Before the MAHARASHTRA ELECTRICITY REGULATORY …

1 Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION. World Trade Centre, Centre , 13th Floor, Cuffe Parade, Mumbai 400 005. Tel. 022 - 22163964/ 65/ 69 Fax No. 022 - 22163976. Email: Website: CASE No. 322 of 2019. Case of MAHARASHTRA State ELECTRICITY Distribution Company Limited for Truing-up of Aggregate Revenue Requirement (ARR) of FY 2017-18 and FY 2018-19, Provisional Truing-up of ARR of FY 2019-20 and Projections of ARR and determination for the 4th Multi Year Tariff Control Period FY 2020-21 to FY 2024-25. Coram I. M. Bohari, Member Mukesh Khullar, Member ORDER. Date: 30 March, 2020. MAHARASHTRA State ELECTRICITY Distribution Company Limited (MSEDCL or Petitioner), Prakashgad , Anant Kanekar Marg, Bandra (East), Mumbai has filed has filed a Petition on 27 November, 2019 for Truing-up of ARR for FY 2017-18 and FY 2018-19, Provisional Truing-up of ARR for FY 2019-20 and ARR and Tariff for Multi Year Tariff (MYT) 4th Control Period from FY 2020-21 to FY 2024-25.

2 The Petition has been submitted in accordance with the MERC (Multi Year Tariff) Regulations 2015 ( MYT Regulations, 2015 ), for Truing-up of ARR for FY 2017-18, FY 2018-19 , Provisional Truing-up of ARR for FY 2019-20 and in accordance with MERC (Multi Year Tariff) Regulations 2019 ( MYT Regulations, 2019 ) for ARR of Control Period FY 2020-21. and FY 2024-25. The Commission, in exercise of the powers vested in it under Sections 61, 62 and 86 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 MSEDCL , and in the public consultation process, and all other relevant material, has approved the Truing-up of ARR for FY 2017-18. and FY 2018-19, Provisional Truing-up of ARR for FY 2019-20 and ARR and Tariff of Control Period FY 2020-21 to FY 2024-25 in this Order. Approval of Truing-up for FY 2017-18 and FY 2018-19, Provisional Truing-up for FY 2019-20 and ARR for 4th Control Period from FY 2020-21 and FY 2024-25 for MSEDCL.

3 TABLE OF CONTENTS. 1 BACKGROUND AND SALIENT FEATURES OF THE ORDER .. 22. Background .. 22. Admission of the Petition and REGULATORY Process .. 23. Organisation of the Order .. 27. 2 SUGGESTIONS/OBJECTIONS, MSEDCL'S RESPONSE AND COMMISSION'S. RULINGS .. 28. TVS and Public Consultation Process .. 28. Agricultural Tariff and Sales, Power Supply to Agriculture and Distribution loss .. 29. Increase in Fixed / Demand 36. Wheeling charges .. 41. Power Purchase .. 43. Revenue Gap .. 47. kVAh based Billing .. 49. Recording of Maximum Demand .. 53. Load Factor 55. Power Factor Incentive .. 57. Prepaid Meter Rebate .. 58. Penalty on Contract Demand Violations .. 59. Harmonic Penalty .. 61. Metering Faults, Meter Readings and Billing Issues .. 65. Capital Expenditure and Capitalisation .. 68. Schedule of Charges .. 69. Applicability of Standby Charges for SEZs/Railways .. 73. Accountability of Distribution Franchisees.

4 76. Rebate on Incremental Power Consumption .. 78. Additional Surcharge .. 80. Power Supply and 83. Increase in Tariff .. 84. Fuel Adjustment Cost .. 92. Tariff for EV Charging Stations .. 94. Time of Day tariff .. 95. Tariff Re-categorisation .. 99. Cross Subsidy and Cross Subsidy surcharge .. 103. Open Access .. 106. Revision in definition of Billing Demand .. 109. Standard of Performance and Efficiency of Administration .. 112. MERC Order Case No. 322 of 2019 Page 1 of 752. Approval of Truing-up for FY 2017-18 and FY 2018-19, Provisional Truing-up for FY 2019-20 and ARR for 4th Control Period from FY 2020-21 and FY 2024-25 for MSEDCL. Financial Management .. 115. Differentiation in Tariff .. 116. Grid Support Charges .. 117. Implementation issues in Net Metering .. 125. Additional Demand Charges for RE Rooftop Power 127. Renewable Purchase Obligations (RPO) .. 128. Opex Scheme .. 129.

5 3 IMPACT RECONCILIATION OF OPENING GFA .. 131. Background .. 131. 4 TRUE-UP OF FY 2017-18 AND FY 2018-19 .. 136. Background .. 136. Sales in FY 2017-18 and FY 2018-19 .. 136. Energy Balance for FY 2017-18 and FY 2018-19 .. 152. Distribution Losses for FY 2017-18 and FY 2018-19 .. 159. Power Purchase Expenses for FY 2017-18 and FY 2018-19 .. 161. Intra State Transmission Charges and MSLDC Charges for FY 2017-18 and FY 2018- 19 182. O&M Expenses for FY 2017-18 and FY 2018-19 .. 183. Capital Expenditure and Capitalization for FY 2017-18 and FY 2018-19 .. 192. Depreciation for FY 2017-18 and FY 2018-19 .. 197. Interest Expenses for FY 2017-18 and FY 2018-19 .. 201. Return on Equity for FY 2017-18 and FY 2018-19 .. 206. Interest on Working Capital for FY 2017-18 and FY 2018-19 .. 209. Other Finance Charges for FY 2017-18 and FY 2018-19 .. 214. Provision for Bad Debts for FY 2017-18 and FY 2018-19.

