Order 95 of 2009

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. 95 of 2009
IN THE MATTER OF Petition filed by Brihan-Mumbai Electric Supply and Transport Undertaking (BEST) for approval of Truing Up for FY 2008-09, Annual Performance Review for FY 2009-10 and determination of ARR and 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 the MERC (Terms and Conditions of Tariff) Regulations, 2005 (hereinafter referred as MERC Tariff Regulations) and upon directions from the Maharashtra Electricity Regulatory Commission (hereinafter referred to as MERC or the Commission), Brihan-Mumbai Electric Supply and Transport Undertaking (BEST), submitted its application on affidavit for approval of truing up for FY 200809, Annual Performance Review (APR) for FY 2009-10 and Determination of Aggregate Revenue Requirement (ARR) 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 BEST, all the suggestions and objections of the public, responses of BEST, issues raised during the Public Hearing, and all other relevant material, and after review of Annual Performance for FY 2009-10, determines the ARR and Tariff for BEST for FY 2010-11 as under.
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MERC Order for BEST for APR of FY 2009-10 and ARR & Tariff for FY 2010-11
Table of Contents
1 BACKGROUND AND BRIEF HISTORY _____________________________ 9
1.1 MERC Tariff Regulations __________________________________________ 9
1.2 MERC Order on ARR and Tariff Petition for FY 2004-05 and FY 2005-06 and related Orders _______________________________________________________ 9 1.3 MERC Order on ARR and Tariff Petition for FY 2006-07 ______________ 10
1.4 MERC Order on MYT Petition for BEST for the first Control Period from FY 2007-08 to FY 2009-10 ________________________________________________ 10 1.5 MERC Order on APR Petition for BEST for FY 2007-08 and Tariff Determination for FY 2008-09 ____________________________________________ 11 1.6 MERC Order on APR Petition for BEST for FY 2008-09 and Tariff Determination for FY 2009-10 ____________________________________________ 11 1.7 Petition for Annual Performance Review for FY 2009-10 and Tariff Determination for FY 2010-11 ____________________________________________ 11 1.8 1.9 Admission of Petitions and Public Process ____________________________ 12 Organisation of the Order _________________________________________ 13
2 OBJECTIONS RECEIVED, BESTS RESPONSE AND COMMISSIONS RULING ___________________________________________________________ 15

2.1 2.2 2.3 2.4 2.5 2.6 2.7 2.8 2.9 2.10 2.11 2.12 Non- Compliance with Regulations __________________________________ 15 Segregation of consumers __________________________________________ 16 Sales Forecast and Revenue ________________________________________ 16 Power Purchase Expenses _________________________________________ 17 Employee Expenses _______________________________________________ 20 Interest on loan __________________________________________________ 20 Distribution Losses _______________________________________________ 21 Stand-by Charges ________________________________________________ 23 Capital Expenditure ______________________________________________ 25 Short-term Power Purchase Cost ___________________________________ 26 Determination of wheeling charges and cross subsidy surcharge _________ 26 Cross-Subsidy ___________________________________________________ 27
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2.13 2.14 2.15 2.16 2.17 2.18 2.19 2.20 2.21 2.22 2.23 2.24 2.25 2.26 2.27 2.28 2.29 2.30 2.31 2.32
Demand Side Management (DSM) __________________________________ 28 Return on Equity_________________________________________________ 28 Income due to sale of excess power available from TPC-G_______________ 29 Revenue Gap ____________________________________________________ 30 Cost of Supply ___________________________________________________ 30 Tariff __________________________________________________________ 31 Connected Load__________________________________________________ 32 Separation of wheeling and retail business ____________________________ 33 Single Tariff for whole Control Period _______________________________ 33 Open Access _____________________________________________________ 35 Replacement of Meters ____________________________________________ 36 Categorisation of consumers _______________________________________ 36 Re-categorisation of Consumers ____________________________________ 37 Parallel Licensee _________________________________________________ 39 Information about all charges ______________________________________ 40 Migration of consumers ___________________________________________ 40 Norms for addition of Power Transformer and Distribution Transformer _ 41 Appointment of more Consumer Representatives ______________________ 42 Information required in Tariff Order ________________________________ 42 Direction for compliance of Regulations ______________________________ 43
TRUING UP OF ARR FOR FY 2008-09 _____________________________ 44

3.1 3.2 3.3 3.4 3.5 3.6 3.7 3.8 Sales ___________________________________________________________ 44 Distribution Losses and Energy Input Requirement ____________________ 44 Power Purchase Expenses for FY 2008-09 ____________________________ 45 O&M Expenses __________________________________________________ 51 Revised Capitalisation for FY 2007-08 _______________________________ 54 Capital expenditure and Capitalisation for FY 2008-09 _________________ 55 Depreciation_____________________________________________________ 57 Interest Expenses_________________________________________________ 57
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3.9 3.10 3.11 3.12 3.13 3.14 3.15 3.16 3.17 3.18
Return on Internal Funds__________________________________________ 60 Return on Equity (RoE) ___________________________________________ 61 Interest on working capital and Consumers Security Deposit ___________ 63 Provisioning for Bad Debts ________________________________________ 66 Other Expenses __________________________________________________ 66 Income Tax _____________________________________________________ 66 Contribution To Contingency Reserve _______________________________ 66 Non Tariff Income ________________________________________________ 66 Other claims_____________________________________________________ 67 Sharing of gains and losses in FY 2008-09 ____________________________ 68
3.19 Aggregate Revenue Requirement and Revenue Gap for FY 2008-09 after truing up ______________________________________________________________ 72
4 PERFORMANCE REVIEW OF FY 2009-10 AND DETERMINATION OF AGGREGATE REVENUE REQUIREMENT FOR FY 2010-11 ______________ 75
4.1 4.2 4.3 4.4 4.5 Performance Parameters __________________________________________ 75 Provisional Truing-up for FY 2009-10 _______________________________ 76 Sales ___________________________________________________________ 77 Distribution Losses and Energy Input Requirement ____________________ 79 Energy Availability and Power Purchase cost for FY 2009-10 and FY 2010-11 80 O&M Expenses for FY 2009-10 and FY 2010-11 _______________________ 94 Capital Expenditure and Capitalisation ______________________________ 98 Depreciation____________________________________________________ 100 Interest Expenses________________________________________________ 101 Interest on Internal Funds ________________________________________ 103 Return on Equity (RoE) for FY 2009-10 and FY 2010-11 _______________ 105
4.6 4.7 4.8 4.9 4.10 4.11
4.12 Interest on Working Capital and Consumers Security Deposit for FY 2009-10 and FY 2010-11________________________________________________________ 106 4.13 4.14 Provisioning for Bad Debts _______________________________________ 108 Other Expenses _________________________________________________ 109
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4.15 4.16 4.17 4.18
Income Tax ____________________________________________________ 109 Contribution to contingency reserve ________________________________ 110 Non Tariff Income _______________________________________________ 110 Revenue from existing tariff for FY 2009-10 and fy 2010-11 ____________ 110
4.19 Aggregate Revenue Requirement and Revenue Gap of BEST for FY 2009-10 and FY 2010-11________________________________________________________ 111
5 TARIFF PHILOSOPHY AND CATEGORY-WISE TARIFFS FOR FY 201011 116

5.1 5.2 5.3 5.4 5.5 5.6 5.7 5.8 Applicability of Revised Tariffs ____________________________________ 116 Revenue Gap for FY 2009-10 and FY 2010-11 ________________________ 116 Tariffs Proposed by BEST ________________________________________ 117 Commissions Tariff Philosophy ___________________________________ 117 Revised Tariffs with effect from SEPTEMBER 1, 2010 ________________ 125 Wheeling Charges and Loss Compensation __________________________ 127 Incentives and Disincentives_______________________________________ 128 Applicability of Order ___________________________________________ 131
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List of Abbreviations A&G APDRP APR ARR AS ATE BEST BMC BMC Act CAGR CEA CERC COS CPI CPP Commission/ MERC Cr DA DC DPC DSM EA 2003/ Act ERC Act FAC FBSM FY GFA GM
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Administration and General Accelerated Power Development and Reforms Programme Annual Performance Review Aggregate Revenue Requirement Accounting Standard Appellate Tribunal for Electricity Brihanmumbai Electric Supply & Transport Undertaking Brihanmumbai Municipal Corporation Brihanmumbai Municipal Corporation Act, 1988 Compounded Annual Growth Rate Central Electricity Authority Central Electricity Regulatory Commission Cost of Supply Consumer Price Index Captive Power Plant Maharashtra Electricity Regulatory Commission Crore Dearness Allowance Direct Current Delayed Payment Charges Demand Side Management Electricity Act, 2003 Electricity Regulatory Commissions Act, 1998 Fuel Adjustment Cost Final Balancing & Settlement Mechanism Financial Year Gross Fixed Assets General Manager
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GoI GoM HT IBSM IDC InSTS kVA kW kWh LT MGP MMC Act MSEB MSETCL MSLDC MU MYT O&M PF PLF PMG PPA PPD PRC RC RE REL/RInfra RPO RPS
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Government of India Government of Maharashtra High Tension Interim Balancing Settlement Mechanism Interest During Construction Intra-State Transmission System Kilo-Volt Ampere Kilo Watt Kilo Watt Hour / Unit Low Tension Mumbai Grahak Panchayat Mumbai Municipal Corporation Act, 1888 Maharashtra State Electricity Board Maharashtra State Electricity Transmission Company Ltd. Maharashtra State Load Despatch Centre Million Units (MkWh) Multi Year Tariff Operation and Maintenance Power Factor Plant Load Factor Power Management Group Power Purchase Agreement Pre Payment Discount Pay Revision Committee Reliability Charge Renewable Energy Reliance Energy Limited / Reliance Infrastructure Limited Renewable Purchase Obligation Renewable Purchase Specification
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RoE Rs. SAIDI SERC SLDC STU TP T&D ToD TAH ToSE TPC TTSC TVS UI VRS WPI
Return on Equity Indian Rupees System Average Interruption Duration Index State Electricity Regulatory Commission State Load Despatch Centre State Transmission Utility Tariff Policy Transmission and Distribution Time of Day The Association of Hospitals Tax on Sale of Electricity The Tata Power Company Ltd. Total Transmission System Cost Technical Validation Session Unscheduled Interchange Voluntary Retirement Scheme Wholesale Price Index
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1 BACKGROUND AND BRIEF HISTORY

The Brihan-Mumbai Electric Supply and Transport Undertaking (BEST) is an Undertaking of the Brihanmumbai Mahanagarpalika and is in the business of distribution of electricity and providing public road transport. 1.1 MERC Tariff Regulations
The Commission, in exercise of the powers conferred by the Electricity Act, 2003, notified the Maharashtra Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2005, on August 26, 2005 (hereinafter referred as MERC Tariff Regulations). These Regulations superseded the MERC (Terms and Conditions of Tariff) Regulations, 2004. 1.2 MERC Order on ARR and Tariff Petition for FY 2004-05 and FY 2005-06 and related Orders
BEST submitted its application for approval of Aggregate Revenue Requirement and Tariff Proposal for the first time for FY 2004-05 and FY 2005-06 (Case No. 4 of 2004). The Commission issued the Operative Order dated February 25, 2006 and subsequent Detailed Order dated March 9, 2006. Subsequently, BEST filed an Appeal before the Hon'ble Appellate Tribunal for Electricity (ATE) on April 18, 2006 (Appeal No. 61 of 2006), challenging the operative Order and detailed Order of the Commission. The ATE passed its Judgment in Appeal No. 61 on August 18, 2006. In compliance of the ATEs Judgment dated August 18, 2006 and various directives issued/relief granted thereunder, the Commission re-determined the ARR for FY 2004-05 and FY 2005-06 and Tariff for FY 2005-06 for BEST through its Supplementary Order dated September 26, 2006. Subsequently, BEST submitted a Review Petition under Affidavit to the Commission vide its letter dated October 11, 2006 seeking a review of the Supplementary Order of the Commission under Section 94(1)(f) of the Electricity Act, 2003 read with Regulation 85 of MERC (Conduct of Business) Regulations, 2004. The Commission disposed of the Review Petition of BEST vide its Order dated November 8, 2006 in Case No. 32 of 2006. Subsequently, BEST filed an Appeal before the ATE (Appeal No. 13 of 2007), challenging the Order of the Commission
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dated November 8, 2006 in Case No. 32 of 2006. The ATE passed its Judgment in Appeal No. 13 of 2007 on August 27, 2007. 1.3 MERC Order on ARR and Tariff Petition for FY 2006-07
BEST submitted its ARR and Tariff Petition for FY 2006-07 on February 13, 2006 numbered as Case No. 50 of 2005. The Commission observed certain data gaps in the BEST ARR Petition for FY 2006-07. Pursuant thereto, the Commission requested BEST to submit additional data including the Tariff Proposal for FY 2006-07 (based on the Tariff Structure given in the Commission's Tariff Order dated March 9, 2006 for BEST for FY 2004-05 and FY 2005-06) and the data for truing up for FY 200506. In response to the data gaps raised by the Commission, BEST submitted additional information and the tariff proposal for FY 2006-07 on October 31, 2006. A Technical Validation Session (TVS) was held on November 8, 2006, in the presence of Consumer Representatives (authorised on a standing basis under Section 94(3) of the EA 2003), in respect of BESTs ARR Petition for FY 2006-07 dated February 13, 2006 and additional information and Tariff Proposal dated 31st October 2006. The updated ARR and Tariff Petition of BEST for FY 2006-07 was admitted on December 8, 2006 after scrutiny of the same and receipt of additional information from BEST. The Commission issued the Order on the ARR and Tariff Petition of BEST for FY 2006-07 on January 18, 2007 in Case No. 50 of 2005. 1.4 MERC Order on MYT Petition for BEST for the first Control Period from FY 2007-08 to FY 2009-10
BEST submitted its ARR and Multi Year Tariff (MYT) Petition for the first Control Period from FY 2007-08 to FY 2009-10, on December 11, 2006 numbered as Case No. 66 of 2006. The Commission issued the MYT Order for BEST for the first Control Period on April 3, 2007, which came into effect from April 1, 2007 and the tariffs were valid up to March 31, 2008, which was later extended till the revised revenue requirement was determined for FY 2008-09, vide the Commissions Order dated April 1, 2008, in Case No. 102 of 2007.
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1.5 MERC Order on APR Petition for BEST for FY 2007-08 and Tariff Determination for FY 2008-09 BEST submitted its Petition for Annual Performance Review (APR) for FY 2007-08 and Tariff Determination for FY 2008-09 on December 17, 2007 numbered as Case No. 73 of 2007. The Commission issued the APR Order for BEST on June 6, 2008, which came into effect from June 1, 2008, and the tariffs were initially valid up to March 31, 2009, which was later extended till the revised revenue requirement was determined for FY 2009-10, vide the Commissions Order dated April 15, 2009 in Case Nos. 152, 153 and 154 of 2008. 1.6 MERC Order on APR Petition for BEST for FY 2008-09 and Tariff Determination for FY 2009-10 BEST submitted its Petition for Truing-up for FY 2007-08, APR for FY 2008-09 and Tariff Determination for FY 2009-10 on December 11, 2008 numbered as Case No. 118 of 2008. The Commission issued the APR Order for BEST on June 15, 2009, which came into effect from June 1, 2009. 1.7 Petition for Annual Performance Review for FY 2009-10 and Tariff Determination for FY 2010-11
In accordance with Regulation 9.1 of the MERC Tariff Regulations, an Application for the determination of tariff is required to be made to the Commission not less than 120 days before the date from when the tariff is intended to be made effective. Further, the first proviso to Regulation 9.1 of the MERC Tariff Regulations provides that the date of receipt of application for the purpose of this Regulation shall be the date of intimation about receipt of a complete application in accordance with Regulation 8.4 above. In view of the separate process being undertaken by the Commission for formulation of the MERC MYT Regulations for the Control Period from FY 2011-12 to FY 201516, the Commission directed BEST to submit the Petition for truing up for FY 200809, APR for FY 2009-10 and determination of revenue requirement and tariff for FY 2010-11 latest by December 31, 2009. BEST submitted its Petition for truing up for FY 2008-09, APR for FY 2008-09 and tariff determination for FY 2010-11 on December 31, 2009, based on actual audited expenditure for FY 2008-09, actual expenditure for first half of FY 2009-10, i.e.,
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from April to September 2009, and revised estimated expenses from October 2009 to March 2010, and projections for FY 2010-11. BEST, in its Petition, requested the Commission to: Undertake truing up for FY 2008-09; Approve provisional true-up amount for FY 2009-10; Approve total recovery of ARR of FY 2010-11; Approve proposed category-wise tariff revision for FY 2010-11; Consider ceiling distribution loss of 10% for FY 2010-11; Approve Tariff philosophy suggestions as requested by BEST.
The Commission, vide its letter dated February 1, 2010, forwarded the preliminary data gaps and information required from BEST. BEST submitted its replies to preliminary data gaps and information requirement on February 5, 2010. The Commission scheduled a Technical Validation Session (TVS) on BESTs Petition for truing up for FY 2008-09, APR for FY 2008-09 and tariff determination for FY 2010-11 on February 8, 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. The list of individuals, who participated in the TVS, is provided at Appendix-1. During the TVS, the Commission directed BEST to provide additional information and clarifications on the issues raised during the TVS. The Commission also directed BEST 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 BEST submitted its responses to the queries raised during the TVS and the revised APR Petition, on March 13, 2010, and the Commission admitted the APR Petition of BEST on March 15, 2010. In accordance with Section 64 of the EA 2003, the Commission directed BEST to publish its APR Petition in the prescribed abridged form and manner, to ensure public participation. The Commission also directed BEST to reply expeditiously to all the suggestions and objections received from stakeholders on its Petition. BEST issued the Public Notice in newspapers inviting suggestions and objections from stakeholders on its APR Petition. The Public Notice was published in newspapersHindusthan Times and Indian Express on March 17, 2010, Navshakthi and
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Maharashtra Times on March 18, 2010. The copies of BEST's Petition and its summary were made available for inspection/purchase to members of the public at BEST's offices and on BEST's website (www.bestundertaking.com). The copy of Public Notice and Executive Summary of the Petition was also available 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 BEST. The Commission received written suggestions and objections on various issues. The Public Hearing was held in Mumbai on April 13, 2010 at 11:00 hours at Centrum Hall, 1st Floor, Centre 1, World Trade Centre, Cuffe Parade, Mumbai-400 005. The list of objectors, who participated in the Public Hearing, is provided in Appendix- 2. The Commission has ensured that the due process as contemplated under law to ensure transparency and public participation was 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, Annual Performance Review of FY 2009-10 and tariff determination of BEST for FY 2010-11. Various suggestions and objections that were raised on BESTs Petition after issuance of the Public Notice both in writing as well as during the Public Hearing, along with BESTs 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 five 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. Section 2 of the Order lists out the various suggestions and objections raised by the objectors in writing as well as during the Public Hearing before the Commission. The various suggestions and objections have been summarized, followed by the response of BEST and the rulings of the Commission on each of the issues.
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Section 3 of the Order details the truing up of expenses and revenue of BEST for FY 2008-09, including sharing of efficiency gains/losses due to controllable factors. Section 4 of the Order comprises the Review of Performance for FY 2009-10, covering both operational performance and expenditure heads. This Section also comprises the Commission's analysis on various components of aggregate revenue requirement of BEST for FY 2010-11. Section 5 of the Order comprises the Tariff Philosophy adopted by the Commission and the category-wise tariffs applicable for FY 2010-11.
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2 OBJECTIONS RECEIVED, BESTS RESPONSE AND COMMISSIONS RULING

