Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION ...mercindia.org.in/pdf/Order 58...
Transcript of Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION ...mercindia.org.in/pdf/Order 58...
Before the
MAHARASHTRA ELECTRICITY REGULATORY COMMISSION
World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai – 400 005
Tel. 22163964/ 65/ 69 Fax 22163976
Email: [email protected]
Website: www.mercindia.org.in / www.merc.gov.in
Case No. 39 of 2013
IN THE MATTER OF
Petition for Truing up for FY 2011-12, Annual Performance Review of FY 2012-13 and
Aggregate Revenue Requirement for the MYT Second Control Period from FY 2013-14
to FY 2015-16 of Maharashtra State Electricity Transmission Company Limited
(MSETCL)
Shri Vijay L. Sonavane, Member
Smt. Chandra Iyengar, Member
Maharashtra State Electricity Transmission Company Limited (MSETCL) ...............Petitioner
ORDER
13 February, 2014
Maharashtra State Electricity Transmission Company Limited submitted a Petition seeking
approval of Truing up for FY 2011-12, Annual Performance Review for FY 2012-13 and
determination of Aggregate Revenue Requirement for the MYT Second Control Period from
FY 2013-14 to FY 2015-16 under the provisions of MERC (Terms and Conditions of Tariff)
Regulations, 2005 and MERC (Multi Year Tariff) Regulations, 2011, respectively. 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 MSETCL, all the objections and
comments of the public, issues raised during the Public Hearing and all other relevant
material, has carried out Truing up for FY 2011-12, APR for FY 2012-13 and ARR for the
MYT Second Control Period from FY 2013-14 to FY 2015-16 in this Order.
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 2 of 143
Table of Contents
1. INTRODUCTION...................................................................................................... 10
1.1. Background .............................................................................................................................. 10
1.2. Organisation of the Order ........................................................................................................ 11
1.3. Tariff Regulations and Control Period ..................................................................................... 12
1.4. Petition and prayers of the Petitioner ....................................................................................... 14
1.5. Admission of Petition and Public Hearing process .................................................................. 15
2. OBJECTIONS RECEIVED, MSETCL’S RESPONSE AND THE
COMMISSION’S RULING ...................................................................................... 17
2.1. Transmission Losses and Efficiency ........................................................................................ 17
2.2. Aggregate Revenue Requirement ............................................................................................ 19
2.3. Public process .......................................................................................................................... 21
2.4. Cost of gas ............................................................................................................................... 22
2.5. Compensation for land and Non-compliance of Provisions of Acts and Regulations ............. 23
2.6. Capitalisation and Disallowed Capitalisation .......................................................................... 26
2.7. Use of Contractors/ Private Companies/ Agents ...................................................................... 27
2.8. Quality control ......................................................................................................................... 28
3. IMPACT OF DISALLOWED CAPITALISATION OF ASSETS FOR
PREVIOUS YEARS .................................................................................................. 30
3.1. Background .............................................................................................................................. 30
3.2. Impact of Disallowed Capitalisation of Assets during FY 2007-08 ........................................ 30
3.3. Impact of Disallowed Capitalisation of Assets during FY 2008-09 ........................................ 32
3.4. Impact of Disallowed Capitalisation of Assets for FY 2007-08 and FY 2008-09 in FY 2009-
10 ............................................................................................................................................. 33
3.5. Impact of Disallowed Capitalisation of Assets for FY 2010-11 .............................................. 34
3.6. Disallowed capitalisation approved by the Commission ......................................................... 36
3.7. Impact of disallowed capitalisation analysed by the Commission........................................... 38
3.8. Carrying Cost on increase in ARR due to impact of disallowed capitalisation ....................... 53
4. TRUING UP OF AGGREGATE REVENUE REQUIREMENT FOR FY 2011-12
............................................................................................................................ 54
4.1. Background .............................................................................................................................. 54
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4.2. Change of Accounting Policy .................................................................................................. 54
4.3. Truing up of O&M expenses for FY 2011-12 ......................................................................... 54
4.4. Employee expenses for FY 2011-12 ........................................................................................ 56
4.5. Administrative and general expenses ....................................................................................... 59
4.6. Repair and Maintenance(R&M) expenses ............................................................................... 66
4.7. Capital Expenditure and Capitalisation.................................................................................... 68
4.8. Depreciation including advance against depreciation (AAD) ................................................. 71
4.9. Interest on Long term Loans .................................................................................................... 72
4.10. Other Interest & Finance Charges ............................................................................................ 75
4.11. Interest on Working Capital (IoWC) ....................................................................................... 76
4.12. Other Expenses ........................................................................................................................ 78
4.13. Return on Equity ...................................................................................................................... 81
4.14. Income Tax .............................................................................................................................. 82
4.15. Contribution towards contingency reserves ............................................................................. 83
4.16. Revenue from Transmission Charges ...................................................................................... 84
4.17. Non-Tariff Income ................................................................................................................... 85
4.18. Incentive on Transmission Availability ................................................................................... 90
4.19. Sharing of gains/losses ............................................................................................................. 91
4.20. Summary of efficiency gains/ (losses) for FY 2011-12 ........................................................... 93
4.21. Revenue (Gap)/ surplus till FY 2011-12 .................................................................................. 93
4.22. Summary of Truing up including Sharing of Gains & Losses for FY 2011-12 ....................... 94
4.23. Performance Parameters .......................................................................................................... 95
5. ANNUAL PERFORMANCE REVIEW FOR FY 2012-13 .................................... 98
5.1. Background .............................................................................................................................. 98
5.2. O&M Expenses for FY 2012-13 .............................................................................................. 98
5.3. Capitalisation ......................................................................................................................... 101
5.4. Interest and Finance Charges ................................................................................................. 102
5.5. Depreciation ........................................................................................................................... 104
5.6. Interest on working capital and consumer security deposit ................................................... 105
5.7. Return on Equity .................................................................................................................... 107
5.8. Other Expenses ...................................................................................................................... 109
5.9. Contingency Reserves ............................................................................................................ 109
5.10. Income Tax ............................................................................................................................ 110
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Control Period
MERC, Mumbai Page 4 of 143
5.11. Non-Tariff Income ................................................................................................................. 110
5.12. Income from wheeling received from Goa and Dadra Nagar ................................................ 112
5.13. Summary of Estimated Aggregate revenue requirement for FY 2012-13 ............................. 113
5.14. Revenue Gap for FY 2012-13 ................................................................................................ 114
