Generation Company. While tariff is determined on a station-wise basis, AAD is a special provision, which enables the Utility to meet its loan repayment obligations as a whole rather than for each Station. Giving AAD on a station-wise basis may result in a situation, where the generation tariffs are determined higher to account for the component of AAD, even though the Company has enough funds to meet its loan repayment obligations. Accordingly, the Commission has not allowed advance against depreciation for FY 2009-10 and FY 2010-11. 5.9 INTEREST ON LOAN CAPITAL AND FINANCE CHARGES MSPGCL submitted in its APR Petition that it has inherited a portfolio of loans from erstwhile MSEB and station/project wise allocation of loans was not provided in the Transfer Scheme. Considering the above, the loans have been allocated to various projects based on the following principles. The loans, which are clearly identifiable with the project have been assigned to the project only The loans (Generic Loans), which are not identifiable directly with the project have been allocated plant-wise. MSPGCL submitted that for computation of interest charges, the Commission had considered an interest rate of around 10.50% for debt to be raised during the Control Period. However, considering the recent economic conditions, MSPGCL has considered the actual interest rate as applicable to existing loans and has considered an interest rate of 13.00% during FY 2009-10 and 11.75% for FY 2010-11 for the loan capital to be borrowed during these years. MSGPCL further submitted that the Commission in its Order dated 17th August 2009 has clarified that any deviation in interest expenses on account of variation of interest rate shall be considered based on actuals, subject to prudence check, for the purpose of truing up during subsequent annual performance review. The Petitioner, accordingly will approach the Commission suitably for truing-up on interest expenses based on audited accounts. MSPGCL submitted that it has estimated other financing charges at Rs 19.37 Crore for FY 200910 and Rs 46.95 Crore for FY 2010-11 based on following assumptions: Guarantee Fees: Projected on the outstanding balance of loans as on the year ending date
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Finance Charges Based on the actual finance charges incurred in FY 2008-09 and escalated at 6.1% YoY SBI Lease Rentals and Consumer Security Deposit Projected to remain at FY 2008-09 actual levels The Commission, in its APR Order for FY 2009-10, had permitted net interest expense to the extent of Rs 115.6 Crore for FY 2009-10. As regards funding for new capex proposed during FY 2009-10, MSPGCL proposed funding through 100% debt and the same has been considered by the Commission. Based on the prevalent market conditions, the Commission has considered the interest rate at 10.5%. However, the Commission clarifies that any revision on this account shall be considered based on actuals, subject to prudence check, for the purpose of truing up during subsequent annual performance review. As regards funding for new schemes during FY 2010-11, MSPGCL submitted that the debt for funding capex during FY 2010-11 is yet to be tied up. As the funding for the new schemes is yet to be tied up, the Commission has considered the means of finance for funding new capex scheme at Debt: Equity ratio of 80:20 in accordance with MYT Order. The Commission has considered the interest rate of 11% for new loans in FY 2010-11. However, the Commission clarifies that any revision on this account shall be considered based on actuals, subject to prudence check, for the purpose of truing up during subsequent annual performance review. The summary of interest expenses is given in following Table: Table: Interest Expenses for FY 2009-10 & FY 2010-11 (Rs. Crore) APR Order 7.08 0.2 2.95 Revised Estimate Approved FY 2009-10 10.26 9.60 0.29 0.33 4.28 3.94 Revised Projection Approved FY 2010-11 20.04 10.19 0.26 0.31 5.83 4.44
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Stations Khaparkheda Paras Bhusawal