2.1 Non- Compliance with Regulations Shri Raksh Pal Abrol from Bharatiya Udhami Avam Upbhokta Sangh submitted that BEST in its proposal for approval of APR and ARR before the Commission has neither followed MERC (Electricity Supply Code and Other Conditions of Supply) Regulations, 2005 dated January 20, 2005 nor MERC (Standard of Performance of distribution licensees, Period of giving supply and determination of compensation) Regulations, 2005 dated January, 2005. Shri N. Ponrathnam submitted that BEST should be considered as a Company as per the Companies Act, taken over by BMC. BEST is a licensee as per Electricity Act, 2003. He further submitted that the Local Authority (being exempted from Licence) cannot be a licensee, and only a licensee can submit ARR Petition as per Section 64(1) of Electricity Act, 2003. BESTs Response BEST submitted that it has submitted the Petition for the approval of APR for FY 2009-10 and ARR and tariff for FY 2010-11 in accordance with Regulation No.s 17, 18, 19 and 20 of MERC (Terms and Conditions of Tariff) Regulations, 2005 and Sections 61, 62 and 64 of Electricity Act, 2003. BEST further submitted that the Appellate Tribunal of Electricity (APTEL) in its Judgment in Appeal No. 61 of 2006 has already ruled that BEST is a local authority, and the Commission has also notified the MERC (Specific Conditions of Distribution Licence applicable to Brihan-Mumbai Electric Supply and Transport Undertaking of Municipal Corporation of Greater Mumbai) Regulations, 2007. Commissions Ruling The Commission is of the view that there is no merit in the objections raised in this context. The Commission has notified the MERC (Specific Conditions of Distribution Licence applicable to Brihan-Mumbai Electric Supply and Transport Undertaking of Municipal Corporation of Greater Mumbai) Regulations, 2007, and BEST is a deemed distribution licensee in the State of Maharashtra in terms of the first proviso to Section 14 of the Electricity Act, 2003 whose licence is due to expire in the year 2028. Further, the APR Petition has been filed in accordance with the MERC Tariff Regulations, and consequent to the Commission's directions in the matter.
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2.2
Segregation of consumers
Bharatiya Udhami Avam Upbhokta Sangh submitted that BEST has not segregated the consumers on the basis of consumers using single phase meters and three phase meters for ascertaining the electricity consumed in the said premises. Further, it submitted that BEST has also not provided breakup of consumers charged on the basis of sanctioned load and Contract Demand based on recent approval of categorisation of consumers in their licensed area. BESTs Response BEST submitted that it has provided the information of consumers having single phase/three phase meters and category-wise/slab-wise consumers based on sanctioned load in Form-13.1 of APR Petition. Commissions Ruling BEST has submitted the requisite data in Form-13.1 of APR Petition, hence, the objection is not relevant. 2.3 Sales Forecast and Revenue
Bharatiya Udhami Avam Upbhokta Sangh submitted that BEST should have shown the sale of electricity to LT Consumers and HT Consumers, and losses due to the sale to LT Consumers, separately. It further submitted that total sales (MU) as submitted by BEST in the Petition during FY 2008-09, FY 2009-10 and FY 2010-11 (4103 MU, 4164 MU and 4321 MU, respectively) is quite low as compared to the demand for tariff hike for certain consumers. It also submitted that BEST has not disclosed the sale of energy based on the recent categories approved by the Commission for FY 2009-10. Shri Ashok Pendse from TBIA (Thane Belapur Industries Association) submitted that sales of various categories have been over projected by BEST. He also submitted that sales in Navynagar and Ambedkarnagar (both put together) have increased by 30.45 MU, while sales projected by BEST do not justify it. BESTs Response BEST submitted that it has submitted the details of category-wise sales along with fixed charges in Form-13.1. BEST also submitted that total sales during FY 2008-09, FY 2009-10 and FY 2010-11 is based on 5-year, 3- year and year-on-year growth rate.
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BEST added that it has considered 3.78% growth rate for FY 2010-11 and projected sales of 4321 MU for FY 2010-11. BEST submitted that the actual sales for FY 2008-09 are given in Form No. 11, Page No. 231 of APR petition. The sales figure for FY 2009-10 and FY 2010-11 are based on the projections, which is explained in Page No. 80, 81 and 84, 85 respectively. Commissions Ruling For FY 2008-09 and FY 2009-10, the Commission has accepted the actual sales and revenue as submitted by BEST. The sales for FY 2010-11 have been projected based on the actual sales in FY 2009-10, by considering the past trends in sales, viz., 5-year CAGR, 3-year CAGR, etc., as appropriate. The details of category-wise sales projected by the Commission for FY 2010-11 have been elaborated in Section 4.3 of this Order. 2.4 Power Purchase Expenses
Indian Hotel & Restaurant Association submitted that at present the only source of energy procurement for BEST undertaking is TPC-G, whose cost of generation from hydro (3 Units), gas (4 Units), coal (2 Units) and fuel oil (7 Units) is Rs. 1.50 per kWh, Rs. 1.50 per kWh, Rs. 3.00 per kWh and Rs. 6 per kWh respectively. Therefore, average rate of energy procured from TPC-G will always be greater than pure gas based, coal based or nuclear based power plants. As BEST is the largest distributor of electricity, it can get lower rates from generators and can reduce the rates of electricity for consumers. Shri A.R. Bapat submitted that the rate of power purchase from TPC-G (Unit-8) in FY 2009-10 (H1) as submitted by BEST is Rs. 3.36/ Unit as compared to Rs. 1.05/Unit as approved by the Commission. He further submitted that on page 91, energy from TPC-G Unit-8 is not shown while on page 95, energy from TPC-G Unit-8 is also shown. He added that power purchase expenses as submitted by BEST in the Petition for FY 2008-09, FY 2009-10 and FY 2010-11 is Rs. 2209 Crore, Rs. 1784 Crore and Rs. 2013 Crore, respectively. He requested BEST to provide reasons for such huge variation. He further submitted that the quantum of purchase during FY 2010-11 may not materialise due to migration of consumers to TPC-D. Shri Ulhas Pandarinath Chaudhari from Sadbhavna Sangh submitted that additional electricity for Mumbai should be purchased collectively and the Commission should determine the average tariff for distribution of electricity in Mumbai, so that consumers would have to pay equal price for the usage of electricity.
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BESTs Response BEST submitted that in order to secure reliable electric supply at reasonable cost for the esteemed consumers of Mumbai city, it has entered into PPA with TPC-G for supply of 832 MW (presently operational) for a period of 10 years. The rates of supply of such power of BEST are being determined by the Commission on year-onyear basis. It is well known fact that TPC-G is one of the most reliable generators of electricity in India. In view of the situation, it is not advisable to exit this contract keeping in view of the reliability required in a mega city like Mumbai. TPC-Gs islanding systems have helped Mumbai city from blackouts when rest of the State have been plunged into darkness. However, BEST is exploring alternative sources for reliable power for future requirements considering the cost aspects as per the Competitive Bidding Guidelines of Government of India (GOI). BEST submitted that when the Tariff Order for last APR Petition was issued by the Commission, it had estimated the variable cost for power purchase from Unit-8 at Rs. 1.05 per kWh whereas the rate for sale from Unit-8 has been determined at Rs. 1.75 per kWh in TPC-Gs APR Order. BEST had filed a review Petition to correct the power purchase cost as per the rate specified in TPC-Gs Tariff Order. BEST further submitted that the Commission vide its Order dated June 15, 2009 in Case No. 118 of 2009 clarified that the rate of power purchase from Unit-8 has been incorrectly considered in BESTs APR Order and directed BEST to consider the approved power purchase rate of Rs. 1.05/kWh for FAC computations, and recover the variation through the FAC mechanism subject to the ceiling on FAC charge. The Commission further stated that any under recovery/ over recovery on this account will be adjusted at the time of truing-up at the end of the year. The average power purchase cost for Unit-8 for H1 of FY 2009-10 was Rs. 3.36 per kWh as billed by TPC-G. As regards energy from Unit-8 shown in the Petition, BEST submitted that it is true that generation from Unit-8 has not been shown in the Table on Page-91 in the Petition. However, Unit-8 has actually been considered in the Petition. BEST submitted that the Commission considers the quantum of energy available to BEST by virtue of its PPA with TPC-G for the capacity contracted and estimates the revenue through the sale/Interim Balancing and Settlement Mechanism (IBSM), which is considered while estimating power purchase expenses. BEST further submitted that it may be seen from the power purchase cost submitted by Utility and that approved by the Commission in all the Tariff Orders that this variation is mainly
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due to the change in power purchase cost due to the tariff determined by the Commission. Commissions Ruling BEST has entered into a 10-year Power Purchase Agreement (PPA) with TPC-G for 832 MW of power on round-the-clock basis, which has already been approved by the Commission. In addition, BEST has recently entered into another PPA with TPC-G for an additional capacity of 100 MW, to meet its peak demand requirements, which has also since been approved by the Commission, in a separate case being Case No. 1 of 2010 before the Commission subject to the condition of directions, if any, to be passed by the Commission after considering the Competition Commissions opinion as stated in the Order in Case No. 1 of 2010. The rates charged by TPC-G from BEST are regulated rates and are approved by the Commission in a manner similar to that adopted by the Commission for BEST. The Commission has considered all the sources, including Unit 8 of TPC-G, as mentioned by BEST in the APR Petition. As regards power purchase rate from Unit-8, the Commission, in its Order dated December 15, 2009 (Case No.44 of 2009) directed BEST to consider the rate of Rs. 1.05/ kWh for Unit-8 and recover the variation through the FAC mechanism subject to the ceiling on FAC charge, with the underrecovery if any, being adjusted through the truing up mechanism. The details of power purchase quantum and cost for FY 2008-09 as approved by the Commission is provided in Section-3.3 of this Order. For FY 2009-10, the Commission obtained source-wise actual details of power purchase quantum and cost from BEST, which has been accepted by the Commission, under the provisional truing up exercise. For FY 2010-11, the power purchase rate as approved by the Commission in the APR Order of TPC-G (Case No. 96 of 2009) has been considered. The details of power purchase quantum and cost for FY 2009-10 and FY 2010-11 as approved by the Commission has been provided in Section 4.6 of this Order. As regards the suggestion regarding determination of uniform tariffs in the city of Mumbai, the Commission has articulated its views in the previous Orders also. Every distribution licensee has a different consumer and consumption mix and cost profile, including arrangement for procuring power from various sources, and hence, it is not practical to have uniform retail tariff across different distribution licensees.
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2.5
Employee Expenses
Shri Ashok Pendse submitted that BEST has employed manpower in excess of that actually required. He further submitted that the number of substations, HT Lines, LT Lines, Distribution Transformers, and energy sold by BEST are 2%, 0.7%, 1.4%, 1.0%, 7%, 10% and 11% of MSEDCL respectively but number of employees and employee expenditure are 10% and 11% respectively as compared to that of MSEDCL. BESTs Response BEST submitted that the comparison has been made between two entities, which have nothing in common except that both are in electricity distribution business. The reliability index, standards of performance, number of consumers, total geographical area of electricity distributed, consumer mix, type of locality (urban/rural), distribution system (underground/overhead), etc., are all different for BEST and MSEDCL and there is nothing in common. Hence, it is not correct to compare these two Utilities. Commissions Ruling The approved employee expenditure for FY 2010-11 has been determined by applying the appropriate inflation indices on the provisionally trued up expenditure for FY 2009-10. The final truing up of the employee expenditure for FY 2009-10 will be undertaken only after the end of the year, once the audited data is submitted to the Commission, and subject to prudence check. The Commissions computations in this regard have been elaborated in the Section 4.7 of this Order on provisional truing up and revised revenue requirement for FY 2009-10 and FY 2010-11, respectively. As regards the need for benchmarking the employee expenses with other comparable distribution licensees, in order to be able to specify normative performance parameters, the Commission has undertaken this exercise while developing the MultiYear Tariff (MYT) framework for the second Control Period from FY 2011-12 to FY 2015-16, which is being undertaken in parallel by the Commission. 2.6 Interest on loan
Shri Ashok Pendse submitted that the rate of interest on Government loan for mega city and District Plan & Development Council loan (DPDC) is 15% and 14.25%, respectively, while all the other loans are in the range of 10-12%. Hence, it is necessary to examine these two loans for reduction of interest.
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BESTs Response BEST submitted that the Government loan for the megacity has already been repaid in the month of June 2009. BEST further submitted that the said loan was as per the terms and conditions of the Government of India and hence, reduction of interest on such loan was not under the control of the Licensee. Regarding DPDC loan, BEST submitted that it had discussed the issue with Industry, Energy and Labour department of Government of Maharashtra in FY 2004-05 and FY 2005-06 for terminating the loan, as there is no provision for reducing the loan interest. The matter is continuously being followed up with Government of Maharashtra. Commissions Ruling The interest expenses as approved by the Commission for FY 2008-09 are detailed in Section-3 and for FY 2009-10 and FY 2010-11, the calculations are detailed in Section-4 of this Order. However, as a general rule, BEST and all Utilities should strive to reduce their interest expenses, by negotiating with the lenders/replacement of costly loans, etc. 2.7 Distribution Losses
Dr. Ashok Pendse, Shri A.R. Bapat and Shri M.G. Varhade submitted that BEST has achieved distribution loss of 9.25%. However, BEST has considered only 10% loss for subsequent years. He further submitted that if distribution loss is considered as 9.25% then energy requirement reduces by 56 MU, which translates to lesser power purchase cost. Indian Hotel and Restaurant Association submitted that if TPC-D is confident of restricting distribution loss to 0.65% in spite of growth in number of consumers then, BEST should also reduce loss of electricity through checking theft and installing new meters instead of obsolete meters, as every percentage reduction would lead to savings of Rs. 18.5 Crore for BEST. Shri N. Ponrathnam submitted that increase of distribution loss from 9% to 10% should not be allowed by the Commission. He further submitted that BEST should be directed to reduce the distribution loss to 5%.
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BESTs Response BEST submitted that BEST has one of the lowest distribution losses as compared to similar Utilities with similar HT/LT ratio in the country. BEST has achieved distribution loss trajectory as directed by the Commission. The distribution losses for FY 2008-09 and H1 of FY 2009-10 are lower than the trajectory for distribution loss stipulated by the Commission. The details of revenue recovery through stringent vigilance activity are given in the Petition. BEST will continue with its best efforts of bringing down the distribution loss to the practicable levels considering the vast existing aged low tension network maintained by it. Incidentally, the distribution loss also depends upon HT/ LT ratio and the number and consumption at LT voltages in TPC area is negligible as compared to that of BEST and therefore, it is unfair to compare distribution loss of TPC with that of BEST. BEST submitted that the actual distribution loss for FY 2008-09 is 9.29% and distribution loss during H1 of FY 2009-10 is 9.21%. Even though the distribution loss is lower than the trajectory approved by the Commission, it would not be prudent to continue with the same loss level for the rest of the year as the actual distribution loss of FY 2009-10 will be known at the end of the year, which takes into consideration the loading and seasonal variation. Therefore, BEST has considered 10% as the distribution loss as per the trajectory approved by the Commission for the computation of projection for FY 2010-11 also. BEST also submitted that for FY 2010-11, BEST has considered 10% as benchmark for FY 2010-11. This is in line with commissions approach for Generating Stations as outlined in MERC (Terms and Condition of Tariff) Regulations, 2005, the target PLF has been specified as follows: 33 Norms for operation 33.1 Thermal generating stations 33.1.1 Availability (a) Target availability for full recovery of annual fixed charges shall be 80 percent (c) Target Plant Load Factor for incentive in accordance with Regulation 37shall be 80 per cent Further, BEST submitted that as the Tariff Regulations have not specified distribution loss level, by fixing a benchmark distribution loss level of 10% for future years and
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linking incentive to it, there will be motivation for achieving lower loss level and BEST consumers would automatically get incentivized for loss reduction (below bench mark) by way of 1/3rd amount as laid down in Regulation 19 of MERC (Terms and Condition of Tariff) Regulations, 2005.
Commissions Ruling The Commission has considered the distribution losses for FY 2009-10 as 10% in accordance with the philosophy adopted in the MYT Order, which considered a loss reduction trajectory of 0.5% every year. The actual distribution loss during first half of FY 2009-10 as reported by BEST are lower, at around 9.21%, and will be considered at the time of final truing-up for FY 2009-10, and any deviation from distribution loss approved by the Commission will be reflected in sharing of efficiency gains/losses due to distribution loss in accordance with MERC Tariff Regulations. For FY 2010-11, the Commission has considered a further reduction of 0.5% in the distribution losses, thereby, resulting in distribution losses of 9.5%, in accordance with reasons elaborated in subsequent sub-sections of this Order. The detailed discussion in this regard is given in Sections 3.2 and 4.4 of this Order. 2.8 Stand-by Charges
Guruprasad Shetty from Indian Hotel and Restaurant Association submitted that BEST should stop subsidising the inefficiency of MSEDCL by paying standby charges and transmission charges. He further submitted that since BEST buys power directly from TPC-G and has no direct linkage to MSEDCL, these charges should immediately be discontinued. Sadbhavna Sangh submitted that BEST should take necessary steps to reduce Transmission Charges and Standby charges. He further suggested that BEST can directly sign PPA with Uran Generation or Kalwa or it can build its own transmission system to transmit power from Uran via sea or New Nhava Sewri Bridge. BESTs Response BEST submitted that arranging outages for routine maintenance of generators at certain intervals is an accepted practice for proper up-keep of the generator to get reliable service. Besides this, even with the best maintenance practices, there can be unscheduled outages due to faults developing in the generation system. Under these circumstances, standby arrangement for availability of power from secured sources is
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essential as and when required to avoid load shedding. MSEDCL is providing the service of giving power to Mumbai in case of eventualities explained above. The amount to be paid to MSEDCL is determined by the Commission and MSEDCL is making arrangement for off-take of required quantum of power. This has been one of the long standing arrangements, which have helped Mumbai to escape from load shedding and survive during generator outages/breakdowns. As regards transmission charges, the Commission has determined that the expenses of composite transmission system is to be shared by all distribution licensees as determined by the Commission and as one of the transmission system users, BEST has to pay the transmission charges in accordance with the Tariff Order issued by the Commission. Further, transmission charges are being paid to State Transmission Utility (STU) and not to MSEDCL. Commissions Ruling In order to avoid outages in Mumbai licence area, stand-by support is provided by MSEDCL. For providing stand-by support, all the distribution licensees in Mumbai, viz., BEST, RInfra-D, and TPC-D, have to pay standby charges to MSEDCL. In this Order, the Commission has considered the Standby Charges in accordance with the philosophy adopted in the last APR Order, and has accordingly allocated the Standby Charges for FY 2010-11 between the three Distribution Licensees in Mumbai in proportion to the coincident peak demand for the last one year, i.e., for the period from October 2008 to September 2009, after accounting for the migration of consumers from RInfra-D to TPC-D, to the extent of 160 MW, as elaborated in Section 4 of this Order. The transmission charges payable by BEST for FY 2008-09 are given in Section 3, and for FY 2009-10 and FY 2010-11, the transmission charges are given in Section 4 of this Order. It may be noted that the transmission charges are approved by the Commission through a separate process, and is thus, a fully regulated price. All the distribution licensees in the State of Maharashtra are connected to the Intra-State Transmission System (InSTS) and have to pay transmission charges, through a pooling mechanism, under which all the transmission licensees are also able to recover their ARR.
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2.9
Capital Expenditure
Bharatiya Udhami Avam Upbhokta Sangh submitted that BEST has not provided the data regarding capex investment approved for FY 2009-10 and further development in their licensed area. Shri Ashok Pendse submitted that the actual capital expenditure achieved seems to be far away from that projected during the Performance Review stage. BESTs Response BEST submitted that the actual expenditure and capitalisation for first half of FY 2009-10 and the revised estimate for FY 2009-10 is given in the table 45 on Page 114 of APR Petition. Commissions Ruling As regards capital expenditure, the Commission in last APR Order dated June 15, 2009 directed BEST as under: As regards whether projected benefits have actually accrued for the benefit of the consumers, the Commission directs BEST to submit the detailed report with established benefits vis--vis the benefits projected, within one month from the issuance of this Order. The Commission, at the time of annual performance review, shall consider revision of approved capitalisation for FY 2007-08, if necessary, upon scrutiny of BESTs submission in this respect. The Commission has instituted a process of giving in-principle 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. In this Order, the Commission has considered revision of approved capitalisation for FY 2007-08 along with truing-up of FY 2008-09, which has been detailed in Section 3 of this Order while capitalisation as approved for FY 2009-10 and FY 2010-11 is detailed in Section 4 of this Order.
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2.10 Short-term Power Purchase Cost Shri N. Ponrathnam submitted that the Commission should direct BEST to arrange for the required quantum of power at reasonable price by entering into long term power purchase agreement in order to provide uninterrupted power supply to the consumers, and costly power purchase should not be allowed by the Commission. BESTs Response BEST submitted that it has already entered into long-term Power Purchase Agreement with TPC for 832 MW. The agreement for additional 100 MW has also been signed with TPC for which the Petition has already been filed before the Commission. Additional power purchases to meet the peak demand are made as per the Regulations and directives existing in this regard considering the need to provide uninterrupted supply in Mumbai. Commissions Ruling The power purchase expenses of BEST have been computed in accordance with the PPA for purchase from TPC-G, which has been approved by the Commission. In case of BEST, while there is a requirement of certain quantum of costly power purchase due to the mismatch between the MW requirement and the MW available from TPCG, in energy terms (MU), based on all sources of power including Unit 8 of TPC-G, it is estimated that BEST will have surplus energy, which will be contributed to the pool under the Interim Balancing and Settlement Mechanism (IBSM) prevalent in the State of Maharashtra, and will earn revenue at the rate of Rs. 5 per kWh. This revenue has been considered to reduce the overall power purchase expense, and has accordingly, enabled the Commission to reduce the ARR correspondingly. 2.11 Determination of wheeling charges and cross subsidy surcharge Shri N. Ponrathnam submitted that BEST should be directed by the Commission to give details in order to determine wheeling charges and cross subsidy surcharge as mentioned in Section 42 of the Electricity Act, 2003. BESTs Response BEST submitted that it is exempted from Open Access as per Regulation 19 of the MERC (Distribution Open Access) Regulations, 2005.
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Commissions Ruling As regards determination of wheeling charges, the Commission during TVS emphasised that apportioning of ARR of BEST distribution business to wires and retail business is of utmost importance and directed BEST to do the apportioning with certain assumptions, if necessary, and to revise the APR Petition to that extent. BEST submitted the provisionally segregated ARR and stated that it will require further time to carryout detailed segregation. The wheeling charges and cross-subsidy surcharge based on ARR and tariffs determined by the Commission in this Order is detailed in Section 5.4 of this Order. 2.12 Cross-Subsidy Indian Hotel and Restaurant Association submitted that as per Tariff Policy, the cross subsidy should be restricted to +/-20% and if commercial consumers are not charged appropriately then they have the option to shift to other distribution licensee. Shri N. Ponrathnam also submitted that cross subsidy should be reduced to +/- 20% as per Tariff Policy. He further submitted that the State Government may be advised by the Commission to directly help poor with subsidy by a separate fund in order to eliminate cross subsidy so as to comply with Section 65 of EA 2003, Section 8.2 (3) and Section 8.3 of Tariff Policy and other Regulations. This will also eliminate tariff shock. BESTs Response BEST submitted that it will abide by the road map as determined by the Commission with regard to cross subsidy. BEST added that it adopts the tariff for various categories as determined by the Commission. Commissions Ruling In accordance with the provisions of Section 61 of the EA 2003, the cross-subsidies have to be reduced gradually and the tariff differentiation between different consumer categories cannot be very significant in the long run. Accordingly, the Commission has been attempting to reduce the inter-category cross-subsidy over the past Tariff Orders, in a gradual manner, since, if the cross subsidy is immediately reduced to +/20%, it may lead to tariff shock to the consumers. The cross-subsidy between different consumer categories based on tariffs determined by the Commission in this Order is given in Section 5.4 of this Order.
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2.13 Demand Side Management (DSM) Sadbhavna Sangh submitted that it is necessary to save 50% of electricity according to the target of Government Policy. The need of the times is to save electricity. BESTs Response BEST submitted that it is proactively taking measures for creating awareness about energy efficiency. It also follows very strict norms about efficiency while buying any material for the distribution business. Commissions Ruling The DSM activities cover awareness programme among consumers, educating consumers about DSM, capacity building, load survey, etc. As DSM will help in shifting the load curve and reducing the costly power purchase, it will help in reduction of Tariff, which will benefit the consumers. BEST should take active steps and implement viable DSM projects, with the objective of achieving DSM. 2.14 Return on Equity Indian Hotel and Restaurant Association submitted that BEST as a public authority is investing public money as equity. Therefore, it should not claim return on equity on public money in its ARR. BESTs Response BEST submitted that Return on Equity is recovered as per Clause 76.1.1 of MERC (Terms & Conditions of Tariff) Regulations, 2005. It further submitted that it is aware of its social responsibilities and always puts its best efforts to give the best service at minimum cost. Commissions Ruling Out of the total capitalisation allowed during the year, Consumer Contribution and Grants provided by the Government during the year are deducted and then debt-equity ratio of 70:30 is applied to the allowable capital cost in accordance with MERC Tariff Regulations. Only 30% of the allowable capital cost or actual equity employed whichever is less is considered for calculation of return on equity. However, returns as interest on internal funds on Government assistance and normative loan drawl during the year if any, is provided at 6% p.a. to BEST according to the ATE Judgment dated August 27, 2007.
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2.15 Income due to sale of excess power available from TPC-G Shri Ashok Pendse submitted that by virtue of PPA between BEST and TPC-G, BEST has surplus power, which is sold at higher price in the market as compared to the cost of purchase. In FY 2010-11, due to the availability of additional energy, this difference, i.e., profit for BEST could be higher depending upon price at which power is purchased and sold. BESTs Response BEST submitted that it is inevitable that the load profile of any utility like BEST will have peaks and valleys. The Utility generally enters into PPAs taking into consideration the peak demand, base load, etc. Therefore, during off peak hours of the day, there is surplus of contracted capacity and surplus power if the generator generates during that period. The peak demand of BEST for past two years is around 865 MW (at T < > D interface) while PPA of BEST with TPC is only for 832 MW. With 832 MW at G < > T interface, the normative availability at T < >D interface will be 675 MW. Therefore, at present the contracted capacity is not sufficient to meet the peak demand. Further, at present PPAs are on round the clock basis. According to the directive of the Commission, the power is given to the other Utility at marginal rate, which is generally higher than the average rate paid by the Utility (as marginal cost is the highest rate paid by it for procuring the power). It is therefore, grossly incorrect to say that BEST's profits would be higher. Commissions Ruling The Commission has obtained the actual power purchase cost incurred by BEST during FY 2009-10. For FY 2010-11, power purchase quantum and cost has been calculated after considering all the sources of power as submitted by BEST in the Petition. The surplus power available with BEST, after meeting the requirement of its consumers in the licence area, has been considered as available for sales to BEST, and is typically absorbed by the other distribution licensees in the State under the Interim Balancing & Settlement Mechanism (IBSM) prevalent in the State. The Commissions computations in this regard have been elaborated in Section 4.6 of this Order on provisional truing up and revised revenue requirement for FY 2009-10 and FY 2010-11, respectively.
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2.16 Revenue Gap Shri A.R. Bapat submitted that BEST had projected deficit of Rs. 1362 Crore in its APR Petition for FY 2008-09 and proposed a steep rise of around 30% in tariffs against which, the Commission approved only 10.5% increase. However, in its APR Petition for FY 2009-10, BEST has not considered such variation between Petitioned figures and Approved figures. He further submitted that BESTs proposal for rise in tariff by 7% during FY 2010-11 was not fair. BESTs Response BEST submitted that for FY 2009-10, BEST had proposed increase in Tariff to recover a total revenue gap of Rs. 1361.58 Crore. The Commission, vide its Order dated June 15, 2009 reduced the average tariff by around 6%. The detailed estimates done by BEST are available in BESTs APR Petition of FY 2008-09. Similarly the expenditure considered by the Commission while determining Tariff for FY 2009-10 on the expenditure (ARR) estimates are given in the Order issued by the Commission on June 15, 2009 in APR Petition for FY 2008-09 (Case No. 118 of 2008). BEST further submitted that in the APR Petition for FY 2009-10, a revenue gap of Rs. 237.1 Crore has been shown for FY 2009-10, which cannot be recovered with existing tariffs. The tariff increase proposed is to recover the estimated revenue gap. Commissions Ruling The details of ARR and Revenue Gap as approved by the Commission for FY 200910 and FY 2010-11 are elaborated in Section 4.19 of this APR Order. 2.17 Cost of Supply Shri A.R. Bapat and Shri M.G. Varade submitted that cost of supply for FY 2008-09, FY 2009-10 and FY 2010-11 as submitted by BEST is Rs. 7.04/ kWh, Rs. 7.53/ kWh and Rs. 6.88/kWh respectively. They further submitted that BEST may submit the reasons for the reduction in cost of supply from Rs. 7.04/ kWh in FY 2008-09 to Rs. 6.88/ kWh in FY 2010-11 and if the cost of supply is lower, then the tariff should be reduced rather than increased. BESTs Response BEST submitted that the average cost of supply is worked out on the basis of total aggregate revenue requirement and units sold. In the Petition, the average cost of supply (ACoS) submitted for FY 2008-09 is as per trued up accounts while, for FY
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2009-10 the estimated ARR consists of estimated stand alone ARR of FY 2009-10 and carry forward revenue gaps of FY 2008-09. The estimated cost of supply is based on estimated annual ARR. BEST submitted that it is not expected to realise the estimated annual ARR with the existing tariff and it will lead to estimate revenue gap for FY 2009-10 as explained in the Petition. Therefore, it does not follow that if the projected average cost for FY 2010-11 is lower, it will result in decrease in tariff. It needs to be taken into account that this average cost of supply of FY 2009-10 is not average realisation but it is based on estimated ARR. Commissions Ruling Average cost of supply is the ratio of Aggregate Revenue Requirement and total energy sold during the year. Average cost of supply may be less either due to reduction in ARR or increase in sales to the consumers during the year. The Commission observed that in accordance with the submissions of BEST in the Petition, ARR for FY 2010-11 is greater as compared to ARR of FY 2009-10 which means that average cost of supply may be less due to increase in sales to the consumers as projected by BEST. In this case, the revenue from sale of power depends upon the category of consumers, i.e., Commercial, Industrial, Residential etc. The Utility recovers its ARR through revenue from sale of energy to various categories. Different categories are charged according to different rates (Tariff). If ARR cannot be recovered through existing tariff, then existing tariff is changed to the extent that ARR can be recovered according to the new tariff. The tariff proposed by BEST and approved by the Commission for FY 2010-11 and its philosophy is given in Section 5.4 in this Order while comparison of ARR as proposed by BEST and as approved by the Commission is given in Section 4.19 of this Order. 2.18 Tariff Shri N. Ponrathnam submitted that a benchmark for tariff (comparison of tariff determined by State Electricity Regulatory Commissions throughout the Country) should be specified by the Commission. BESTs Response BEST has not submitted reply to the query.
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Commissions Ruling As regards the suggestion regarding determination of a benchmark tariff, applicable for consumers in the city of Mumbai, the Commission has articulated its views in the previous Orders also. Every distribution licensee has a different consumer and consumption mix and cost profile, including arrangement for procuring power from various sources, and hence, it is not practical to have uniform retail tariff across different distribution licensees, leave alone, a benchmark tariff for the country as a whole.
2.19 Connected Load Bharatiya Udhami Avam Upbhokta Sangh submitted that the system of Connected Load has been omitted after the enactment of the Electricity Act 2003 and framing of MERC Tariff Regulations. However, BEST has not adopted the system. Further, it submitted that BEST has not modified the system of classifying the consumers on connected load basis. Residential (above BPL), Industrial and Commercial consumers should be charged on sanctioned load basis instead of Connected Load. Shri N. Ponrathnam submitted that LT Consumers have been defined on sanctioned load and HT Consumers have been defined on Contract Demand as provided under MERC Regulations 2005. Further, he requested the Commission to ensure that LT consumers are defined according to the sanctioned load and they should not be levied contract demand charges. BESTs Response BEST submitted that it is following MERC (Standards of Performance of distribution licensee) Regulations, 2005, MERC (Electricity Supply Code and Other Conditions of Supply) Regulations, 2005, and MERC (Terms and Conditions of Tariff) Regulations, 2005. BEST submitted that it has adopted the system of sanctioned load and practice of classifying consumers as per guidelines and directives of MERC. BEST further submitted that Residential, Industrial and Commercial consumers are classified on the basis of sanctioned load as per the Tariff Schedule approved by the Commission. Commissions Ruling The Commission does not find any merit in the objections, since, BEST is following the relevant Regulations as well as the Commission's Tariff Orders issued from time to time. In the revised schedule of tariffs issued by the Commission along with the
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APR Order dated June 15, 2009, LT Consumers have been defined on sanctioned load and HT Consumers have been defined on the basis contract demand. 2.20 Separation of wheeling and retail business Shri N. Ponrathnam submitted that BEST should be directed to separate wheeling charges and retail supply tariff in accordance with Section 61 (1) (c) & (d) of Electricity Act, 2003. BESTs Response BEST has not submitted any reply to this objection. Commissions Ruling The Commission, during TVS, emphasised that apportioning of ARR of BEST distribution business to wires and retail supply business is of utmost importance and directed BEST to do the apportioning with certain assumptions, if necessary, and to revise the current Petition to that extent. BEST submitted the provisionally segregated ARR and stated that it will require further time to carryout detailed segregation. 2.21 Single Tariff for whole Control Period Shri N. Ponrathnam requested the Commission not to grant any tariff hike at present. He also submitted that the tariff should be same for Multi Year Tariff (MYT) Control Period of 3 years or 5 years in compliance with MYT principles laid down under Section 61(f) of Electricity Act, 2003 and Tariff Policy, 2006. MGP requested the Commission to protect the interest of consumers in accordance with Electricity Act, 2003. Hence, the present tariff of all Utilities should be fixed at least for four years and no tariff hike should be allowed by the Commission. BESTs Response BEST submitted that if tariff hike is not allowed then it may seriously affect the financial viability of the Utility. Commissions Ruling The philosophy behind Annual Performance Review is in accordance with Section 12.2 of MERC Tariff Regulations, 2005 which stipulates as under;
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12.2 The multi-year tariff framework shall be based on the following elements, for calculation of aggregate revenue requirement and expected revenue from tariff and charges: i. Control period, at the commencement of which a forecast of the aggregate revenue requirement and expected revenue from existing tariffs and charges shall be submitted by the applicant and approved by the Commission; ii. Applicants forecast of aggregate revenue requirement and expected revenue from tariffs and charges during the control period, based on reasonable assumptions relating to the expected behaviour of the underlying financial and operational variables; iii. Trajectory for specific variables as may be stipulated by the Commission, where the performance of the applicant is sought to be improved through incentives and disincentives; iv. Annual review of performance vis--vis the approved forecast and categorization of variations in performance into those that were caused by factors within the control of the applicant (controllable factors) and those caused by factors beyond the control of the applicant (uncontrollable factors); v. Mechanism for pass-through of approved gains or losses on account of uncontrollable factors; vi. Mechanism for sharing of approved gains or losses arising out of controllable factors; vii. Annual determination of tariff for each financial year within the control period, based on the approved forecast and results of the annual performance review. The Commission is undertaking the current exercise in accordance with the MERC Tariff Regulations. If there is any deviation in controllable or uncontrollable parameters, then the Commission will treat it in accordance with the above Clause of the Regulations. Further, Regulation 20.1 of the MERC Tariff Regulations clearly specify that tariff determination will be undertaken on an annual basis, and hence, no relief can be granted. However, the Commission appreciates the suggestion of the stakeholders in this regard, and has attempted to address this particular issue in the draft MERC MYT Regulations, 2010.
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2.22 Open Access The Indian Hotel and Restaurant Association submitted that at present, there is a difference of Rs. 3-4 per unit in rates of BEST and TPC-D. If TPC-D lays down its distribution network in the area of BEST, then BEST will lose its commercial consumers. In next 2-3 years, BEST will get energy at a lower price than that offered by TPC-G. So BEST should en-cash the existing distribution network by charging open access charge and at the same time retain large consumers. BESTs response BEST submitted that as per the provisions of EA 2003, the consumers of BEST, which is a local authority, cannot ask for electricity supply from any other distribution licensee through open access. The Commission vide Order dated February 22, 2010 has therefore directed TPC to develop its own network in order to supply electricity to the consumers of BEST if they so desire to changeover to TPC. The present difference in tariff between BEST and TPC is because of HT/ LT ratio of distributed energy, consumer mix and extent of cross subsidy. All these factors are not in favour of BEST, which is the incumbent licensee and has a historical legacy. No Authority can lose sight of this fact, while dealing with this issue. Further, the Commission's Order dated February 22, 2010 has been challenged by BEST before the Appellate Tribunal for Electricity. It is the contention of BEST that in view of the protection granted to a local authority engaged in business of distribution of electricity before the appointed date, consumers of BEST cannot opt for any other distribution licensee for supply of electricity. Commissions Ruling Section-43 of EA 2003 deals with Universal supply obligation which states as under: "(1) Every distribution licensee, shall, on application by the owner or occupier of any premises, give supply of electricity to such premises, within one month after receipt of the application requiring such supply: Provided that where such supply requires extension of distribution mains, or commissioning of new sub-stations, the distribution licensee shall supply the electricity to such premises immediately after such extension or commissioning or within such period as may be specified by the Appropriate Commission. ...
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Accordingly, the Commission has already directed TPC-D in its Order dated February 22, 2010 to develop its own network in order to provide electricity to those consumers who want to changeover from BEST to TPC-D. 2.23 Replacement of Meters Bharatiya Udhami Avam Upbhokta Sangh submitted that BEST has provided more than one meter for domestic supply, i.e., light, fan etc., and motive power such as water pumps, elevators installed in the premises. It further submitted that single meter should be provided for domestic usage and mechanical usage. BESTs response BEST submitted that largely all consumers are provided with meters and they are billed as per the appropriate tariffs. Where there is more than one meter for same Tariff category, these meters are now being combined. This exercise will take some time but will be completed in nearby future. Commissions Ruling BEST is directed to expedite the installation of single meters in cases where there are presently more than one meter for the same connection and purpose. 2.24 Categorisation of consumers Bharatiya Udhami Avam Upbhokta Sangh submitted that the distribution licensee may classify or reclassify consumers into various Commission approved tariff categories based on the purpose of supply of the consumers. BESTs response BEST submitted that it follows the tariff categories, which are approved by the Commission in the Tariff Schedule for BEST every year. Commissions Ruling The objector has stated a fact, and no specific ruling is required to be given on the matter.
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2.25 Re-categorisation of Consumers The Association of Hospitals submitted that all the charitable hospitals render yeoman service to the society and general public and play a vital role in supplementing the governmental facilities for health care. They are presently categorised under LT-II commercial category, which adversely affects their ability to provide quality service, while the professionals like Lawyers, Doctors, professional Engineer, Chartered Accountant, etc., using their residences and electricity for their professional activity are covered under LT-I Category. They further submitted that it will be unfair to treat the Public Charitable Trust Hospitals in the same class of consumers of electricity like shopping malls, multiplexes, cinema halls, theatres, etc., and even Section 62 (3) of Electricity Act, 2003 contemplate differential treatment of consumers based on purpose for which supply is required. Therefore, they requested that there should be a separate concessional category for charitable hospitals. Shri N. Ponrathnam requested the Commission to specify the basis of formation of various categories and their differentiation considering Hospitals and Educational Institutions as residential consumers and suddenly categorising them as Commercial category. He further requested to specify the basis of creation of various new categories like Malls and Multiplexes, hoarding, burial ground, Temples, etc. Sadbhavna Sangh submitted that hoardings used for promoting sales of Tobacco, alcohol, etc., should be charged higher tariff and revenue from sale of energy to such categories should be used for cross subsidization. As against this, small shops, flour mills, etc., should be charged as per the residential tariff. BESTs Response BEST submitted that the tariff is fixed by the Commission as per Electricity Act, 2003 and Regulations framed thereunder. The Commission is also conscious of the fact that the distributor of electricity must be in a viable position so as to meet the growing demand for electricity and to meet the huge expenses that are to be incurred in providing necessary infrastructure. Merely giving concessional tariff to a large category of consumers would affect the survival of the distribution licensee and it is also necessary that the distribution licensee should have reasonable levels of revenue to enable them to provide very efficient and competent service. The Commission has recognized this fact and has therefore, reduced the number of tariff categories ensuring that by and large, the concessional tariff is offered only to the residential class of consumers.
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Commissions Ruling The Commission has deliberated at length on the issue of consumer categorisation in the previous APR Order for distribution licensees. The essence of the Commission's ruling in this regard is given here. While undertaking the rationalisation of tariff categories, the Commission has borne in mind the provisions of Section 62(3) of the Electricity Act, 2003, which stipulates as under: The Appropriate Commission shall not, while determining the tariff under this Act, show undue preference to any consumer of electricity but may differentiate according to the consumer's load factor, power factor, voltage, total consumption of electricity during any specified period or the time at which the supply is required or the geographical position of any area, the nature of supply and the purpose for which the supply is required. It should be noted that it is not possible to apply all the above specified criteria at the same time, for designing the tariff categories; else, with many permutations and combinations, there will be too many categories. If any specific consumer category has to be created then it has to be done according to the consumer's load factor, power factor, voltage, total consumption of electricity during any specified period or the time at which the supply is required or the geographical position of any area, the nature of supply and the purpose for which the supply is required. All these criteria may not exist for a consumer at the same time. Any one criterion is sufficient to be there for differentiating in tariffs. It is clarified that the commercial category actually refers to all non-residential, non-industrial purpose, or which has not been classified under any other specific category. For instance, all office establishments (whether Government or private), hospitals, educational institutions, airports, bus-stands, multiplexes, shopping malls, small and big stores, automobile showrooms, etc., are all covered under this categorisation. Clearly, they cannot be termed as residential or industrial. Further, the EA 2003 does not permit differentiation between consumers on the basis of ownership or whether an organisation is charitable or profit-motivated, etc. While appreciating the anxiety of different classes of consumers to reduce their payments on account of use of electricity, the reasonable costs incurred by the Utilities have to be met, and irrespective of the number of consumer categories or the sub-classification considered in accordance with the provisions of Section 62(3) of the EA 2003, the cross-subsidies have to be reduced gradually and the tariff differential between categories cannot be very significant in the long-run.
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2.26 Parallel Licensee Shri N. Ponrathnam submitted that the Commission should encourage competition in compliance with Section 61 (c) of EA 2003 and the directions of Supreme Court (Civil Appeal No. 3466 and Civil Appeal No. 3467 of 2006) which allows TPC-D to supply electricity to all consumers (including less than 1000 kVA) of Mumbai. He further submitted that the Commission should direct both TPC-D and BEST to immediately make arrangements to supply electricity to all consumers across Mumbai. Sadbhavna Sangh submitted that BEST is a public undertaking Company and hence, the Commission should stay its Order in which the Commission has allowed parallel licence to The Tata Power Company in the area of BEST. The concept of Parallel Licensee would cause damage to the publicly owned company and hence, to the public as BEST Undertaking is owned by the Public. BESTs Response BEST submitted that it can presently distribute energy only in the licence area as mentioned in the specific conditions of licence given to BEST by the Commission. However, the Commission has directed TPC-D to develop independent network and to supply electricity to the consumers of BEST who desire to changeover to TPC. BEST has challenged the Order dated February 22, 2010 by filing an Appeal before Appellate Tribunal of Electricity. BEST submitted that it is one of the Local Authorities, which have been excluded from the Electricity Act, 2003. BEST submitted that it has already expressed its view during the public hearing on this matter and is waiting for the Commissions decision and would take action accordingly. Commissions Ruling The Commission has notified the Specific Conditions of Distribution Licence for BEST and TPC-D, and BEST's licence area overlaps with part of TPC-D's licence area. Hence, both BEST and TPC-D have the obligation to supply on request to all the consumers within their licence area. The Commission, in its Order dated February 22, 2010, has already directed TPC-D to develop its own network in order to provide electricity to those consumers who want to changeover from BEST to TPC-D.
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2.27 Information about all charges Sadbhavna Sangh submitted that the electricity bill should clearly mention various charges like rate of purchase of electricity, rate of sale of electricity, charges for HT and LT transmission, T & D losses, etc., so that the consumer would understand all charges and hence, would understand the computation. BESTs Response BEST submitted that the electricity bill of BEST is in accordance with Clause No. 15.2.4 of the MERC (Electricity Supply Code and Other Conditions of Supply) Regulations, 2005. Commissions Ruling As stated by BEST, the electricity bill of BEST is in accordance with Clause No. 15.2.4 of the MERC (Electricity Supply Code and Other Conditions of Supply) Regulations, 2005. Moreover, there is no merit in the suggestion that the entire Tariff Schedule should be incorporated in the electricity bill, as it is neither practical nor required. 2.28 Migration of consumers Shri Ashok Pendse submitted that the existing subsidising consumers will start shifting from BEST to TPC-D, which will have an adverse impact on subsidised consumers. This aspect has not been covered by BEST in the Petition. Shri A.R. Bapat and M.G. Varade submitted that a rise of 6% and 8% has been shown in y-o-y energy sales to HT II and HT III categories, respectively, which is unrealistic as the consumers from these categories are likely to migrate to TPC-D. BESTs Response BEST submitted that so far no consumer has shifted from BEST supply to M/s. TPCD supply. As regards the MERC Order on the Petition filed by Shri Guruprasad Shetty and others, BEST has filed an appeal against this Order before the Appellate Tribunal for Electricity. BEST submitted that the growth rate of HT II and HT III categories has been estimated by considering 5 year CAGR, 3 year CAGR and y-o-y growth rate of these categories. Y-o-Y growth of these categories are 7% and 13%, respectively, whereas 5 year CAGR is 4.28% and 7.85%, respectively, as mentioned in the Petition.
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Commissions Ruling The migration of consumers has not been considered in this APR Order as the same was not projected by BEST in the Petition. Further, till date, there is no single instance of migration from BEST to TPC-D, and hence, it is very difficult to estimate the shift in consumers from BEST to TPC-D. The Commission obtained the actual energy sales during FY 2009-10 from BEST. The Commission has recalculated 5year CAGR, 3- year CAGR and year-on-year growth rate after considering the actual sales during FY 2009-10 as submitted by BEST. The details of sales approved by the Commission for FY 2010-11 are given in Section 4.4 of this APR Order. However, actual sales will be considered at the time of truing-up of FY 2010-11. 2.29 Norms for addition of Power Transformer and Distribution Transformer Shri Ashok Pendse submitted that ratio of Power transformer capacity to maximum demand is 1.7, whereas the ratio of Distribution transformer capacity to maximum demand is 2.43. He further submitted that norms for transformer addition do not seem to have been followed by BEST. BESTs Response BEST submitted that there are no standard norms. BEST submitted that it maintains adequate redundancy (n-1) criteria in the system as a policy and majority of the receiving substations (RSS) are 3 transformer or 2 transformer stations. Transformers are loaded in such a manner to meet the supply immediately in case of failure of one transformer of station. In this case, the ratio of station capacity to coincident maximum demand is 1.5 in case of RSS with 3 transformers and above and in case of RSS with 2 transformers, the ratio of installed capacity to maximum demand of the system workouts to 2, and average considering both the cases is 1.75. BEST further submitted that the distribution substation's capacity is established by considering the reliability requirement and future load growth. In Mumbai city, the space is at premium and there is great difficulty in getting space for substations. When the space for substation is handed over to the Utility, the same has to be commissioned immediately as keeping vacant for long time may result in encroachment. Considering the demand of comparatively large loads in short notice in metro city like Mumbai, sufficient spare capacity has to be maintained for giving supply in minimum time. Considering all this, BEST generally maintains ratio in the range of 2.5 of maximum demand to distribution transformer capacity and this ratio has helped BEST to give an efficient service.
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Commissions Ruling These aspects are not within the scope of the present exercise, which is being undertaken to determine the truing up requirement for FY 2008-09, provisional truing up for FY 2009-10, and determination of ARR and tariff for FY 2010-11. 2.30 Appointment of more Consumer Representatives Shri N. Ponrathnam submitted that more consumer representatives as per Section 18 of MERC (Conduct of Business) Regulations, 2004 should be appointed. He further submitted that the responsibility of consumer representatives should be defined and penalty should be levied on them for not performing their duties. BESTs Response BEST has not submitted its reply to the suggestion. Commissions Ruling These aspects are not within the scope of the present exercise, which is being undertaken to determine the truing up requirement for FY 2008-09, provisional truing up for FY 2009-10, and determination of ARR and tariff for FY 2010-11. 2.31 Information required in Tariff Order Shri N. Ponrathnam submitted that the Commission should provide following details in accordance with Section 62 (3) and Section 61 (g) of Electricity Act 2003: a. Cost of supply for each consumer category b. Cost of supply at different voltages c. Cost of supply for different load factor d. Cost of supply for different power factor e. Cost of supply at different time in a day f. Cost of supply for single phase and three phase g. Cross subsidy amount for each category BESTs Response BEST submitted that the above objection is a prayer made by the objector to the Commission.
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Commissions Ruling The Commission has determined the category-wise tariffs and the cross-subsidy reduction based on the Average Cost of Supply, in line with the practice followed in the previous Tariff Orders. The level of granularity desired by the objector in the cost of supply data is not available at present. 2.32 Direction for compliance of Regulations Shri N. Ponrathnam submitted that the electricity Companies should be directed by the Commission to enter into formal agreements for space required for distribution transformers in order to comply with Section 5.5 of MERC (Electricity Supply Code and Other Conditions of Supply) Regulations, 2005. BESTs Response BEST submitted that it is complying with MERC (Electric Supply Code and other Conditions of Supply) Regulations, 2005. Commissions Ruling These aspects are not within the scope of the present exercise, which is being undertaken to determine the truing up requirement for FY 2008-09, provisional truing up for FY 2009-10, and determination of ARR and tariff for FY 2010-11.
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3 TRUING UP OF AGGREGATE REQUIREMENT FOR FY 2008-09
REVENUE
BEST, in its Petition for Annual Performance Review for FY 2009-10 and tariff determination for FY 2010-11 has elaborated on the final truing up of expenditure and revenue for FY 2008-09 based on actual expenditure and revenue for FY 2008-09 as per audited accounts. BEST provided the comparison of actual revenue and expenditure against each head with the revenue and expenditure approved by the Commission along with the reasons for deviations. In this Section, the Commission has analysed all the elements of actual revenue and expenses for FY 2008-09, and has carried out the truing up of expenses and revenue after prudence check. 3.1 SALES
BEST submitted the month-wise actual category-wise sales in the Formats annexed to the APR Petition, and stated that in its APR Petition for FY 2008-09, BEST had forecasted energy sales of 4086 MU for FY 2008-09, and the Commission in the APR Order approved sales of 4103 MU, based on actual sales data submitted by BEST. BEST submitted that the actual sales of 4103.15 MU in FY 2008-09 amounts to a growth rate of 4.14% as compared to actual sales in FY 2007-08. Table: BESTs Actual Sales in FY 2008-09 (MU)
Sl. 1 Particulars Sales APR Order 4103 Actuals 4103
The Commission has considered the actual sales in FY 2008-09 under the truing up process. 3.2 DISTRIBUTION LOSSES AND ENERGY INPUT REQUIREMENT
In the MYT Order, the Commission directed BEST to reduce the distribution losses to 10.50% in FY 2008-09, from the level of 11.00% in FY 2007-08. In the APR Petition, BEST submitted that the actual distribution losses in FY 2008-09 were 9.29%, as compared to the approved distribution losses of 10.50%, as given in the Table below:
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Table: Distribution Losses for FY 2008-09 as submitted by BEST Year FY 2008-09 Units Purchased (MU) 4754.30 Units Sold (MU) 4103.15 Distribution Losses (%) 9.29% Distribution Losses Approved (%) 10.50%
BEST also submitted the Energy Balance for FY 2008-09, wherein BEST considered the Intra-State Transmission System (InSTS) losses as 4.86%. The Commission observed that the Energy Balance as submitted by BEST for FY 2008-09 is in line with Maharashtra State Load Despatch Centres (MSLDC) Balancing & Settlement Statements for FY 2008-09. The Energy Balance as submitted by BEST for FY 200809 and as approved by the Commission for FY 2008-09 is shown in the Table below: Table: Energy Balance of BEST for FY 2008-09 Particulars Sales (MU) Distribution loss (in %) Energy Requirement (MU) at T< >D interface Transmission Losses (%) Total Energy Requirement (MU) BEST 4103.15 9.29% 4523.28 4.86% 4754.30 Commission 4103.15 9.29% 4523.28 4.86% 4754.30
3.3
POWER PURCHASE EXPENSES FOR FY 2008-09
The Commission, in its APR Order for BEST dated June 15, 2009 in Case No. 118 of 2008 approved the total quantum of power purchase of 4797.50 MU from Tata Power Company-Generation Business (TPC-G), Renewable Energy (RE) sources, and external sources for FY 2008-09. However, the actual quantum of power purchased by BEST from various sources during FY 2008-09, as submitted in BESTs APR Petition, is 4754.30 MU. The Commission, in its above-said APR Order dated June 15, 2009 in Case No. 118 of 2008 had allowed total power purchase expenses of Rs. 2323.67 Crore for FY 2008-09, excluding transmission charges, Maharashtra State Load Despatch Centre (MSLDC) charges and Standby Charges, while the actual power purchase expenses for FY 2008-09 as submitted by BEST in its APR Petition, is Rs. 2209.28 Crore, excluding transmission charges, MSLDC charges and Standby Charges.
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BEST submitted that the reduction in power purchase cost is on account of additional power availability from M/s TPC-G based on Power Purchase Agreement signed between BEST and TPC-G and approved by the Commission on November 6, 2007. Further, BEST submitted that during FY 2008-09, power purchase requirement reduced mainly on account of significant reduction in distribution loss as a result of its various efforts like increased vigilance activity, capital expenditure for strengthening the network, installation of new meters and taking various measures for energy auditing, etc., to reduce the loss. 3.3.1 Power Purchase from TPC-G The Commission validated the actual expense on power purchase from TPC-G by two Distribution Licensees in Mumbai, i.e., The Tata Power Company-Distribution Business (TPC-D) and BEST as submitted in their respective APR Petition, with the details of revenue submitted by TPC-G in its APR Petition and observed that there is a difference of Rs. 4.94 Crore between revenue indicated by TPC-G from sale to BEST, and power purchase expenses as submitted by BEST in its APR Petition. In reply to the queries raised by the Commission in this regard, BEST submitted that the above difference is on account of the credit given for fuel charges on account of energy sales to traders in April and May 2008 by TPC-G in the energy bill. The Commission is of the view that since the credit given to BEST is on account of energy sales to traders by TPC-G, it has to be included in sale to outside license area instead of deducting it from power purchase expenses from TPC-G. The summary of power purchase by BEST from TPC-G is given in the following Table:
Table: Summary of power purchase by BEST for FY 2008-09 BEST Source TPC-G Quantum (MU) 4,773.45 BEST (After Approved after truing Reconciliation) up Total Cost Quantum Total Cost Quantum Total Cost (MU) (MU) (Rs. Crore) (Rs. Crore) (Rs. Crore) 2235.30 4,773.45 2240.22 4,773.45 2240.22
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3.3.2 Power Purchase from other Sources BEST submitted that the actual power purchased from external sources on short-term basis, imbalance pool and sale to Outside License Area was 89.00 MU against the approved quantum of 82.54 MU. As discussed in previous section, Rs. 4.94 Crore as credit was given for fuel charges on account of energy sales to traders for April and May 2008 by TPC-G in the energy bills. So, the Commission has added it to the sales to outside license area. The summary of power purchase by BEST from other sources is given in the following Table:
Table: Summary of Power Purchase Expenses from Other sources BEST Source Short Term Pool Purchase/(Sales) Sale to Outside License Area and Banking Quantum (MU) 462.75 (373.75) (151.69) BEST (After Reconciliation) Total Cost Quantum Total Cost (Rs Crore) (MU) (Rs Crore) 394.84 462.75 394.84 (327.49) (60.23) (373.75) (151.69) (327.49) (65.17) Approved after truing up Quantum Total Cost (MU) (Rs Crore) 462.75 394.84 (373.75) (151.69) (327.49) (65.17)
3.3.3 Renewable Purchase Specification (RPS) As regards the purchase from Renewable Energy sources for FY 2008-09, BEST submitted that it purchased 43.58 MU at a cost of Rs. 19.88 Crore. As a part of the replies to the queries raised by the Commission, BEST submitted the source-wise details of quantum and cost of energy purchased from renewable energy sources. The Commission further asked BEST to submit the type of source, i.e., wind, solar, biomass, etc., from which power was purchased during FY 2008-09. The details of quantum and cost of power purchase from each type of renewable energy sources during FY 2008-09 are summarised as under: Table: Renewable Purchase during FY 2008-09 Source Individual windmill Owners
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Quantum (MU) 16.40
Type of Source Wind
Cost (Rs. Crore) 6.30