6. AGGREGATE REVENUE REQUIREMENT FOR MYT SECOND CONTROL
PERIOD .................................................................................................................... 115
6.1. Background ............................................................................................................................ 115
6.2. O&M expenses ...................................................................................................................... 115
6.3. Capital expenditure and capitalisation ................................................................................... 118
6.4. Depreciation ........................................................................................................................... 120
6.5. Interest on long-term loans .................................................................................................... 122
6.6. Interest on working capital ..................................................................................................... 125
6.7. Contribution to contingency reserves .................................................................................... 127
6.8. Return on equity (RoE) .......................................................................................................... 127
6.9. Income tax .............................................................................................................................. 129
6.10. Non-Tariff income ................................................................................................................. 131
6.11. Income from wheeling charges received from Goa and Dadra Nagar ................................... 134
6.12. Aggregate revenue requirement ............................................................................................. 135
6.13. Transmission Tariff for Second Control Period ..................................................................... 136
7. SUMMARY OF DIRECTIVES ISSUED BY THE COMMISSION AND
COMPLIANCE STATUS ....................................................................................... 137
7.1. Background ............................................................................................................................ 137
7.2. Assets put to use .................................................................................................................... 137
7.3. Submission of Business Plan ................................................................................................. 138
7.4. Quantification of controllable and uncontrollable expenses .................................................. 138
7.5. Information on theft of electrical lines, plants and installations ............................................ 139
7.6. Compliance report on investment of foreign exchange gain/loss in securities ...................... 140
8. APPLICABILITY OF THE ORDER .................................................................... 141
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 5 of 143
List of Tables
Table 1: Transmission Losses for Intra-State Transmission System submitted by MSETCL 18
Table 2: Revised Transmission Loss of InSTS for FY 2011-12 submitted by MSETCL ....... 19
Table 3: Query on ARR submitted by Shri George John ........................................................ 20
Table 4: Abstract of Accidents submitted by MSETCL .......................................................... 29
Table 5: Claim of Disallowed Capitalisation for FY 2007-08 submitted by MSETCL ......... 31
Table 6: Impact of disallowed capitalisation for FY 2007-08 submitted by MSETCL .......... 32
Table 7: Claim on disallowed capitalisation for FY 2008-09 by MSETCL ........................... 33
Table 8: Impact of claim on disallowed capitalisation for FY 2008-09 submitted by MSETCL
.................................................................................................................................................. 33
Table 9: Impact of claim on disallowed capitalisation for FY 2009-10 submitted by MSETCL
.................................................................................................................................................. 34
Table 10: Claim on disallowed capitalisation for FY 2010-11 by MSETCL ......................... 35
Table 11: Impact of claim on disallowed capitalisation for FY 2010-11 submitted by
MSETCL ................................................................................................................................. 35
Table 12: Summary of Impact due to Disallowed Capitalisation submitted by MSETCL .... 36
Table 13: Disallowed capitalisation approved by the Commission ........................................ 38
Table 14: Past True up Orders considered in analysis ............................................................. 39
Table 15: Depreciation for FY 2007-08 approved by the Commission .................................. 40
Table 16: Depreciation for FY 2008-09 approved by the Commission .................................. 40
Table 17: Depreciation for FY 2009-10 approved by the Commission .................................. 41
Table 18: Depreciation for FY 2010-11 approved by the Commission .................................. 41
Table 19: Interest expenses for FY 2007-08 approved by the Commission ........................... 43
Table 20: Interest expenses for FY 2008-09 approved by the Commission ........................... 43
Table 21: Interest expenses for FY 2009-10 approved by the Commission ........................... 44
Table 22: Interest expenses for FY 2010-11 approved by the Commission ........................... 45
Table 23: Net increase in interest expenses approved by the Commission ............................ 45
Table 24: Return on equity for FY 2007-08 approved by the Commission ........................... 46
Table 25: Return on Equity for FY 2008-09 approved by the Commission ........................... 47
Table 26: Return on Equity for FY 2009-10 approved by the Commission ........................... 47
Table 27: Return on Equity for FY 2010-11 approved by the Commission ........................... 48
Table 28: Net increase in Return on Equity approved by the Commission ............................ 49
Table 29: Net increase in incentive on transmission system availability approved by the
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Commission ............................................................................................................................ 52
Table 30: Impact of disallowed capitalisation as approved by the Commission .................... 52
Table 31: O&M expenses submitted by MSETCL ................................................................. 55
Table 32: Reconciliation of O&M expenses submitted in the Petition and audited annual
accounts as submitted by MSETCL ........................................................................................ 56
Table 33: Deviation analysis of Employee expenses for FY 2011-12 .................................... 57
Table 34: Employee expenses approved by the Commission for FY 2011-12 ....................... 59
Table 35: Asset base submitted by MSETCL .......................................................................... 60
Table 36: Year-wise increment of assets submitted by MSETCL ........................................... 60
Table 37: Electricity charges submitted by MSETCL ............................................................ 61
Table 38: Deviation analysis of A&G expenses for FY 2011-12 ........................................... 62
Table 39: A&G expenses approved for FY 2011-12 by the Commission .............................. 66
Table 40: Deviation analysis of R&M expenses for FY 2011-12 .......................................... 66
Table 41: Net R&M Expenses approved for FY 2011-12 by the Commission ...................... 68
Table 42: Net O&M expenses approved for FY 2011-12 by the Commission ...................... 68
Table 43: Capital Expenditure and Capitalisation for FY 2011-12 submitted by MSETCL .. 69
Table 44: Capital Expenditure and Capitalisation for FY 2011-12 approved by the
Commission ............................................................................................................................ 70
Table 45: Depreciation including advance against depreciation for FY 2011-12 submitted by
MSETCL ................................................................................................................................. 71
Table 46: Depreciation including AAD for FY 2011-12 approved by the Commission ........ 72
Table 47: Interest on long term loans for FY 2011-12 approved by the Commission ........... 75
Table 48: Other Interest and Finance Charges for FY 2011-12 approved by the Commission
.................................................................................................................................................. 76
Table 49: Interest on Working Capital for FY 2011-12 as approved by the Commission ..... 78
Table 50: Break-up of other expenses submitted by MSETCL .............................................. 78
Table 51: Prior period expenses submitted by MSETCL ....................................................... 79
Table 52: Other Expenses for FY 2011-12 approved by the Commission ............................. 80
Table 53: Return on Equity for FY 2011-12 submitted by MSETCL .................................... 81
Table 54: Return on equity approved for FY 2011-12 approved by the Commission ........... 82
Table 55: Income Tax for FY 2011-12 as approved by the Commission ............................... 83
Table 56: Contribution towards Contingency Reserves for FY 2011-12 approved by the
Commission ............................................................................................................................ 84
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Control Period
MERC, Mumbai Page 7 of 143
Table 57: Revenue from Transmission Charges for FY 2011-12 submitted by MSETCL .... 84
Table 58: Revenue from Transmission Charges for FY 2011-12 as approved by the
Commission ............................................................................................................................ 85
