MAHARASHTRA ELECTRICITY REGULATORY COMMISSION

TARIFF ORDERDate: 12 September, 2018

Case No. 195 of 2017

In the matter of Mid-Term Review Petition of Maharashtra State Electricity Distribution Company

Limited for Truing-up of Aggregate Revenue requirement (ARR) of FY 2015-16 and FY 2016-17,

Provisional Truing-up of ARR of FY 2017-18 and Revised Projections of ARR for FY 2018-19 and FY 2019-20

• HIGHLIGHTS OF COMMISSIONS TARIFF ORDER

• Commission has considered most of the suggestions of VIA and issued a balanced tariff order against MSEDCL’s very high projections of deficiency in ARR to the tune of Rs. 34646 crore to be recovered in 2 years in addition to the existing tariff.

• This proposal of MSEDCL would have impact of 25 to 40% increase in industrial consumers energy bills.

• VIA objected and submitted to Commission that this will be a tariff shock which violates the appellate tribunal order

• Commission approved revenue gap of Rs. 20651 crore and out of this Commission decided to create regulatory asset of Rs. 12382 crore and allowed to recover Rs.8268 crore through increase in tariff.

• Commission allowed deferred recovery of such Regulatory Asset over and beyond the 3rd Control Period alongwith carrying cost, as allowed under the MYT Regulations.

• Commission considered VIA’s suggestions and decided following.• Did not change definition of billing demand which could have very

adverse impact on consumers energy bills.• Did not allow KVAH billing within this control period which could

have raised consumers energy bills by more than 25% and the incentives of power factor would have been withdrawn

• Commission did not change a provision of load factor incentive but did not allow to give load factor incentive to those consumers who will exceed contract demand during any time of the day including off peak hours.

• One important change which shall affect consumers energy bills is that the power factor incentive has been reduced to 50% i.e. maximum incentive of 3.5% instead of 7% on unity power factor. Consumers will have to pay penalty upto 5% maximum on low power factor which may be lagging or leading . Earlier there was not penalty for leading power factor and to maintain good power factor consumers will have to install automatic power factor correction panels.

• On VIA suggestions Commission did not allow bulk discount rebate and rebate for new industry as this could have created discrimination within consumers and small industries would have been adversely affected.

• VIA objected to gross metering in roof top solar system and imposition of surcharge on roof top solar system saying that it is a separate policy and can not be changed through MYT petition. Commission did not change the existing net metering system and did not impose surcharge.

• Considering importance of accurate Agricultural consumption assessment, the Commission has decided to undertake Third Party verification of Agricultural Sales of MSEDCL which will be completed by March, 2020.

• Commission has introduced a discount of 0.25% of the monthly bill (excluding taxes and duties), subject to a cap of Rs. 500/- per month per bill for LT category consumers for payment of electricity bills through various modes of digital payment such as credit cards, debit cards, UPI, BHIM, internet banking, mobile banking, mobile wallets, etc

• Commission did not allow stand by charges to be imposed on CPP for stand by demand.

HIGHLIGHTS OF INCREASE IN TARIFF RATES

• There is a high rise a demand and fixed charges to the tune of 25 to 30%.

• The variable charges has been increased by 2 to 4%

• Wheeling charges has been increased as below.

• EHV consumers - NIL

• 33 KV consumer – 9 paise to 15 paise

• 22 KV consumers – 82 paise to 38 paise (reduction)

• 11 KV consumers – 82 paise to 78 paise (reduction)

• LT category consumers – 118 paise to 130 paise

COMMENTS OF VIA ON TARIFF ORDER

• Commission has issued a balanced tariff considering a very high revenue deficiency projected by MSEDCL. By creating regulatory asset Commission avoided to tariff shock to consumers.

• The overall impact on consumers energy bills would be 7 to 10% depending on working shifts i.e. for single shift consumers it will be more and for 3 shift consumers it will be less because high rise in demand charges.

• The regulatory asset shall be recover in next control period of 5 years but the impact may be reduced because of lower power purchase cost, improving efficiency by MSEDCL, reducing losses, improvement in recovery and reducing expenses.