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Source TPTCL (Trading Licensee) TOTAL
Quantum (MU) 27.18 43.58
Type of Source Bagasse
Cost (Rs. Crore) 13.59 19.88
Considering energy input for FY 2008-09 as 4754.30 MU, 5% of the RPS target as stipulated in the Commissions Order dated August 16, 2006 in Case No. 6 of 2006 works out to 237.72 MU, as against actual purchase of 43.58 MU by BEST. Thus, BEST has not met the RPS target corresponding to FY 2008-09. As regards the enforcement on account of non-fulfilment of the RPS target, the Commission in its Order dated August 7, 2009 in Case No. 125 of 2008 modified the RPS percentage requirement for FY 2007-08, FY 2008-09 and FY 2009-10. Para-39 of Order dated August 7, 2009 (Case Nos. 104, 122 and 125 of 2008) is reproduced below:
39. Further, considering year-to-year shortfall in RE capacity addition, the Commission is of the view that it would not be practical to expect that such shortfall can be made good on cumulative basis by the end of FY 2009-10. Hence, the Commission believes that in pursuance of Cl. 2.6.12 of RPS Order (Case 6 of 2006), it would be most appropriate to modify the RPS percentage requirement for FY 2007-08, FY 2008-09 and FY 2009-10 to be lower of (a) RPS target as specified under Cl. 2.6.7 or (b) actual achievement of RPS target in respect of each Eligible Person.
Therefore, the Commission has considered the purchase from Renewable energy sources as submitted by BEST in the Petition. However, the Commission directs BEST to expedite its activities to procure power from possible RE sources to meet the targets for FY 2010-11. 3.3.4 Reduction in Costly Power Purchase through Demand Side Management The Commission, in its MYT Order, had ruled that 2% of the costly power purchase requirement will have to be reduced by implementation of Demand Side Management (DSM) measures as an initial step. This translated to reduction in power purchase cost by Rs. 3.38 Crore for BEST for FY 2008-09. However, BEST did not consider any reduction in costly power purchase on this account under its truing up requirement.
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As regards DSM expenses, BEST submitted that it has made a beginning in the area of Energy Efficient lighting, water pumping, Street lighting, Combined Heat and Power (CHP) cycle generators, etc., for developing DSM programmes. BEST also submitted that considering pre-requisites for DSM programme, it is too early to assign such big targets for reduction in costly power purchase through DSM. BEST submitted the details of DSM activities undertaken during FY 2008-09 which mainly included the following: 1. Establishment of DSM Cell 2. Engaging agencies for studying Cost Benefit Analysis for Combined Heat and Power (CHP) generation by Micro Gas Turbine under DSM. 3. Energy Efficient Lighting Project 4. Water Pump Energy Audit 5. Study of DSM Potential in Street Lighting 6. Arranging Awareness Programme 7. Cost Effectiveness Assessment Guidelines 8. Allocation of budget of Rs. 4.00 Crore for DSM. BEST further submitted the following points in relation to DSM expenses in its Petition: 1. A Draft Discussion Paper on Regulatory Framework for DSM was issued by the Commission in May 2009. 2. Based on the draft regulatory framework issued by the Commission for DSM in Maharashtra, DSM and Demand Resources (DR) potential determination studies are yet to be decided and there are limitations on data available for carrying out basic resource planning exercise. 3. In next 2-3 years, necessary DSM/ DR Potential data would be available as the required studies and exercises for collection of data would have been completed in this time. 4. Since no potential studies have been conducted yet, it is not possible to specify any specific number as target for yearly cumulative savings at this juncture.
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5. The Draft Guidelines for cost effective assessment of DSM measures and programmes was issued by the Commission in January 2009 and the Regulations are yet to be notified in this regard. 6. Although the power requirement (kWh) has increased in last two years, the Demand (kW) in FY 2009-10 was lower than that in FY 2007-08. This is due to public awareness measures adopted by BEST such as conducting Street Plays, energy conservation week, essay competition for school children and putting advertisements, etc.
The Commission has accepted the justification submitted by BEST for not considering any reduction of costly power purchase on account of DSM during FY 2008-09, and has hence, not considered any reduction in power purchase expenses on this account. 3.3.5 MSLDC and Transmission Charges As regards transmission charges and MSLDC charges during FY 2008-09, BEST submitted that it has considered an amount of Rs. 106.61 Crore and Rs. 0.73 Crore, respectively, for FY 2008-09 based on the actual expenses, which has been considered by the Commission under the truing-up exercise. 3.3.6 Standby Charges As regards Standby Charges being paid to the Maharashtra State Electricity Distribution Company limited (MSEDCL), BEST submitted that it has considered an amount of Rs. 114.00 Crore based on the actuals, which has been considered by the Commission under the truing up exercise. 3.3.7 Surplus amount refunded by TPC-G as per MERC Order BEST considered the surplus amount refunded by TPC-G as per MERC Order in power purchase expenses. The Commission has considered the surplus amount refunded by TPC-G separately and not in cost of power purchase in FY 2008-09 (as considered in last APR Order). 3.3.8 Summary of Power Purchase Quantum and Costs The summary of power purchase quantum and costs, including Standby Charges and transmission tariff for FY 2008-09 as approved by the Commission after final truing up, is given in the following Table:
Case No. 95 of 2009
Table: Summary of Approved Power Purchase Quantum and Costs for FY 2008-09
S.No 1 2 3 4 5 6 7 8 9 10 11 12 13 Source Cost of Energy Purchased TPC-G Thermal (Unit-5 to 7) Hydel Unit-4 Unit-8 TPC-G Sales (Includes Banking) Hydel Incentive Thermal Incentive RPS SLDC Charges Less Hydel Rebate Recovery IBSM Settlement Less Reduction of DSM Less surplus amount refunded by TPCG as per MERC Order Power Purchase from External sources Intrastate Transmission charges Standby charges paid to MSEDCL Total APR Order (Provisional Truing up) Quantum (MU) Cost (Rs. Crore) 4714.96 2257.35
Audited
(Rs. Crore) 2122.14
BEST APR Petition Quantum Cost (Rs. (MU) Crore) 4665.34 2142.67 4399.30 356.38 17.77 (151.69) 1944.39 314.26 4.24 (60.23) 5.04 12.22 19.88 0.73 (44.85) (14.26)
Approved after final truing up Quantum Cost (Rs. (MU) Crore) 4665.34 2186.37 4399.30 356.38 17.77 (151.69) 1949.33 314.26 4.24 (60.23) 5.04 12.22 19.88 0.73 (44.85) (14.26)
4655.67
2273.48
59.29
31.35 0.74 (44.84) (3.38)
43.58
43.58
(38.76) 82.54 67.06 109.61 108.78 2542.80 87.87 106.61 114.00 2430.62 89.00 67.35 106.61 114.00 2430.62 89.00 62.41 106.61 114.00 2469.38
14 15 16
4797.50
4754.34
4754.34
3.4
O&M EXPENSES
Operation and Maintenance (O&M) expenditure comprises of employee related expenditure, Administrative and General (A&G) expenditure, and Repair and Maintenance (R&M) expenditure. BESTs submissions on each of these expenditure heads, and the Commissions ruling on the truing up of the O&M expenditure heads are detailed below. 3.4.1 Employee Expenses BEST submitted that the actual employee expenditure in FY 2008-09 was Rs. 158.65 Crore as compared to the employee expenses of Rs. 142.94 Crore approved by the Commission in the APR Order dated June 15, 2009. BEST submitted the primary reasons for the higher employee expenditure as under: In the last APR Petition, BEST miscalculated the basic salary expenses for FY 2008-09. Employee expenses have also increased due to the payment of difference in leave encashment for the last agreement period to the staff members. As per last APR order dated June 15, 2009, the Commission considered an escalation factor of 7.31% for escalating the expenses. If the actual employee expenses of FY 2007-08, i.e., Rs. 150.35 Crore are escalated by 7.31%, then the employee expense for FY 2008-09 works out to Rs. 161.34 Crore, whereas, BEST has incurred employee expenses of Rs. 158.65 Crore.
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However, if the actual employee expenses is compared with approved expenditure, it is higher by 10.99%. Regarding PRC impact on employee expense for FY 2008-09, BEST added that the Commission in the Order on ARR for FY 2006-07 had approved PRC impact of Rs. 79.30 crore, which was claimable by BEST based on the actual payment in the respective financial year, as given below: Table: PRC expenses of Supply division (Rs. Crore) Particulars Interim Relief paid prior to 2004-05 Interim Relief paid in 2004-05 Interim Relief paid in 2005-06 Interim Relief paid in 2006-07 Paid in 2007-08 to Ex-employees Paid in 2008-09 to Ex-employees Balance to be paid in future Total Amount 27.09 9.17 9.17 15.89 5.05 0.40 12.53 79.30
As regards the balance amount of Rs. 12.53 Crore to be paid in future, BEST submitted that the same will be claimed as and when it is paid to the employees. The Commission has considered the increase in employee expense due to impact of PRC for truing up purpose. It is observed that there is a 84% increase in ex-gratia and bonus payments in FY 2008-09 as compared to FY 2007-08. In replies to the queries raised by the Commission, BEST submitted that in FY 2007-08, BEST made ex-gratia payment of Rs. 5000 and Rs. 2500 as an advance towards Diwali festival, which was subsequently recovered in equal instalments while, in FY 2008-09, the ex-gratia payment was Rs. 9,000. The amount is generally fixed considering the amount paid in similar organisations. Mumbai Municipal Corporation (MMC) fixed Rs. 9000 as exgratia payment to its employees. It was decided by BEST to pay the same amount of ex-gratia to the BEST Employees. Since employee expense is a controllable parameter, the Commission has considered the employee expenses approved in last
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APR Order for FY 2008-09 along with PRC expenses of Rs. 0.40 Crore as submitted by BEST in the Petition.
The summary of the employee expenses approved by the Commission under the truing up exercise has been shown in the following Table:
Table: Employee Expenses (Rs Crore) Particulars Net Employee Expenses APR Order 142.94 Actuals 158.65 Allowed after truing up 143.34
The difference between the approved employee expenses and the employee expenses allowed after truing up for FY 2008-09 has been considered as a controllable loss and has been shared between BEST and the consumers in accordance with Regulation 19 of the MERC Tariff Regulations, as explained later in this Section.
3.4.2 A&G Expenses BEST submitted that the actual A&G expenditure in FY 2008-09 was Rs. 74.80 Crore as compared to the approved expenses of Rs. 72.51 Crore. BEST also submitted the break-up of Rs. 10.33 Crore incurred under the sub-head Other cost of A&G expenses. Further, BEST submitted that prompt payment discount has been recategorised under Other Expenses instead of A&G expenses. BEST submitted that the Other Expenses, i.e., prompt payment discount/rebate on advance payment/Power Factor Incentive, are based on rates determined by the Commission. As the quantum of the cases calling for such receipts and rebates are beyond the control of BEST and calculated according to the Commissions Tariff Order, BEST suggested that the expenses incurred from heads other than sale of energy (based on Commissions Tariff Order) should be put in separate head instead of A&G expenses. The Commission agrees with the suggestion that the rebates, prompt payment discounts, and incentives, should form a part of Other Expenses. Since A&G expense is a controllable parameter, the Commission has considered the A&G expenses as approved in the last APR Order for FY 2008-09.
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The summary of A&G expenses approved in the Order, actual A&G expenses and A&G expenses approved after truing up for FY 2008-09 has been shown in the following Table: Table: A&G Expenses (Rs Crore) Particulars A&G Expenses APR Order 72.51 Actuals 74.80 Allowed after truing up 72.51
The Commission has considered the difference between the allowed A&G expenses and approved A&G expenses under the sharing of gains and losses due to controllable factors, since A&G is a controllable expense.
3.4.3 R&M Expenses BEST submitted that the actual R&M expenditure in FY 2008-09 was Rs. 25.32 Crore as compared to the approved expenses of Rs. 27.28 Crore. BEST submitted that as per the Commissions APR Order dated June 6, 2008, certain items of other expenses have been included under R&M Expenses and accordingly the items are regrouped. The Commission has considered the actual R&M expenses in FY 2008-09, for truing up purposes, as the same is lower than the approved R&M expenses. However, the difference between the actual R&M expenses and R&M expenses allowed in the previous APR Order has been considered as a controllable gain and has been shared between BEST and the consumers in accordance with Regulation 19 of the MERC Tariff Regulations, as explained later in this Section. The summary of R&M expenses approved in the Order, actual R&M expenses and R&M expenses approved after truing up for FY 2008-09 has been shown in the following Table: Table: R&M Expenses (Rs Crore) Particulars R&M Expenses APR Order 27.28 Actuals 25.32 Allowed after truing up 25.32
3.5
Revised Capitalisation for FY 2007-08
In its previous APR Order for BEST dated June 15, 2009, while truing-up of FY 2007-08, the Commission provisionally considered capitalisation of Rs. 91.43 Crore, as against Rs. 156.15 Crore submitted by BEST and directed BEST as under:
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As regards whether projected benefits have actually accrued for the benefit of consumers, the Commission directs BEST to submit the detailed report with established benefits vis--vis the benefits projected, within one month from the issuance of this Order. The Commission, at the time of annual performance review, shall consider revision of approved capitalisation for FY 2007-08, if necessary, upon scrutiny of BESTs submission in this respect. Complying with the above direction, BEST has now submitted the detailed report with established benefits of capex schemes vis-a-vis the benefits projected in the DPRs submitted at the time of obtaining in-principle approval.. On the basis of BESTs submission and on the basis of prudence check carried out, the Commission in this APR Order approves the capitalisation of Rs 156.15 Crore as submitted by BEST in its previous APR Petition.
3.6
Capital expenditure and Capitalisation for FY 2008-09
For FY 2008-09, BEST submitted capitalisation of Rs. 133.54 Crore, which includes works capitalised (Rs. 121.00 Crore), IDC during FY 2006-07 (Rs. 1.55 Crore) and IDC during FY 2008-09 (Rs. 9.43 Crore). Table: Capitalisation in FY 2008-09 (Rs. Crore) Particulars Works capitalised IDC during FY 2008-09 Add approved IDC for FY 2006-07 Total Capitalisation FY 2008-09 APR Order Actuals 121.00 9.43 1.55 133.54
69.00
As regards capitalisation during FY 2008-09, the Commission has examined the actual capitalisation claimed by BEST in detail as against the various capex schemes approved by the Commission. The Commission observes that out of total works capitalisation of Rs 121.00 Crore claimed by BEST during FY 2008-09, the DPR schemes comprise of new receiving substations (Rs 19.57 Crore), new distribution substations (Rs 33.86 Crore), extension of distribution network (Rs 34.97 Crore), augmentation and revamping of existing substations (Rs 5.86 Crore), energy meters
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(Rs 13.91 Crore), furniture, office equipment, tools, civil works, etc. (Rs 6.75 Crore), and street lights (Rs 1.1 Crore), whereas capitalisation of non-DPR related schemes have been proposed as Rs 4.98 Crore. The Commission also observed that in Form F-5.4, BEST has submitted that the capitalisation during FY 2008-09 was Rs. 122.56 Crore, which include works capitalised and interest capitalised of Rs.121.00 Crore and Rs. 1.55 Crore, respectively, while under Form F-4, BEST has submitted that IDC is Rs. 9.43 Crore along with asset addition of Rs. 122.56 Crore during FY 2008-09. As a part of the replies to the Commission's queries, BEST clarified that IDC for FY 2008-09 is Rs. 9.43 Crore, which has been considered along with asset addition of Rs. 122.56 Crore in Form F-4, whereas Interest capitalised (Rs.1.55 Crore) as submitted in Form F-4 is IDC during FY 2006-07 as approved by the Commission in previous APR Order, and IDC during FY 2007-08 has not been included in the Petition as it is yet to be approved by the Commission. Effectively, BEST has claimed actual capitalisation of Rs. 131.99 Crore, which includes works capitalised during FY 2008-09 (Rs. 121.00 Crore), IDC during FY 2006-07 (Rs. 1.55 Crore) and IDC during FY 2008-09 (Rs. 9.43 Crore). The Commission observed that BEST has already included IDC of Rs.1.55 Crore and Rs.11.05 Crore during FY 2006-07 and FY 2007-08, respectively, in its previous APR Petition, which has been approved by the Commission and thus, has already been included in capitalisation of FY 2007-08. In Form F-4, BEST has also indicated that opening GFA of FY 2008-09 includes IDC of Rs.1.55 Crore and Rs.11.05 Crore of FY 2006-07 and FY 2007-08, respectively. If IDC during FY 2006-07 is included in capitalisation during FY 2008-09, it will lead to double accounting of IDC during FY 2006-07. In replies to the Commission's queries, BEST submitted that the IDC amount of Rs. 1.55 crore was included in the Books of Accounts in FY 2008-09. However, the same is not required to be considered in FY 2008-09. For the purpose of truing up for FY 2008-09, the Commission has approved a capitalisation of Rs 122.20 Crore, based on the details of established benefits vis-a-vis projected benefits of various capex schemes as submitted by BEST and on the basis of necessary prudence check carried out by the Commission.
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Table: Approved Capitalisation FY 2008-09 Particulars Capitalisation APR Order 69.00 Actuals 133.54
(Rs Crore) Approved after truing up 122.20
3.7
Depreciation
The Commission, in its earlier Order dated June 15, 2009, had permitted depreciation to the extent of Rs 42.78 Crore for FY 2008-09, which amounts to 3.44% of Opening level of Gross Fixed Assets (GFA) of BEST for FY 2008-09, which was stated at Rs 1244.08 Crore corresponding to the capitalisation approved during FY 2007-08. Further, BEST in its additional submissions, confirmed that depreciation has not been claimed beyond 90% of the asset value in line with the MERC Tariff Regulations. The Commission has considered the revised capitalisation during FY 2007-08 to calculate the closing GFA of FY 2007-08. Accordingly, for the purposes of truing-up exercise for FY 2008-09, the Commission has considered opening GFA of BESTs distribution business during FY 2008-09 at Rs 1307.83 Crore. The depreciation expenditure approved by the Commission for FY 2008-09 has been summarised in the following Table: Table: Depreciation Particulars Depreciation Opening GFA APR Order 42.78 1244.08 Actuals 44.58 1308.81 (Rs Crore) Allowed after truing up 44.54 1307.83
3.8
Interest Expenses
The Commission, in its earlier Order dated June 15, 2009, had approved interest expenditure of Rs 9.31 Crore, based on estimate of average outstanding loan balance during FY 2007-08. In the previous APR Order, as the amount of funds available from various sources was higher than the amount of capitalisation, the Commission allowed the funding of capitalisation through loans only and thus, no equity contribution was considered in the previous Order. As the Commission has revised the
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approved capitalisation for FY 2007-08 during the current APR exercise, the loan amount and interest on loan during FY 2007-08 has also been recalculated. The interest on loan capital has to be provided corresponding to the assets put to use (capitalised) and interest expenses incurred before the asset is capitalised, has to be treated as interest during construction (IDC) and the same should be capitalised for the purpose of allowable capital cost of the project scheme; whereas, the interest expenditure towards such capitalised schemes after the date of capitalisation will have to be treated as interest expenditure chargeable to revenue account in accordance with Regulation 76.3 of the MERC Tariff Regulations. In this context, the Commission observes that the capitalisation during FY 2007-08 as claimed by BEST amounts to Rs 156.15 Crore, and as per BESTs submissions under Form-8; the same is funded by way of contributions from consumers (Rs 8.78 Crore), grant from Government (Rs 0.12 Crore), additional equity capital on normative basis at 30% (Rs 44.18 Crore) and normative debt component at 70% (Rs 103.08 Cr). In case all the sources of funding as considered by BEST are considered, total funding will amount to Rs 203.08 Crore, which is much higher than capitalisation of Rs 156.15 Crore approved by the Commission. Accordingly, the Commission has considered the sources of capitalisation as contributions from consumer (Rs 8.78 Crore), grant from Government (Rs 0.12 Crore) and actual loan of Rs. 147.25 Crore. The Commission has not considered equity for funding of capitalisation during FY 2008-09 as contributions from consumer, grant from Government and actual loan are sufficient to meet the allowed capitalisation. The interest expenditure on actual loan amount admitted has been considered at the rate of 11.50% p.a. for loan from Canara Bank and at the rate of 10% p.a. for loan from Vijaya Bank as proposed by BEST, which amounts to Rs 5.24 Crore. For FY 2007-08, the Commission has accepted the interest on long term loans as submitted by BEST in its last APR Petition. The interest expenses as approved by the Commission after cost-benefit analysis are tabulated as under: Table: Interest Expenses (FY 2007-08) (Rs Crore) Particulars Opening balance of loan Additions Repayment
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APR Order 50.50 82.53 (5.00)
Actuals 50.50 150.00 (5.00)
Approved after cost-benefit analysis submission 50.50 145.70 (5.00)