MERC, Mumbai
Stations Nasik Parli Koradi Chandrapur Uran Hydel Total
APR Order 7.15 6.31 13.97 21.59 11.39 6.88 77.51
Revised Estimate Approved FY 2009-10 19.45 14.04 10.33 9.34 17.18 16.71 31.24 29.89 16.57 15.59 6.00 5.54 115.6 104.98
Revised Projection Approved FY 2010-11 57.3 23.9 12.57 9.71 16.5 13.91 83.6 45.17 13.27 12.87 9.11 7.43 218.48 127.93
5.10 RETURN ON EQUITY (ROE) The Commission, in its APR Order for FY 2008-09, had permitted return on equity to the extent of Rs 358.87 Crore for FY 2009-10. MSPGCL submitted that it has envisaged to fund its schemes of capital nature on 100% debt basis for FY 2009-10 and FY 2010-11 and accordingly has not projected any equity addition with respect to capital expenditure plan. The Commission notes that MSPGCL is yet to tie up any debt for proposed capital expenditure for FY 2010-11, hence, the Commission has considered debt: equity of 80:20 in accordance with earlier assumptions under MYT Order for FY 2009-10 and computed return on equity accordingly. The Station-wise Return on Regulated Equity for FY 2009-10 and FY 2010-11 has been summarised in the following Table. Table: Return on Regulatory Equity (Rs. Crore) Stations Khaparkheda Paras Bhusawal Nasik Parli Koradi
MERC, Mumbai
APR Order 126.11 1.2 13.73 27.728 19.46 23.33
Revised Estimate FY 2009-10 126.11 1.2 13.73 27.728 19.46 23.33
Approved 126.11 1.2 13.73 27.728 19.46 23.33
Revised Projection Approved FY 2010-11 126.11 126.11 1.2 1.2 13.73 13.73 27.728 27.728 19.46 19.46 23.33 23.33
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Stations Chandrapur Uran Hydel Total
APR Order 107.583 39.73 0 358.88
Revised Estimate FY 2009-10 107.583 39.73 0 358.88
Approved 107.583 39.73 0 358.88
Revised Projection Approved FY 2010-11 107.583 107.583 39.73 39.73 0 0 358.88 358.88
5.12 INTEREST ON WORKING CAPITAL FOR FY 2009-10 and FY 2010-11 MSPGCL, in its Petition, submitted that the Working Capital has been computed in accordance with MERC Tariff Regulations. MSPGCL further submitted that for FY 2009-10, it has considered the normative interest rate of 13% in line with Commissions Order. For FY 2010-11, MSPGCL submitted that it has considered the normative interest rate of 11.75%. The Commission for FY 2009-10 has not revised the Interest on Working Capital as part of provisional truing up and the Commission will revise the Interest on Working Capital at the time of final truing up including sharing of gains and losses. For FY 2010-11, the Commission has estimated the Station-wise working capital requirement for the thermal and gas based generating stations of MSPGCL and aggregate working capital requirement for hydel stations of MSPGCL in accordance with the provisions of MERC Tariff Regulations. For Uran gas project, the Commission has estimated the Working Capital requirement at estimated PLF rather than normative availability as projected PLF for Uran gas is lower than the normative availability of 80%. As the prevailing short-term Prime Lending Rate of State Bank of India at the time of filing APR Petition was around 11.75%, the Commission has considered the interest rate of 11.75 % for estimating the interest on working capital for FY 2010-11. . The interest on working capital for each generating station and aggregate for hydel stations for FY 2010-11 is given in the following Table. Table: Interest on Working Capital for FY 2010-11 (Rs Crore)
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Stations Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Hydel Total
Estimated 61.58 4.21 42.20 77.89 55.03 52.48 127.63 48.06 8.81 477.89
Approved 37.56 2.72 29.37 67.46 30.43 57.51 88.04 31.07 8.70 352.87
The Commission observed that there was computational error in the interest on working capital estimated by MSPGCL for some of the stations. Instead of deducting one month fuel payables cost from the working capital requirement, MSPGCL has added the same and hence there is substantial variation in interest on working capital estimated by MSPGCL and interest on working capital computed by the Commission. 5.14 NON TARIFF INCOME FOR FY 2009-10 MSPGCL submitted the revised estimate of Non Tariff Income for FY 2009-10 as Rs 96.78 Crore against Rs 112.93 Crore as approved in APR Order. The Commission has considered the Non Tariff Income as per the revised estimates of MSPGCL.