Table 59: Non-Tariff income for FY 2011-12 submitted by MSETCL ................................. 85
Table 60: Details of miscellaneous receipts for FY 2011-12 submitted by MSETCL ........... 88
Table 61: Classification of scrap .............................................................................................. 89
Table 62: Non-Tariff income for FY 2011-12 approved by the Commission ........................ 90
Table 63: Incentive on transmission availability for FY 2011-12 submitted by MSETCL ... 90
Table 64: Incentive on transmission availability for FY 2011-12 approved by the Commission
.................................................................................................................................................. 91
Table 65: Sharing of Efficiency Gains/(Losses) due to variation in O&M Expenses & Interest
on Working Capital for FY 2011-12 ....................................................................................... 93
Table 66: Cumulative revenue (Gap)/ surplus till FY 2011-12 .............................................. 93
Table 67: Summary of True up for FY 2011-12 approved by the Commission ..................... 94
Table 68: Status of ABT meters installed for interface locations ............................................ 96
Table 69: Transmission loss for InSTS for FY2011-12 submitted by MSETCL .................... 96
Table 70: Revised Transmission Loss of InSTS for FY 2011-12 Submitted by MSETCL .... 97
Table 71: O&M Expenses for FY 2012-13 submitted by MSETCL ...................................... 99
Table 72: Component-wise O&M expenses submitted by MSETCL .................................... 99
Table 73: O&M Expenses for FY 2012-13 approved by the Commission ........................... 101
Table 74: Capitalisation for FY 2012-13 submitted by MSETCL ....................................... 101
Table 75: Capitalisation for FY 2012-13 approved by the Commission .............................. 102
Table 76: Estimated Interest Expenses for FY 2012-13 submitted by MSETCL ................. 103
Table 77: Interest expenses for FY 2012-13 approved by the Commission ......................... 104
Table 78: Estimated depreciation for FY 2012-13 submitted by MSETCL ......................... 104
Table 79: Depreciation for FY 2012-13 approved by the Commission ................................ 105
Table 80: Interest on working capital for FY 2012-13 approved by the Commission ......... 107
Table 81: Return on equity for FY 2012-13 approved by the Commission ......................... 108
Table 82: Other expenses for FY 2012-13 approved by the Commission ............................ 109
Table 83: Contingency Reserves for FY 2012-13 approved by the Commission ................ 110
Table 84: Income Tax for FY 2012-13 approved by the Commission ................................. 110
Table 85: Non Tariff Income for FY 2012-13 approved by the Commission ...................... 112
Table 86: Income from wheeling received from Goa and Dadra Nagar for FY 2012-13
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approved by the Commission ................................................................................................ 113
Table 87: Summary of Aggregate Revenue Requirement for FY 2012-13 approved by the
Commission .......................................................................................................................... 113
Table 88: Cumulative Revenue Gap till FY 2012-13 approved by the Commission ........... 114
Table 89: O&M expenses submitted by MSETCL ............................................................... 116
Table 90: O&M expenses approved for the Second Control Period .................................... 117
Table 91: Capitalisation submitted by MSETCL .................................................................. 118
Table 92: Capitalisation approved by the Commission ........................................................ 120
Table 93: Depreciation as submitted by MSETCL ............................................................... 121
Table 94: Depreciation approved by the Commission .......................................................... 122
Table 95: Interest expenses as submitted by MSETCL ........................................................ 123
Table 96: Interest on long term loans approved by the Commission ................................... 124
Table 97: Comparison of 1/12th
of book value of stores as submitted by MSETCL ............ 125
Table 98: Interest on working capital as submitted by MSETCL ........................................ 126
Table 99: Interest on working capital as approved by the Commission ............................... 127
Table 100: Contribution to Contingency Reserves submitted by MSETCL ........................ 127
Table 101: Contribution to contingency reserves as approved by the Commission ............. 127
Table 102: Return on Equity as submitted by MSETCL ...................................................... 128
Table 103: Return on equity as approved by the Commission ............................................. 129
Table 104: Income tax calculation as submitted by MSETCL ............................................. 129
Table 105: Income tax approved by the Commission .......................................................... 130
Table 106: Non-Tariff income as submitted by MSETCL ................................................... 133
Table 107: Non-Tariff income as approved by the Commission .......................................... 134
Table 108: Income from wheeling charges to be received from Goa and Dadra Nagar as
submitted by MSETCL ......................................................................................................... 134
Table 109: Income from wheeling charges to be received from Goa and Dadra Nagar as
approved by the Commission ................................................................................................ 134
Table 110: ARR of MSETCL approved by the Commission for MYT Second Control
Period.....................................................................................................................................135
Table 111: Uncontrollable A&G expenses submitted by MSETCL for FY 2011-12 .......... 139
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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List of Abbreviations
A&G Administrative and General
APR Annual Performance Review
ARR Aggregate Revenue Requirement
ATE Appellate Tribunal for Electricity
BSES BSES Limited (now known as Reliance Infrastructure Limited)
Commission/MERC Maharashtra Electricity Regulatory Commission
CPI Consumer Price Index
Capex Capital Expenditure
CWIP Capital Work In Progress
DPR Detailed Project Report
EA 2003 Electricity Act, 2003
EHV Extra High Voltage
GET Graduate Engineer Trainee
GFA Gross Fixed Assets
InSTS Intra-State Transmission System
IWC Interest on working capital
IT Income Tax
kV Kilo Volt
kW Kilo Watt
LILO Loop In Loop Out
MSETCL Maharashtra State Electricity Transmission Company Limited
MYT Multi Year Tariff
O&M Operation & Maintenance
PLR Prime Lending Rate
PBT Profit Before Tax
R&M Repair & Maintenance
RoE Return on Equity
SBI State Bank of India
STU State Transmission Utility
TSU Transmission System Utility
TVS Technical Validation Session
WPI Wholesale Price Index
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MERC, Mumbai Page 10 of 143
1. INTRODUCTION
1.1. Background
1.1.1. Maharashtra State Electricity Transmission Company Limited is a company formed
under the Government of Maharashtra General Resolution No. ELA-
1003/P.K.8588/Bhag-2/Urja-5 dated 24 January, 2005 with effect from 6 June, 2005
according to the provisions envisaged in [Part XIII] of the Electricity Act, 2003 (EA
2003). MSETCL is registered as a company under the Companies Act, 1956 with
the Registrar of Companies, Mumbai, having Certificate of Incorporation No.
U40109 MH 2005 PLC 153646 dated 31 May, 2005.
1.1.2. The Provisional Transfer Scheme was notified under Section 131 (5) (g) of the EA
2003 on 6 June, 2005, which resulted in the creation of following four successor
companies and MSEB Residual Company from the erstwhile Maharashtra State
Electricity Board, namely,
a. MSEB Holding Company Limited;
b. Maharashtra State Power Generation Company Limited;
c. Maharashtra State Electricity Transmission Company Limited; and
d. Maharashtra State Electricity Distribution Company Limited.
1.1.3. Maharashtra State Electricity Transmission Company Limited, the Petitioner, is in
the business of transmission of electricity in the State of Maharashtra, and has been
notified as the State Transmission Utility as per Section 39 of EA 2003.
1.1.4. In compliance of directions of the Commission in the Order dated 11 January, 2013
in Case No. 137 of 2011 (Order on Business Plan for the Second Control Period),
the Petitioner has submitted this Petition seeking approval of Truing up for FY
2011-12, Annual Performance Review for FY 2012-13 and determination of
Aggregate revenue requirement for FY 2013-14 to FY 2015-16. In addition, the
Petitioner has also sought for additional recovery due to impact of disallowed
capitalisation for past years.
1.1.5. The Petition for impact of disallowed capitalisation, Truing up for FY 2011-12 and
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 11 of 143
Annual Performance Review of FY 2012-13 has been filed under the provisions of
MERC (Terms and Conditions of Tariff) Regulations, 2005 and the Petition for
determination of Aggregate Revenue Requirement for the Second Control Period
from FY 2013-14 to FY 2015-16 has been filed under the provisions of MERC
(Multi Year Tariff) Regulations, 2011.
1.1.6. For the sake of brevity, the following abbreviation will be used in this Order
henceforth.
a. Maharashtra Electricity Regulatory Commission: MERC or The
Commission;
b. Maharashtra State Electricity Board: MSEB
c. Maharashtra State Electricity Transmission Company Limited: MSETCL;
d. State Transmission Utility: STU;
e. MERC (Terms and Conditions of Tariff) Regulations, 2005: Tariff
Regulations, 2005;
f. MERC (Multi Year Tariff) Regulations, 2011: Tariff Regulations, 2011;
g. Annual Performance Review: APR; and
h. Aggregate Revenue Requirement: ARR.