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Particulars Closing balance of loan Interest expenditure
APR Order 128.03 9.31
Actuals 195.50 7.97
Approved after cost-benefit analysis submission 192.75 7.97
In its APR Petition for FY 2008-09, BEST submitted that the interest on debt for FY 2008-09 is Rs. 32.44 Crore as against Rs. 14.83 Crore approved by the Commission. BESTs claim for Rs 32.44 Crore of interest expense for FY 2008-09 includes interest on existing loan of Rs 1.53 Crore and interest expense of Rs 30.91 Crore towards short term financial assistance during FY 2008-09. BEST submitted in the Petition that during Technical Validation Session on the previous APR Petition, BEST informed the Commission that being a Local Authority and governed by MMC Act, it has to adhere to the stringent provisions of MMC Act, 1888. BEST submitted that for raising any long term loan, it has to follow the provisions of Section 106 and procedures laid under the said Act, i.e., it has to obtain the approval of BEST Committee and the Brihan Mumbai Municipal Corporation (BMC) followed by the Government of Maharashtra, which is a very time consuming activity. Further, BEST submitted that certain projects which were in pipeline required immediate funding. Therefore, till the approval for raising the long term debt is received from the State Government, it was planning to roll over the short-term loans thereby effectively using it as long term fund. In this context, the Commission observes that the capitalisation during FY 2008-09 as claimed by BEST amounts to Rs 131.99 Crore, which is funded by way of contributions from consumers (Rs 9.72 Crore), grant from Government (Rs 4.78 Crore), additional equity capital on normative basis (Rs 32.42 Crore) and debt component (Rs 85.07 Crore). In case additional loan of Rs 135 Crore as claimed by BEST is admitted along with above sources of funding, total funding will amount to Rs 181.92 Crore, which is much higher than the capitalisation of Rs 131.99 Crore approved by the Commission. Accordingly, the Commission has considered the sources of capitalisation as contributions from consumer (Rs 9.72 Crore), grant from Government (Rs 4.78 Crore), and actual loan of Rs. 107.70 Crore. The interest expenditure on actual loan amount admitted has been considered at the rate of 10.5% p.a. for loan from Canara Bank (Prime) and at the rate of 10% p.a. for loan from Vijaya Bank (Short term finance) and another loan from Vijaya Bank at the rate of 10.5% p.a. as proposed by BEST in the APR Petition. The Commission has
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approved loans equal to allowable capital cost obtained after deducting consumer contribution and grants from capitalisation. The Commission has considered the interest expenditure on the existing loans (public loans, MMRDA loans for Mega City project, DPDC loans, APDRP loan at Rs 4.37 Crore as claimed by BEST while, for actual loans the Commission recalculated the interest expenses for actual loans..The interest expenditure as approved by the Commission is tabulated under: Table: Interest Expenses (Rs Crore) Particulars Opening balance of loan Additions Repayment Closing balance of loan Interest expenditure Actuals 195.50 135.00 (52.29) 278.21 32.44 Approved after truing-up 192.75 107.70 (51.37) 249.08 22.76
3.9
Return on Internal Funds
The Return on internal funds as claimed by BEST in its APR Petition amounts to Rs. 4.91 Crore, which is in line with the Commissions APR Order dated June 15, 2009. The Commission has approved the return on internal funds as submitted by BEST in its APR Petition. Table: Approved Return on Internal funds for FY 2008-09 (Rs. Crore) Particulars Capitalised Cost during the year Less: Consumer Contribution received during the year Less: Govt. Grant Received during the year Allowable Capital cost Cumulative Grants at the end of the year Interest on Internal funds (at 6%) APR Order 69.00 7.00 5.00 57.00 81.75 Actuals 131.99 9.72 4.78 117.49 81.75 Allowed after truing up 122.20 9.72 4.78 107.70 81.75
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Particulars Normative debt component On Government assistance at the start of the year Returns as Interest on Internal funds 3.10 Return on Equity (RoE)
APR Order 0.00 4.91 4.91
Actuals 0.00 4.91 4.91
Allowed after truing up 0.00 4.91 4.91
In its previous APR Order for BEST, the Commission considered capitalisation of Rs. 91.43 Crore for FY 2007-08, which was assumed to be funded by way of consumer contribution, grants and actual loan amount only. The Commission has not considered any equity for funding of capitalisation during FY 2007-08 as entire funding during FY 2007-08 has been considered through consumer contribution , grants and actual loan drawal during FY 2007-08. So, returns have been allowed only on the opening balance of equity. The revised Return on Equity as approved by Commission for FY 2007-08 is summarised in the following Table: Table: Return on Equity (Rs. Crore) Particulars Opening Equity Annual allowable capital cost for the year Less: Contribution made by consumers Less: Government Assistance Net allowable capital cost Normative equity (30%) Closing Equity Computation of RoE Return @ 16% on equity capital at commencement of year
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Formula A
Actual 619.76
Allowed after truing up 619.76
156.15
156.15
C D E=B-C-D F=E*30% G = A+F
(____)* (____)* 156.15 46.85 666.61
(8.78) (0.12) 147.25 0 619.76
H=A*16%
99.16
99.16
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Return @ 16% on 50% of equity portion of annual allowable cost for the year I=F*16%*50% RoE for the year G=H+I
3.75 102.91
0 99.16
*(Note: Actual amount against Contribution made by consumers and Government Assistance as submitted by BEST are Rs 8.78 Crore and Rs 0.12 Crore respectively. However, BEST has not considered the same in ROE Computation)
BEST has considered capitalisation of Rs. 122.56 Crore for calculation of return on equity in FY 2008-09. The Commission has not considered any equity for funding of capitalisation during FY 2008-09 as entire funding during FY 2008-09 has been considered through consumer contribution, grants and actual loan drawal during FY 2007-08. Therefore, returns have been allowed only on the opening balance of equity. The Return on Equity approved by the Commission for FY 2008-09 is summarised in the following Table: Table: Return on Equity (Rs. Crore) Particulars Opening Equity Annual allowable capital cost for the year Less: Contribution made by consumers Less: Government Assistance Net allowable capital cost Normative equity (30%) Closing Equity Computation of RoE Return @ 16% on equity capital at
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Formula A
Actuals 663.95
Allowed after truing up 619.76
122.56
122.20
9.72
9.72
D E=B-C-D F = E*30% G = A+F
4.78 108.06 32.42 696.37
4.78 107.70 0 619.76
H=A*16%
106.23
99.16
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commencement of year Return @ 16% on 50% of equity portion of annual allowable cost I=F*16%* for the year 50% RoE for the G=H+I year
2.59 108.83
0.00 99.16
Thus, total interest on internal funds and return on equity approved by the Commission vis--vis that claimed by BEST for FY 2008-09 is summarised in the following Table: Table: Total returns during FY 2008-09 (Rs Crore) FY 2008-09 Particulars Returns as Interest on Internal funds Return as Return on equity Total Estimate BEST 4.91 108.82 113.73 by Allowed true-up after 4.91 99.16 104.07
3.11 INTEREST ON WORKING CAPITAL AND CONSUMERS SECURITY DEPOSIT BEST, in its APR Petition, has considered both, actual interest on working capital of Rs 12.36 Crore, and normative interest on working capital of Rs 10.87 Crore, totalling to Rs. 23.23 crore, against the normative interest on working capital of Rs 3.94 Crore approved by the Commission in the APR Order dated June 15, 2009. Further, BEST submitted that actual interest on consumers security deposit for FY 2008-09 was Rs. 12.94 against the interest on consumer deposit of Rs. 14.13 Crore approved by the Commission. As regards Interest on Working Capital, BEST submitted that in H1 of FY 2008-09, BEST had to incur additional expenses towards external power purchase wherein the
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approved rate was Rs. 5.50 per unit, however, BEST has paid Rs.9.39 per unit. As a result, BEST faced cash crunch for the Working Capital and there was no alternative but to borrow funds from financial institutions to run the business as well as avail the Overdraft Facility from Banks. The Commission has estimated the normative working capital interest for FY 2008-09 in accordance with the MERC Tariff Regulations and based on expenses approved in this Order after truing up. However, in accordance with the MERC Tariff Regulations and the approach adopted by the Commission in the previous APR Order for BEST, the Commission has not directly allowed the actual interest on working capital incurred by BEST, but has computed the sharing of losses on the difference between normative working capital interest and the actual working capital interest incurred, since this is a controllable parameter, as clearly stipulated in the MERC Tariff Regulations as reproduced below: 17.6.2 Some illustrative variations or expected variations in the performance of the applicant which may be attributed by the Commission to controllable factors include, but are not limited to, the following: (d) Variations in working capital requirements By virtue of the above provision in the MERC Tariff Regulations, it follows that if the actual working capital requirement is higher/lower than the normative level of working capital, then the difference between the actual working capital requirement and the normative working capital requirement will have to be treated as a loss/gain as the case may be. Thus, in case the actual working capital requirement and hence, actual working capital interest incurred is zero, then the entire normative working capital interest is considered as a controllable efficiency gain and shared between the licensee and the consumers. Similarly, in the case of BEST, the actual interest on working capital is significantly higher than the normative interest on working capital, and hence, the difference between actual and normative working capital interest has been considered as a controllable efficiency loss, and hence, shared between BEST and the consumers. The details of the sharing have been elaborated later in this Section. Further, the MERC Tariff Regulations stipulates 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
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determination of tariff is made. As the short-term Prime Lending Rate of State Bank of India at the time when BEST filed the Petition for tariff determination for FY 200809 was 12.75%, the Commission has considered the interest rate of 12.75% for estimating the normative interest on working capital, which works out to Rs 10.89 Crore, while the Commission has considered actual interest on consumer security deposit. The calculation of interest on working capital is tabulated below: Table: Interest on Working Capital for FY 2008-09 (Rs. Crore)
S. No 1 1.1 1.2 1.3 Particulars Computation of Working Capital One-twelfth of the amount of Operations and Maintenance Expenses One-twelfth of the sum of the book value of stores, materials and supplies One-sixth of the expected revenue from sale of electricity at the prevailing tariffs Less: Amount of Security Deposit From Consumers From Distribution System users One-Twelfth of the cost of power purchased Total Working Capital = (1.1 + 1.2 + 1.3 ) - ( 1.4 + 1.5) 2 2.1 2.2 Computation of working capital interest 12.75% for FY 2008-09 Interest on Working Capital BEST Approved
21.56 1.85 472.05
21.56 1.85 475.39
1.4 a b 1.5
207.63 202.55 85.28 12.75% 10.87
207.63 205.78 85.39
12.75% 10.89
The summary of Interest on Working Capital and Interest on consumer security deposit approved in the APR Order, actuals and approved after truing up for FY 200809, has been shown in the following Table: Table: Interest on Working Capital and Interest on Consumer Deposit (Rs Crore) Particulars Interest on Working capital Normative Actual APR Order 3.94 3.94 Actuals 23.23 10.87 12.36 Allowed after truing up 10.89 10.89 -
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Interest on Consumers security Deposit
14.13
12.94
12.94
3.12 PROVISIONING FOR BAD DEBTS BEST submitted that against the provisioning for bad debts of Rs. 0.04 Crore approved in the APR Order for FY 2008-09, BEST has not considered provisioning for bad debts n FY 2008-09, which has been considered by the Commission under the truing up exercise for FY 2008-09. 3.13 OTHER EXPENSES BEST, in its Petition, submitted that the Other Expenses in FY 2008-09 was Rs. 10.87 Crore, which includes prompt payment rebate of Rs. 10.80 Crore and power factor incentive of Rs. 0.07 Crore. The Commission has considered other expenses of Rs. 10.87 Crore as submitted by BEST in the Petition under the truing-up exercise for FY 2008-09. 3.14 INCOME TAX BEST, in its Petition, submitted that under Section 10(20) of the Income Tax Act, the income of local authority is exempted. Hence, no income tax is payable. Hence, the Commission has not considered income tax under the truing up exercise. 3.15 CONTRIBUTION TO CONTINGENCY RESERVE BEST, in its APR Petition, included an amount of Rs 6.45 Crore towards Contribution to Contingency Reserve for FY 2008-09. In replies to the queries raised by the Commission, BEST submitted the documentary evidence for investment of contingency reserve in approved securities. In the last APR Order, the Commission considered contribution to contingency reserve to the extent of 0.25% of opening GFA for FY 2008-09. Accordingly, the Commission has allowed provisioning towards contingency reserve for FY 2008-09 at Rs 3.27 Crore which is 0.25% of opening GFA, i.e., Rs. 1306.29 Crore under the truing up exercise, in accordance with MERC Tariff Regulations. 3.16 NON TARIFF INCOME BEST submitted that the non-tariff income in FY 2008-09 was higher at Rs. 70.83 Crore, as against Rs. 55.53 Crore considered by the Commission in the APR Order.
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BEST submitted in the Petition that it does not have equity in the traditional sense. The funding for capitalization is mainly done through internal sources with the approval of the BEST Committee and Municipal Corporation as per Section 460 II of MMC Act, 1888. Contingency Reserve is one of the internal sources, which is used for funding the Capital expenditure. Hence, interest on contingency reserve should not be considered as a part of Non-Tariff Income. BEST submitted that the non-tariff income has increased mainly due to contract charges, electricity duty collection charges, receipts on account of delayed payment charges, cut-out charges and requisition charges, checking and testing of meters and income earned on account of rents of buildings, advertisement receipts and discounts. The analysis of the components of non-tariff income considered by BEST indicates that the interest on contingency reserve investments have been considered as nil by BEST. The Commission has considered the interest on contingency reserve investments at the rate of 7% on the average balance of contingency reserves during the year, and included the same under the non-tariff income. The non-tariff income considered by the Commission under the truing up exercise is shown in the Table below: Table: Non-tariff income for FY 2008-09 (Rs Crore) Particulars Non-tariff Income 3.17 OTHER CLAIMS BEST has included the impact of Review Order (Case No. 44 of 2009) issued by the Commission on December 15, 2009 on the Review Petition filed by BEST in the matter of APR Order dated June 15, 2009, as under: Table: Other Claims for FY 2008-09 (Rs. Crore) S. No Particulars Amount 1 Inclusion of PF incentive in revenue from retail tariff for FY 2007-08 8.16 2 Computation of gains in respect of A&G expenses 3.79 Total Impact of Review Order in Case No. 44 of 2009 11.95 APR Order 55.53 Actuals 70.83 Allowed after truing up 74.78
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Further, BEST has claimed actual interest expense and normative return on equity based on Capital expenditure incurred in FY 2007-08 and loans and internal resources used to fund the same. The Commission has considered the impact of Review Order in Case No. 44 of 2009 as submitted by BEST in the Petition while determining the Aggregate Revenue Requirement of FY 2010-11. As regards interest expenses during FY 2007-08, the revision of interest expenses have been discussed in earlier paragraphs of the Order. The net impact of revision of capitalisation on interest expenses considered by the Commission is a reduction of Rs. 1.34 crore (Rs.9.31 crore - Rs.7.97 crore).
3.18 SHARING OF GAINS AND LOSSES IN FY 2008-09 The relevant provisions under the MERC Tariff Regulations stipulating sharing of gains/losses due to controllable factors are reproduced below: 17.6.2 Some illustrative variations or expected variations in the performance of the applicant which may be attributed by the Commission to controllable factors include, but are not limited to, the following: (a) Variations in capital expenditure on account of time and/ or cost overruns/efficiencies in the implementation of a capital expenditure project not attributable to an approved change in scope of such project, change in statutory levies or force majeure events; (b) Variations in technical and commercial losses, including bad debts; (c) Variations in the number or mix of consumers or quantities of electricity supplied to consumers as specified in the first and second proviso to clause (b) of Regulation 17.6.1; (d) Variations in working capital requirements; (e) Failure to meet the standards specified in the Standards of Performance Regulations, except where exempted in accordance with those Regulations; (f) Variations in labour productivity; (g) Variations in any variable other than those stipulated by the Commission under Regulation 15.6 above, except where reviewed by the Commission under the second proviso to this Regulation 17.6.
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19.1 The approved aggregate gain to the Generating Company or Licensee on account of controllable factors shall be dealt with in the following manner: (a) One-third of the amount of such gain shall be passed on as a rebate in tariffs over such period as may be specified in the Order of the Commission under Regulation 17.10; (b) In case of a Licensee, one-third of the amount of such gain shall be retained in a special reserve for the purpose of absorbing the impact of any future losses on account of controllable factors under clause (b) of Regulation 19.2; and (c) The balance amount of gain may be utilized at the discretion of the Generating Company or Licensee. 19.2 The approved aggregate loss to the Generating Company or Licensee on account of controllable factors shall be dealt with in the following manner: (a) One-third of the amount of such loss may be passed on as an additional charge in tariffs over such period as may be specified in the Order of the Commission under Regulation 17.10; and (b) The balance amount of loss shall be absorbed by the Generating Company or Licensee. In response to the Commissions query, BEST submitted that the increase in expenses is due to the circumstances, which are beyond BEST's control and the expenses that had to be undertaken on urgent basis for ensuring security to receiving substations should be considered as uncontrollable expenses. However, BEST included the incentive of Rs. 25.23 Crore due to the reduction of distribution losses in the APR for FY 2008-09. The Commission has considered the various expenses for computing the sharing of gains/losses in accordance with the MERC Tariff Regulations, as elaborated below: O&M Expenditure The actual O&M expense for FY 2008-09 as approved by the Commission after final true-up is Rs 241.17 Crore as against earlier approved expense of Rs 242.72 Crore and the actual expenditure of Rs. 258.77 Crore as submitted by BEST. The efficiency gain/loss has been computed for each of the heads of O&M expenses, and shared according to the MERC Tariff Regulations.
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In accordance with the philosophy adopted by the Commission in this regard in the past, the difference between the allowed and actual employee and A & G expenses have been considered as efficiency loss and shared in accordance with the MERC Tariff Regulations. The total efficiency loss works out to Rs. 15.31 Crore and Rs. 2.29 Crore in case of employee expenses and A & G expenses, respectively. In case of R&M expenses, the total efficiency gain works out to Rs. 1.96 Crore, which has been shared in accordance with the MERC Tariff Regulations. The net efficiency loss to be shared with consumers on account of O&M expenses works out to Rs.5.21 Crore. Interest on Working Capital In case of BEST, the interest on actual working capital is higher than the interest on normative working capital. Hence, the Commission has considered the difference between normative interest on working capital and actual interest on working capital as an efficiency loss and has considered sharing of 1/3rd of the same with the consumers, 2/3rd has been considered as absorbed by BEST, in accordance with the MERC (Terms and Conditions of Tariff) Regulations, 2005. Thus, the efficiency loss passed on to the consumers on this account works out to Rs. 4.12 Crore. Efficiency Gain due to Reduction in Distribution Losses BEST has achieved actual distribution loss of 9.29% as against the normative loss level of 10.50% for FY 2008-09. BEST submitted the calculation of efficiency gain in its Petition as under:
Table: Efficiency gain as submitted by BEST in its Petition Particulars Normative Distribution loss Normative Sales considering same Energy input Actual Sales in FY 2008-09 Additional (lower) sales due to actual distribution loss Actual Revenue for the year Units % MU MU MU Rs. Crore Amount 10.50% 4048.33 4103.15 54.82 2832.28
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Particulars Average billing rate Additional (lower) revenue due to actual distribution loss being the Incentive component Amount retained by BEST (2/3rd of above incentive)
Units Rs / unit Rs. Crore
Amount 6.90 37.84
Rs. Crore
25.23
The Commission observed that BEST has considered 2/3rd of efficiency gain on account of reduction in distribution loss in the Petition. According to the MERC Tariff Regulations, 1/3rd of efficiency gains has to be passed on to the consumers, 1/3rd to be passed on to special reserves and 1/3rd to be retained by the Distribution Licensee. Accordingly, the Commission has calculated efficiency gain due to reduction in distribution loss as under: Table: Efficiency Gain due to reduction in Distribution Loss Particulars Energy Input at InSTS Actual Distribution Loss Normative Distribution Loss Actual Sales Normative Sales with Distribution Loss Increase/(Reduction) in sales Average Billing Rate Revenue Gain/(Loss) BEST's Share of Gain/(Loss) Gain/(Loss) to be transferred to Special Reserve Gain/(Loss) to be passed on to consumers 10.5% Units MU % % MU MU MU Rs/kWh Rs. Crore Rs. Crore Rs. Crore Rs. Crore Approved
4523.37 9.29% 10.50% 4103.15 4048.42 54.73 6.93 37.91 12.64 12.64 12.64
Total Amount of Efficiency Losses Accordingly, the total addition to the ARR for FY 2008-09 due to sharing of efficiency gains and losses works out to Rs. 9.33 Crore, (efficiency loss of Rs.5.10 Crore, Rs.0.76 Crore and Rs.4.12 Crore on account of employee expense, A&G expenses and interest on working capital (actual), respectively, and efficiency gain of
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Rs. 0.65 Crore on account of R&M expenses) excluding efficiency gain due to distribution loss. The efficiency gain due to distribution loss has been considered separately as Rs. 12.64 Crore in ARR as against Rs. 25.23 Crore submitted by BEST in the Petition. 3.19 AGGREGATE REVENUE REQUIREMENT AND REVENUE GAP FOR FY 2008-09 AFTER TRUING UP
The net revenue entitlement for BEST for FY 2008-09 works out to Rs. 3175.97 Crore, as compared to the revenue requirement of Rs. 3224.51 Crore allowed to BEST in the APR Order dated June 15, 2009. In the Petition, under some heads, BEST has changed the representation of figures which were approved by the Commission in the last APR Order. However, the Commission, in this Order, has considered the figures submitted by BEST in the Petition as per the representation in last APR Order. The total revenue from retail tariff after final true-up for FY 2008-09 amounts to Rs 2852.31 Crore, as compared to the revenue of Rs. 2832.28 crore considered by BEST in its submissions. The difference in actual revenue in on account of the additional recovery of Rs. 20.03 crore made by BEST through its vigilance drives, which has not been included by BEST in its submissions. In reply to the Commission's query in this regard, BEST submitted that the amount recovered against vigilance cases are kept in Balance sheet Account and are not included in the APR Petition. However, as and when the amount is liquidated through separate bills, the same will be considered under the respective head, under the Annual Revenue Statement. The Commission is of the view that such additional revenue should be considered as revenue in the year in which the recovery is made, and has hence, added the same to the revenue from sale of electricity. The summary of truing-up of FY 2008-09 is tabulated as under: Table: Summary of Truing up for FY 2008-09 including sharing of efficiency gains (Rs. Crore)
Previous Year (FY 2008-09) Approved After April Approved Provisional March after final Truing Up (Audited) truing up 2323.67 2209.28 2248.04 Page 72 of 154
Sl. 1
Particulars Power Purchase Expenses (incl. External Power Purchase)
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Sl. 2 2.1 2.2 2.3 3 4 5 5.1 5.2 6 7 8 9 10 11 11 12 13 14 15 16 17 18 19 24
Particulars Operation & Maintenance Expenses Employee Expenses Administration & General Expenses Repair & Maintenance Expenses Depreciation, including advance against depreciation Interest on Long-term Loan Capital & Short Term Finance Interest on Working Capital ( Normative) Interest on Working Capital (Actual ) Interest on Consumer Deposits Provision for Bad Debts Other Expenses Income Tax Stand-by charges payable to MSEDCL Transmission Charges payable to Transmission licensee Annual SLDC fees & charges Contribution to contingency reserves Incentive for reduction of distribution loss Sharing of efficiency gains & losses Less: Surplus amount refunded by TPC-G as per MERC Order Total Revenue Expenditure Return on Equity Capital Return as Interest on Internal funds Aggregate Revenue Requirement Less: Non Tariff Income Aggregate Revenue Requirement from Retail Tariff Truing-up for FY 2004-05 & FY 2005-06-ATE ROE Truing-up for FY 2006-07 Impact due to truing up for FY 2007-08, after cost-benefit analysis Net Aggregate Revenue Requirement Revenue from existing tariff
Previous Year (FY 2008-09) Approved After April Approved Provisional March after final Truing Up (Audited) truing up 242.72 258.77 241.17 142.94 72.51 27.28 42.78 14.83 3.94 0.00 14.13 0.04 0.00 0.00 108.78 109.61 0.74 3.11 0.00 158.65 74.80 25.32 43.40 32.44 10.87 12.36 12.94 0.00 10.87 0.00 114.00 106.61 0.73 6.45 25.23 143.34 72.51 25.32 44.54 22.76 10.89 0.00 12.94 0.00 10.87 0.00 114.00 106.61 0.73 3.27 0.00 21.97 -38.76 2825.60 100.53 4.91 2931.04 55.53 2875.51 2843.95 108.83 4.91 2957.70 70.83 2886.87 -38.76 2799.03 99.16 4.91 2903.10 74.78 2828.31
25 26 30 33 34
72.62 276.38
72.62 276.38
72.62 276.38 -1.34
3224.51 2832.28
3235.87 2832.28
3175.97 2852.31
35 Net Revenue Gap 392.23 403.59 323.66 Notes: Rs. 38.76 Crore received from TPC-G deduction considered by BEST as reduction in Power Purchase expenses
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The above computed revenue gap of Rs. 323.66 Crore for FY 2008-09 after final trueup for FY 2008-09, has been included in the ARR of FY 2009-10 to calculate net revenue gap of FY 2009-10 and net revenue gap of FY 2009-10 has been considered while determining ARR and Tariff for FY 2010-11.
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4 PERFORMANCE REVIEW OF FY 2009-10 AND DETERMINATION OF AGGREGATE REVENUE REQUIREMENT FOR FY 2010-11
4.1 PERFORMANCE PARAMETERS
Regulation 16.1 of the MERC (Terms and Conditions of Tariff) Regulations, 2005, stipulates, 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.
4.1.1 Distribution Losses For FY 2009-10, the Commission had specified the distribution loss trajectory at 10.00% in the MYT Order for BEST dated April 3, 2007 in Case No. 66 of 2006, by considering a target loss reduction of 0.5% for every year in the Control Period. The target of 10.00% for FY 2009-10 was based on the base target level of distribution loss of 10.50% in FY 2008-09. BEST submitted that it has continued to maintain its distribution losses at lower levels in FY 2009-10 also. In the first half of FY 2009-10, BEST has maintained the distribution loss of 9.21%, which is well within the target loss level of 10.00%. However, BEST submitted that it would not be prudent to assume the same loss level for the rest of the year as the distribution loss are required to be considered on an annual basis, which takes into consideration the loading and seasonal variations. Therefore, for the purpose of estimation of energy requirement, BEST considered distribution losses of 10.00%, in line with the trajectory approved by the Commission in the MYT Order. For FY 2010-11, BEST has considered distribution loss at 10.00% and requested the Commission to consider 10.00% distribution loss as benchmark Distribution loss level during FY 2010-11, as shown in the Table below:
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Table: Distribution losses considered by BEST for FY 2009-10 and FY 2010-11 Energy requirement at T< >D interface (MU) 4627 4801 Energy Sales (MU) 4862 5046 Distribution Losses (%) 10.00% 10.00%
Year
FY 2009-10 FY 2010-11
For FY 2009-10, the Commission has considered the distribution losses at 10.00%, in accordance with the loss level specified under the MYT trajectory. Any sharing of gains due to better performance of BEST as regards this controllable parameter will be undertaken at the time of final truing up for FY 2009-10. For FY 2010-11, the Commission has considered a lower distribution loss trajectory, since, the actual distribution losses in FY 2008-09 at 9.29%, are significantly lower than the target loss level of 10.5% for FY 2008-09, and even the target loss level of 10.0% for FY 2009-10. Also, the actual distribution losses indicated for the first half of FY 2009-10 are even lower, at 9.21%. Hence, the Commission has considered the distribution losses of 9.50% for FY 2010-11, which is a further reduction of 0.5% over the trajectory considered for FY 2009-10, as there appears to be no merit in BESTs argument that the loss levels should be considered at 10.00% for the purpose of projecting the energy input requirement, given that the actual losses in FY 2008-09 were 9.29%, and the actual losses in the first half of FY 2009-10 were 9.21%. 4.2 PROVISIONAL TRUING-UP FOR FY 2009-10
BEST, in its APR Petition for FY 2009-10 and ARR and Tariff Petition for FY 201011, 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 estimated performance for the second half of the year, i.e., October 2009 to March 2010. BEST submitted the comparison of each element of expenditure and revenue with that approved by the Commission in its Order dated June 15, 2009 on BEST's Petition for APR for FY 2008-09 and Tariff Determination for FY 2009-10. The Commission in this Order on APR for FY 2009-10 and determination of ARR and tariff for FY 2010-11, has considered provisional truing up of certain elements of
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the revenue requirement and revenue, in cases where the impact is very high, or there is a change in principles/methodology, and due to revision in capital expenditure/capitalisation figures. The revised estimate of performance of BEST during FY 2009-10 as compared to the Commissions MYT/APR Order for BEST is discussed in the following paragraphs. The Commission clarifies that the final truing up and the computation of sharing of gains and losses due to controllable factors will be undertaken only after the audited expenses and revenue are available. Further, for computing sharing of efficiency gains/losses for FY 2009-10, the revised expenses approved for FY 2009-10 in this Order under the provisional truing up exercise will be considered as base expenses. 4.3 SALES
BEST submitted that the sales for FY 2009-10 have been estimated on the basis of the actual sales in H1 of FY 2009-10 and projected sales for H2 of FY 2009-10. BEST submitted that the revised estimated sales, i.e., 4164 MU for FY 2009-10 is lower than the sales of 4257 MU approved by the Commission in the APR Order. For FY 2010-11, BEST submitted that it has considered 5-year CAGR of 3.77% for projecting sales. BEST adopted the following approach to undertake sales projection for FY 2010-11: 1. The growth rate for different categories considered for FY 2010-11 has been calculated by BEST by taking into consideration 5-year CAGR, 3-year CAGR and year-on-year growth rate along with practical considerations and historical trends. Negative CAGR or year-on-year growth rate has been considered as zero growth. The conventional industries are shifting from BEST's licenced area of supply. However, new IT based industries are being set up in BEST's licenced area. Considering this fact, higher growth rate has been considered for all Industrial categories except higher tariff Industrial category, i.e., LT IV B. For residential category consumers, 5-year CAGR growth rate has been considered by BEST. BEST submitted that considering the present trend of mill lands being developed into posh residential and high-end commercial premises in
2.
3.
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BEST licenced area, the growth rate for such categories has been considered on the basis of practical considerations. For FY 2009-10, the Commission obtained the details of actual category-wise sales for the 12-month period from April 2009 to March 2010. The actual sales for FY 2009-10 as submitted by BEST is 43 MU lower than the revised estimates as submitted by BEST in the Petition. The Commission has considered the actual sales as submitted by BEST for provisional truing-up of FY 2009-10 in this Order. For FY 2010-11, the Commission has re-computed the 5-Year CAGR after taking the actual sales of FY 2009-10 as submitted by BEST into consideration. For most categories, the 5-Year CAGR has been applied to project the sales for FY 2010-11, while for some categories, where there is no clear trend visible, growth rate projected by BEST has been accepted. The category-wise sales projected by BEST for FY 2009-01 and FY 2010-11, and approved by the Commission in this Order are given in the Table below:
Table: Approved sales for FY 2009-10 and FY 2010-11 (MU) FY 2009-10 Customer Category FY 2008 -09 0.04 1733 1006 APR Orde r 0.04 1774 974 BEST Revised Estimate 0.08 1777 878 Actual 0.09 1694 877 Provision al Truing Up 0.09 1694 877 FY 2010-11 Petition 0.08 1860 922 Appr oved
0.09 1740 877
LT I BPL LT I Residential LT II A Commercial up to 20 kW LT-II B Commercial >20 kW and <=50 kW LT-II C Commercial >50 kW LT-III Industrial up to 20 kW LT IVA Industrial > 20 kW and <=100 kW LT-IVB Industrial>100 kW LT-V Advt. And
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134 469 73
172 564 77
252 512 58
254 527 57
254 527 57
252 512 58
338 629 58
48 48 3
46 48 2
52 47 2
53 49 3
53 49 3
52 51 3
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53 53 3.49
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FY 2009-10 Customer Category FY 2008 -09 APR Orde r 23 0.06 19 1 178 321 59 0 4257 BEST Revised Estimate 22 0.04 28 1 144 358 31 0.34 4164 Actual Provision al Truing Up 29 0.05 31 1 137 375 32 3 4121
FY 2010-11 Petition Appr oved
Housing LT-VI Streetlight LT-VIIA Temp. Religious LT-VIIB Temp. Others LT-VIII Cremation and Burial Grounds HT-I Industry HT-II Commercial HT-III Group Housing HT-IV Temporary Supply Total
29 0.09 23 1 176 321 40 0 4103
29 0.05 31 1 137 375 32 3 4121
22 0.05 30 1 144 380 34 0 4321
29 0.05 33 1.24 137 403 35 2.64 4390
Thus, the total sales considered by the Commission for FY 2009-10 and FY 2010-11 is 4121 MU and 4390.32 MU, respectively, as compared to BESTs estimate of 4164 MU and 4321 MU respectively, in the APR Petition. 4.4 DISTRIBUTION LOSSES AND ENERGY INPUT REQUIREMENT
As discussed earlier, BEST has considered the distribution losses of 10% for both FY 2009-10 and FY 2010-11 for computing the energy input requirement, whereas, the Commission has considered the distribution losses for FY 2009-10 and FY 2010-11, as 10.00% and 9.5%, respectively. The Energy Balance for FY 2009-10 is given in the Table below:
Table: Energy Balance for FY 2009-10 FY 2009-10 BEST Revised Submission 4164 10.00% 4627
Particulars Sales Distribution Loss Energy Requirement