6 215. Other Expenses for FY 2017-18 and FY 2018-19 .. 218. Contribution to Contingency Reserves for FY 2017-18 and FY 2018-19 .. 221. Income Tax for FY 2017-18 and FY 2018-19 .. 222. Incentives and Discounts for FY 2017-18 and FY 2018-19 .. 223. RLC Refund for FY 2017-18 and FY 2018-19 .. 224. Additional Supply Charge Refund for FY 2015-16 .. 225. Revenue for FY 2017-18 and FY 2018-19 .. 226. Non-Tariff Income for FY 2017-18 and FY 2018-19 .. 229. Income from Wheeling Charges for FY 2017-18 and FY 2018-19 .. 232. Income from Additional Surcharge for FY 2017-18 and FY 2018-19 .. 232. Income from Open Access Charges .. 233. Income from Trading Surplus Power .. 236. MERC Order Case No. 322 of 2019 Page 2 of 752. Approval of Truing-up for FY 2017-18 and FY 2018-19, Provisional Truing-up for FY 2019-20 and ARR for 4th Control Period from FY 2020-21 and FY 2024-25 for MSEDCL. Impact of Payment to MPECS for FY 2017-18 and FY 2018-19.

7 237. Past Period Adjustment by Commission .. 238. Sharing of Efficiency Gains and Losses for FY 2017-18 and FY 2018-19 .. 238. Aggregate Revenue Requirement for FY 2017-18 and FY 246. 5 PROVISIONAL TRUE-UP FOR FY 2019-20 .. 252. Provisional Sales for FY 2019-20 .. 252. Energy Balance for FY 2019-20 .. 254. Distribution Loss for FY 2019-20 .. 257. Power Purchase Expense for FY 259. Intra State Transmission Charges for FY 264. O&M Expenses for FY 2019-20 .. 265. Capital Expenditure and Capitalization for FY 2019-20 .. 268. Depreciation for FY 2019-20 .. 273. Interest Expenses for FY 2019-20 .. 274. Other Finance Charges .. 276. Return on Equity for FY 278. Interest on Working Capital for FY 2019-20 .. 280. Provision for Bad Debts for FY 2019-20 .. 284. Other Expenses for FY 2019-20 .. 286. Contribution to Contingency Reserves for FY 2019-20 .. 288. Income Tax for FY 2019-20 .. 290. Incentives and Discounts for FY 2019-20.

8 290. RLC Refund for FY 291. Non-Tariff Income for FY 292. Income from Wheeling Charges for FY 2019-20 .. 293. Income from Open Access Charges for FY 2019-20 .. 294. Impact of payment to MPECS in FY 2019-20 .. 295. Past period Adjustment allowed by Commission for FY 2019-20 .. 296. Revenue Gap Recovery Allowed for FY 2019-20 .. 296. Revenue for FY 2019-20 .. 297. Income from Additional Surcharge for FY 2019-20 .. 298. Income from Trading of Surplus Power .. 299. Segregation of Wires and Supply ARR .. 299. Aggregate Revenue Requirement for FY 2019-20 .. 300. 6 PROJECTION OF AGGREGATE REVENUE REQUIREMENT FOR FOURTH. CONTROL PERIOD FROM FY 2020-21 TO FY 2024-25 .. 306. Background .. 306. MERC Order Case No. 322 of 2019 Page 3 of 752. Approval of Truing-up for FY 2017-18 and FY 2018-19, Provisional Truing-up for FY 2019-20 and ARR for 4th Control Period from FY 2020-21 and FY 2024-25 for MSEDCL.

9 Segregation of Wires and Supply Business for Control Period .. 306. Sales projections for Forth Control 307. Distribution Loss for Fourth Control Period .. 329. Energy Balance for 4th Control Period from FY 2020-21 to FY 2024-25 .. 330. Power Purchase Expenses for 4th Control Period FY 2020-21 to FY 2024-25 .. 339. Intra State Transmission Charges and MSLDC Charges .. 363. O&M Expenses for Fourth Control Period from FY 2020-21 to FY 2024-25 .. 365. Opex for the Fourth Control Period from FY 2020-21 to FY 369. Capital Expenditure and Capitalization for 4th Control Period .. 376. Depreciation for Fourth Control Period from FY 2020-21 to FY 2024-25 .. 380. Interest on Long-Term Loan for Fourth Control 381. Return on Equity for Fourth Control Period .. 383. Interest on Working Capital for Fourth Control Period .. 388. Other Finance Charges for Fourth Control Period .. 393. Provision for Bad Debts for Fourth Control Period.

10 394. Other Expenses for Fourth Control Period .. 396. Contribution to Contingency Reserves for FY 2018-19 and FY 2019-20 .. 397. Incentives and Discounts for Fourth Control Period .. 399. Non-Tariff Income for Fourth Control Period .. 400. Impact of Payment to MPECS for the Fourth Control Period .. 402. Income from Open Access Charges .. 402. Revenue from Projected Sales for the Fourth Control Period .. 404. Income from Additional Surcharge .. 405. Incremental Consumption & Bulk Consumption Rebate .. 406. Aggregate Revenue Requirement from FY 2020-21 to FY 2024-25 .. 407. 7 ADDITIONAL CLAIMS AND REVENUE GAP .. 413. Impact of Reinstatement of GFA .. 413. Impact of Capitalization of DPDC for FY 2016-17 in MTR Order .. 413. Impact of Review Order .. 415. Impact of Change in Law in Power Purchase .. 420. Carrying Cost on Previous Gap and other claims .. 424. Carrying Cost on unrecovered revenue gap during the control period.