1.2. Organisation of the Order
1.2.1. This Order is organised in the following eight sections:
a. Section 1 provides a brief of the regulatory process undertaken by the
Commission.
b. Section 2 deals with the various objections / suggestions submitted in
writing as well as during the Public Hearing before the Commission. The
objections/suggestions have been summarised, followed by the response of
MSETCL and the rulings of the Commission on each of the issues.
c. Section 3 deals with the impact of disallowed capitalisation of FY 2007-08,
FY 2008-09 and FY 2010-11.
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d. Section 4 deals with the Truing up of expenses and revenue of MSETCL
for FY 2011-12.
e. Section 5 deals with APR of MSETCL for FY 2012-13.
f. Section 6 deals with determination of ARR of MSETCL for the Second
Control Period FY 2013-14 to FY 2015-16 and revenue gap/ surplus to be
recovered.
g. Section 7 deals with MSETCL’s compliance of the directives issued by the
Commission in the previous Order’s.
h. Section 8 deals with the applicability of the present Order.
1.3. Tariff Regulations and Control Period
1.3.1. First Control Period: The Commission had specified the First Control Period in
Maharashtra to be a period of three (3) years from FY 2006-07 till FY 2008-09,
through notification of the Tariff Regulations, 2005 on 23 August, 2005. However,
upon receipt of applications from utilities in Maharashtra, the Commission passed
an Order on 20 December, 2005 re-notifying the First Control Period from FY
2007-08 till FY 2009-10. The Orders passed by the Commission in the First Control
Period for MSETCL under Tariff Regulations, 2005 are listed below:
a. ARR Order for FY 2005-06 and FY 2006-07: Order dated 28 June, 2006 in
Case No. 49 of 2005.
b. Review Order issued on 19 October, 2006 in Case No. 21 of 2006.
c. MYT Order for FY 2007-08 to FY 2009-10: Order dated 2 April, 2007 in
Case No. 67 of 2006.
d. APR Order for FY 2007-08 and ARR for FY 2008-09: Order dated 31
May, 2008 in Case No. 70 of 2007.
e. Review Order issued on 12 September, 2008 in Case No. 40 of 2008.
f. APR for FY 2008-09 and ARR for FY 2009-10: Order dated 28 May, 2009
in Case No. 114 of 2008.
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g. True-up of FY 2008-09, APR for FY 2009-10 and ARR for FY 2010-11:
Order dated 10 September, 2010 in Case No. 103 of 2009.
h. Review Order issued on 30 November, 2010 in Case No. 73 of 2010.
i. Order on additional expenses; dated 30 March, 2011 in Case No. 21 of
2011.
j. True-up for FY 2009-10, APR for FY 2010-11: Order dated 29 December,
2011 in Case No. 102 of 2011.
k. Review Order dated 24 December, 2012 in Case No. 17 of 2012.
l. True up for FY 2010-11, ARR for FY 2011-12 and FY 2012-13: Order
dated 18 May, 2012 in Case No. 169 of 2011.
m. Review Order dated 14 December, 2012 in Case No. 106 of 2012.
1.3.2. Second Control Period: On 4 February, 2011, the Commission notified the MYT
Regulations, 2011. In these Regulations the Commission specified the Second
Control Period for Tariff determination to be a period of five (5) years starting from
FY 2011-12 till FY 2015-16. However, upon receipt of an application from
MSETCL in Case No. 62 of 2011, the Commission had passed an Order dated 3
November, 2011 granting exemption to MSETCL from determination of Tariff
under the MYT Regulations, 2011 for a period of two (2) years till 31 March, 2013.
The MYT Regulations, 2011 were amended vide notification of MERC (Multi Year
Tariff) (First Amendment) Regulations, 2011 on 21 October, 2011. In the said
amendment, the Commission specified that the generating companies and licensees
who have been exempted for certain periods from determination of Tariff under the
MYT Regulations, 2011, shall continue to file annual applications for approval of
ARR and Tariff for the period of exemption under the Tariff Regulations, 2005.
Apart from other relevant amendments, the Commission also included “transitory
provisions” in these Regulations. The transitory provisions dealt with the issue of
continuance of Tariff Order issued by the Commission for the year ending 31
March, 2011 and other provisions of Business Plan, Tariff, etc.
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1.4. Petition and prayers of the Petitioner
1.4.1. MSETCL submitted the present Petition on 18 March, 2013 based on actual audited
expenditure for FY 2011-12, estimated expenditure for FY 2012-13, and forecast of
expenses for the Second Control Period from FY 2013-14 to FY 2015-16.
1.4.2. The Commission, vide email dated 25 March, 2013, forwarded the data gaps and
information requirement identified in the Petition filed by MSETCL. Subsequently,
the Commission scheduled the Technical Validation Session (TVS) on 2 April,
2013. The list of persons who participated in the TVS is provided in Appendix-1.
1.4.3. Thereafter, MSETCL filed a revised Petition on 23 April, 2013 after some
amendments in the Petition along with replies to the queries of the Commission. In
the meantime, the Commission had issued the Tariff Order for the Second Control
Period for Intra State Transmission System (InSTS) on 13 May, 2013 in Case No.
56 of 2013. It was observed after scrutiny of MSETCL’s revised Petition that the
system demand and revenue estimated by MSETCL were different as compared to
the Tariff Order for the Second Control Period. Therefore, the Commission directed
MSETCL vide Letter No. MERC/TARIFF/2013-14/0743 dated 27 June, 2013 to
submit a revised Petition incorporating demand figures and revenue estimate as per
the InSTS Tariff Order dated 13 May, 2013 in Case No. 56 of 2013.
1.4.4. Accordingly, in compliance with the above direction, MSETCL submitted the
revised Petition on 15 July, 2013, which was considered by the Commission for
admittance and further processing.
1.4.5. The prayers of MSETCL in the Petition are as follows:-
“
a. Admit this Multi Year Tariff Petition
b. Allow the recovery of impact of disallowed capitalisation for past years
along with the appropriate carrying cost and allow to recover the same with
ARR for FY 2013-14
c. Allow true-up of expenses of FY 2011-12 based on the Audited Accounts and
approve the Revenue gap/surplus arrived after duly sharing the efficiency
gain with the transmission system users of MSETCL according to the
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principle of the Commission set out in MERC (Terms and Conditions of
Tariff) Regulations, 2005
d. Approve the provisional true-up for FY 2012-13 to the extent claimed by
MSETCL in accordance with the submissions and rationale given in this
Petition
e. Approve the ARR forecast for FY 2013-14 to FY 2015-16 as provided in the
Petition
f. Determine the Tariff for FY 2013-14 to FY 2015-16 that would help in
recovery of consolidated ARR including revenue gap/surplus of each year of
the Control Period
g. Approve the deviation in the parameters prescribed in the MYT Regulations,
2011 as sought in the Petition
h. Provide the workable excel model used by the Hon'ble Commission for
approval of the above true up and ARR Requirement of MSETCL
i. Condone any shortcomings/deficiencies and allow MSETCL to submit
additional information/data at a later stage as may be required.”
1.5. Admission of Petition and Public Hearing process
1.5.1. The Commission admitted the Petition vide letter dated 17 September, 2013 and
directed MSETCL to publish its application in accordance with Section 64 of the
EA 2003, in the prescribed abridged form and manner, to ensure adequate public
participation. The Commission also directed MSETCL to reply expeditiously to all
the suggestions and comments received from stakeholders on its Petition.