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Units MU % MU
APR Order 4257 10.00% 4730
Approved 4121 10.00% 4579

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at T<>D interface Transmission Loss Total Energy Requirement
% MU
4.85% 4971
4.85% 4862
4.85% 4812
Thus, the total approved energy input for BEST in FY 2009-10 is 4812 MU. For FY 2010-11, the Commission has considered distribution loss and transmission loss of 9.5% and 4.85%, respectively. The Energy Balance for FY 2010-11 is given in the Table below:
Table: Energy Balance for FY 2010-11 FY 2010-11 BEST APR Petition Approved 4321 4390 10.00% 9.50% 4801 4.85% 5046
4851 4.85% 5098
Particulars Sales Distribution Loss Energy Requirement at T<>D interface Transmission Loss Total Energy Requirement
Units MU % MU % MU
4.5
ENERGY AVAILABILITY AND POWER PURCHASE COST FOR FY 2009-10 AND FY 2010-11
4.5.1 Power Purchase from TPC-G BEST submitted that it procures power primarily from Tata Power Company Generation Business (TPC-G) to meet its demand. BEST submitted that it has a Power Purchase Agreement (PPA) with TPC-G for 800 MW of generation capacity, which has been approved by the Commission vide its Order dated November 6, 2007. BEST submitted that according to the approved PPA, its share in Unit-8 (commissioned by TPC-G on March 28, 2009) is 100 MW. However, after the Commissioning of Unit-8, Unit-4 would be available only as contingency unit. Therefore, net capacity available for BEST is 832.5 MW. The share of BEST in TPCG in FY 2009-10 is as under:
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Table: BEST share in TPC Generation (MW) Tata Power Generating Units Unit-4 Unit-5 Unit-6 Unit-7 Unit-8 Hydel Total Installed Capacity MW 150 500 500 180 250 447 2027 BEST Share % 45.02 45.02 45.02 45.02 40.00 45.02 225 225 81 100 201.5 832.5 BEST Share MW
As regards the power purchase quantum from TPC-G during FY 2009-10, BEST submitted that it has analysed its power purchase requirement and availability during first half of FY 2009-10 based on energy data available from SLDC. BEST submitted that it had made the following assumptions for projection of power purchase from TPC-G in FY 2009-10:
a)
BEST submitted that the actual power purchase quantum was 2518 MU at a cost of Rs. 977 Crore during first half (H1) of FY 2009-10, i.e., April 2009 to September
2009.
b)
Power purchase quantum for second half (H2) of FY 2009-10 has been projected by BEST based on TPC-G's APR order in Case No. 111 of 2008 and BEST's APR Order in Case No. 118 of 2008. Projected power purchase quantum from TPC-G in H2 of FY 2009-10 has been adjusted after considering the likely outage of Unit-5 in FY 2009-10. BEST assumed that Unit-5 will remain out for annual maintenance during January 2010 according to the normal practice. BEST assumed that whenever Outage of Unit 5 will take place, there would be supplementary generation from Unit 4, and has projected 33 MU as power purchase quantum from Unit- 4. BEST estimated ex-bus quantum available from Unit 8 as 358 MU during second half of FY 2009-10. Power purchase cost for TPC-G stations has been projected by BEST on the basis of actual cost incurred in H1 of FY 2009-10.
c)
d)
e)
f)
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As regards the power purchase quantum from TPC-G during FY 2010-11, BEST submitted that in addition to 832.5 MW from TPC-G stations as shown above, BEST has accepted the offer of additional allocation of 100 MW from existing stations of TPC-G starting from April 1, 2010. BEST submitted that it has considered 100 MW in its Petition, and will submit the PPA for the approval of the Commission subsequent to the signing of PPA. The allocated generation capacity in FY 2010-11 as submitted by BEST in its Petition is tabulated as under: Table: BEST Share in TPC-G Tata Power Generating Stations Unit-4 Unit-5 Unit-6 Unit-7 Unit-8 Hydel Total Installed Capacity MW 150 500 500 180 250 447 2027 BEST Share % 45.02 51.17 51.17 51.17 40.00 51.17 256 256 92 100 229 932.5 BEST Share MW
The net generation from TPC-G generating units during FY 2010-11 as projected by BEST in its Petition, is tabulated as under: Table: Net generation capacity of TPC-G Stations Allocated Generating Stations Unit-4* Unit-5 Unit-6 Unit-7 Unit-8 Hydel Total BEST Share % 45.02 51.17 51.17 51.17 40.00 51.17 BEST Share MW 67.5 256 256 92 100 229 932.5 Availa bility % 92 99 91.1 90 Gross Generation MU 1905 1905 686 745 767.49 6008 Auxiliary Consumpti on % 5.5 3.5 2.75 9 0.50 Net Generation for FY 2010-11 MU 1800 1838 667 678 411 5394
PLF % 85 85 85 85
Note: * - Standby generation facility

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As regards power purchase cost from TPC-G stations in FY 2010-11, BEST submitted that it has assumed 5% escalation in power purchase cost on actual power purchase cost of H1 of FY 2009-10. In replies to the queries raised by the Commission, BEST submitted that TPC-G was requested by BEST to make available the copy of its APR Petition before December 31, 2009, but BEST did not receive the copy of the Petition from TPC-G. Hence, BEST assumed 5% escalation in actual power purchase cost of H1 of FY 2009-10 for projecting power purchase expenses of FY 2010-11. The Commission obtained the details of the actual quantum and cost of power purchase from TPC-G Stations during FY 2009-10, from BEST. The Commission observed that the actual quantum and cost of power purchase from TPC-G is significantly lower than the revised estimate submitted by BEST. The Commission has considered actual quantum and cost of power purchase for FY 2009-10 as submitted by BEST. The summary of the approved quantum and cost of power purchase by BEST from TPC-G for FY 2009-10 is given in the following Table:
Table: Quantum and Cost for Purchase of Power from TPC-G in FY 2009-10
Approved after provisional truingup Cost Quantum (Rs. (MU) Crore)
APR Order Quantum (MU) Cost (Rs. Crore)
Source of Power Purchase TPC-G Thermal Excluding Unit-4 Hydel Unit-4 Incentive (Hydel+Thermal) Unit-8 Less Hydel Rebate Recovery Total
BEST APR Petition Cost Quantum (Rs. (MU) Crore)
Actuals Quantum (MU) Cost (Rs. Crore)
4002.99 671.69 32.47 725.55

5432.70
1605.69 122.58 17.64 159.46 (40.32)

1865.05
4559.34 621.94
5181.28
1855.13 6.08 209.23 (39.66)

2030.78
4386.02 1773.89 10.94 635.05 175.65 (38.36)

5021.07 1922.13
4386.02 635.05 5021.07
1773.89 10.94 175.65 (38.36) 1922.13
For FY 2010-11, as regards the PPA between TPC-G and BEST for additional 100 MW capacity, BEST submitted the same, which has been processed separately by the Commission, under Case No. 1 of 2010. For the purpose of this Order, for computing the power purchase quantum and cost from TPC-G during FY 2010-11, the
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Commission has considered the PPA for additional 100 MW between BEST and TPC-G, with effect from April 1, 2010. The Commission has considered the net generation and tariff approved by the Commission in its Order dated September 8, 2010 in Case No. 96 of 2009 on TPCGs APR Petition for FY 2009-10. Considering the fact that the tariff for FY 2010-11 for generating stations of TPC-G is applicable from September 1, 2010, the Commission has considered the fixed and energy charges for 7 months on the basis of charges approved in the Order dated September 8, 2010 in Case No. 96 of 2009, and considered the fixed charges and energy charges for 5 months on the basis of charges approved for FY 2009-10 in the Order dated May 28, 2009 in Case No. 118 of 2008.
The summary of the approved quantum and cost of power purchase by BEST from TPC-G for FY 2010-11 is given in the following Table: Table: Quantum and Variable Cost for Purchase of Power from TPC-G in FY 2010-11
BEST APR Petition Source of Power Purchase TPC-G: Thermal excl Unit 8 Hydel TPC-G : Unit 8 Less Hydel Rebate Total 5394.08 Quantum (MU) Cost (Rs. Crore) Approved Cost Quantum (Rs. (MU) Crore) 4020.67 4716.49 677.59 2037.91 239.35 -40.32 2236.94 5375.30 720.63 634.00 1729.20 131.52 218.86 -37.20 2042.37
4.5.2 Renewable Purchase Specification For FY 2009-10, BEST projected a total quantum of 195 MU at an estimated cost of Rs. 88.00 Crore as against quantum and cost of 299 MU and Rs. 114 Crore, respectively, considered by the Commission in the APR Order dated June 15, 2009. BEST submitted that for FY 2009-10, quantum of RPS Power Purchase in H2 of FY 2009-10 has been considered based on offers received from various RE developers and Letter of Intent (LOI) issued for supply of power during H2 of FY 2009-10. As a part of replies to queries raised by the Commission, BEST submitted the details of
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actual quantum and cost of power purchase from various Renewable Energy sources in FY 2009-10, as under: Table: Renewable Purchase in FY 2009-10
Sources Hydro Bagasse Wind Total Quantum MU 15 45 126 186 Cost Rs. Crore 9 25 59 96
As regards Renewable Purchase Specification in FY 2010-11, BEST submitted that it has entered into Energy Purchase Agreement (EPA) with Renewable Energy source (Spark Green) for 45 MW from November 2010 onwards to fulfil its obligation under RPS. However, in the Petition, BEST projected 105 MU to be procured through RE sources during FY 2010-11. In replies to the queries raised by the Commission, BEST submitted the details of quantum and cost of power to be purchased from Renewable Energy sources during FY 2010-11, as under:
Table: Renewable Energy Purchase in FY 2010-11

Sources Hydro Biomass Wind Total Quantum MU 21 245 81 347 Cost Rs. Crore 13 133 16 162
As regards the enforcement on account of non-fulfilment of the RPS target, the Commission, in its Order dated August 7, 2009 in Case No. 125 of 2008 modified the RPS percentage requirement for FY 2007-08, FY 2008-09 and FY 2009-10. Para-39 of Order dated August 7, 2009 (Case No. 104, 122 and 125 of 2008) is reproduced below:
39. Further, considering year-to-year shortfall in RE capacity addition, the Commission is of the view that it would not be practical to expect that such shortfall can be made good on cumulative basis by the end of FY 2009-10. Hence, the Commission believes that in pursuance of Cl. 2.6.12 of RPS Order (Case 6 of 2006), it would be most appropriate to modify the RPS percentage requirement for FY 2007-08, FY 2008-09 and FY 2009-10 to be lower of (a) RPS target as
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specified under Cl. 2.6.7 or (b) actual achievement of RPS target in respect of each Eligible Person.
Therefore, for FY 2009-10, the Commission has considered the purchase from Renewable energy sources as submitted by BEST in the Petition. As regards RPS target for FY 2010-11, the Commission has considered 6% of total power procurement to be purchased from Renewable Energy sources out of total power purchase quantum in accordance with MERC (Renewable Purchase Obligation, its compliance and implementation of REC Framework) Regulations, 2010. Based on the total energy input approved by the Commission, the RPS obligation of BEST for FY 2010-11 works out to 305.90 MU and corresponding cost works out to Rs 116.44 Crore, assuming an average rate of Rs. 3.80/kWh. Though the Commission has considered the purchase rate of Rs. 3.80/kWh from renewable sources, the Commission clarifies that it would consider the actual power purchase cost considering the actual purchase and effective purchase rate in accordance with the tariff approved for such RE sources from where BEST would purchase RE, while undertaking the truing up for FY 2010-11. 4.5.3 Short-Term Power Purchase As regards short-term power purchase, BEST submitted that during the peak demand period in FY 2009-10, it had to procure power from sources other than TPC-G to meet the demand of its consumers. BEST submitted that 150 MU were procured from external sources to tide over the peak time shortage. BEST added that maximum and minimum monthly peak shortfall was 164 MW and 46 MW in the month of September and August, respectively. BEST estimated requirement of 38 MU in order to meet the peak shortage in H2 of FY 2009-10 at the same rate of power purchase as seen during H1 of FY 2009-10. BEST has not considered any short-term power purchase quantum and cost during FY 2010-11. However, BEST submitted that the power purchase quantum contracted against approved power purchase quantum is not sufficient to meet peak time shortages. The Commission obtained the actual quantum and cost of short-term power purchase during FY 2009-10, from BEST. The Commission observed that actual quantum and cost of short term power purchase is significantly higher than the projections for FY 2009-10 as submitted by BEST in its Petition. The Commission has considered actual
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quantum and cost of short term power purchase during FY 2009-10, as shown in the Table below: Table: Approved power purchase quantum and cost of FY 2009-10
BEST Particulars Additional Power Purchase
Quantum MU Variable Cost Rs. Crore
Actuals
Quantum MU Variable Cost Rs. Crore
Approved
Quantum MU 265.99 Variable Cost Rs. Crore 161.72
188.49
102.85
265.99
161.72
As regards FY 2010-11, there is no requirement for procurement of additional power from other sources, since based on the available sources, there is surplus quantum available with BEST. However, in real-time basis, due to mismatches between demand and supply, BEST would be required to procure additional power from bilateral sources/power exchange/traders, etc., which would be adjusted against the surplus quantum and revenue received by BEST, as discussed subsequently in this Order. 4.5.4 Sale from surplus power BEST submitted that the actual sales due to pool imbalances and TPC-G sales including banking were to the extent of 270.72 MU and 32.73 MU, respectively, during H1 of FY 2009-10. BEST submitted that it had realised revenue of Rs. 205.24 Crore (Rs. 178.35 Crore + Rs. 26.39 Crore), from sale of this surplus energy during H1 of FY 2009-10. Based on actual sales of H1 and estimated surplus power available, BEST projected surplus power of 398 MU during H2, translating to revenue of Rs.270 Crore at the actual billing rate as realised in H1. BEST estimated sale of 453 MU of surplus power during FY 2010-11, and an estimated revenue of Rs. 268 Crore at an average rate of Rs. 5.91/ kWh. The Commission obtained the actual sale from surplus power during FY 2009-10, which has been considered for the purpose of provisional truing-up of FY 2009-10, as shown in the Table below:
Table: Approved power purchase quantum and cost of FY 2009-10

BEST Particulars
Quantum Variable Cost
Actuals
Approved
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MU
Rs Crore
MU
Rs Crore
MU
Rs Crore
TPC-G Sales (incl. banking Sale from surplus power
(47.25)
(34.66)
(47.25)
(34.66)
(701.91)
(474.74)
(659.05)
(446.72)
(659.05)
(446.72)
Note: brackets indicate that these are sales quantum and cost, and help to reduce the power purchase cost.
For FY 2010-11, BEST estimated that it would have surplus quantum of 453 MU, which would realise revenue of Rs. 268 crore, at an average rate of Rs. 5.91 per kWh. BEST has accordingly reduced the power purchase expense for FY 2010-11 by Rs. 268 crore. The Commission has projected the surplus quantum available with BEST for FY 2010-11 as 583 MU, based on the projected sales and energy availability as discussed in earlier paragraphs. The additional revenue from sale of this surplus power has been estimated by considering an ad-hoc rate of Rs. 5 per kWh, which is lower than the rate of Rs. 5.91 per kWh considered by BEST and the average rate of Rs. 6.08 per kWh seen in FY 2009-10 based on actual sale of surplus energy. The rationale for considering a lower rate is that in FY 2010-11, the prices prevailing in the Power Exchanges have been much lower, at around Rs. 3 per kWh, and it is likely that the rate discovered under the balancing mechanism would be lower than that in FY 200910, at least going by present trends. Hence, the Commission has considered an ad-hoc rate of Rs. 5 per kWh, subject to truing up based on actuals at the end of the year. The surplus revenue on this account is thus, estimated at Rs. 292 crore.
4.5.5 Month-wise Power Purchase Quantum for FY 2010-11 The summary of month-wise power purchase quantum approved by the Commission based on trends of month-wise energy input requirement in the previous year is given in the Table below:
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Table: Month-wise Power Purchase Quantum (MU) for FY 2010-11

BEST Power Purchase (MU) Apr May 437.03 465.55 Jun 453.64 Jul Aug 448.82 435.67 Sep 433.03 Oct Nov 464.19 420.73 Dec 393.42 Jan 368.32 Feb Mar Total 350.83 426.76 5098
4.5.6 Standby Charges BEST, in its Petition, submitted that it has estimated the Standby Charges payable to MSEDCL at Rs. 112.13 Crore each for FY 2009-10 and FY 2010-11 based on the Standby Charges approved by the Commission in its APR Order in Case No. 118 of 2008 for BEST for FY 2009-10. The Commission obtained the actual standby charges (Rs.106.91 Crore) paid by BEST to MSEDCL during FY 2009-10, and has considered the same for provisional truing-up for FY 2009-10. For FY 2010-11, the Commission has to allocate the Standby Charges between the three Distribution Licensees in Mumbai in proportion to the coincident peak demand for the last one year, i.e., for the period from October 2008 to September 2009. MSETCL provided the month-wise coincident peak demand details for all licensees (TSUs) from October 2008 to September 2009 in its APR Petition. However, as regards the average peak demand of TPC-D and RInfra-D, and their respective share in the average coincident peak demand in FY 2010-11, the same needs to be adjusted to accommodate the changes envisaged during FY 2010-11 pertaining to the shifting of load from RInfra-D to TPC-D due to the shifting of consumer base from RInfra-D to TPC-D, following the Supreme Court Judgment dated July 8, 2008, which upheld TPC-Ds right for retail distribution in the entire area of TPC-Ds licence area which included the licence areas of RInfra-D as well. Further, TPC-D, in its APR Petition for FY 2009-10, has submitted that an additional capacity of 160 MW would be made available to TPC-D by TPTCL, over and above the already contracted capacity to meet its increase in peak demand requirement in FY 2010-11 including demand catered to on account of shifting of load. The relevant extract of the submission by TPC-D is reproduced as under:
Based on the Energy requirement, the Peak Demand (MW) projections are carried out as follows: For the purpose of Peak Demand (MW) projections, a load factor of 0.73 has been considered. Based on this load Factor of 0.73, the computation of the quarterly
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Peak Demand and the Requirement of contracted generating capacities for the period FY 2010-11 works out as tabulated below.
Table 1-32: Peak Load Demand Projections
As seen from the above table, Tata Power D needs to contract about 160 MW of power over and above its existing contracted capacities with Tata Power G to meet its peak demand.
In view of the above, the Commission has modified the contributions of TPC-D and RInfra-D to the average Coincident Peak Demand as shown in the table below and the same has been considered to share the Total Transmission System Charges (TTSC) for FY 2010-11.
Months Oct 08 Nov 08 Dec 08 Jan 09 Feb 09 Mar 09 Apr 09 May 09 Jun 09 Jul 09 Aug 09 Sep 09
Contribution to Coincident Peak Demand by each TSU (MW) MSEDCL 11408 11101 10548 10835 11045 11406 11373 11179 11103 10382 11004 11299 TPC-D 364 342 365 342 316 345 344 350 351 342 351 331 RInfra-D 1400 1377 1456 1318 1242 1429 1402 1406 1403 1283 1391 1464 BEST-D 702 707 733 637 562 641 620 657 630 567 636 659 Total 13874 13527 13102 13132 13165 13821 13739 13592 13487 12574 13382 13753
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Months Average Est. Shift Consumer Load (ref. Para 8) Modified Average *
Contribution to Coincident Peak Demand by each TSU (MW) MSEDCL 11057 TPC-D 345 + 160 RInfra-D 1381 (160) BEST-D 646 Total 13429
11057
505
1221
646
13429
*(Considering impact of Load shift from TPC-D to RInfra-D) Accordingly, the Standby Charges allocated to BEST for FY 2010-11, works out to Rs. 107.85 Crore. However, the above share of BEST has been considered for 7 months, and the Standby Charges for the remaining 5 months have been considered in accordance with the previous APR Order of BEST. BEST will hence, pay Standby Charges of Rs. 107.85 Crore to MSEDCL during FY 2010-11. 4.5.7 Transmission Charges and MSLDC Charges BEST, in its APR Petition, submitted that it has estimated the transmission charges at Rs. 91.38 Crore for FY 2009-10 based on transmission charges approved by the Commission in its APR Order in Case No. 118 of 2008 for BEST for FY 2009-10, while for FY 2010-11, BEST submitted that it has considered 5% escalation in transmission charges, which amounts to Rs.95.9 Crore. BEST has considered Rs. 0.53 Crore as MSLDC Charges each for FY 2009-10 and FY 2010-11. In the actual power purchase cost incurred during FY 2009-10, BEST submitted MSLDC Charges and Transmission charges as Rs. 0.46 Crore and Rs. 91.39 Crore, respectively, which has been considered by the Commission in the provisional truingup of FY 2009-10. As regards the MSLDC charges for FY 2010-11, the Commission, in its Order dated August 6, 2010 in Case No. 94 of 2009, in the matter of approval of MSLDC Budget for FY 2010-11, has determined the MSLDC Fees and Charges for FY 2010-11. The Commission has considered BESTs share of the approved MSLDC Budget for FY 2010-11 in accordance with the above-said Order, however, the Commission has considered the MSLDC Operating charges for 8 months based on the Order dated August 6, 2010 and for 4 months, the Commission has considered MSLDC Operating
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Charges as approved in the Order dated April 29, 2009 in Case No. 117 of 2008. The total MSLDC Fees and Operating Charges payable by BEST during FY 2010-11 works out to Rs.0.63Crore. As regards transmission charges in FY 2010-11, the Commission vide its Order dated September 10, 2010 in Case No. 120 of 2009 on determination of Transmission Tariff for the Intra-State Transmission System has approved the revised Transmission Charges for FY 2010-11 with effect from September 1, 2010. Accordingly, the Commission has considered the approved monthly transmission charges for FY 201011 payable by BEST as approved in the Order dated September 10, 2010 in Case No. 120 of 2009 for 7 months and has considered the approved monthly transmission charges for 5 months as approved in the Order in Case No. 155 of 2008. Accordingly, the total transmission charges payable by BEST for FY 2010-11 as approved by the Commission works out to Rs. 111.10 Crore. 4.5.8 Payment of Rs. 7.86 Crore to TPC-G BEST submitted that the Commission, in its Review Order dated December 15, 2009 in Case No. 44 of 2009, ruled that the impact of Rs. 7.86 Crore will be considered in BESTs APR Order for FY 2009-10 in the context of the share of surplus to be recovered from each Mumbai Distribution Licensee. The Commission has considered the impact of Rs. 7.86 Crore in this APR Order, separately in the ARR of FY 2009-10. 4.5.9 Miscellaneous Charges BEST submitted in the Petition that it has also considered the payment as per Case No. 111 of 2008 (MERC Order dated May 28, 2009) and credit received from M/s TPC-G on June 22, 2009 (for energy sold outside the licenced area for the period of April 2007 to June 2007) of Rs. 30.60 Crore and Rs. (1.46) Crore, respectively, in power purchase cost of FY 2009-10. The Commission has considered the payment as per Case No. 111 of 2008 and credit received from TPC-G on June 22, 2009 in power purchase expenses of FY 2009-10. 4.5.10 Payment in Case No. 35 of 2009 BEST has shown payment of Rs. 4.28 Crore in Order dated January 19, 2010 (Case No. 35 of 2009) in actual power purchase expenses submitted in reply to the queries raised by the Commission. The Commission observed that this payment is on account of refund to be made by BEST in the matter of Unit-8 to TPC-G. The Commission has
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considered the impact of Case No. 35 of 2009. However, the actual power purchases expenses will be considered at the time of truing-up of FY 2009-10 subject to prudence check. 4.5.11 Summary of Power Purchase Related Cost The summary of the total power purchase cost as approved in the APR Order for FY 2009-10, as estimated by BEST in its APR Petition, actuals as submitted by BEST and as approved by the Commission based on provisional truing up for FY 2009-10, is given in the Table below:
Table: Approved Power Purchase cost for FY 2009-10

APR Order Quantum Cost (Rs. (MU) Crore) BEST APR Petition Quantum Cost (Rs. (MU) Crore) Actuals Quantum Cost (Rs. (MU) Crore) Approved after provisional truing-up Quantum Cost (Rs. (MU) Crore)
Source of Power Purchase TPC-G Thermal Excluding Unit-4 Hydel Unit-4 Incentive (Hydel+Thermal) Unit-8 RPS Additional PP TPC-G Sales (Includes banking) Pool Imbalance Units Standby charges Less Hydel Rebate Recovery Intrastate Transmission charges SLDC Charges Refund in Case No. 111 of 2008 Credit received from TPC-G Refund in case no. 46 of 2008 Refund in case no. 35 of 2009 Discount given by TPC-G Total
4002.99 671.69 32.47 725.55 298.75
1605.69 122.58 17.64 159.46 113.52
4559.34 621.94 194.56 188.49 (701.91)
1855.13 6.08 209.23 87.93 102.85 (474.74) 112.13 (39.66)

91.38 0.53 31.00 (1.46) 7.86
4386.02 635.05 185.82 265.99 (47.25) (659.05)
(759.76)
(531.83) 112.13 (40.32)

91.38 0.53 31.00
1773.89 10.94 175.65 96.30 161.72 (34.66) (446.72) 106.91 (38.36)