The Commission has determined the net revenue gap to be recovered from FY 2016-17 to FY 2019-20 as shown below:

• Thus, as against the total Revenue Gap of Rs. 34646 Croreestimated by MSEDCL which is 23% of its total projected ARR, the Commission has determined lower total Revenue Gap of Rs. 20651 Crore. In order to avoid Tariff shock to the consumers, the Commission has decided to create Regulatory Asset. Accordingly out of approved revenue gap of Rs 20651 crore, only Rs. 8268 crore has been allowed through average tariff increase of 5 % and balance amount of Rs. 12382 crore has been treated as Regulatory Asset and allow deferred recovery of such Regulatory Asset over and beyond the 3rd Control Period alongwith carrying cost, as allowed under the MYT Regulations.

• VIA SUBMISSION AGAINST KVAH BILLING

• Vidharbha Industries Association (VIA) has opposed kVAh billing on several grounds as mentioned below:

• 1) Since MYT Regulations are framed considering kWh as a unit for sale of electricity and the entire MTR Petition is filed under MYT Regulations 2015. VIA states that the Commission in Case 94 of 2015 have ruled based on the Hon’ble Supreme Court Order that the Orders of the Commission has no jurisdiction to change the unit of measurement of energy.

• 2) The Provision of MTR is made with an intention to allow Truing-up of revenue deficit, if any. The proposals including changing billing unit and tariff philosophy falls within the scope of review of Conduct of Business Regulations, 2004. All such proposals are beyond the scope of MTR.

• 3) VIA stated that kVAh is a derived quantity. It violates legal metrology Act, which comes under the Consumer Affair Department.

• 4) MSEDCL is purchasing power in terms of kWh units and proposed to sale kVAh units which are against the principles of any business.

• 5) kVAh tariffs are never equitable - Reactive power is a locally-generated phenomena. The kVAh drawl by a consumer for the same connected load will vary depending on the voltage at consumer premises. As voltage at which power is delivered to consumers is under control of the Distribution Company and not consumers, it is unethical and unequitable to bill consumers as per their kVAh drawl. kWh drawl by consumers are also affected by voltages, but a consumer does not have to “adjust” or “compensate” his consumption when voltages are poor and still land himself or herself at a financial disadvantage.

• 6) A poor power factor penalty (or demand overshoot) is more appropriate than kVAh based tariffs because penalties generally have two very fair components (i) a limit for which there is no penalty – a warning factor (ii) a penalty for violations beyond the allowable limit – that is a penal component. A kVAh tariff on the other hand does notgive any allowable limit as a warning. It is “impossible to maintain” magic figure of a perfect unity power factor.

• 7) In availability-based tariffs, maintenance of MW drawl schedules, generation schedules, drawls from the Grid etc. are to be paid based on pre-decided contracts, which are in MW and kWh. The deviation from schedules is to be measured and charged at rates, which are related to the incremental cost of generation in the system, such incremental cost being determined from the grid frequency. It may be noted that here also, the stress (or commercial deterrent) is based on kWh and not kVAh. The voltage linked reactive drawls (in the proposed inter-utility tariffs) are more in nature of a penalty than a tariff. Hence, the Commission is requested not to consider kVAh billing which is non-technical and illegal

• Commission’s Analysis & Ruling• 2.8.19 The Commission has noted the objections in

this regard, and MSEDCL’s replies. The Commission is of the view that the kVAh billing may not appropriate at this juncture of time as it has to be done in a gradual manner to avoid any tariff shock due to such change. MSEDCL may submit its proposal for kVAhbilling in next control period. The Commission intends to implement kVAh billing to all HT consumer and LT consumers having load above 20 kW from 1 April, 2020.

2.9. Load Factor Incentive

• In order to ensure secure operation of electricity grid, it is critical that every constituent of the system acts within its assigned boundaries. Intentional violation of Contract Demand limit by individual consumer for its own financial gain may lead to a system failure, which may affect other consumers.

• Hence, the Commission is constrained to rules that Load Factor Incentive should not be applicable for the month if the consumer exceeds its Contract Demand in that month. Further, the Consumers exceeding Contract demand during the off-peak hours (2200 hrs to 0600 hrs) would also not be eligible for Load factor Incentive for that month.

Power factor incentive

• Though PF Incentive mechanism encourages the consumer to improve its lagging power factor and maintain it to unity, there are cases of over compensation causing leading power factor. There is no clarity about leading power factor in existing Tariff Order. As is the case with lagging power factor, higher magnitude of leading power factor is also not desirable.