1.5.2. MSETCL issued a public notice in newspapers inviting comments/suggestions from
stakeholders on its Petition. The notice was published in English in Times of India
and DNA on 23 September, 2013 and in Marathi in Loksatta and Punya Nagari on
23 September, 2013. The copies of the Petition and its summary were made
available for inspection/purchase to members of the public at MSETCL’s offices
and website (www.mahatransco.in). The public notice and executive summary of
the Petition were also made available on the website of the Commission
(www.mercindia.org.in, www.merc.gov.in) in a downloadable format.
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1.5.3. The Commission received written objections regarding issues related to
transmission losses, approval of disallowed capitalisation, O&M expenses, etc. The
Commission held a Public Hearing on 29 October, 2013 in the Commission’s office.
The list of consumer representative and other stakeholders, who participated in the
Public Hearing, is provided in Appendix 2.
1.5.4. The Commission ensured that the due process contemplated under law to ensure
transparency and public participation was followed meticulously at every stage and
adequate opportunity was given to all the persons concerned to express their views
in the matter.
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2. OBJECTIONS RECEIVED, MSETCL’S RESPONSE AND THE
COMMISSION’S RULING
2.1. Transmission Losses and Efficiency
Suggestion/ Objection
2.1.1. Shri George John submitted that the transmission losses projected by MSETCL
were showing an upward trend from 4.17% in FY 2011-12 to 4.85% in FY 2012-13
onwards, even though there has been significant advancement in transmission
technology. He highlighted the fact that BEST, a distribution licensee has reported
distribution loss of 7.94% in FY10-11 which subsequently reduced to 7.56% in
FY11-12 and 7.4% in FY12-13. In this context, Shri John submitted that MSETCL
should target to reduce its transmission loss level to at least 3% in the short term and
to around 2% in the long term, as technology advances. He also requested MSETCL
to provide calculations based on which they arrived at transmission loss of 4.71%
and submit data on MUs received in each zone and MUs injected at corresponding
injection points, to quantify the energy lost in the system.
2.1.2. Shri John also submitted that MSETCL should be given power to monitor, cross
examine records, energy readings at transmission and receiving ends of even other
transmission entities to make each one responsible for achieving higher
transmission efficiency.
MSETCL’s response
2.1.3. MSETCL submitted that it has provided all the details pertaining to transmission
loss in Section 4.2.2.1 of its Petition. It further stated that though the Commission
had approved intra-state loss of 4.85% in FY 2010-11, it managed to keep the actual
loss incurred during FY 2010-11 to 4.31%. Despite the growing volume of
electricity handled by its network, the level of losses has been kept close to
normative loss level approved by the Commission in previous Order. The
decreasing trend of transmission loss is given in table below:
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Table 1: Transmission Losses for Intra-State Transmission System submitted by
MSETCL
S. No Year Energy Input
(MU)
Energy Output
(MU)
Transmission
Loss
1 FY 2008-09 95,477.956 90,815.816 4.88%
2 FY 2009-10 1,01,872.316 97,195.234 4.59%
3 FY 2010-11 1,07,810.082 1,03,162.694 4.31%
4 FY 2011-12 1,17,534.520 1,12,634.492 4.17%
2.1.4. MSETCL submitted that its transmission loss is 4.17% and not 4.71% and
submitted the detailed calculations on Page No. 109 of its Petition. For FY 2011-12,
it calculated transmission loss based on average annual energy wheeled by its
network (i/p and o/p) as follows:
Energy Input (Wheeling Units) = 1,17,536 MU ...(a)
Energy Output (Wheeling Units) = 1,12,633 MU ...(b)
Transmission Loss = [(a)-(b)]/(a)*100 = 4.17%
2.1.5. MSETCL further claimed that it has reduced transmission losses from 5.94% in FY
2006-07 to 4.31% in FY 2010-11.
2.1.6. MSETCL submitted that the Commission has engaged Central Power Research
Institute (CPRI) to carry load flow analysis with regard to the transmission loss
level in MSETCL network and arrive at scientifically optimum level of loss. On the
basis of data collated and analysis prepared by CPRI, a transmission loss level of
4.445% in the MSETCL network for FY 2004-05 has been arrived at.
2.1.7. As for the data asked by Shri George John for each zone, MSETCL replied that the
zones belong to MSEDCL and it cannot provide any data on the same.
Commission’s ruling
2.1.8. The Commission on verification of transmission loss figures submitted by
MSTECL found that it is in variance with the transmission loss figures made
available by MSLDC. In this regard, the Commission directed MSETCL to
submit the actual transmission loss figures against the transmission loss figure
of 4.25% for FY 2011-12 provided by MSLDC. MSETCL submitted that due
to revision in the energy accounting by MSEDCL circle offices and other
distribution utilities, the transmission loss numbers have been revised by
SLDC, Kalwa. Therefore, the transmission loss of InSTS has been revised as
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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4.25% and computed as below:
Table 2: Revised Transmission Loss of InSTS for FY 2011-12 submitted by MSETCL
S.
No
Year Energy Input
(MU)
Energy Output
(MU) Transmission Loss
1 FY 2011-12 1,17,555.044 1,12,561.678 4.25%
2.1.9. Additionally, the Commission appreciated concern of the objectors on
transmission losses of MSETCL. However, the Commission understands that a
transmission licensee has transmission losses majorly due to technical losses
and even a fraction of reduction in transmission losses require huge capital
investment from the transmission Licensee. Such high capital investment will
in turn increase transmission Tariff. Thus, can be undertaken after duly
considering cost benefit analysis of reduction in transmission losses vis-a-vis
increase in Tariff. The Commission directs MSETCL to undertake a detailed
study to determine feasible options for reduction of losses in its transmission
network including technical solutions and best practices/benchmarking of such
solutions in other States. The study report shall be submitted to the
Commission within a period of one year from date of issue of the present
Order.
2.2. Aggregate Revenue Requirement
Suggestion/Objection
2.2.1. Shri George John requested MSETCL to provide details of electricity transmitted
(in MUs), considered for computation of transmission Tariff per unit. He provided a
table which is reproduced below and requested MSETCL to fill the row C with
information on MUs considered. Further, he requested MSETCL to explain the
variance between ARR required from Tariff (Row A) and ARR of MSETCL (Row
B) as given in the table below:
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Table 3: Query on ARR submitted by Shri George John
S. No Particulars FY
2012-13
FY
2013-14
FY
2014-15
FY
2015-16
A ARR reqd. from Tariff(in Rs crore
Table 3-D) 2,955 4,275 4,963 5,652
B ARR of MSETCL (Rs crore) 3,553 5,603 4,923 5,781
(In present MYT Table 9.1)
C Pl indicate MUs for which ARR sought - - - -
D Transmission Tariff
i. Rs/kW 213 320 265 285
ii. Rs/ kWh 0.29 0.43 0.36 0.36
2.2.2. Shri Ravindra Chavan, MLA submitted that increase in infrastructure costs have led
to increase in revenue requirement which ultimately leads to hike in Tariff. The
ARR for MSETCL has doubled from FY 2011-12 to FY 2015-16. Such high
increase has defeated the purpose of EA 2003 and Tariff Policy. Operations and
maintenance expenses, administrative and general expenses, audit and legal fees
have also been increasing every year and no proper explanation has been provided
for the same in the Petition.
2.2.3. Shri Ravindra Chavan also submitted that "Other Expenses" claimed by MSETCL
should not be allowed unless they are supported by substantial proof.