91.39 0.46 30.60 (1.46) 7.86 4.28 (22.26) 1916.55
4386.02 635.05 185.82 265.99 (47.25) (659.05)
4971.23
1681.60
4862.42
1988.26
4766.58
4766.58
1773.89 10.94 175.65 96.30 161.72 (34.66) (446.72) 106.91 (38.36) 91.39 0.46 30.60 (1.46) 7.86 4.28 (22.26) 1916.55
The summary of the total power purchase cost considered by the Commission during FY 2010-11 is shown in the Table below:
Table: Approved Power Purchase cost for FY 2010-11
BEST APR Petition Source of Power Purchase TPC-G: Thermal excl Unit 8 Hydel TPC-G : Unit 8 MERC, Mumbai Quantum (MU) 4716.49 677.59 Cost (Rs. Crore) 2037.91 239.35
Approved Quantum (MU) 4020.67 720.63 634.00 Cost (Rs. Crore) 1729.20 131.52 218.86 Page 93 of 154
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RPS Additional PP/ Sale Standby Charges Incentive Less Hydel Rebate sub-total (Power Purchase) Transmission Charges SLDC Charges Total
104.63 -453
5045.71
44.78 -267.72 112.13 0.00 -40.32 2126.13 95.90 1.14 2223.17
305.88 -583.18
5098.00
116.23 -291.59 109.63 0.00 -37.20 1976.65 111.10 1.14 2088.89
5045.71
5098.00
4.6
O&M EXPENSES FOR FY 2009-10 AND FY 2010-11
Operation and Maintenance (O&M) expenditure comprises of employee related expenditure, Administrative and General (A&G) expenditure, and Repair and Maintenance (R&M) expenditure. 4.6.1 Employee Expenses BEST submitted that for FY 2009-10, it has estimated revised employee expenses of Rs. 170.45 Crore as compared to the approved expenses of Rs. 153.39 Crore in the last APR Order. For FY 2010-11, BEST projected employee expenses of Rs. 182.84 Crore. BEST submitted the detailed assumptions for projecting employee expenses in FY 2009-10, as under: a) Salaries, wages & allowances Based on number of employees on roll of BEST as on April 1, 2009. b) Dearness Allowance (DA) In order to determine DA payable to staff, the average monthly increase in DA index has been computed based on DA Index over the last 3 years, and thereafter, fixed DA Index of future year has been determined. The payment of Variable Dearness Allowance will be made according to the formula linked with base figure of 9839 from April 1, 2009 to the employees of Electric Supply Division. c) Contribution to PF Calculated as 12% of Basic Pay + DA d) Gratuity Based on the estimated number of staff likely to retire e) Cost of bus token & passes Calculated at Rs. 173 per person per month. f) LTA Calculated on the basis of the Basic Pay on a grading scale.
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BEST submitted that it has merged interim DA payment with DA and discontinued the interim DA payment for the next Agreement period. Therefore, BEST has projected only the DA (Dearness Allowance) for FY 2009-10 and FY 2010-11. Further, BEST submitted that it has discontinued provision of special benefits to employees from FY 2009-10. For FY 2009-10, for each sub-head of employee expenditure, the Commission has considered an increase of around 6.35% p.a. on account of inflation factor corresponding to increase in Consumer Price Index (CPI) over the revised level of employee expenses as approved for FY 2008-09 under the truing up exercise in this Order. The Commission has considered the point to point inflation over CPI numbers for Industrial Workers (as per Labour Bureau, Government of India) for a period of 5 years, i.e., FY 2004-05 to FY 2008-09 (up to March 2009), to smoothen the inflation curve. In FY 2010-11, for each sub-head of employee expenditure, the Commission has considered an increase on account of inflation rate of around 8.49% per annum on account of inflation factor corresponding to increase in Consumer Price Index (CPI) over the revised level of employee expenses as approved for FY 2009-10 under the provisional truing-up exercise in this Order. The Commission has considered the point to point inflation over CPI numbers for Industrial Workers (as per Labour Bureau, Government of India) for a period of 5 years, i.e., FY 2005-06 to FY 2009-10 (up to March 2009), to smoothen the inflation curve.
Accordingly, the approved employee expenses for FY 2009-10 and FY 2010-11 is summarised in the following Table: Table: Employee Expenses for FY 2009-10 and FY 2010-11 (Rs. Crore) FY 2009-10 Particulars APR Order Revised Estimate by BEST 170.45 Approved after Provisional truing-up 152.44 FY 2010-11 Revised Estimate by BEST 182.84 Approved
Net employee expenses
153.39
165.38
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4.6.2 A&G Expenses BEST submitted that for FY 2009-10, it has estimated revised expenses of Rs. 79.39 Crore as compared to the approved expenses of Rs. 76.89 Crore. For FY 2010-11, BEST projected A&G expenses of Rs. 84.15 Crore. BEST submitted the break-up of A&G expenses and requested the Commission to allow the same. For FY 2009-10, the Commission has considered an increase of around 5.48% p.a. on account of inflation factor corresponding to increase in Wholesale Price Index (WPI) and Consumer Price Index (CPI) over the revised level of A&G expenses as approved for FY 2008-09 in this Order. The Commission has considered the point to point inflation over WPI numbers (as per Office of Economic Advisor of Govt. of India) and CPI numbers for Industrial Workers (as per Labour Bureau, Government of India) for a period of 5 years, i.e., FY 2004-05to FY 2008-09 (up to March 2009), to smoothen the inflation curve. The Commission has considered a weight of 60% to WPI and 40% to CPI, based on the expected relationship with the cost drivers. The Commission will undertake the final truing up of A&G expenses for FY 2009-10 based on actual A&G expenses for the entire year and prudence check. For FY 2010-11, the Commission has considered increase in various components on account of inflation at the rate of 7.02% per annum, on account of inflation factor corresponding to increase in Wholesale Price Index (WPI) and Consumer Price Index (CPI) over the revised level of A&G expenses as approved for FY 2009-10 in this Order. The Commission has considered the point to point inflation over WPI numbers (as per Office of Economic Advisor of Govt. of India) and CPI numbers for Industrial Workers (as per Labour Bureau, Government of India) for a period of 5 years, i.e., FY 2005-06to FY 2009-10 (up to March 2010), to smoothen the inflation curve. The Commission has considered a weight of 60% to WPI and 40% to CPI, based on the expected relationship with the cost drivers. Accordingly, the approved A&G expenses for FY 2009-10 and FY 2010-11 are summarised in the following Table: Table: A&G Expenses for FY 2009-10 and FY 2010-11 (Rs. Crore) FY 2009-10 Particulars APR Order 76.89 Revised Estimate by BEST 79.39 Approved after Provisional truing-up 76.48 FY 2010-11 Revised Estimate Approved by BEST 84.15 81.85
A & G expenses
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4.6.3 R&M Expenses BEST submitted that for FY 2009-10, it has estimated revised R&M expenses of Rs. 29.52 Crore as compared to the approved R&M expenses of Rs. 28.69 Crore for FY 2009-10 in the APR Order. For FY 2010-11, BEST projected R & M expenses of Rs. 34.12 Crore. For FY 2009-10, the Commission has considered an increase of around 4.91% p.a. on account of inflation factor corresponding to increase in Wholesale Price Index (WPI) over the revised level of R&M expenses as approved for FY 2008-09 under the truing up exercise in this Order. The Commission has considered the point to point inflation over WPI numbers (as per Office of Economic Advisor of Govt. of India) for a period of 5 years, i.e., FY 2004-05 to FY 2008-09 (up to March 2009), to smoothen the inflation curve. The Commission will undertake the final truing up of R&M expenses for FY 2009-10 based on actual R&M expenses for the entire year and prudence check. For FY 2010-11, the Commission has considered an increase of around 6.05% p.a. on account of inflation factor corresponding to increase in Wholesale Price Index (WPI) over the revised level of R&M expenses as approved for FY 2009-10 under the provisional truing up exercise in this Order. The Commission has considered the point to point inflation over WPI numbers (as per Office of Economic Advisor of Govt. of India) for a period of 5 years, i.e., FY 2005-06 to FY 2009-10 (up to March 2010), to smoothen the inflation curve. Accordingly, the approved R&M expenses for FY 200910 and FY 2010-11 is summarised in the following Table:
Table: R&M Expenses for FY 2009-10 and FY 2010-11 (Rs. Crore) Particulars APR Order FY 2009-10 Revised Estimate by BEST 29.52 Approved after Provisional truing-up 26.56 FY 2010-11 Revised Approved Estimate by BEST 34.12 28.17
R & M expenses
28.69
4.6.4 O&M expenses The total O&M expenses approved by the Commission for FY 2009-10 and FY 201011 is summarised in the following Table:
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Table: O&M Expenses for FY 2009-10 & FY 2010-11 (Rs. Crore) APR Order FY 2009-10 Revised Approved Estimate by after BEST provisional truing up 170.45 79.39 29.52 279.36 152.44 76.48 26.56 255.49 FY 2010-11 Revised Approved Estimate by BEST 182.84 84.15 34.12 301.11 165.38 81.85 28.17 275.41
Particulars
Net employee expenses Net A&G expenses Net R&M expenses Total O&M expenses
153.39 76.89 28.69 258.97
4.7
CAPITAL EXPENDITURE AND CAPITALISATION
The capital expenditure and capitalisation considered by BEST in the APR Petition for FY 2009-10 and ARR and Tariff Petition for FY 2010-11 is as under: Table: Capital Expenditure and Capitalisation projected by BEST for FY 2009-10 and FY 2010-11 (Rs. Crore) Particulars FY 2009-10 APR Revised Order Estimate by BEST 181.87 70.01 135 FY 2010-11 BEST Projection 218.07 150
Capital Expenditure Capitalisation
BEST has submitted the following schemes to be capitalised during FY 2009-10 and FY 2010-11 New (Receiving Substation) RSS commissioning Augmentation and replacement of existing RSS New Distribution Substation (DSS) and Augmentation & alteration to existing DSS Extension of Distribution network SCADA, Digitisation and Automation Energy Meters Street Lightning (Lamps & Cables)
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Furniture, Office equipment, Tools, Civil Engineering Works, Motor vehicle share of G.A. expenses. BEST submitted that it requires the requisite Capital expenditure for creating sufficient redundancy in the network to give reliable and quality power to consumers, to meet Universal Supply Obligations and future growth in demand, introduction of IT/Automation to give better service and meet the Standards of Performance obligations as stipulated in MERC Regulations. The funding of capital expenditure for FY 2009-10 and FY 2010-11 as projected by BEST in the Petition is tabulated below: Table: Source of funding in FY 2009-10 and FY 2010-11 (Rs. Crore) Sources of Funding Consumer contribution Government Grant Financial Assistance from Banks Internal Sources Total FY 2009-10 10 120 51.87 181.87 FY 2010-11 10 150 58.07 218.07
As regards capital expenditure, the Commission 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. The Commission observed that out of the total capitalisation in FY 2009-10 (Rs.135 Crore) as projected by BEST in the Petition, DPR schemes are of Rs. 131 Crore and Non-DPR schemes are of Rs. 4 Crore only. For the purpose of APR exercise for FY 2009-10 and projection for FY 2010-11, the Commission has considered 100% of the capitalisation of the DPR schemes for which in-principle approval has been granted by the Commission and has also considered capitalisation of Non-DPR schemes as proposed by BEST. Accordingly, the Commission has considered capitalisation of Rs 135 Crore during FY 2009-10 and Rs 150 Crore during FY 2010-11 as submitted by BEST in the Petition. The Commission
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shall review the capitalisation at the time of final truing-up for FY 2009-10 and annual performance review for FY 2010-11. Accordingly, approved capitalisation for FY 2009-10 and FY 2010-11 is summarised in the following Table: Table: Approved Capital Expenditure and Capitalisation for FY 2009-10 and FY 2010-11 (Rs. Crore) Particulars Capitalisation APR Order 70.01 FY 2009-10 FY 2010-11 Revised Approved Revised Approved by Estimate by the Estimate by the by BEST Commission BEST Commission 135 135 150 150
4.8
DEPRECIATION
The Commission, in its APR Order, had considered depreciation expenditure of Rs 49.66 Crore for FY 2009-10, which amounts to 3.46% of Opening level of Gross Fixed Assets (GFA) of BEST for FY 2009-10. The opening GFA was considered as Rs. 1349.00 Crore for FY 2009-10 and the depreciation rates were considered as prescribed under MERC Tariff Regulations. BEST has projected revised estimate of the depreciation expenditure for FY 2009-10 and FY 2010-11 as shown in the following Table: Table: Depreciation expenditure projected by BEST for FY 2009-10 and FY 2010-11 (Rs. Crore) FY 2009-10 Particulars Depreciation Opening GFA APR Order 45.3 1310.06 Revised Estimate by BEST 47.7 1435.21 FY 2010-11 Projected 49.66 1575.01
The Commission has examined the depreciation and actual capitalisation claimed by BEST in detail as against the various capex schemes approved by the Commission. Further, BEST in its submissions confirmed that depreciation has not been claimed beyond 90% of the asset value in line with the MERC Tariff Regulations.
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As discussed in earlier Section, the Commission has approved a capitalisation of Rs 122.20 Crore during FY 2008-09 against a capitalisation of Rs 131.99 Crore submitted by BEST. Thus, the opening GFA for FY 2009-10 as approved by the Commission is Rs. 1423.79 Crore. Accordingly, the approved depreciation expenditure for FY 2009-10 and FY 2010-11 is summarised in the following Table: Table: Approved Depreciation expenditure for FY 2009-10 and FY 2010-11 (Rs. Crore) Particulars Depreciation Opening GFA Depn as % of Op. GFA FY 2009-10 Revised Estimate by Approved BEST
47.7 1435.21 3.32% 47.32 1423.79 3.32%
APR Order
45.3 1310.06 3.46%
FY 2010-11 Revised Estimate by Approved BEST

49.66 1575.01 3.15% 48.92 1553.20 3.15%
The Commission will undertake the truing up of Depreciation based on actual capitalisation during the entire year, subject to prudence check. 4.9 INTEREST EXPENSES
The Commission, in its APR Order, had allowed interest expenses of Rs. 19.42 Crore for FY 2009-10 with a weighted average interest rate of around 10.7% p.a. BEST, in its APR Petition, has submitted revised estimate of interest expenses for FY 2009-10 and projections for FY 2010-11 as Rs 19.17 Crore and Rs 30.12 Crore, respectively. BEST has considered loan addition of Rs. 245 Crore during FY 2009-10 and Rs. 150 Crore during FY 2010-11. Table: Interest expenditure projected by BEST for FY 2009-10 and FY 2010-11 (Rs. Crore) FY 2009-10 Particulars APR Order 161.88 Revised Estimate by BEST 278.21 FY 2010-11 BEST Estimate 224.02
Op. balance of loan
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Loan Addition Loan Repayment Closing Balance of loan Interest expenses
44.1 (3.55) 202.43 19.42
245 (299.19) 224.02 19.17
150 (63.78) 310.24 30.12
The Commission is of the view that interest on loan capital will have to be provided corresponding to the assets put to use (capitalised) and not on the capital expenditure. Further, interest on capital expenditure will have to be treated as interest during construction (IDC) and the same should be capitalised for the purpose of allowable capital cost of the project scheme, whereas, the interest expenditure towards such capitalised schemes beyond the date of capitalisation will have to be treated as interest expenditure chargeable to revenue account. In this context, the capitalisation during FY 2009-10 as claimed by BEST amounts to Rs 135 Cr and as per BESTs submissions under Form-8, the same is funded by way of contributions from consumer (Rs 10 Crore), grant from Government (nil), additional equity capital on normative basis at 30% (Rs 37.50 Crore) and normative debt component at 70% (Rs 87.50 Crore). In reply to the query asked by the Commission, BEST clarified that it has received Rs. 1.46 Crore as Government grants during FY 2009-10. As regards the capitalisation of Rs 150.00 Crore during FY 2010-11, BEST has proposed to fund the same by way of contributions from consumer (Rs 10 Crore), grant from Government (nil), additional equity capital on normative basis at 30% (Rs 42.00 Crore) and normative debt component at 70% (Rs 98.00 Crore). Accordingly, the Commission has considered the sources of capitalisation as contributions from consumer (Rs 10.00 Crore), grant from Government (Rs 1.46 Crore), and actual loan of Rs. 123.54 Crore. The Commission has approved loans equal to allowable capital cost obtained after deducting consumer contribution and grants from capitalisation. The Commission has not considered funding from equity as the capitalisation submitted by BEST is considered as funded through Consumer contribution, grants and loan. As regards the funding of capitalisation during FY 2010-11, the Commission has considered the sources of capitalisation as contributions from consumer (Rs 10.00 Crore), grant from Government (Rs 0.00 Crore), and actual loan of Rs. 140.00 Crore. The Commission has approved loans equal to allowable capital cost obtained after deducting consumer contribution and grants from capitalisation. The Commission has
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not considered funding from equity as the capitalisation submitted by BEST is considered as funded through Consumer contribution, grants and loan. The interest expenses on actual loans and existing loans during FY 2009-10 and FY 2010-11 has been calculated based on the interest rates as submitted by BEST. Accordingly, interest expenses approved for FY 2009-10 and FY 2010-11 is summarised in the following Table: Table: Approved Interest expenditure for FY 2009-10 and FY 2010-11 (Rs. Crore) APR Order FY 2009-10 Revised Approved Estimate After by BEST provisional truing up 278.21 245 (299.19) 224.02 19.17 249.08 123.54 (237.64) 134.98 14.68 FY 2010-11 BEST Approved Estimate
Particulars
Op. balance of loan Loan Addition Loan Repayment Cl. Balance of loan Interest expenses
161.88 44.1 (3.55) 202.43 19.42
224.02 150 (63.78) 310.24 30.12
134.98 140 (32.33) 242.65 16.71
4.10 INTEREST ON INTERNAL FUNDS The Commission, in its APR Order, had allowed interest expenditure at 6% p.a. on internal funds at Rs 5.21 Crore for FY 2009-10. BEST in its APR Petition has revised its estimates for FY 2009-10 and FY 2010-11 as Rs 5.19 Crore and Rs 5.79 Crore, respectively. The Interest on Internal funds, at the rate of 6% for FY 2009-10 and FY 2010-11 as projected by BEST is given below: Table: BESTs Estimation of Interest on Internal funds (Rs. Crore) Particulars Capital expenditure during the year Less: Consumer Contribution received during the year Less: Govt. Grant Received during the year Allowable Capital cost FY 2009-10 135.00 10.00 0.00 125.00 FY 2010-11 150.00 10.00 0.00 140.00
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Particulars Cumulative Grants at the end of the year Interest on Internal funds (at 6%) Normative debt component On Government assistance at the start of the year Returns as Interest on Internal funds
FY 2009-10 86.53 0.00 5.19 5.19
FY 2010-11 96.53 0.00 5.79 5.79
The Commission has considered BESTs claim for interest on internal funds (including grant on Government, as normative debt is assumed to be nil) during FY 2009-10 and FY 2010-11. As discussed in earlier section, the Commission has considered the capitalisation as submitted by BEST for FY 2009-10 and FY 2010-11. The normative debt part is considered as nil for FY 2009-10 and FY 2010-11 as BEST is availing actual loan (proposed to convert existing short term borrowings into long term loans) during the period and hence, no interest on normative debt is considered. The interest on internal funds as approved by the Commission for FY 2009-10 and FY 2010-11 is summarised in the following Table: Table: Interest on internal funds (Rs Crore) Particulars Capitalised Cost during the year Less: Consumer Contribution received during the year Less: Govt. Grant Received during the year Allowable Capital cost Cumulative Grants at the end of the year Interest on Internal funds (at 6%) Normative debt component On Government assistance at the start of the year Returns as Interest on Internal funds 0.00 5.19 5.19 0.00 5.28 5.28 FY 2009-10 135.00 10.00 1.46 123.54 86.53 FY 2010-11 150.00 10.00 0.00 140.00 87.99
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4.11 RETURN ON EQUITY (ROE) FOR FY 2009-10 AND FY 2010-11 The Commission, in its APR Order, had permitted return on equity to the extent of Rs 116.22 Crore for FY 2009-10 at a rate of return of 16% in accordance with Regulation 63.1 of MERC (Terms and Conditions of Tariff) Regulations, 2005. BEST, in its APR Petition, submitted the revised estimate of Return on Equity for FY 2009-10 and projection for FY 2010-11 as Rs 114.66 Crore and Rs 121.50 Crore, respectively, as per the following computation: Table: BESTs Estimation of RoE for the period FY 2009-10 and FY 2010-11 (Rs. Crore) Particulars Opening Equity Annual allowable capital cost for the year Normative equity (30%) Closing Equity Computation of RoE Return @ 16% on equity capital at commencement of year Return @ 16% on 50% of equity portion of annual allowable cost for the year RoE for the year 3.24 114.66 3.60 121.50 111.42 117.90 FY 2009-10 696.37 135.00 40.50 736.87 FY 2010-11 736.87 150.00 45.00 781.87
The Commission has not considered any equity during FY 2009-10 and FY 2010-11 as the entire capitalisation during FY 2009-10 and FY 2010-11 has been considered as funded through Consumer contribution, Grants and actual Loan drawal during the year. Accordingly, there is no addition to the opening balance of equity during FY 2009-10 and FY 2010-11, and the Commission has considered return only on opening balance of equity. The Return on Equity as approved by the Commission for FY 2009-10 and FY 2010-11 is summarised in the following Table:
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Table: Return on Equity for FY 2009-10 and FY 2010-11 (Rs. Crore) Particulars Opening Equity Annual allowable capital cost for the year Less: Contribution made by consumers Less: Government Assistance Net allowable capital cost Normative equity (30%) Closing Equity Computation of RoE Return @ 16% on equity capital at H=A*16% commencement of year Return @ 16% on 50% of equity portion I=F*16%*50 of annual allowable cost for the year % RoE for the year G=E+F 99.16 0 99.16 99.16 0 99.16 A B C D E=B-C-D F = E*30% G = A+F FY 2009-10 619.76 135.00 (10.00) (1.46) 123.54 0 619.76 FY 2010-11 619.76 150.00 (10.00) (0.00) 140.00 0 619.76
Thus, total interest on internal funds and return on equity approved by the Commission vis--vis that claimed by BEST for FY 2009-10 and FY 2010-11 is summarised under the following Table: Table: Total Returns in FY 2009-10 and FY 2010-11(Rs. Crore) Particulars Returns as Interest on Internal funds Return as Return on equity Total FY 2009-10 Revised Estimate by BEST 5.19 114.66 119.85 FY 2010-11 Revised Estimate by Approved BEST 5.79 121.5 127.29 5.28 99.16 104.44
APR Order
Approved
5.21 103.41 108.62
5.19 99.16 104.35
4.12 INTEREST ON WORKING CAPITAL AND CONSUMERS SECURITY DEPOSIT FOR FY 2009-10 AND FY 2010-11 BEST submitted that the interest on normative working capital in accordance with the MERC Tariff Regulations for FY 2009-10 and FY 2010-11 works out to Rs. 12.97
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Crore and Rs. 5.72 Crore, respectively, by considering the rate of interest as 12.75% for both the years. In its APR Petition, BEST claimed the interest on normative working capital as well as the difference between the interest on actual working capital loans and interest on normative working capital, as a part of its Aggregate Revenue Requirement for FY 2009-10 and FY 2010-11. BEST projected the interest on consumers security deposit as Rs. 12.46 Crore and Rs. 15.77 Crore for FY 2009-10 and FY 2010-11, respectively, by considering an interest rate of 6%. BEST submitted in the Petition that it has assessed the position of Consumer Deposit amount as on April 1, 2009 at Rs. 207.63 Crore as per its billing cycle. BEST further submitted that as per the MERC Tariff Regulations, it is eligible to retain Consumer Deposit amount to the extent of Rs. 262.88 Crore and has initiated measures to recover the balance amount of Rs.55.25 Crore from the consumers. The Commission has estimated the working capital requirement of BEST for FY 2009-10 in accordance with the MERC Tariff Regulations, after considering the provisional truing up of various expenditure and revenue heads. However, the Commission has not considered the interest on actual working capital loans incurred by BEST at this stage, since only interest on normative working capital loans can be allowed in accordance with the MERC Tariff Regulations. At the time of final truing up, in case the interest on actual working capital loans is higher than the interest on normative working capital loans, then the difference between the two would have to be allowed under the mechanism of sharing of efficiency losses, since this is a controllable parameter, as clearly stipulated in the MERC Tariff Regulations. The Commission has considered two months receivables during FY 2009-10 on the basis of actual revenue during FY 2009-10 as submitted by BEST in replies to the queries raised by the Commission. For calculation of two months receivables during FY 2010-11, the Commission has calculated revenue by considering actual revenue during FY 2009-10 as submitted by BEST for 5 months, i.e., from April 2010 to August 2010 and revenue of FY 2010-11 for 7 months, i.e., from September 2010 to March 2011, on the basis of the revised ARR approved for FY 2010-11. The MERC Tariff Regulations stipulates that the rate of interest on working capital shall be allowed 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. Accordingly, the Commission has considered the short-term Prime Lending Rate of State Bank of India of 13.00% and 11.75% for FY
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2009-10 and FY 2010-11, respectively, for estimating the interest on working capital, which works out to Rs. 18.33 Crore and Rs. 3.70 Crore, respectively. As regards the consumer security deposit for FY 2009-10 and FY 2010-11, the Commission has considered a 10% increase over FY 2008-09 and FY 2009-10 levels, respectively. However, the Commission will consider the actual level of consumer security deposit at the time of truing-up. The Commission has considered interest rate of 6% on consumer security deposit for FY 2009-10 and FY 2010-11. Therefore, interest on consumers' security deposit during FY 2009-10 and FY 2010-11 works out to Rs. 12.94 Crore and Rs. 15.77 Crore, respectively. The revised interest on working capital and consumers security deposit for BEST for FY 2009-10 and FY 2010-11 is given in the following Table: Table: Interest on Working Capital and Consumers Security Deposit for FY 200910 and FY 2010-11 (Rs. Crore) FY 2009-10 Revised Approved Estimate after by provisional BEST truing-up 12.97 18.33 FY 2010-11 Revised Estimate by BEST 9.17 Approved
Particulars
APR Order
Interest on Normative Working Capital Interest on actual working capital loans, less normative interest Interest on consumers security deposits Total
8.14
9.81
8.04
5.73
15.54 23.68
12.46 33.47
12.94 31.27
15.77 30.68
15.77 25.28
4.13 PROVISIONING FOR BAD DEBTS BEST submitted that it has estimated the provisioning for bad debts at Rs. 0.15 Crore each for FY 2009-10 and FY 2010-11. The Commission has considered Rs. 0.04 Crore as the provision for bad debts for FY 2009-10 and FY 2010-11 as approved by the Commission for FY 2009-10 in the last APR Order.
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4.14 OTHER EXPENSES BEST has categorised prompt payment discount, power factor incentive and DSM expenses under other expenses. BEST has submitted that it used to show these expenses under the head of A&G expenses in its audited accounts, but now these expenses have emanated from Tariff Order, so these are shown under the head 'Other Expenses'. The Commission has been approving the initiatives related to DSM, through a separate procedure. The Commission has approved the funding of these DSM initiatives out of the load management charge (LMC) amount available with BEST, and hence, there is no impact of expenditure on DSM activities on the ARR of BEST for FY 2009-10 and FY 2010-11. The Commission, in the last APR Order, had allowed Power Factor Incentive as a part of A&G expenses. The comparison of other expenses as approved by the Commission in the last APR Order, as projected by BEST and as approved by the Commission are tabulated as under: Table: Other Expenses (Rs. Crore) FY 2009-10 Approved by Revised the Estimate Commission 12 12 FY 2010-11 Approved by Revised the Estimate Commission 13 13
Particulars Prompt payment discount Power Factor Incentive DSM Total
APR Order
9.18
44 0.26 56.26
44 0 56.00
44 0.26 57.26
44 0 57.00
9.18
4.15 INCOME TAX BEST, in its Petition, submitted that under Section 10(20) of the Income Tax Act, the income of local authority is exempted. Hence, no income tax is payable. The Commission has hence, not considered any income tax for FY 2009-10 and FY 201011.
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4.16 CONTRIBUTION TO CONTINGENCY RESERVE The MERC (Terms and Conditions of Tariff) Regulations, 2005, has provided for contribution to contingency reserves, as a revenue expense, to be computed as 0.25% to 0.5% of opening GFA, as follows: 76.9.1 Where the Distribution Licensee has made an appropriation to Contingencies Reserve, a sum not less than 0.25 per cent and not more than 0.5 per cent of the original cost of fixed assets shall be allowed towards such appropriation in the calculation of aggregate revenue requirement: The Commission in accordance with the above provision, has considered the Contribution to contingency reserve of Rs. 3.56 Crore and Rs.3.88 Crore at rate of 0.25% of opening GFA as against Rs. 7.18 Crore and Rs. 7.87 Crore projected by BEST for FY 2009-10 and FY 2010-11, respectively. 4.17 NON TARIFF INCOME BEST submitted that the non-tariff income for FY 2009-10 and FY 2010-11 was estimated as Rs. 71.15 Crore and Rs. 71.49 Crore, respectively, as compared to the actual non-tariff income of Rs. 70.83Crore in FY 2008-09.. The Commission has considered an increase of 10% in the non-tariff income of FY 2008-09 for calculating Non-Tariff Income of FY 2009-10. Similarly, for FY 201011, the Commission has considered an increase of 10% in the non-tariff income of FY 2009-10.. Hence, the Commission has considered Non-Tariff Income for FY 2009-10 and FY 2010-11 as Rs. 82.26 Crore and Rs. 90.49 Crore, respectively. 4.18 REVENUE FROM EXISTING TARIFF FOR FY 2009-10 AND FY 201011 In its APR Petition, BEST estimated the revenue from sale of electricity and FAC recovered from the consumers for FY 2009-10 as Rs. 2699.50 Crore and Rs. 200.87 Crore, respectively, and submitted the computations of the same as a part of the Formats submitted along with the APR Petition. For FY 2010-11, BEST estimated the revenue from sale of electricity as Rs. 2797.74 Crore, based on the existing tariffs and the projected category-wise sales and demand. For FY 2009-10, the Commission obtained the details of actual revenue earned by BEST from sale of electricity during the year, which was submitted by BEST as Rs.
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2896.57 Crore. The total revenue from retail tariff after provisional true-up for FY 2009-10 has been considered as Rs 2911.18 Crore, as compared to the revenue of Rs. 2896.57 crore considered by BEST in its submissions. The difference in actual revenue in on account of the additional recovery of Rs. 14.61 crore made by BEST through its vigilance drives, which has not been included by BEST in its submissions. In reply to the Commission's query in this regard, BEST submitted that the amount recovered against vigilance cases are kept in Balance sheet Account and are not included in the APR Petition. However, as and when the amount is liquidated through separate bills, the same will be considered under the respective head, under the Annual Revenue Statement. The Commission is of the view that such additional revenue should be considered as revenue in the year in which the recovery is made, and has hence, added the same to the revenue from sale of electricity. Based on audited results, the Commission will true up the actual expenses and revenue for FY 2009-10, subject to prudence check. For FY 2010-11, the Commission has computed the category-wise revenue based on the existing tariffs and the category-wise sales and demand as approved by the Commission, and after considering all components of tariff, which works out to Rs. 2973.82 Crore. It may be noted that while computing revenue from existing tariffs, BEST has not considered the FAC component of the existing tariffs (average FAC charged in FY 2009-10 was Rs. 0.54 per kWh), even though FAC is a part of the tariff, and the consumers are paying the same. Ideally, the FAC component should have been considered while computing the revenue from existing tariffs, in order to convey the correct impact of the revised tariffs to the consumers. However, since BEST has not considered the FAC component while computing the revenue from existing tariffs and revenue gap, the Commission has also not considered the same in its computations, to ensure liketo-like comparison. 4.19 AGGREGATE REVENUE REQUIREMENT AND REVENUE GAP OF BEST FOR FY 2009-10 AND FY 2010-11 Based on analysis of each element discussed above, the Aggregate Revenue Requirement and Revenue Gap of BEST for FY 2009-10 and FY 2010-11 as approved by the Commission in its APR Order, as estimated by BEST in the APR Petition and as approved by the Commission in this Order is given in the following Tables:
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Table: Aggregate Revenue Requirement for FY 2009-10 (Rs Crore) Current Year (FY 2009-10) Approved April after March APR provisional (Estimated) Order truing up 1784.22 279.36 170.45 79.39 29.52 47.70 19.17 12.97 8.04 12.46 0.15 56.26 0.00 112.13 91.38 0.53 7.18 2431.54 114.66 5.19 2551.39 71.15 2480.24 225.79 392.23 3098.26 2900.37 197.89 1477.56 258.97 153.39 76.89 28.69 45.30 19.42 8.14 0.00 15.54 0.04 0.00 0.00 112.13 91.38 0.53 3.28 2032.29 103.41 5.21 2140.91 55.53 2085.38 225.79 392.23 2703.40 2704.99 -1.59 1717.80 255.49 152.44 76.48 26.56 47.32 14.68 18.33 0.00 12.94 0.04 56.00 0.00 106.91 91.39 0.46 3.56 2324.92 99.16 5.19 2429.27 82.26 2347.00 225.79 323.66 2896.45 2911.18 -14.73
S.No. 1 2 2.1 2.2 2.3 3 4 5 5.1 5.2 6 7 8 9 10 11 11 15 16 17 18 19 24 27 28 33 34 35
Particulars Power Purchase Expenses ( including External Power Purchase) Operation & Maintenance Expenses Employee Expenses Administration & General Expenses Repair & Maintenance Expenses Depreciation, including advance against depreciation Interest on Long-term Loan Capital & Short Term Finance Interest on Working Capital (Normative) Interest on Working Capital (Actual ) Interest on Consumer Deposits Provision for Bad Debts Other Expenses Income Tax Stand-by charges payable to MSEDCL Transmission Charges payable to Transmission licensee Annual SLDC fees & charges Contribution to contingency reserves Total Revenue Expenditure Return on Equity Capital Return as Interest on Internal funds Aggregate Revenue Requirement Less: Non Tariff Income Aggregate Revenue Requirement from Retail Tariff Truing-up of FY 2007-08 Truing-up of FY 2008-09 Net Aggregate Revenue Requirement Revenue from existing tariff Net Revenue Gap
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Based on provisional truing up of various elements for FY 2009-10 as discussed in above paragraphs, the Aggregate Revenue Requirement for FY 2009-10 after considering truing-up arrears of FY 2007-08 and FY 2008-09 works out to Rs 2896.45 Crore. After considering the revenue from sale of electricity in FY 2009-10, the Commission has estimated that BEST will have a revenue surplus of Rs. 14.73 Crore, as compared to a revenue gap of Rs. 197.89 Crore estimated by BEST. The primary reasons for the reduction in revenue requirement are the reduction in power purchase cost based on actuals submitted by BEST, disallowance of interest on actual working capital loans at present, reduced requirement for truing up for FY 2008-09 (as approved in earlier Section), reduction in O&M expenses on normative basis, etc. The revenue surplus of Rs 14.73 Crore during FY 2009-10 after provisional truing up has been considered for determination of ARR for FY 2010-11, as shown below: Table: Aggregate Revenue Requirement for FY 2010-11 (Rs Crore) Ensuing Year (FY 2010-11) S.No. Particulars Power Purchase Expenses ( including External Power Purchase) Operation & Maintenance Expenses Employee Expenses Administration & General Expenses Repair & Maintenance Expenses Depreciation, including advance against depreciation Interest on Long-term Loan Capital & Short Term Finance Interest on Working Capital ( Normative) Interest on Working Capital (Actual ) Interest on Consumer Deposits Provision for Bad Debts Other Expenses Income Tax Stand-by charges payable to MSEDCL Transmission Charges payable to Transmission licensee Annual SLDC fees & charges Contribution to contingency reserves BEST Projections 2014.00 301.11 182.84 84.15 34.12 49.66 30.12 9.17 5.73 15.77 0.15 57.26 0.00 112.13 95.90 1.14 7.87
Approved 1867.02 275.41 165.38 81.85 28.17 48.92 16.71 9.81 0.00 15.77 0.04 57.00 0.00 109.63 111.10 1.14 3.88
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1 2 2.1 2.2 2.3 3 4 5 5.1 5.2 6 7 8 9 10 11 11
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Ensuing Year (FY 2010-11) S.No. Particulars 15 16 17 18 19 24 29 30 32 33 34 35 Total Revenue Expenditure Return on Equity Capital Return as Interest on Internal funds Aggregate Revenue Requirement Less: Non Tariff Income Aggregate Revenue Requirement from Retail Tariff Impact of review order (Case no. 44 of 2009) Impact due to truing up for FY 2007-08, after cost-benefit analysis Revenue gap/(surplus) after provisional truing-up of FY 2009-10 Net Aggregate Revenue Requirement Revenue from existing tariff Net Revenue Gap BEST Projections 2700.00 121.50 5.79 2827.29 71.49 2755.80 11.95
Approved 2516.43 99.16 5.28 2620.87 90.49 2530.38 11.95 -1.34
197.89 2965.64 2797.74 167.90
-14.73 2526.27 2973.82 -447.55
The Aggregate Revenue Requirement and net Revenue Gap for FY 2010-11 is significantly lower than that projected by BEST primarily due to the following reasons: Reduction in revenue gap for FY 2009-10 after provisional truing up as discussed earlier Reduction in power purchase quantum on account of lower distribution losses of 9.5% considered by the Commission as compared to 10% distribution losses considered by BEST. Since, the actual distribution losses in FY 2009-10 are already lower than 9.5%, there is no impact on BEST on account of this change. Reduction in power purchase expenses on account of additional quantum of power being procured from TPC-G, and consequent increase in surplus power being sold through the Balancing & Settlement Mechanism prevalent in the State of Maharashtra, hence, there is no impact on BEST. Reduction in interest on long term loans as the long term loans have been considered to the extent of 70% of allowable capital cost after deducting consumer contribution and grants, hence, there is no impact on BEST. Reduction in Return on Equity on account of additional capitalisation being funded entirely through consumer contribution, grants, and loans, without any
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addition of equity, hence, there is no impact on BEST. Difference in Operation and Maintenance expenses as projected by BEST and approved by the Commission. The revenue from existing tariff as computed by the Commission is significantly higher than that estimated by BEST on account of certain computation errors of BEST and higher sales considered by the Commission.
Accordingly, the Commission approves Aggregate Revenue Requirement for FY 2010-11 as Rs 2526.27 Crore.
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5 TARIFF
PHILOSOPHY
AND
CATEGORY-WISE
TARIFFS FOR FY 2010-11