5.15 NON TARIFF INCOME FOR FY 2010-11 For FY 2010-11, MSPGCL submitted the revised estimate of Rs 97.17 Crore. The Commission has considered the Non-tariff Income at the same level as projected by MSPGCL for FY 201011. 5.16 INCOME TAX FOR FY 2009-10 AND FY 2010-11 MSPGCL has projected income tax in FY 2009-10 and FY 2010-11 on the basis of income-tax rate applicable on eligible return on equity.
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Accordingly, MSPGCL has projected income tax of Rs 61.01 Crore as against Rs 61.0 Crore approved in the APR Order for FY 2009-10 and Income Tax of Rs 61.01 Crore for FY 2010-11. The Commission has estimated the income tax for FY 2010-11 considering the approved return on equity for each station in this Order and estimated the income tax considering the MAT rate of 19.93% as applicable for FY 2010-11.
5.17 SUMMARY OF PROVISIONAL TRUING UP FOR FY 2009-10 Based on various elements of ARR as discussed in above sections, the summary of provisional truing up of ARR for FY 2009-10 is given in following Table: Table: Summary of Provisional Truing up for FY 2009-10 (Rs Crore)
APR Order Approved in this Order 7,975.53 1,035.48 275.53 104.97 315.54 60.99 358.88 96.78 10,030.15 Provisional Truing up 224.34 37.27 (79.39) 9.56 (0.01) 0.01 (16.15) 207.94
Fuel Related Expenses/Lease Rentals Operation & Maintenance Expenses Depreciation, including advance against depreciation Interest on Long-term Loan Capital Interest on Working Capital Income Tax Return on Equity Capital Non Tariff Income Total ARR
7,751.19 998.21 354.92 95.41 315.54 61.00 358.87 112.93 9,822.21
The total revenue gap for FY 2009-10 based on provisional truing up works out to Rs 207.94 Crore which has been allowed to be recovered as part of FY 2010-11 tariff. 5.17 FIXED COST OF GENERATION FOR FY 2010-11
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The summary of Annual Fixed Charges for existing Stations of MSPGCL as approved by the Commission for FY 2010-11 after adjusting for final truing up for FY 2008-09 and provisional truing up for FY 2009-10 is given in the following Table: Table: Station-wise Annual Fixed Charges for FY 2010-11 (Rs Crore)
Particulars Operation & Maintenance Expenses Interest on Long-term Loan Capital Interest on Working Capital Income Tax Hydro Lease Rent Total Revenue Expenditure Return on Equity Capital Aggregate Revenue Requirement Non Tariff Income Net Aggregate Revenue Requirement Provisional Truing up for FY 2009-10 Truing up for FY 2008-09 Net AFC 141.51 13.73 155.24 5.06 150.18 12.62 (18.88) 143.93 471.32 107.58 578.90 22.05 556.85 46.80 (69.99) 533.66 275.94 27.73 303.67 16.06 287.61 24.17 (36.15) 275.63 306.14 23.33 329.47 6.42 323.05 27.15 (40.61) 309.59 29.77 1.20 30.97 0.00 30.97 2.60 (3.89) 29.68 186.58 19.46 206.04 14.00 192.04 16.14 (24.14) 184.04 124.63 39.73 164.36 0.16 164.20 13.80 (20.64) 157.36 275.70 126.11 401.82 33.42 368.39 30.96 (46.31) 353.05 Bhusawal 98.94 4.44 29.37 2.74 Chandrapur 283.04 33.62 45.17 88.04 21.44 Nasik 156.56 22.49 23.90 67.46 5.53 Koradi 199.18 30.89 13.91 57.51 4.65 Paras 25.16 1.34 0.31 2.72 0.24 Parli 137.30 5.25 9.71 30.43 3.88 Uran 57.81 16.13 12.87 31.07 6.75 Khaparkheda Hydel 120.38 82.44 10.19 37.56 25.14 314.81 400.92 0.00 400.92 0.00 400.92 33.69 (50.39) 384.22 65.28 4.71 7.43 8.70 Total 1143.64 202.89 127.94 352.87 70.36 314.81 2212.52 358.88 2571.40 97.17 2474.22 207.94 (311.00) 2,371.16 Depreciation, including advance against depreciation 6.03
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TARIFF OF MSPGCLS GENERATING STATIONS
Regulation 20.1 of the MERC Tariff Regulations stipulates that the tariff will be determined on an annual basis, as reproduced below: The Commission shall determine the tariff of a Generating Company or Licensee covered under a multi-year tariff framework for each financial year during the control period, at the commencement of such financial year, having regard to the following: The approved forecast of aggregate revenue requirement and expected revenue from tariff and charges for such financial year, including approved modifications to such forecast; and Approved gains and losses to be passed through in tariffs, following the annual performance review. The Commission, in its MYT Order, has approved the Annual Fixed Charge and parameters of variable cost for each thermal generating station and hydel generating station for the Control Period. The Commission further stipulated in the MYT Order that it will determine the Tariff of MSPGCLs generating stations for each financial year during the Control Period in accordance with Regulation 20.1 above and considering the fuel prices prevalent during the current year. In accordance with the principles of the MERC Tariff Regulations, the Commission has determined the tariff, i.e., Annual Fixed Charge as well as variable charge for MSPGCL generating stations for FY 2010-11 in this Order.