2.2.4. Smt. Poornima Mepani claimed that any increase in transmission charges by
MSETCL will be borne by consumers of the distribution company, and highest
impact will be on those consumers who are cross-subsidizing other consumers.
MSETCL’s response
2.2.5. MSETCL submitted that Row A corresponds to ARR as approved by the
Commission in its Business Plan Order dated 11 January, 2013 in Case No. 137 of
2011 and Row B corresponds to ARR submitted in the present Petition. The
variation for FY 2012-13 and for period from FY 2012-13 to FY 2015-16, is
explained in detailed manner in Section 5 and Section 6 of the Petition respectively.
For figures sought in Rows C and D for FY 2012-13 and period from FY 2013-14
to FY 2015-16, MSETCL relied on the InSTS Tariff Order dated 21 May, 2012 in
Case No. 51 of 2012 and Order dated 13 May, 2013 in Case No. 56 of 2013
respectively.
2.2.6. MSETCL submitted that for O&M expenses of FY 2011-12, it has provided detailed
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explanation and reasons in the Petition and have claimed the same on the basis of
audited annual accounts. Further, the same has been projected in accordance with
the norms specified in the MYT Regulations, 2011.
2.2.7. MSETCL submitted that "Other Expenses" claimed in the Petition for FY 2011-12
have been considered based on audited annual accounts for the year. Also, it
submitted that it has provided all the details and rationale of the expenses and
revenue in the Petition.
2.2.8. In response to the query submitted by Smt. Poornima Mepani, MSETCL stated that
it has submitted its MYT Petition and claimed the revenue and expenses based on
the audited annual accounts and in accordance with the principles laid down under
MERC Tariff Regulations, 2005 for period up to FY 2012-13 and MYT
Regulations, 2011 for the Second Control Period from FY 2013-14 to FY 2015-16.
Further, the details and rationale of all expenses and revenue are provided in the
Petition as sought by the Commission.
Commission’s ruling
2.2.9. The Commission has verified that MSETCL provided details of MUs from the
InSTS Order dated 13 May, 2013 in Case No. 56 of 2013. The Commission has
conducted prudence check based on audited annual accounts of FY 2011-12
and approved expenses and ARR for FY 2011-12 and FY 2012-13 as per
MERC Tariff Regulations, 2005. The expenses and ARR for Second Control
Period from FY 2013-14 to FY 2015-16 have been approved as per MYT
Regulations, 2011. The analysis conducted by the Commission for approving
expenses for FY 2011-12, FY 2012-13 and Second Control Period from FY
2013-14 to FY 2015-16 is detailed in Section 4, 5 and 6 of the present Order,
respectively.
2.3. Public process
Suggestion/Objection
2.3.1. Smt. Poornima Mepani submitted that the time granted to citizens to revert with
objections and suggestions is very short.
2.3.2. Shri Ravindra Chavan raised objection that Public Hearing for MSETCL is
conducted only in one place, while, for MSEDCL, it is conducted in five different
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places in Maharashtra. Further, Public Hearing should be conducted for every issue
due to which Tariff may increase and burden is likely to be passed on to the
consumers. Also, the Petition filed by MSETCL is not written in lucid language.
MSETCL's response
2.3.3. MSETCL submitted that the time given for submitting comments/suggestions on the
Petition is as per the Commission’s directions.
2.3.4. As regards locations where Public Hearing is to be conducted, MSETCL submitted
that it is not under the purview of MSETCL and hence, MSETCL can’t provide any
explanation for the same. MSETCL also submitted that the Petition is written in
simple language.
Commission’s ruling
2.3.5. The Commission conducts process of admittance of Petition and Public
Hearing in accordance with MERC (Conduct of Business) Regulations, 2004.
The same has been followed in processing of present Petition filed by
MSETCL.
2.3.6. Further, the Commission provided 28 days to the consumers for providing
objection/suggestions on the said Petition. The Commission opines that a time
period of three weeks is sufficient for responding on the Petition keeping in
mind that the total process is to be undertaken expeditiously and within a
period of 120 days from the date of admittance of the Petition.
2.3.7. Further, the Commission has decided to hold the Public Hearing of MSETCL
at one place unlike Public Hearing held at six places for MSEDCL, considering
the nature of the Petition under consideration.
2.4. Cost of gas
Suggestion/Objection
2.4.1. Smt. Poornima Mepani requested for a copy on the deal wherein Ras Laffan has
agreed to sell gas to Indian Petronet LNG at around $2 per unit for 25 years. She
requested MSEDCL to enforce the deal and also suggested that MSEDCL could
enter into a similar deal to overcome the increase in costs and Tariff due to the
increasing cost of gas. Further, MSEDCL should clarify if Ras Gas was being paid
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in excess of the contracted price and/or for a quality inferior to the contracted one
and if this money will come back to India from Qatar as inward FDI or QFI
investment.
MSETCL's response
2.4.2. MSETCL replied that the objection is not related to the scope of current Petition,
i.e., True up of FY 2011-12, APR of FY 2012-13 and MYT Petition from FY 2013-
14 to FY 2015-16.
Commission’s ruling
2.4.3. The Commission highlights that objection raised doesn’t pertain to MSETCL’s
Petition and cannot be considered under the present proceedings.
2.5. Compensation for land and Non-compliance of Provisions of Acts and
Regulations
Suggestion/Objection
2.5.1. Advocate Pawan Uttarwar claimed that MSETCL did not seek consent from the
affected land owner or the District Collector, as required by the provisions of the
EA 2003, and Maharashtra Electricity Work of Licensees Rules, 2012, before
carrying out work of its high tension network in Aurangabad district. MSETCL
neither follows any acquisition procedure nor pays appropriate compensation to the
affected persons for the losses suffered by them. Also, merely on the basis of power
granted under Telegraph Authority, Licensees cannot dispose land owners. He
further submitted that MSETCL has not mentioned any provision for compensation
paid to the land owners in the present Petition, which should have reflected the
number of landowners affected by high tension transmission works. MSETCL does
not make application under Section 68 of the EA 2003 and also do not take
permission from the Forest Department to cut down trees.
2.5.2. Advocate Uttarwar further submitted that MSETCL has not deposited the amount of
compensation awarded by the District Collector under the Powers of the EA 2003
and the provisions of the Maharashtra Electricity Work of Licensees Rules, 2012.
MSETCL is liable to be penalized under the non-compliance of the Orders passed
by the District Collector of Aurangabad under the EA 2003 and the Provisions of
the Maharashtra Electricity Work of Licensees Rules, 2012. Cases of affected land
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owners have been presented before the Commission, but they have not been treated
seriously. It is necessary for the Commission to confirm the compensation paid by
MSETCL to the land owners over the years and its adjustment in the expenses
shown in the present ARR Petition. Further, the Commission has power to direct
and penalize MSETCL.
2.5.3. Shri Ravindra Chavan also raised objection on the same issues.
MSETCL's response
2.5.4. MSETCL submitted that while executing the work of EHV lines, preliminary
survey is carried out such that there is a bare minimum loss to the cultivator and no
line is laid without intimation to the cultivators. Also, according to the Section 164
of the EA 2003, the powers conferred upon Indian Telegraph Authority under
Indian Telegraph Act,1885, have been conferred to MSETCL by Government of
Maharashtra vide Order no. Sankirn-06/C.No.312/Energy-4 dated 24 August, 2006.
Whilst staying within the powers received vide the Order mentioned above,
technically competent route is selected and EHV towers as well as lines are erected.