5.1 APPLICABILITY OF REVISED TARIFFS
The revised tariffs will be applicable from September 1, 2010. In cases, where there is a billing cycle difference for a consumer with respect to the date of applicability of the revised tariffs, then the revised tariff should be made applicable on a pro-rata basis for the consumption. The bills for the respective periods as per existing tariff and revised tariffs shall be calculated based on the pro-rata consumption (units consumed during respective period arrived at on the basis of average unit consumption per day multiplied by number of days in the respective period falling under the billing cycle). The Commission has determined the tariffs and revenue from revised tariffs as if the revised tariffs are applicable for the entire year. The Commission clarifies that any shortfall/surplus in actual revenue vis--vis the revenue requirement approved after truing up, due to the applicability of the revised tariffs for only seven months of FY 2010-11, will be trued up at the end of the year. 5.2 REVENUE GAP FOR FY 2009-10 AND FY 2010-11
In the APR Petition, BEST submitted cumulative revenue gap of Rs. 173.85 Crore up to FY 2010-11 which includes revenue surplus of Rs. 27.39 Crore in FY 2008-09 on stand-alone basis, revenue gap of Rs. 237.1 Crore in FY 2009-10 (includes all previous revenue gaps except FY 2008-09), revenue surplus of Rs. 47.81 Crore in FY 2010-11 on stand-alone basis, and impact of Review Order of Rs. 11.95 Crore as per Case No. 44 of 2009, as summarised in the Table below:
S.No. 1 2 3 4 5 Particulars True Up requirement of FY 2008-09 Provisional True up of FY 2009-10 Revenue Gap of FY 2010-11 Impact of Review Order in Case No. 44 of 2009 Total Revenue Gap/(Surplus) Rs Crore -27.39 237.1 -47.81 11.95 173.85 % -0.98% 8.47% -1.71% 0.43% 6.21%
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As elaborated in Section 4.19 of this Order, the Commission has projected a cumulative revenue surplus of Rs. 447.55 crore in FY 2010-11, including the revenue gap/(surplus) of FY 2008-09 and FY 2009-10 after final truing up and provisional truing up, respectively. Since, the total revenue from the existing tariffs is projected at Rs. 2973.82 Crore vis--vis the revenue requirement of Rs. 2526.27 Crore, which has enabled the Commission to reduce the average tariffs by around 15%, as compared to the average increase of 6.21% proposed by BEST in its APR Petition. 5.3 TARIFFS PROPOSED BY BEST
BEST submitted that the resultant gap to be recovered in FY 2009-10 is Rs. 173.85 Crore, which required an average increase of 6.21% in Tariff. BEST submitted that it had adopted the following philosophy while proposing the revised tariffs: 1. No increase has been proposed in the tariff of residential categories up to 300 units per month. 2. No increase has been proposed in demand charge for any category. 3. No increase has been proposed in energy charge for Industrial category consumers. 4. Increase in Tariff has been proposed in accordance with the provisions of the EA 2003, Tariff Policy and previous Orders of the Commission.
BEST proposed category-wise tariffs and submitted the proposed reduction in category-wise cross-subsidy by adopting the approach adopted by the Commission in the previous Tariff Order. BEST also requested the Commission to clarify the method of levying Power Factor (PF) incentive and penalty, on which BEST had already sought clarification from the Commission through a separate communication, to ensure that the PF incentive and penalty were charged in the desired manner uniformly.
5.4
COMMISSIONS TARIFF PHILOSOPHY
In this Order, the Commission has been able to reduce the tariffs in general, while at the same time, reducing the cross-subsidy over that prevailing in the previous year. As discussed in Section 5.2 of this Order, the Commission has determined the total revenue requirement for FY 2010-11 as Rs. 2526.27 Crore after considering the
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revenue gap/(surplus) of FY 2008-09 and FY 2009-10 after final truing up and provisional truing up, respectively, which indicates that there is a need to reduce the tariffs by around 15%. The Commission has determined the tariffs in line with the tariff philosophy adopted by it in the past, and the provisions of law. The tariffs and tariff categorisation have been determined so that the cross-subsidy is reduced without subjecting any consumer category to a tariff shock. Rationalisation of Tariff Categories As enunciated by the Commission in the previous APR Orders, the Commission is of the view that it is not feasible to have uniform tariffs across different licensees, due to inherent differences, such as revenue requirement, consumer mix, consumption mix, LT:HT ratio, etc. It is also, not appropriate to compare category-wise tariffs across different licensees for the same reasons. However, in the previous APR Orders, the Commission had made significant progress in its efforts to rationalise and make uniform the tariff categorisation and applicability of tariffs for licensees in the State. No further rationalisation has been undertaken in this Order. The differences exist because of historical reasons and differences in management policies and approach across licensees. There will of course, be some differences, on account of certain consumer categories being present only in certain licence areas, such as agricultural category, power looms, etc., which will exist only in certain licence areas. As enunciated in earlier Tariff Orders, while undertaking the rationalisation of tariff categories, the Commission has borne in mind the provisions of Section 62(3) of the Electricity Act, 2003, which stipulates as under: The Appropriate Commission shall not, while determining the tariff under this Act, show undue preference to any consumer of electricity but may differentiate according to the consumer's load factor, power factor, voltage, total consumption of electricity during any specified period or the time at which the supply is required or the geographical position of any area, the nature of supply and the purpose for which the supply is required. It should be noted that it is not possible to apply all the above specified criteria at the same time, for designing the tariff categories; else, with many permutations and
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combinations, there will be too many categories. Perhaps, that is also not the intention behind the provision, which merely enables the Regulators to work within the criteria. Thus, it will be seen from the elucidation given below, as to how different criteria have been used to categorise different types of consumers: The load factor and power factor criteria have been used to provide rebates and disincentives, such as load factor incentive for load factor above certain specified levels, and power factor rebates and disincentives are provided to consumers who are able to maintain their power factor above specified levels. The consumer categories are broadly classified under High Tension (HT) and Low Tension (LT) categories, in accordance with the voltage criteria under Section 62(3) reproduced above. The time of supply criteria has been used to specify time of day (ToD) tariffs, so that the consumers are incentivised to shift their consumption to offpeak periods and thus, reduce the burden on the system during peak hours. The nature of supply criteria has been used to specify differential tariff for continuous (non-interruptible) and non-continuous supply (interruptible) The criteria of purpose of supply has been used extensively to differentiate between consumer categories, with categories such as residential, nonresidential/commercial purposes, industrial purpose, agricultural purpose, street lighting purpose, etc. In this context, quite a few consumers have been representing before the Commission during the Public Hearings, stating that they are not undertaking any commercial activity or activities for making profit within their premises, and hence, they should not be classified under the commercial category. It is clarified that the commercial category actually refers to all non-residential, non-industrial purpose, or which has not been classified under any other specific category. For instance, all office establishments (whether Government or private), hospitals, educational institutions, airports, bus-stands, multiplexes, shopping malls, small and big stores, automobile showrooms, etc., are all covered under this categorisation, since they cannot be termed as residential or industrial. In order to bring clarity in this regard, the Commission had renamed this category as non-residential or commercial in the previous APR Order. As regards the submission by different consumer for creation of new categories is protect their own interest, in the past, it has been experienced that when the Commission created some new categories, the consumers went in appeal
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against the Commissions decision stating that such creation was neither proposed by the Utility nor were public or the concerned consumer put to notice of the same and hence it was set aside for reconsideration of the Commission by the concerned appellate authorities. Hence, in case the distribution licensees feel the justification and necessity for the creation of a new category, for consumers like schools, colleges, hospitals, etc., then they should submit the necessary consumer and consumption data and also ensure that the categorisation is in accordance with the criteria for differentiation provided under Section 62(3) of the EA 2003, for the Commission's consideration. A similar impression is conveyed as regards the Industry categorisation, with the Commission receiving several representations during and after the Public Hearings, from the hotel industry, leisure and travel industry, etc., stating that they have also been classified as industry for the purpose of taxation and/or other benefits being extended by the Central Government or State Government, and hence, they should also be classified as industry for the purpose of tariff determination. In this regards, it is clarified that classification under Industry for tax purposes and other purposes by the Central or State Government shall apply to matters within their jurisdiction and have no bearing on the tariffs determined by the Commission under the EA 2003, and the import of the categorisation under Industry under other specific laws cannot be applied to seek relief under other statutes. Broadly, the categorisation of Industry is applicable to such activities, which entail manufacture. While appreciating the anxiety of different classes of consumers to reduce their payments on account of use of electricity, the reasonable costs incurred by the Utilities have to be met, and irrespective of the number of consumer categories or the sub-classification considered in accordance with the provisions of Section 62(3) of the EA 2003, the cross-subsidies have to be reduced gradually and the tariff differential between categories cannot be very significant in the long-run. Further, it is clarified that the consumer categorisation should reflect the main purpose of the consumer premises. For instance, within a Factory, there could be canteens, recreation rooms for staff, gymnasium, time office, creche for employees' children, dormitory for workers, guest houses for visiting officers, etc., which are related to and incidental to the main purpose of the factory premises, and are intended for use by the staff/workers employed within the factory premises, and are not offered on
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commercial payment basis to people not employed within the factory premises. The factory cannot function in the absence of such ancillary activities. In such cases, the categorisation of such consumers should be 'Industrial' and the distribution licensee should not install sub-meters or separate meters for such ancillary and incidental activities, and charge them at commercial or any other rate, as has been done in some cases. On the other hand, if there are full-fledged employee quarters spread across one or more buildings, wherein the employees employed in the factory are given accommodation, then the supply to such premises should be metered separately through a sub-meter, and such premises should be charged at appropriate HT residential or LT residential tariffs, depending on the level of metering. It should be noted that all previous clarifications given by the Commission through its various Orders continue to be applicable, unless they are specifically contrary to anything that has been stated in this Order, wherein the clarifications given in this Order shall prevail. The applicability of tariffs for different consumer categories has been stipulated in the approved Tariff Schedule, which is annexed as a part of this Order (Annexure II). Rationalisation of Tariff Components The Commission has continued to determine the tariffs such that there is an in-built incentive to consumers to reduce their consumption, as the impact on the bills is designed to increase as the consumption increases, on account of the higher telescopic tariffs applicable for the higher consumption slabs, while at the same time ensuring that even the consumers falling in the higher consumption slabs are charged lower for the consumption corresponding to the lower consumption slab. The Commission has retained the fixed charges/demand charges applicable for different consumer categories at the previous years level. The applicability of the BPL category tariffs has been retained same as that specified in the previous APR Order, read with any clarification thereon. The eligibility criteria has been retained at an annual limit of 360 units. The applicability of BPL category will have to be assessed at the end of each financial year. In case any BPL consumer has consumed more than 360 units in the previous financial year, then the consumer will henceforth, be considered under the LT-I residential category. Once a consumer is classified under the LT-I category, then he cannot be classified under BPL category.
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The Commission has ensured that the HT tariffs are lower than the LT tariffs, as the cost of supply is lower than the cost of supply at lower voltages, due to the lower losses at higher voltages, and the lower network related costs since the electricity does not have to stepped down to lower voltages. Further, there was a certain anomaly in the existing tariffs, wherein the tariff applicable for the consumption slab of over 500 units per month for residential category was same as that for the same slab under commercial category. This anomaly has now been removed. Also, the tariff for the lower consumption slabs under LT II (A) commercial category has been reduced, to protect the smaller consumers under this slab, while at the same time, the consumers who consume at higher levels also get the benefit of the lower tariff for the lower consumption, on account of the telescopic nature of the tariff structure. The Time of Day (ToD) tariffs will be applicable compulsorily to HT I and HT II categories, LT II (B) and (C), and LT IV category consumers having TOD meters, as well as optionally available to LT II (A) and LT III category consumers, who have TOD meters. The TOD tariffs have been retained at the existing levels as under: Five time slots, viz., (a) 2200 to 0600 hours, (b) 0600 to 0900 hours, (c) 0900 to 1200 hours, (d) 1200 to 1800 hours, and (e) 1800 to 2200 hours. Additional peak hour tariff will be payable for consumption during the peak hours in the State, viz., 0900 to 1200 hours morning peak, and 1800 to 2200 hours evening peak, in the following manner: o 0900 to 1200 hours : Additional 0.50 Rs/kWh o 1800 to 2200 hours : Additional 1.00 Rs/kWh For consumption during night off-peak hours, viz., 2200 to 0600 hours, a rebate of 0.75 Rs/kWh will be available Neither additional tariff nor rebate will be applicable for consumption during 0600 to 0900 hours and 1200 to 1800 hours. Additional demand charges of Rs 20 per kVA per month would be chargeable for the stand by component, for CPPs, only if the actual demand recorded exceeds the Contract Demand. The Billing Demand definition has been retained at the existing levels, i.e.,
Case No. 95 of 2009
Monthly Billing Demand will be the higher of the following: (a) Actual Maximum Demand recorded in the month during 0600 hours to 2200 hours; (b) 75% of the highest billing demand/Contract Demand, whichever is lower, recorded during the preceding eleven months; (c) 50% of the Contract Demand. Fuel Adjustment Charges The existing Fuel Adjustment Cost (FAC) Charge has been equated to zero, on account of the adoption of the existing fuel costs for projection of the fuel expenses. In case of any variation in the fuel prices with respect to these levels, BEST will be able to pass on the corresponding increase to the consumers through the existing FAC mechanism, subject to the stipulated ceiling of 10% of average energy charges, which works out to 51.77 paise/kWh. The FAC will be charged on a monthly basis, and the details of the computation and recovery from the same will have to be submitted to the Commission for post-facto approval, on a quarterly basis. Average Cost of Supply and Cross-Subsidy The average cost of supply (CoS) is given below:
Table: Average Cost of Supply for FY 2010-11 Sl. 1 2 3 Particulars Total Revenue Requirement (Rs. Crore) Total Sales (MU) Average Cost of Supply (Rs/kWh) Amount 2526.27 4390.32 5.75
The prevailing cross-subsidy and the reduction in cross-subsidy considered by the Commission are given in the Table below:
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Average Billing Rate (Rs./unit) Average Cost of Supply (Rs./unit)
Category LT Category LT I - BPL LT I - Residential LT II A - Commercial upto 20 kW LT II B - Commercial > 20 kW & <=50 kW LT II C - Commercial above 50 kW LT III - LT Industrial upto 20 kW LT-IV A - LT Industrial >20 kW & < 100 kW LT-IV B - LT Industrial above 100 kW LT V - Advertisement & Hoardings LT-VI - Street Lighting LT VII (A) - Temporary Religious LT VII (B) - Temporary - Others LT-VIII - Crematorium & Burial Grounds HT Category HT I - Industry HT II - Commercial HT III - Group Housing Society HT IV - Temporary
Ratio of Average Billing Rate to Average Cost of Supply (%) Existing Revised Tariff Tariff to Tariff to Existing Proposed Revised APR Order current current Tariff by BEST Tariff for FY09 ACOS ACOS 0.49 4.17 7.55 9.85 10.69 6.85 8.72 7.84 13.62 6.70 2.88 10.62 2.67 6.48 6.84 4.22 9.00 0.50 4.79 7.89 9.78 10.82 7.01 8.18 7.72 14.82 6.90 3.04 10.62 2.67 6.90 6.92 4.81 9.00 0.49 3.68 6.64 8.25 8.44 6.08 6.93 6.14 12.10 5.91 2.88 8.78 2.66 5.72 5.83 3.61 8.20 19% 67% 115% 149% 163% 106% 125% 118% 214% 104% 45% 168% 42% 101% 109% 69% 9% 72% 131% 171% 186% 119% 152% 136% 237% 116% 50% 185% 46% 113% 119% 73% 156% 9% 64% 115% 143% 147% 106% 120% 107% 210% 103% 50% 153% 46% 99% 101% 63% 143%
Percentage increase in tariff (%) 0% -12% -12% -16% -21% -11% -21% -22% -11% -12% 0% -17% 0% -12% -15% -14% -9%
5.75
5.75
In the above Table, (a) Existing Tariff refers to the tariff approved by the Commission in the APR Order dated June 15, 2009 (b) Revised Tariff refers to the tariff approved by the Commission in the present APR Order (c) Ratio of Average Billing Rate (ABR) to Average Cost of Supply (ACOS) i) APR Order for FY09 refers to the ratio of ABR to ACOS as envisaged in the APR Order for FY 2008-09 ii) Existing Tariff to current ACOS refers to the ratio of ABR approved in the APR Order for FY 2008-09 to the ACOS approved in the present APR Order, i.e., Rs. 5.75 per kWh iii) Revised Tariff to current ACOS refers to the ratio of ABR approved in this APR Order for FY 2009-10 to the ACOS approved in the present APR Order, i.e., Rs. 5.75 per kWh The above Table clearly shows that the Commission has reduced the cross-subsidy levels for most consumer categories, while at the same reducing the tariff for all consumer categories, since the reference tariff and cross-subsidy levels have to be considered based on the APR Order for FY 2008-09. Further, for most categories, the cross-subsidy levels are within the levels of + 20% of ACOS specified by the Tariff Policy as the target cross-subsidy levels to be achieved by the year 2010-11.
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While the tariffs have been determined such that the revenue gap considered for the year is met entirely through the revision in tariffs, it is possible that the actual revenue earned by BEST may be higher or lower than that considered by the Commission, on account of the changes in consumption pattern. The revenue shortfall/surplus if any, will be trued up based on actuals. 5.5
Sl.
REVISED TARIFFS WITH EFFECT FROM SEPTEMBER 1, 2010

Consumer category & Consumption Slab Tariffs Fixed/ Demand Charge Energy Charge (Rs/kWh)
LOW TENSION CATEGORIES 1 LT I - Residential (BPL) LT I Residential 0-100 units 101-300 units 301 to 500 units Above 500 units (balance units) 2 LT II - LT Non-residential or Commercial (A) 0-20 kW 0-300 units 301-500 units 501 to 1000 units Above 1000 units (balance units) (B) > 20 kW and < 50 kW (C) > 50 kW 3 LT III - LT Industrial below 20 kW load 0-300 units 301-500 units 501 to 1000 units Above 1000 units (balance units) 4 LT IV (A)- LT Industrial above 20 kW (A) LT Industrial above 20 kW and upto 100 kW load (B) LT Industrial above 100 kW load Rs 150 per kVA per month 5.40 5.30 Rs. 250 per month Rs. 300 per month Rs. 350 per month Rs. 350 per month 3.70 5.50 5.95 6.40 Rs. 150 per kVA per month Rs. 200 per month 4.00 6.00 6.90 7.60 7.30 7.55 Rs. 30 per month Rs. 50 per month$$ Rs. 100 per month$$
1.55 3.30 5.30 6.80
Rs. 3 per month
0.40
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Sl.
Consumer category & Consumption Slab
Tariffs Fixed/ Demand Charge Energy Charge (Rs/kWh) 11.40 5.30
5 LT V - Advertisement & Hoardings, incl. floodlights & neon signs 6 LT VI Streetlights 7 LT VII Temporary Supply (A) TSR Temporary Supply Religious
Rs. 300 per month Rs 150 per kVA per month# Rs 150 per connection per month Rs 150 per connection per month Rs 100 per connection per month
2.85
(B) TSO Temporary Supply Others
8.75
6 LT VIII Crematoriums and Burial Grounds
2.65
TOD Tariffs (in addition to above base tariffs) compulsory for LT II (B) and (C), and LT IV category, and optional for LT II (A) and LT III category 0600 hours to 0900 hours 0900 hours to 1200 hours 1200 hours to 1800 hours 1800 hours to 2200 hours 2200 hours to 0600 hours HIGH TENSION CATEGORIES 7 HT I Industry 8 HT II Commercial 9 HT III Group Housing Society 10 HT IV Temporary Supply Rs 200 per kVA per month Rs 200 per kVA per month Rs 200 per kVA per month Rs 200 per connection per month 5.05 5.35 3.00 8.20 0.00 0.50 0.00 1.00 -0.75
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Sl.
Consumer category & Consumption Slab
Tariffs Fixed/ Demand Charge Energy Charge (Rs/kWh)
TOD Tariffs (in addition to above base tariffs) for HT I and HT II categories 0600 hours to 0900 hours 0900 hours to 1200 hours 1200 hours to 1800 hours 1800 hours to 2200 hours 2200 hours to 0600 hours
Notes: 1. Fuel Adjustment Cost (FAC) will be applicable to all consumers and will be charged over the above tariffs, on the basis of the FAC formula prescribed by the Commission, and computed on a monthly basis. $$: Fixed charge of Rs. 100 per month will be levied on residential consumers availing 3 phase supply. Additional Fixed Charge of Rs. 100 per 10 kW load or part thereof above 10 kW load shall 3. be payable. #: Street lightings having 'automatic timers' for switching 'on/off' would be levied Demand Charges on the lower of the following: (A. 50% of the Contract Demand (B. Actual Recorded Demand
0.00 0.50 0.00 1.00 -0.75
2.
The detailed computation of category-wise revenue with revised tariffs has been given as Annexure I to this Order. The approved Tariff Schedule has been given as Annexure II to this Order. 5.6 WHEELING CHARGES AND LOSS COMPENSATION
In the previous APR Petitions, BEST has not submitted the segregation of costs between the Wires Business and Supply Business on the ground that BEST is a Local Authority and is exempted from providing Open Access under Section 42(3) of the EA 2003. BEST has added that BEST has been recognised as a Local Authority by the Appellate Tribunal for Electricity and also, the MERC (Distribution Open Access) Regulations, also specifically exempted BEST from the purview of the Open Access Regulations.
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During the TVS on BEST's APR Petition, the Commission directed BEST to submit the desired allocation of costs between Wires and Supply Business and the desired voltage level asset data. In response, BEST has segregated the total ARR into the ARR of the Wires Business and Supply Business on a provisional basis and stated that BEST has initiated the necessary action to carry out detailed segregation, which will take further time. Though BEST has submitted the provisional allocation of the expenses to the Wires Business and Supply Business, more authentic data is required, to enable like-to-like comparison of the operational efficiency of the Wires Business and Supply Business across different distribution licensees. The Commission directs BEST to expedite submission of the necessary data regarding allocation of expenses between Wires Business and Supply Business, and Wheeling Losses at HT and LT voltages.
5.7
INCENTIVES AND DISINCENTIVES
Power Factor Incentive (Applicable for all HT categories, LT II (B), LT II (C) and LT IV categories) Whenever the average power factor is more than 0.95, an incentive shall be given at the rate of the following percentages of the amount of the monthly bill including energy charges, reliability charges, FAC, and Fixed/Demand Charges, but excluding Taxes and Duties: Sl. 1 2 3 4 5 6 Range of Power Factor 0.951 to 0.954 0.955 to 0.964 0.965 to 0.974 0.975 to 0.984 0.985 to 0.994 0.995 to 1.000 Power Factor Level 0.95 0.96 0.97 0.98 0.99 1.00 Incentive 0% 1% 2% 3% 5% 7%
Note: PF to be measured/computed upto 3 decimals, after universal rounding off Power Factor Penalty (Applicable for all HT categories, LT II (B), LT II (C) and LT IV categories)
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Whenever the average PF is less than 0.9, penal charges shall be levied at the rate of the following percentages of the amount of the monthly bill including energy charges, reliability charges, FAC, and Fixed/Demand Charges, but excluding Taxes and Duties: Sl. 1 2 3 4 5 6 7 8 9 10 ... Range of Power Factor 0.895 to 0.900 0.885 to 0.894 0.875 to 0.884 0.865 to 0.874 0.855 to 0.864 0.845 to 0.854 0.835 to 0.844 0.825 to 0.834 0.815 to 0.824 0.805 to 0.814 ... Power Factor Level 0.90 0.89 0.88 0.87 0.86 0.85 0.84 0.83 0.82 0.81 ... Penalty 0% 2% 3% 4% 5% 6% 7% 8% 9% 10% ...
Note: PF to be measured/computed upto 3 decimals, after universal rounding off Prompt Payment Discount A prompt payment discount of one percent on the monthly bill (excluding Taxes and Duties) shall be available to the consumers if the bills are paid within a period of 7 working days from the date of issue of the bill. Delayed Payment Charges (DPC) In case the electricity bills are not paid within the due date mentioned on the bill, delayed payment charges of 2 percent on the total electricity bill (including Taxes and Duties) shall be levied on the bill amount. For the purpose of computation of time limit for payment of bills, the day of presentation of bill or the date of the bill or "the date of issue of the bill", etc. as the case may be, will not be excluded. Rate of Interest on Arrears The rate of interest chargeable on arrears will be as given below for payment of arrears-
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Case No. 95 of 2009
Sr. No. 1 2 3
Delay in Payment (months) Payment after due date upto 3 months (0 - 3) Payment made after 3 months and before 6 months (3 - 6) Payment made after 6 months (> 6)
Interest Rate p.a. (%) 12% 15% 18%
Load Factor Incentive Consumers having load factor over 75% upto 85% will be entitled to a rebate of 0.75% on the energy charges for every percentage point increase in load factor from 75% to 85%. Consumers having a load factor over 85 % will be entitled to rebate of 1% on the energy charges for every percentage point increase in load factor from 85%. The total rebate under this head will be subject to a ceiling of 15% of the energy charges for that consumer. This incentive is limited to HT I and HT II categories only. Further, the load factor rebate will be available only if the consumer has no arrears with BEST, and payment is made within seven days from the date of the bill. However, this incentive will be applicable to consumers where payment of arrears in instalments has been granted by BEST, and the same is being made as scheduled. BEST has to take a commercial decision on the issue of how to determine the time frame for which the payments should have been made as scheduled, in order to be eligible for the Load Factor incentive. The Load Factor has been defined below: Load Factor = Consumption during the month in MU Maximum Consumption Possible during the month in MU Maximum consumption possible = Contract Demand (kVA) x Actual Power Factor x (Total no. of hrs during the month less planned load shedding hours*) * - Interruption/non-supply to the extent of 60 hours in a 30 day month has been built in the scheme. In case the billing demand exceeds the contract demand in any particular month, then the load factor incentive will not be payable in that month. (The billing demand definition excludes the demand recorded during the non-peak hours i.e. 22:00 hrs to 06:00 hrs and therefore, even if the maximum demand exceeds the contract demand in that duration, load factor incentives would be applicable. However, the consumer would be subjected to the penal charges for exceeding the contract demand and has to pay the applicable penal charges).
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Case No. 95 of 2009
5.8
APPLICABILITY OF ORDER
This Order for FY 2010-11, shall come into force with effect 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 process for BEST for FY 2009-10 and determination of revised tariffs for FY 201011.
Sd/(V. L. Sonavane) Member
Sd/(S. B. Kulkarni) Member
Sd/(V.P. Raja) Chairman
(K. N. Khawarey) Secretary, MERC
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Case No. 95 of 2009
Annexure I: Category-wise Revenue from Revised Tariffs

No. of consumers Tariff Category Components of tariff Variable charge (Rs. / kWh) Relevant sales & load/demand data for revenue calculation Revenue from fixed charges (Rs. Crore) Revenue from variable charges (Rs. Crore) Average Total Billing Revenue Rate (Rs./ (Rs. Crore) kWh)
Slab Single phase Three Phase
Single phase Demand Total meter charge Consumer (Rs./ (Rs./ kVA connection / month) / month)
Energy consumption (kWh)
Billing Demand (kVA)
Fixed charge (Single phase)
Fixed charge for kVA demand
Total Fixed charge
LT category BPL 0-30 LT-I

0-100 101-300 301-500 >500 0-300 301-500 501-1000 >1000 all units all units 0-300 301-500 501-1000 >1000 all units all units all units all units
232 209243 342344 58828 24727 172182 21842 14627 3110 142 2 4267 391 215 62 13 0 549 379
0 11335 14179 13775 33518 11455 3871 7676 14180 5099 2214 3550 779 1305 1542 1405 126 133 103
232 220578 356523 72603 58245 183637 25713 22303 17290 5241 2216 7817 1170 1520 1604 1418 126 682 482
3 30 50 & 100 50 & 100 100 200 200 200 200 150 150 250 300 350 350 150 150 300 150
0.40 1.55 3.3 5.3 6.8 4 6 6.9 7.6 7.3 7.55 3.7 5.5 5.95 6.4 5.4 5.3 11.4 5.3
0.09 719 532 146 343 336 90 118 333 338 629 18 7 11 22 53 53 3 29
9749 45129 24420 177706 310332
0.0008 7.94 22.24 5.18 6.99 44.07 6.17 5.35 4.15