• Therefore, the Commission introduces penalty for leading power factor also. This penalty will be applicable from prospective effect. As a first step towards the implementation of kVAh billing system, which is devoid of any separate incentive / penalty for power factor,

• the Commission has decided to reduce the existing PF Incentive / Penalty by 50%. Accordingly, maximum PF Incentive, which is 7% at Unity power factor, has been reduced to 3.5%. Similarly, Penalty for lower power factor has been rationalised.

BULK SUPPLY REBATE AND INCENTIVE TO NEW INDUSTRIESVidhrabha Industries Association (VIA) and others stated that MSEDCL has proposed incentives for new HT industries. EA-2003 do not empower MSEDCL or the Commission to propose it or approve it. This amounts to discrimination between two consumers of identical category based on new or old and thus it is illegal under the provisions of EA 2003 section 62(3). They also stated that Bulk discount proposal format is unacceptable and beyond scope of MTR. It will create discrimination between small capacity plant and large plants and badly hurt SME.

• Commission’s Analysis & Rulings• 2.16.9. The Commission has noted the concerns and objections

raised during public hearing process, wherein several objectors have raised objections and concerns that MSEDCL’s proposal for bulk supply rebate seeks to discriminate against small consumers in favour of bulk/large industries. Such differential bulk rebate design would be discriminatory and would only favour large consumers as against small/micro/mini scale consumers. Pass through such bulk discount through ARR of utility would further affect the other small/micro organisations. Hence, the Commission has not allowed such Bulk Consumption Rebate as proposed by MSEDCL.

• PROPOSAL OF WHEELING CHARGES FOR ROOF TOP SOLAR SYSTEM AND GROSS METERING

•

• VIA submission to Commission MSEDCL has proposed the Leavy of wheeling charges to roof top solar consumers. It is beyond the scope of tariff petition as the same is governed by separate policy. On the contrary, MSEDCL is not taking regular reading of roof top generation meters which could have been utilized to fulfill its RPO obligations. MSEDCL may please be directed to submit detailed analysis total roof top solar consumers along with RPO obligations fulfilment done through it.

• Commission’s Analysis & Rulings 2.17.21. The Commission has taken a note of the Petitioner’s submission regarding the issues pertaining to Net-metering/Gross Metering arrangement. Commission observes that, the above highlighted issue is specifically linked to the provisions stipulated under the MERC (Net-Metering for Solar-Rooftop Photo Voltaic System) Regulations, 2015 and the entails modification/review of Net Metering framework upon due regulatory consultation process. Thus, the submissions of Petitioner cannot be addressed under the present MTR process initiated in pursuance of the MYT Regulations, 2015.

• Considering importance of accurate Agricultural consumption assessment, the Commission has decided to undertake Third Party verification of Agricultural Sales of MSEDCL which will be completed by March, 2020. Meantime in the present Order, the Commission has assessed Agricultural sales for FY 2015-16 to FY 2017-18 which will be subjected to outcome of third party verification.

• In line with the Government’s initiative of encouraging digitization across areas including monetary transactions, the Commission has introduced a discount of 0.25% of the monthly bill (excluding taxes and duties), subject to a cap of Rs. 500/- per month per bill for LT category consumers for payment of electricity bills through various modes of digital payment such as credit cards, debit cards, UPI, BHIM, internet banking, mobile banking, mobile wallets, etc. This will further benefit consumers who are making prompt payment of their bills, as they will also be eligible for the prompt payment discount of 0.5% of their monthly bill.

COMMISSIONS RULING ON STAND BY CHARGES OF CPP

• 9.35.10.As regards, the Standby Charges to CPPs, the Commission has already determined the Stand-by charges of Rs. 20/kVA for the embedded CPPs. The Commission notes that the same said charges, which has been worked in the past, might require some revision. The same shall be taken up during next MYT Order for the new Control Period. In addition, the Commission would like to highlight that Petitioner’s claim for the levy of Stand-by charges will not be justified, since the standalone CPP generators in no way have any connection with MSEDCL’s network, though they are connected to a common grid.

•9.35.11.However, in case of drawl from the grid takes place, the CPP generators itself would have to pay penalty in terms of Deviation Charges, whereas the CPPs who are directly connected to the MSEDCL’s Distribution network and wheels power in case of shutdown of plant, MSEDCL can rightly charge penalty for the extra wheeled energy also, the same embedded consumers are already being paying their Stand-by charges as defined under Tariff Schedule for the respective voltage levels. In view of above facts, the Stand-by Charges will not be levied to the Standalone CPP generators.

MSEDCL DEMAND FOR STAND BY POWER TO CPP

Thank You.