2.5.5. Further, farmers are free to take crops in the other area of the farm except the land
under the tower. Also, the compensation for damage suffered during the erection of
towers and lines is decided on the rules mentioned below:
a. The compensation for damage to standing crops/fruit bearing trees/other trees is
paid based on the valuation received from revenue/ agriculture/forest
departments of GoM.
b. Based on the Order no. Sankirn-0210/C.No.29/Energy-4 dated 1 November,
2010 issued by GoM, the compensation for the land occupied by EHV tower is
paid on the basis of the classification of land and as per the rates under ready
reckoner of the respective region.
2.5.6. MSETCL submitted that it is not violating Section 67 & 68 of EA 2003 and
Maharashtra Electricity Work of Licensees Rules, 2012 and it takes necessary
permission from various authorities such as forest, railway, MIDC, Revenue
Authority, etc., before laying lines. The compensation paid for the losses while
laying down EHV lines is included in the cost of project.
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2.5.7. MSETCL submitted that as regards the compensation for crops and trees for
Aurangabad zone, it has paid the compensation to the land owner and advance
payment towards land compensation has also been paid to some of the land owners.
Moreover, payment towards land compensation has been kept on hold based on the
instructions from the Chief Legal Adviser of MSETCL. Also, the land
compensation Orders issued by the District Collector, Aurangabad has various
discrepancies:
a. Land valuations are not as per Govt. Resolution No. Sankirn/ 0210/Case No.
29/Energy - 4 dated 1 November, 2010.
b. Rates taken for the land valuation are non-agriculture land rates which are very
much on the higher side.
c. Land compensation Orders are issued for those farmers which are not eligible
for the compensation, etc.
2.5.8. The Chief Legal Adviser, MSETCL visited Collector office Aurangabad on 22
October, 2013. As per discussion with the Collector, Aurangabad, Chief Legal
Adviser had instructed MSETCL to go for revision of the land compensation Orders
issued by Collector Aurangabad. The revision of the land compensation Order is
under process and hence, the payment is kept on hold. With regards to Regulations
and Rules for computation of losses suffered by land owners, a detailed procedure
regarding land compensation is described in Govt. Resolution No. Sankirn/
0210/Case No. 29/ Energy - 4 dated 1 November, 2010.
2.5.9. MSETCL submitted that the Maharashtra Electricity Work of Licensees Rules, 2012
is not applicable for MSETCL. Rule 3 sub-rule 4 of the Maharashtra Electricity
Work of Licensees Rules, 2012 has an overriding effect on the entire Rule. Also,
similar Judgment is passed by Hon’ble Jharkhand High Court, Case No. AIR 2008
JHAR 34 2007(2) BLJR 1798 Ajay Munjal v/s PGCIL regarding Electricity Work
of Licensees Rules, 2006.
2.5.10. MSTECL submitted that it has never denied land compensation and its social
responsibility. Also, it is carrying out constant follow up to obtain the corrected land
compensation Order and to make sure it receives accurate Orders in future.
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Commission’s ruling
2.5.11. The Commission has noted the response of MSETCL and in this regard views
the objection doesn’t pertain to the present Tariff Petition. Therefore, this
issue has not been considered in the present proceedings. However, the
expenses of the MSETCL has been scrutinised and only prudent cost is allowed
to be pass through.
2.6. Capitalisation and Disallowed Capitalisation
Suggestion/Objection
2.6.1. Shri Ravindra Chavan submitted that MSETCL cannot seek review of the
disallowed capitalisation for the past few years to cover its revenue gap. Once the
Commission has passed it, it can be reviewed only under prescribed limitations and
on basis of permissible grounds under the law such as discovery of new and
important matters of evidence, mistakes or error apparent on the face of the record
or any other sufficient reason. Further, the prayer clause submitted by MSETCL in
the present Petition is vague and does not specifically pray to allow review of Tariff
Order. Further, the claim is not supported by sufficient documents. MSETCL should
have filed a separate review Petition under proper procedure prescribed by law.
2.6.2. The capitalisation approved to MSETCL is Rs 3874.62 crore, which is high and
does not have any rational.
MSETCL's response
2.6.3. MSETCL submitted that it has provided detailed justification for claims on
expenses incurred in the previous years. Also, it has not sought the review of the
Orders; rather, it has sought Truing up to the extent for which justification has been
submitted. Further, MSETCL submitted that the Commission in its Order dated 28
May, 2009 in Case No. 114 of 2008 has allowed those schemes which were
disallowed in the past. The impact of disallowed capitalisation on ARR may be
considered for the respective year and for subsequent years as well. Hence,
MSETCL submitted that its prayer to allow recovery of impact of disallowed
capitalisation along with the present ARR for FY 2013-14 is not defective.
2.6.4. MSETCL submitted that it has considered capitalisation as approved by the
Commission in its Order dated 18 May, 2012 in Case No. 169 of 2011.
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Commission's Ruling
2.6.5. The Commission has conducted detailed scrutiny of the claims submitted by
MSETCL on account of disallowed capitalisation of past years and has
accordingly, considered its impact on ARR of previous years. The details of
scrutiny and analysis done by the Commission and the decision taken with
regards to allowance of disallowed capitalisation of previous years is elucidated
in Section 3 of this Order.
2.7. Use of Contractors/ Private Companies/ Agents
Suggestion/Objections
2.7.1. Shri Ravindra Chavan submitted that MSETCL should not use agents/ contractors
and private companies for laying down transmission lines and should be able to
execute all infrastructure development work using its own employees, as it spends a
large amount of money on training for employees. Also, agents and contractors
work for profits, which increases project costs and thus Tariff every year.
MSETCL's inefficiency in carrying out infrastructure/ construction defeats the
purpose of the EA 2003 and is burdening the consumers of Maharashtra. The
Commission should grant Licence to Licensees who are capable of completing
construction works for transmission projects. Further, he claimed that projects are
not competitively bid and corruption exists in selecting contractors and agents.
Directions should be provided to MSETCL to reduce dependency on
agents/contractors.
MSETCL's response
2.7.2. MSETCL submitted that post trifurcation of MSEB, there has been increase in
generation and load demand leading to increase in the number of transmission
projects to be executed. This increase is temporary and it is not economical to
recruit new staff for the same. Further, executing projects require placing Orders to
suppliers, procuring major and minor materials, managing supplier period of each
supplier, etc. In view of these, turnkey contracts are provided to expedite the
process. Further, reduction in transmission loss trajectory and increase in
transmission system availability even when demand is growing and network is
expanding, is an indication of MSETCL’s efforts to expand its network while
reduce expenses.
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Commission's Ruling
2.7.3. The Commission conducts thorough scrutiny of the capital cost and expenses
submitted by MSETCL before approving them. Further, wherever necessary,
the Commission disallows expenditure if found imprudent. Employing
agents/contractors or using own employees for carrying out construction
activities is a decision which rests with the utility and the Commission plays no
role in enforcing the same on the utility. However, as a Regulatory body, the
Commission ensures that only prudent cost is passed on to the consumers by
way of Tariff.