6.1 TARIFF FOR THERMAL POWER GENERATING STATIONS
Regulation 28 of the MERC Tariff Regulations specifies that Tariff for sale of electricity from a thermal power generating station shall comprise of two parts, namely, the recovery of annual fixed charges and energy charges. i) Approved Annual Fixed Charges As regards the recovery of Annual Fixed Charges, Regulation 33.1.1 of the MERC Tariff Regulations stipulates that the target availability for full recovery of annual fixed charges shall be 80 percent. As elaborated in Section 4, for FY 2010-11, the Commission has approved the
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station-wise normative availability as per CPRI report. The Commission hence, approves the full recovery of fixed charges during FY 2010-11 for all thermal stations. However, in the event of actual availability for the year, computed in accordance with the MERC Tariff Regulations (after accounting for the unavailability of fuel), being less than that approved PLF, the fixed charges shall be proportionately reduced in accordance with the MERC Tariff Regulations, while truing up the revenue requirement. However, for Uran Gas based station, the Commission approves the recovery of full fixed charges based on the approved availability for FY 2010-11. The approved Station-wise Fixed Charges for Thermal Stations for FY 2010-11 is given in the following Table: Table: Approved Fixed Charge of MSPGCL Thermal Stations for FY 2010-11 (Rs. Crore)
Station Estimated by MSPGCL 409.39 30.35 196.77 355.91 225.28 350.19 764.14 198.84 2931.51 Approved Net AFC for FY Generation 2010-11 353.05 29.68 143.93 275.63 184.04 309.59 533.66 157.36 1,987 5459 337 2946 5394 4172 6016 14898 5745 44968 Rs/kWh
Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran Total
0.65 0.88 0.49 0.51 0.44 0.51 0.36 0.27 0.44
The variation in Annual Fixed Charges as approved by the Commission as compared to Annual Fixed Charges as estimated by MSPGCL is mainly on account of following reasons: Computational Error by MSPGCL for computing Interest on Working Capital Deduction of Provisional Truing up Amount as the Commission has allowed the same to be recovered separately from March 2010 to February 2011. Variation in Capex. Related expenses i.e., Depreciation and Interest as the Commission has not considered the schemes which are yet to be approved by the Commission Dis-allowance of Advance Against Depreciation Variation in O&M expenses as the Commission has allowed the normative O&M expenses considering the revised base approved in its Order March 5, 2010 in Case No. 16 of 2008
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ii) Energy Charge The rate of energy charge (ex-bus) for FY 2010-11 has been approved for each station, based on approved operational parameters and assumed fuel price for FY 2010-11. Any variations in the fuel price shall be dealt with under the FAC mechanism. The following Table details the stationwise energy charge to be charged by MSPGCL for sale of power from its thermal generating stations: Table: Approved Energy Charges & Total Tariff of MSPGCL Thermal Stations for FY 201011 (Rs/KWh)
S.No Station Estimated Energy Charges 1.87 2.45 2.71 2.95 2.46 1.75 1.56 1.88 Approved Energy Charge per unit 1.82 1.92 2.22 2.32 2.00 1.67 1.61 1.68 Approved Fixed Cost per unit 0.65 0.88 0.49 0.51 0.44 0.51 0.36 0.27 Approved Total Tariff 2.47 2.8 2.71 2.83 2.44 2.18 1.97 1.95
1 2 3 4 5 6 7 8
Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran
The variation in Energy Charge per unit as approved by the Commission as compared to Energy Charges estimated by MSPGCL is mainly on account of following reasons: The Commission has considered the norms based on CPRI recommendations. However, the norms particularly the heat rate and secondary fuel oil consumption norm considered by MSPGCL are substantially higher than the CPRI recommendations The Commission has considered the fuel costs and calorific value equivalent to the average fuel cost and calorific value for the last quarter of FY 2009-10 i.e January 2010 to March 2010 and has not factored in any escalation in fuel prices.
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iii) Incentive In accordance with Regulation 37 of MERC Tariff Regulations, MSPGCL shall be eligible for an incentive of 25.0 paise/kWh for ex-bus scheduled energy corresponding to generation in excess of ex-bus energy corresponding to a target Plant Load Factor. As regards the incentive, the Commission, in its APR Order in Case No. 71 of 2007 stipulated: MSPGCL appealed on this issue with the ATE and the ATE in its judgment in Appeal No. 86 & 87 of 2007 upheld the MSPGCLs appeal for monthly billing of incentives and held that any under or over recovery on account of such claims may be adjusted on monthly basis. The Commission approves the monthly billing of incentives and directs MSPGCL to determine the incentives at the end of each month on the basis of actual performance and raise the bill for incentive amount to MSEDCL on monthly basis considering the cumulative generation till that particular month. Any under or over recovery on account of incentive computations at the end of every month may be adjusted on monthly basis. However, the Commission rejects MSPGCLs request for providing incentive for Uran gas thermal station on the basis of reduced availability and PLF, due to shortage of gas. The Commission is of the view that though full fixed cost recovery has been permitted to Uran gas station, despite non achievement of normative availability of 80%, it would not be fair to the consumers to provide incentive to MSPGCL at such low levels of generation. Accordingly, the Commission approves monthly billing of incentives and directs MSPGCL to determine the incentives at the end of each month on the basis of actual performance and raise the bill for incentive amount to MSEDCL on monthly basis considering the cumulative generation till that particular month. Any under or over recovery on account of incentive computations at the end of every month may be adjusted on monthly basis and at the end of the year on annual basis.
6.2
TARIFF FOR HYDEL POWER GENERATING STATIONS
i) Energy Charges for Generation during Peak and Non Peak Period The Electricity Act, 2003 requires the Commission to encourage economical use of the resources while determining the terms and conditions of tariff. Accordingly, the MERC Tariff Regulations
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propose an energy rate for hydro stations, which is equal to the variable cost of the least-cost, available alternative source of power if such hydropower generating station was not to be dispatched in accordance with the final dispatch schedule of the State Load Despatch Centre. The MERC Tariff Regulations in this regard specify that, Tariff for sale of electricity from a hydro power generating station shall comprise of two-parts, namely, recovery of annual capacity charge and energy charges. Provided that the annual capacity charges for a hydro power generating station shall be computed in accordance with the following formula: Annual Capacity Charges = (Annual Fixed Charge- Energy Charge) Provided further that the Energy Charge shall not exceed the Annual Fixed Charge under these Regulations (emphasis added) The Commission in its Order dated September 7, 2006 on ARR and Tariff Petition of MSPGCL for FY 2006-07 approved a differential hydro peaking tariff to optimise the hydel generation during peak hours as follows: Table: Differential Tariff for Hydro Stations Differential Energy Charges for peak and non peak hours Peak Hours (0900 to 1200 hrs & 1800 to 2200 hrs) Non Peak Hours (Other than peak hours) Rs/kWh 2.00 1.65
Table: Hydro Generation during Peak and Non-Peak for FY 2010-11 (MU) Generation during peak hours 2874 2874 Generation during non peak hours 350 710 1060
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Source Koyna Other Hydro Total