31.99 55.86
0.00 7.94 22.24 5.18 6.99 44.07 6.17 5.35 4.15 31.99 55.86 2.35 0.42 0.64 0.67
8.12 4.40
0.004 111.38 175.63 77.13 233.39 134.52 53.75 81.11 253.38 246.60 475.16 6.53 3.93 6.62 14.03 28.67 27.85 3.98 15.31
0.00 119.32 197.88 82.31 240.38 178.59 59.92 86.46 257.53 278.59 531.02 8.88 4.35 7.26 14.71 36.79 32.25 4.22 17.06
0.49 1.66 3.72 5.66 7.00 5.31 6.69 7.36 7.72 8.25 8.44 5.03 6.09 6.52 6.71 6.93 6.14 12.10 5.91
LT-II A
LT-II B LT-II C LT-III
2.35 0.42 0.64 0.67
LT-IV A LT-IV B LT - V LT-VI # LT-VII (A)
8.12 4.40 0.25
0.25
1.75
1.75
all units
1 10 2
0 545 12
1 555 14
150
2.85
0.05
0.0002
0.00
0.02
0.02
2.88
LT-VII(B) all units LT-VIII all units HT category HT-I all units HT-II
HT-III HT-IV Total all units all units all units
150 100
8.75 2.65
33 1
0.10 0.002
0.10 0.00
28.95 0.33
29.05 0.33
8.78 2.66
0 0 0 0 853168
52 75 5 0 126934
52 75 5 0 980102
200 200 200
5.05 5.35 3 8.2
137 403 35 3
4390.32
38278 81128 8806
9.19 19.47 2.11 0.00 106.5 132.9
9.19 19.47 2.11 0.00

239.4
68.95 215.37 10.42 2.17

2275.2
78.14 234.84 12.53 2.17

2514.6
5.72 5.83 3.61 8.20 5.73
PF Surcharge TOD CHARGES

GRAND TOTAL
10.08 3.39 2528.06
5.76
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Case No. 95 of 2009
ANNEXURE II
THE BEST UNDERTAKING (Of the Brihan Mumbai Mahanagarpalika) SCHEDULE OF ELECTRICITY TARIFFS (With Effect from September 1, 2010) The Maharashtra Electricity Regulatory Commission, in exercise of the powers vested in it under Section 61 and Section 62 of the Electricity Act, 2003 and all other powers enabling it in this behalf, has determined, by its Order dated September 12, 2010 in Case No. 95 of 2009, the tariff for supply of Electricity by BEST Undertaking for various classes of consumers as applicable from September 1, 2010. General 1. These tariffs supersede all tariffs so far in force including in the case where any agreement provides specifically for continuance of old agreemental tariff, or any modifications thereof as may have been already agreed upon. 2. Tariffs are subject to revision and/or surcharge that may be levied by BEST from time to time as per the directives of the Commission. 3. The tariffs are exclusive of electricity duty, Tax on Sale of Electricity (ToSE) and other charges as levied by Government or other competent authorities and the same, will be payable by the consumers in addition to the charges levied as per the tariffs hereunder. 4. The tariffs are applicable for supply at one point only. 5. BEST reserves the right to measure the Maximum Demand on any period shorter than 30 minutes period of maximum use, subject to conformity with the prevalent Supply Code, in cases where BEST considers that there are considerable load fluctuations in operation. 6. The tariffs are subject to the provisions of the MERC (Electricity Supply Code and Other Conditions of Supply) Regulations, 2005 in force (i.e. as on September 1, 2010) and directions, if any that may be issued by the Commission from time to time. 7. Unless specifically stated to the contrary, the figures of Energy Charge relate to Rupees per unit (kWh) charge for energy consumed during the month. 8. Fuel Adjustment Costs (FAC) Charge as may be approved by the Commission from time to time shall be applicable to all categories of consumers and will be
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charged over and above the tariffs on the basis of FAC formula specified by the Commission and computed on a monthly basis. LOW TENSION (LT) - TARIFF LT I: Residential (BPL) Applicability Residential consumers who have a sanctioned load of upto and less than 0.1 kW, and who have consumed less than 360 units per annum in the previous financial year. The applicability of Below Poverty Line (BPL) category will have to be assessed at the end of each financial year. In case any BPL consumer has consumed more than 360 units in the previous financial year, then the consumer will henceforth, be considered under the LT-I residential category. Once a consumer is classified under the LT-I category, then he cannot be classified under BPL category. The categorisation of such BPL consumers will be reassessed at the end of the financial year, on a pro-rata basis. Similarly, the classification of BPL consumers who have been added during the previous year would be assessed on a pro-rata basis, i.e., 30 units per month. All the new consumers subsequently added in any month with sanctioned load of upto and less than 0.1 kW and consumption between 1 to 30 units (on pro rata basis of 1 unit/day) in the first billing month, will be considered in BPL Category. Rate Schedule Consumption Slab ( kWh) Fixed /Demand Charge Energy Charge (Rs./kWh)
BPL Category
Rs. 3 per month
0.40
LT I: LT Residential Applicability Electricity used at Low/Medium Voltage for operating various appliances used for purposes like lighting, heating, cooling, cooking, washing/cleaning, entertainment/leisure, pumping in the following places: a) Private residential premises,
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b) Premises exclusively used for worship such as temples, gurudwaras, churches, mosques, etc. Provided that Halls, Gardens or any other portion of the premises that may be let out for consideration or used for commercial activities would be charged at LT-II tariff as applicable. c) All Students Hostels affiliated to Educational Institutions. d) All Ladies Hostels, such as Students (Girls) Hostels, Working Women Hostels, etc. e) Other type of Hostels, like (i) Homes/Hostels for Destitute, Handicap or Mentally deranged persons (ii) Remand Homes (iii) Dharamshalas, etc., subject to verification and confirmation by BESTs concerned Zonal Chief Engineer. f) Telephone booth owned/operated by handicapped person subject to verification and confirmation by BESTs concerned Zonal Chief Engineer. g) Residential premises used by professionals like Lawyers, Doctors, Professional Engineers, Chartered Accountants, etc., in furtherance of their professional activity in their residences but shall not include Nursing Homes and any Surgical Wards or Hospitals. Rate Schedule Consumption Slab ( kWh) 0-100 units 101 300 units 301 500 units Above 500 units (balance units) Rs. 100 per month$$ Fixed/Demand Charge Energy Charge (Rs./kWh) 1.55 3.30 5.30 6.80
Rs. 30 per month Rs. 50 per month

$$
Note: a)
$$
: Above fixed charges are for single phase connections. Fixed charge of Rs. 100 per month will be levied on residential consumers availing 3 phase supply. Additional Fixed Charge of Rs. 100 per 10 kW load or part thereof above 10 kW load shall be payable.
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LT II: LT- Non-Residential or Commercial Applicability Electricity used at Low/Medium Voltage in all non-residential, non-industrial premises and/or commercial premises for commercial consumption meant for operating various appliances used for purposes such as lighting, heating, cooling, cooking, washing/cleaning, entertainment/leisure, pumping in following places: a) Non-Residential, Commercial and Business premises, including Shopping malls b) All Educational Institutions, Hospitals and Dispensaries c) Combined lighting and power services for Entertainment including film studios, cinemas and theatres, including multiplexes, Hospitality, Leisure, Meeting Halls and Recreation places. d) Electricity used for the external illumination of monumental/historical/heritage buildings approved by MTDC. Rate Schedule Consumption Slab ( kWh) (a) 0-20 kW 0-300 units 301- 500 units 501-1000 units Above 1000 units (balance units) (b) > 20 kW and 50 kW (c ) > 50 kW 0600 to 0900 hours 0900 to 1200 hours 1200 to 1800 hours 1800 to 2200 hours 2200 to 0600 hours Rs.200 per month 4.00 6.00 6.90 Fixed/ Demand Charge Energy Charge (Rs./kWh)
7.60 Rs. 150 per kVA per 7.30 month 7.55 0.00 0.50 0.00 1.00 -0.75
TOD Tariffs (in addition to above base tariffs)
Note: a) The ToD tariff is available to LT-II (b) and (c) category, and optionally available to LT- II (a) having ToD meter installed.
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LT III: LT Industry upto 20 kW Applicability Electricity used at Low/Medium Voltage in premises for purpose of manufacturing, including that used within these premises for general lighting, heating/cooling, etc., having a sanctioned load upto and including 20 kW (26.8 HP). This consumer category also includes IT industry and IT enabled services (as defined in the Government of Maharashtra Policy). Rate Schedule Consumption Slab ( kWh) Fixed/Demand Charge Energy Charge (Rs./kWh)
0-20 Kw 0-300 units 301- 500 units 501-1000 units Above 1000 units (balance units) 0600 to 0900 hours 0900 to 1200 hours 1200 to 1800 hours 1800 to 2200 hours 2200 to 0600 hours Rs. 350 per month 6.40 0.00 0.50 0.00 1.00 -0.75 Rs. 250 per month Rs. 300 per month 3.70 5.50 5.95
TOD Tariffs (in addition to above base tariffs)
Note: a) The ToD tariff is optionally available to LT III category consumers having ToD meter installed. LT IV: LT Industrial above 20 kW load Applicability Electricity used at Low/Medium Voltage in premises for purpose of manufacturing including that used within these premises for general lighting, heating/cooling, etc., and having sanctioned load greater than 20 kW( 26.8 HP). This consumer category
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also includes IT industry and IT enabled services (as defined in the Government of Maharashtra Policy). Rate Schedule Consumption Slab ( kWh) Fixed/Demand Charge Energy Charge (Rs./kWh)
(a) Above 20 kW and upto Rs. 150 per kVA per 5.40 100 kW month (b) Above 100 kW 5.30 TOD Tariffs (in addition to above base tariffs) 0600 to 0900 hours 0900 to 1200 hours 1200 to 1800 hours 1800 to 2200 hours 2200 to 0600 hours 0.00 0.50 0.00 1.00 -0.75
LT V: LT - Advertisements and Hoardings Applicability Electricity used for the purpose of advertisements, hoardings and other conspicuous consumption such as external flood light, displays, neon signs at departmental stores, malls, multiplexes, theatres, clubs, hotels and other such entertainment/leisure establishments except those specifically covered under LT-II as well as electricity used for the external illuminations of monumental, historical/heritage buildings approved by MTDC, which shall be covered under LT-II category depending upon Sanctioned Load. Rate Schedule Consumption Slab ( kWh) All Units Fixed / Demand Charge Energy Charge (Rs./kWh) 11.40
Rs. 300 per month
Note a) The electricity, that is used for the purpose of indicating /displaying the name and other details of the shops or Commercial premises, for which electric supply is
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rendered, shall not be under LT V Tariff Category. Such usage of electricity shall be covered under the prevailing tariff of such shops or commercial premises.
LT VI: LT- Street Lights Applicability Electricity used at Low/Medium Voltage for purpose of public street lighting, lighting in public gardens, traffic island, bus shelters, public sanitary conveniences, police chowkies, traffic lights, public fountains, other such common public places irrespective of whether such facilities are being provided by the Government or the Municipality, or Port Trust or other private parties. Rate Schedule Consumption Slab (kWh) Fixed/Demand Charge Energy Charge (Rs./kWh)
All Units
Rs. 150 per kVA per 5.30 month
Note Street Lightings having Automatic Timers for switching On/Off the street lights would be levied Demand Charges on lower of the following a) 50 percent of Contract Demand or b) Actual Recorded Demand LT VII: LT-Temporary Supply Applicability LT VII (A) Temporary Supply Religious (TSR) Electricity supplied at Low/Medium Voltage for temporary purposes during public religious functions like Ganesh Utsav, Navaratri, Eid, Moharam, Ram Lila, Ambedkar Jayanti, Diwali, Christmas, Guru Nanak Jayanti, etc., or areas where community prayers are held. LT VII (B) - Temporary Supply Others (TSO)
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Electricity used at Low/Medium Voltage on a temporary basis for any construction work, decorative lighting for exhibitions, circus, film shooting, marriages, etc. and any activity not covered under tariff LT VII (A), and electricity used at low/medium voltage on an emergency basis for purpose of fire fighting activity by the fire department in residential/other premises. Rate Schedule Consumption Slab (kWh) LT VII (A) All Units LT VII (B) All Units Fixed/Demand Charge Energy Charge (Rs./kWh)
Rs. 150 per connection 2.85 per month Rs. 150 per connection 8.75 month
Note In case of LT VII (B) the Additional fixed charges of Rs. 150 per 10 kW load or part thereof above 10 kW load shall be payable. LT VIII: LT- Crematorium and Burial Grounds Applicability Electricity used at Low/Medium Voltage in Crematorium and Burial Grounds for all purposes including lighting, and will be applicable only to the portion catering to such activities, and in case part of the area is being used for other commercial purposes, then a separate meter will have to be provided for the same, and the consumption in this meter will be chargeable under LT-II Commercial rates as applicable. Rate Schedule Consumption (kWh) All Units Slab Fixed/Demand Charge Energy Charge ( Rs./kWh)
Rs. 100 per connection 2.65 per month
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HIGH TENSION (HT) - TARIFF HT I: HT- Industry Applicability This category includes consumers taking 3-phase electricity supply at High Voltage for purpose of manufacturing. This Tariff shall also be applicable to IT Industry & IT enabled services (as defined in the Government of Maharashtra policy), taking 3phase electricity supply at High Voltage. Rate Schedule Consumption Slab ( kWh) Fixed/ Demand Charge Energy Charge (Rs./kWh)
All Units
Rs 150 per kVA per 5.05 month 0.00 0.50 0.00 1.00 -0.75
TOD Tariffs (in addition to above base tariffs) 0600 to 0900 hours 0900 to 1200 hours 1200 to 1800 hours 1800 to 2200 hours 2200 to 0600 hours
HT II: HT- Commercial Applicability This category includes consumers of electricity such as all Educational Institutions, Hospitals, and religious and charitable institutions taking supply at High Voltage. This category also includes consumers taking electricity supply at High Voltage for commercial purposes, including Hotels, Shopping Malls, film studios, cinemas and theatres, including multiplexes. The Consumers belonging to HT II requiring a single point supply for the purpose of downstream consumption by separately identifiable entities will have to either operate through a franchisee route or such entities will have to take individual connections under relevant category. These downstream entities will pay appropriate tariff as applicable as per BEST Tariff Schedule i.e. LT II.
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Rate Schedule Consumption Slab ( kWh) Fixed/ Demand Charge Energy Charge (Rs./kWh)
All Units
Rs 150 per kVA per 5.35 month 0.00 0.50 0.00 1.00 -0.75
TOD Tariffs (in addition to above base tariffs) 0600 to 0900 hours 0900 to 1200 hours 1200 to 1800 hours 1800 to 2200 hours 2200 to 0600 hours HT III: HT Group Housing Society Applicability This category includes Group Housing Societies taking single point electricity supply at High Voltage for consumption by individual dwellings. Such individual dwellings will pay appropriate tariff LT I: LT- Residential as per BEST Tariff Schedule in force. Rate Schedule Consumption Slab ( kWh) Fixed/ Demand Charge Energy Charge (Rs./kWh)
All Units
Rs. 150 per kVA per 3.00 month
HT IV- HT - Temporary Supply Applicability Electricity used at High Voltage on a temporary basis of supply for any construction work, decorative lighting for exhibitions, circus, film shooting, marriages, etc. This category also includes electricity supplied at High Voltage for temporary purposes during public religious functions like Ganesh Utsav, Navaratri, Eid,
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Moharam, Ram Lila, Ambedkar Jayanti, Diwali, Christmas, Guru Nanak Jayanti, etc. or areas where community prayers are held. Rate Schedule Consumption (kWh) Slab Fixed/Demand Charge Energy (Rs./kWh) Charge
Temporary Supply All units
- Rs. 200 per connection 8.20 per month
MISCELLANEOUS AND GENERAL CHARGES Fuel Adjustment Cost (FAC) Charges The FAC charge will be determined based on the approved Formula and relevant directions, as may be given by the Commission from time to time and will be applicable to all consumer categories for their entire consumption. The FAC Formula takes into account any change in the cost of own generation and power purchase due to variations in the fuel cost. Fuel Price shall mean the landed cost of fuel at power station battery limits and will consist of only following components: a) Basic Fuel Price including statutory taxes, duties, royalty as applicable b) Transportation (freight) cost by rail/road/pipeline or any other means including transportation service charges for bringing fuel up to the Power Station boundary. c) Fuel Treatment Charges such as washing/cleaning charges, Sizing Crushing Charges, Fuel Analysis Charges etc. for making fuel up to the required grade /quality d) Fuel Handling Charges, including that towards loading and unloading charges for bringing fuel to the power station boundary. Besides above, the Commission specifies a ceiling on transportation service charge, at 2% of the freight charge. The FAC charge shall be computed and levied/refunded, as the case may be, on a monthly basis. The following Formula shall be used for computing FAC: FAC = C + I + B where, FAC = Total Fuel Cost and Power Purchase Cost Adjustment C = Change in cost of own generation and power purchase due to variation in the fuel cost, I = Interest on Working Capital, B = Adjustment Factor for over-recovery/under-recovery. The details for each month shall be available on BEST website at www.bestundertaking.com.
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Fuel Adjustment Charges The existing Fuel Adjustment Cost (FAC) Charge has been equated to zero, on account of the adoption of the existing fuel costs for projection of the fuel expenses. In case of any variation in the fuel prices with respect to these levels, BEST will be able to pass on the corresponding increase to the consumers through the existing FAC mechanism, subject to the stipulated ceiling of 10% of average energy charges, which works out to 51.77 paise/kWh. The FAC will be charged on a monthly basis, and the details of the computation and recovery from the same will have to be submitted to the Commission for post-facto approval, on a quarterly basis. Electricity Duty and Tax on Sale of Electricity The electricity duty and Tax on Sale of Electricity will be charged in addition to charges levied as per the tariffs mentioned hereunder (as approved by the Commission) as per the Government guidelines from time to time. However, the rate and the reference number of the Government Resolution/ Order vide which the Electricity Duty and Tax on Sale of Electricity is made effective, shall be stated in the bill. A copy of the said resolution / order shall be made available on BEST website at www.bestundertaking.com. Power Factor Calculation Wherever, the average power factor measurement is not possible through the installed meter, the following method for calculating the average power factor during the billing period shall be adoptedTotal ( kWH ) Total (kVAh)
Average Power Factor =
Wherein the kVAh is
(kWh) 2
( RkVAh) 2
(i.e. Square Root of the summation of the squares of kWh and RkVAh ) Power Factor Incentive (Applicable for all HT categories, LT II (B), LT II (C) and LT IV categories) Whenever the average power factor is more than 0.95, an incentive shall be given at the rate of the following percentages of the amount of the monthly bill including
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energy charges, reliability charges, FAC, and Fixed/Demand Charges, but excluding Taxes and Duties: Sl. 1 2 3 4 5 6 Range of Power Factor 0.951 to 0.954 0.955 to 0.964 0.965 to 0.974 0.975 to 0.984 0.985 to 0.994 0.995 to 1.000 Power Factor Level 0.95 0.96 0.97 0.98 0.99 1.00 Incentive 0% 1% 2% 3% 5% 7%
Note: PF to be measured/computed upto 3 decimals, after universal rounding off Power Factor Penalty (Applicable for all HT categories, LT II (B), LT II (C) and LT IV categories) Whenever the average PF is less than 0.9, penal charges shall be levied at the rate of the following percentages of the amount of the monthly bill including energy charges, reliability charges, FAC, and Fixed/Demand Charges, but excluding Taxes and Duties: Sl. 1 2 3 4 5 6 7 8 9 10 ... Range of Power Factor 0.895 to 0.900 0.885 to 0.894 0.875 to 0.884 0.865 to 0.874 0.855 to 0.864 0.845 to 0.854 0.835 to 0.844 0.825 to 0.834 0.815 to 0.824 0.805 to 0.814 ... Power Factor Level 0.90 0.89 0.88 0.87 0.86 0.85 0.84 0.83 0.82 0.81 ... Penalty 0% 2% 3% 4% 5% 6% 7% 8% 9% 10% ...
Note: PF to be measured/computed upto 3 decimals, after universal rounding off Prompt Payment Discount A prompt payment discount of one percent on the monthly bill (excluding Taxes and Duties) shall be available to the consumers if the bills are paid within a period of 7 working days from the date of issue of the bill.
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Delayed Payment Charges (DPC) In case the electricity bills are not paid within the due date mentioned on the bill, delayed payment charges of 2 percent on the total electricity bill (including Taxes and Duties) shall be levied on the bill amount. For the purpose of computation of time limit for payment of bills, the day of presentation of bill or the date of the bill or "the date of issue of the bill", etc. as the case may be, will not be excluded. Rate of Interest on Arrears The rate of interest chargeable on arrears will be as given below for payment of arrearsInterest Rate p.a. (%) 12% 15% 18%
Sr. No. 1 2 3
Delay in Payment (months) Payment after due date upto 3 months (0 - 3) Payment made after 3 months and before 6 months (3 - 6) Payment made after 6 months (> 6)
Load Factor Incentive Consumers having load factor over 75% upto 85% will be entitled to a rebate of 0.75% on the energy charges for every percentage point increase in load factor from 75% to 85%. Consumers having a load factor over 85 % will be entitled to rebate of 1% on the energy charges for every percentage point increase in load factor from 85%. The total rebate under this head will be subject to a ceiling of 15% of the energy charges for that consumer. This incentive is limited to HT I and HT II categories only. Further, the load factor rebate will be available only if the consumer has no arrears with BEST, and payment is made within seven days from the date of the bill. However, this incentive will be applicable to consumers where payment of arrears in instalments has been granted by BEST, and the same is being made as scheduled. BEST has to take a commercial decision on the issue of how to determine the time frame for which the payments should have been made as scheduled, in order to be eligible for the Load Factor incentive. The Load Factor has been defined below: Load Factor = Consumption during the month in MU Maximum Consumption Possible during the month in MU
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Maximum consumption possible = Contract Demand (kVA) x Actual Power Factor x (Total no. of hrs during the month less planned load shedding hours*) * - Interruption/non-supply to the extent of 60 hours in a 30 day month has been built in the scheme. In case the billing demand exceeds the contract demand in any particular month, then the load factor incentive will not be payable in that month. (The billing demand definition excludes the demand recorded during the non-peak hours i.e. 22:00 hrs to 06:00 hrs and therefore, even if the maximum demand exceeds the contract demand in that duration, load factor incentives would be applicable. However, the consumer would be subjected to the penal charges for exceeding the contract demand and has to pay the applicable penal charges). Penalty for exceeding Contract Demand In case, a consumer (availing Demand based Tariff) exceeds his Contract Demand, he will be billed at the appropriate Demand Charge rate for the Demand actually recorded and will be additionally charged at the rate of 150% of the prevailing Demand Charges (only for the excess Demand over the Contract Demand). In case any consumer exceeds the Contract Demand on more than three occasions in a calendar year, the action taken in such cases would be governed by the Supply Code. Additional Demand Charges for Consumers having Captive Power Plant For customers having Captive Power Plant (CPP), the additional demand charges would be at a rate of Rs. 20/kVA/month only on extent of Stand-by demand component, and not on the entire Contract Demand. Additional Demand Charges will be levied on such consumers on the Stand-by component, only if the consumers demand exceeds the Contract Demand. Security Deposit 1) Subject to the provisions of sub-section (5) of Section 47 of the Act, BEST would require any person to whom supply of electricity has been sanctioned to deposit a security in accordance with the provisions of clause (a) of subsection (1) of Section 47 of the Electricity Act, 2003. 2) The amount of the security shall be an equivalent of the average of three months of billing or the billing cycle period, whichever is lesser. For the purpose of determining the average billing, the average of the billing to the
Case No. 95 of 2009
3)
4) 5)
6)
7)
8)
9)
consumer for the last twelve months, or in cases where supply has been provided for a shorter period, the average of the billing of such shorter period, shall be considered Where BEST requires security from a consumer at the time of commencement of service, the amount of such security shall be estimated by the Distribution Licensee based on the tariff category and contract demand / sanctioned load, load factor, diversity factor and number of working shifts of the consumer. BEST shall re-calculate the amount of security based on the actual billing of the consumer once in each financial year. Where the amount of security deposit maintained by the consumer is higher than the security required to be maintained under this Supply Code Regulation 11, BEST shall refund the excess amount of such security deposit in a single payment: Provided that such refund shall be made upon request of the person who gave the security and with an intimation to the consumer, if different from such person, shall be, at the option of such person, either by way of adjustment in the next bill or by way of a separate cheque payment within a period of thirty (30) days from the receipt of such request: Provided further that such refund shall not be required where the amount of refund does not exceed the higher of ten (10) per cent of the amount of security deposit required to be maintained by the consumer or Rupees Three Hundred. Where the amount of security re-calculated pursuant as above, is higher than the security deposit of the consumer, BEST shall be entitled to raise a demand for additional security on the consumer. Provided that the consumer shall be given a time period of not less than thirty days to deposit the additional security pursuant to such demand. Upon termination of supply, BEST shall, after recovery of all amounts due, refund the remainder amount held by the Distribution Licensee to the person who deposited the security, with intimation to the consumer, if different from such person. A consumer - (i) with a consumption of electricity of not less than one lakh (1, 00,000) kilo-watt hours per month; and (ii) with no undisputed sums payable to BEST under Section 56 of the Act may, at the option of such consumer, deposit security, by way of cash, irrevocable letter of credit or unconditional bank guarantee issued by a scheduled commercial bank. BEST shall pay interest on the amount of security deposited in cash (including cheque and demand draft) by the consumer at a rate equivalent to the bank rate
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of the Reserve Bank of India: Provided that such interest shall be paid where the amount of security deposited in cash under this Regulation 11 of Supply Code is equal to or more than Rupees Fifty. 10) Interest on cash security deposit shall be payable from the date of deposit by the consumer till the date of dispatch of the refund by BEST. Definitions: Maximum Demand Maximum Demand in Kilowatts or Kilo-Volt-Amperes, in relation to any period shall, unless otherwise provided in any general or specific Order of the Commission, means twice the largest number of kilowatt-hours or kilo-Volt-Ampere-hours supplied and taken during any consecutive thirty minute blocks in that period. Contract Demand Contract Demand means demand in Kilowatt (kW) / Kilo Volt Ampere (kVA), mutually agreed between BEST and the consumer as entered into in the agreement or agreed through other written communication (For conversion of kW into kVA, Power Factor of 0.80 shall be considered). Sanctioned Load Sanctioned Load means load in Kilowatt (kW) mutually agreed between BEST and the consumer Billing Demand (for LT categories): Monthly Billing Demand will be the higher of the following: a) 65% of the actual Maximum Demand recorded in the month during 0600 hours to 2200 hours. b) 40% of the Contract Demand. Note: c) Demand registered during the period 0600 to 2200 Hrs. will only be considered for determination of the Billing demand. d) In case of change in Contract Demand, the period specified in Clause (a) above will be reckoned from the month following the month in which the change of Contract Demand takes place.
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Billing Demand (for HT categories): Monthly Billing Demand will be the higher of the following: a) Actual Maximum Demand recorded in the month during 0600 hours to 2200 hours. b) 75% of the highest billing demand recorded during preceding eleven months subject to limit of contract demand. c) 50% of the Contract Demand. Note: d) Demand registered during the period 0600 to 2200 Hrs. will only be considered for determination of the Billing demand. e) In case of change in Contract Demand, the period specified in Clause (a) above will be reckoned from the month following the month in which the change of Contract Demand takes place.
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APPENDIX 1 List of persons who attended the Technical Validation Session held on February 22, 2010 S.No BEST Officials 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 Others Shri S.P. Bedekar Shri D.B. Biwalkar Shri K. Vinod Raj Shri B.K. Chavan Shri M. M. Davare Shri N. Y. Bhandari Shri S. D. Pawar Shri K. Pavithran Shri N. P. Jagaldas Shri M. H. Vohra Shri K. N. Rajagopal Shri R. D. Pawar Shri A. G. Patil Shri S. D. Darve Shri A. A. Mule Shri A. A. Kanthariu Shri S. B. Dhule Shri S. M. Shipal Shri C. H Shinde Shri S. B. Mali Shri Bilal A Shaikh Shri R. K. Kamath Shri R. M. Pradhan Shri S. R. Khedkar Shri M. M. Shaikh Shri M. B. Urunkar Shri R. D. Waikar
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Name
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28 29 30 31 32 33 34 35 36 Consultants to Commission 37 38 39 40 41 42
Shri Rakhspal Abrol Shri Sanjay Kumar Jha Shri Sudheer Agale Shri Anil V Kale Shri N Ponrathnam Shri Ashok Pendse Shri S. G. Kelkar Shri A. V. Kolap Shri B. H. Gujarati
Shri Ajit Pandit Shri Suresh Gehani Shri Amit Mittal Shri S. R. Karkhanis Shri G. S. Rao Shri Saurabh Gupta
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APPENDIX 2 List of Objectors S. No. 1 2 3 4 5 6 7 8 Name & Address of the Objector

Shri A.R. Bapat Shri M.G. Varade
Institution / Individual Individual Individual
Shri Ulhas Chaudhari Representative
Pandarinath Sadbhavna Sangh

Bharitya Udhami Avam Upbhokta Sangh The Association of Hospitals Vel Inductions Hardening
Shri Raksh Pal Abrol Shri N. Ponrathnam Shri Ashok Pendse

Shri Guruprasad Shetty
Thane Belapur Industries Association Indian Hotel & Restaurant Association
List of Objectors who attended the Public Hearing held on April 13, 2010 S. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 Name & Address of the Objector Shri Raksh Pal Abrol Representative Shri N. Ponrathnam Shri S.L Patil
Shri Guruprasad Shetty Shri Ganesh Balasubramanian Shri A. V. Kolap Shri B. H. Gujarati Shri Sunil Jogekar Shri A. V. Shenoy Shri Atre Chandrashekhar Shri Sukesh Shetty Shri Bala Shetty Shri S. M. Agart Dr. V. Thanumoorthy Shri P. N. Shridharan
Institution / Individual
Bharitya Udhami Avam Upbhokta Sangh The Association of Hospitals Vel Inductions Hardening
Thane Belapur Industries Association Indian Hotel & Restaurant Association Reliance Infrastructure Ltd. MSLDC MSLDC HIRCO Energy Study Group Individual Association of Hotels and Restaurants Individual VEL Consumer Individual
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17 18 19 20 21 22 23
Shri S. A. Nikalje Shri Sharadkumar J Shah Shri V. P. Chaudhari Shri Rahul Ranade Shri Abhinav Sharma Shri Rajesh Chury Shri Vasant Shirish
Individual Akerkvaerner Power gas Individual Tata Power Company Tata Power Company Maharashtra Times Individual
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Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade Centre, Centre No.

Case No. 95 of 2009

2 OBJECTIONS RECEIVED, BESTS RESPONSE AND COMMISSIONS RULING ___________________________________________________________ 15

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TRUING UP OF ARR FOR FY 2008-09 _____________________________ 44

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4.6 4.7 4.8 4.9 4.10 4.11

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4.15 4.16 4.17 4.18

5 TARIFF PHILOSOPHY AND CATEGORY-WISE TARIFFS FOR FY 201011 116

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1 BACKGROUND AND BRIEF HISTORY

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2 OBJECTIONS RECEIVED, BESTS RESPONSE AND COMMISSIONS RULING

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3 TRUING UP OF AGGREGATE REQUIREMENT FOR FY 2008-09

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POWER PURCHASE EXPENSES FOR FY 2008-09

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Quantum (MU) 16.40

Type of Source Wind

Cost (Rs. Crore) 6.30

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Source TPTCL (Trading Licensee) TOTAL

Quantum (MU) 27.18 43.58

()* ()* 156.15 46.85 666.61