MERC, Mumbai
Total Generation 3224 710 3934
iii) Treatment of excess amount recovered on account of hydro peaking tariff Based on the above assumption of generation in the peak and non-peak hours and the corresponding energy tariffs during those hours, the total revenue recovery is estimated to exceed the annual fixed charge of hydro generating stations by Rs. 365.48 Crore. MSPGCL, in its Petition, submitted that the return of fixed monthly excess recovery should be discontinued as the actual peak and off-peak generation is not in accordance with the peak generation considered by the Commission, i.e., 89% of the total generation. MSPGCL further submitted that the return on the excess recovery should be based on the actual energy generated during the peak and offpeak period and not the normative generation considered by the Commission. MSPGCL further submitted that the return of excess recovery should be provided only after deducting its fixed monthly charges as determined by the Honble Commission. Since the Commission has decided to take a holistic review of the hydel tariff mechanism for the next Control Period, MSPGCLs suggestions for modification to the hydel tariff mechanism are not being considered at this stage, and the existing mechanism is being continued. Hence, the Commission allows 5% of excess recovery of revenue from hydel stations on account of higher generation during peak hours to be shared between Generating Company and Distribution Licensees in the proportion of 50:50. Considering the target generation during peak and off peak hours specified in the Order, the Commission directs 95% of adjustment of excess recovery of Rs. 365.48 Crore from hydro generating stations in the bills for sale of power to be raised by MSPGCL to MSEDCL. The reduction towards excess recovery should be provided every month on pro-rata basis. iv) Incentive MSPGCL shall be eligible for an incentive payable in accordance with Regulations 37.2 of MERC Tariff Regulations. MSPGCL shall compute the incentive on the basis of the actual performance and bill the same as an additional charge on monthly basis. There shall be pro rata recovery of annual fixed charges in case the generating station achieves capacity index below the prescribed normative levels. Any under or over recovery on account of such claims should be adjusted on monthly basis.
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6.3
Provisional Tariff for Paras Unit 4 and Parli Unit 7
MSPGCL, in its Supplementary Petition, requested the Commission to determine provisional tariff for its new Units, i.e., Paras Unit 4 and Parli Unit 7, which are likely to achieve COD during FY 2010-11. The Commission has approved the provisional Tariff for these two Units in this Order. As regards the Fixed Charges, the Commission at this stage has approved the Fixed Charges proposed by MSPGCL on provisional basis as the Commission will undertake the detailed scrutiny of Project Cost, Means of Finance, etc., while approving the tariff based on actual Capital Cost separately. For approving the provisional tariff, the Commission has considered the performance parameters during stabilization period and post stabilization period in accordance with MERC Tariff Regulations as under: . Table: Performance Parameters Performance Parameters PLF (%) SHR (kcal/kWh) Auxiliary (%) During Stabilisation 80 2600 9.5 Post Stabilisation 80 2500 9
The Commission has considered fuel expenses and calorific value same as that of the existing Paras and Parli Stations. Based on above assumptions, the provisional tariff approved by the Commission for Paras Unit 4 and Parli Unit 7 are as under: Table: Provisional Tariff for Paras Unit 4 and Parli Unit 7 for FY 2010-11 Station Fixed Charges Variable Charges During Post Stabilisation Stabilisation Rs/kWh Rs/kWh 1.59 1.46 1.84 1.70
Paras Unit 4 Parli Unit 7
Rs Crore/month 20.262 18.406
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6.4
APPLICABILITY OF ORDER AND TARIFF
This Order shall come into force with effect from September 1, 2010, and the Tariff approved in the Order shall be applicable from September 1, 2010. The Commission acknowledges the efforts taken by the Consumer Representatives and other individuals and organisations for their valuable contribution to the APR determination process.
Sd/(V. L. Sonavane) Member
Sd/(S. B. Kulkarni) Member
Sd/(V.P. Raja) Chairman
(K. N. Khawarey) Secretary, MERC
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Appendix 1 S.No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Name Shri Surendra Sharma Shri Narendra Padalkar Shri P.G.B.Panilor Shri N. Ponrathnam Shri Rakshpal Abrol Shri P.B.Hote Shri B.H. Gujarati Shri Ashwini Chitnis Shri Ashok Pendse Shri A.D.Dimple Shri M.R. Shelar Shri J.K. Srinivasan Shri L.N. Ambedkar Shri M.V. Deshmukh Shri G.J. Girase Shri S.K. Labde Shri Ramandeep Singh Shri Himanshu Mishra Shri S.V. Bedekar Shri C.S. Thoture Shri Arvind Choudhary Shri R.R. Kulkarni Shri S.S. Jadhav Shri A.A. Bapat Shri S.G. Ingle Shri M. Palaniappam Shri. Suresh Gehani Shri. Santosh K.Singh
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5.3.1 5.3.2 5.3.3 5.3.4 5.4 5.5 5.6 6

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OBJECTIONS RECEIVED, MSPGCLS RULING

RESPONSE AND COMMISSIONS

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4. Parli TPS 210MW Unit No.3

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TRUING UP OF REVENUE REQUIREMENT FOR FY 2008-09

Impact -557 318 -71

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Impact 710 244 644

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Khaparkheda Paras Bhusawal Nasik Parli Koradi Chandrapur Uran

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Secondary Fuel Oil Consumption

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Parli Koradi Chandrapur

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7.51 7.01 1.57

2.00 2.81 2.00

Fuel Price, Fuel Mix and Calorific Value

Approved (Rs Crore) 13.77 2.53 18.50 48.22 40.99