2.8. Quality control
Suggestion/Objection
2.8.1. Shri Ravindra Chavan submitted that use of low quality transformer and materials in
the transmission line causes voltage fluctuation in Dombivli area. This causes
damages to electrical equipments, thereby, leading to financial loss to the
consumers. The Commission must establish a team to ensure quality control of the
transmission infrastructure and penalise MSETCL for violating its duty to provide
continuous quality power supply. Further, MSETCL has failed to maintain the
safety standards which are in violation of the Commission’s Order dated 11
January, 2013 in Case No. 137 of 2011. Further, the Commission should direct
MSETCL to construct rooms around the transformers as constructed by BEST for
ensuring safety of people. Also, MSETCL should provide data on death caused due
to electric shocks and lack of safety standards implemented by MSETCL. Further,
he requested data on number of deaths caused due to electrocution in Dombivli in
last five years and the compensation paid to the family of the victim by MSETCL.
MSETCL’s response
2.8.2. MSETCL submitted that it has planned various schemes to augment the network in
Dombivli, to provide better quality of electricity to Dombivli area.
2.8.3. Regarding compliance of safety norms, MSETCL submitted that it complies with
the provisions of CEA (Safety requirements for construction, operation and
maintenance of electrical plants and electrical lines) Regulations, 2011. MSETCL
also submitted its safety manual in its response to the query on non-compliance of
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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safety norms.
2.8.4. MSETCL submitted that no deaths have been caused due to electrocution at
Dombivli in the last five years. Also, the substations are surrounded by compound
wall to prevent trespassing. MSETCL submitted the following table showing the
details of accidents:
Table 4: Abstract of Accidents submitted by MSETCL
Year Total Fatal
Non-
Fatal
Fatal Non-Fatal
Dept. Outsider Dept. Outsider
FY 2005-06 25 3 22 1 2 19 3
FY 2006-07 23 6 17 4 2 16 1
FY 2007-08 25 4 21 1 3 17 4
FY 2008-09 21 7 14 3 4 10 4
FY 2009-10 32 11 21 0 11 12 9
FY 2010-11 23 4 19 0 4 15 4
FY 2011-12 17 7 10 4 3 9 1
FY 2012-13 32 21 11 9 12 2 9
Commission’s ruling
2.8.5. The safety standards are necessary to be complied by MSETCL and shall be in
accordance with the Central Electricity Authority (Safety requirements for
Construction, Operation and Maintenance of Electrical Plants and Electric
Lines) Regulations, 2011 and Central Electricity Authority (Measures relating
to Safety and Electricity Supply) Regulations, 2010.
2.8.6. Additionally, from the information provided on accidents over the past years,
it can be observed that there has been increase in number of accidents in FY
2012-13. The Commission directs MSETCL to take appropriate steps to tackle
this issue on priority basis.
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3. IMPACT OF DISALLOWED CAPITALISATION OF ASSETS
FOR PREVIOUS YEARS
3.1. Background
3.1.1. MSETCL submitted that in its previous True up Orders for FY 2007-08, FY 2008-
09 and FY 2010-11, the Commission had disallowed certain amount of
capitalisation. Certain portion of the disallowed capitalisation is now claimed in the
present Petition by MSETCL.
3.1.2. MSETCL submitted that it has calculated the impact of disallowed capitalisation, to
the extent claimed in the present Petition, on depreciation, interest on long term
loan, interest on working capital, return on equity, contribution to contingency
reserve and incentive for higher availability over and above norm. Further,
MSETCL has claimed this impact on ARR items from the date of capitalisation of
the assets.
3.1.3. Details of MSETCL’s claims on disallowed capitalisation of assets for previous
years are provided in the following sections.
3.2. Impact of Disallowed Capitalisation of Assets during FY 2007-08
3.2.1. MSETCL submitted that the Commission in its Order dated 28 May, 2009 in Case
No. 114 of 2008 and subsequently, in Order dated 10 September, 2010 in Case No.
103 of 2009, approved capitalisation of Rs 513.88 crore vis-a-vis Rs 867.14 crore
claimed for FY 2007-08. MSETCL also mentioned that the Commission in its Order
dated 28 May, 2009 in Case No. 114 of 2008 restricted the capitalisation for FY
2007-08 due to absence of documentary evidence confirming purpose and
achievement of the objective of the capex schemes. Therefore, the Commission
directed MSETCL to submit necessary justification for the same and also asked
MSETCL to obtain the Commission’s approval for non-DPR schemes approved
earlier by the MSEB.
3.2.2. MSETCL submitted that subsequent to the Commission’s direction, it had clubbed
certain non-DPR schemes to form DPR schemes; and submitted 63 such DPR
schemes with estimated capital expenditure of Rs 1699 crore for post facto In-
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principle approval of the Commission. MSETCL submitted that the Commission
had granted post facto In-principle approval for such schemes amounting to Rs
1268.92 crore. Thereafter, MSETCL submitted additional 18 DPR schemes from
MSEB period with estimated capital expenditure of Rs 463.38 crore for post-facto
In-principle approval of the Commission. MSETCL submitted that the Commission
granted post facto approval for these schemes as well.
3.2.3. MSETCL submitted the following table summarising the claim on disallowed
capitalisation for FY 2007-08.
Table 5: Claim of Disallowed Capitalisation for FY 2007-08 submitted by
MSETCL (Rs crore)
Particulars
Original
Claim
Final
Claim
Approved in Case No.
114 of 2008 & 103 of
2009
Disallowed
Capitalisation
Claimed
in this
Petition
DPR 197.21 658.54 447.99 210.55 192.50*
Non-DPR 669.93 208.60 65.89 142.71 70.80#
Total 867.14 867.14 513.88 353.26 263.30
*192.50 crore = Rs 104.66 crore +Rs 87.84 crore, where Rs 104.66 crore relate to schemes disallowed due to
non-submission of schemes for post facto approval and Rs 87.84 crore due to non-commissioning (considered in
True up for FY 2008-09)
#Non-DPR considered as 37% of disallowed DPR as per Case No. 114 of 2008
3.2.4. MSETCL requested the Commission to approve the above claim for disallowed
capitalisation for FY 2007-08.
3.2.5. MSETCL further requested the Commission to provide additional ARR due to
approval of disallowed capitalisation for FY 2007-08. MSETCL highlighted that
any increase in ARR will also have an impact on interest on working capital,
sharing of gains and losses and incentive for transmission availability.
3.2.6. MSETCL submitted the following table showing the impact of disallowed
capitalisation on various heads of ARR and claimed the difference between the
previously approved ARR and revised claim of ARR.
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Table 6: Impact of disallowed capitalisation for FY 2007-08 submitted by
MSETCL (Rs crore)
Particulars
FY 2007-08
Previously
Approved
Revised
Claim* Difference
RoE 387.86 391.54 3.69
Depreciation including AAD 337.68 337.68 0.00
Interest on long-term loan capital 191.21 202.29 11.08
Interest on working capital and on
consumer security deposits 28.31 28.60 0.29
Contribution to contingency reserves 44.83 44.83 0.00
Incentive for higher availability 6.57 6.70 0.13
Total 996.45 1011.64 15.19
*Note: Impact of disallowed capitalisation worked out only for FY 2007-08 and impact of this in subsequent
years have been compounded in respective years by re-computing the opening GFA, loan balance and equity of
respective years.
3.2.7. Therefore, MSETCL claimed for additional ARR of Rs 15.19 crore for FY 2007-08
on account of approval of disallowed capitalisation. The Commission’s analysis of
the above dis-allowed capitalisation and the corresponding impact on ARR has been
outlined in Section 3.6 and Section 3.7 below.
3.3. Impact of Disallowed Capitalisation of Assets during FY 2008-09
3.3.1. MSETCL submitted that the Commission in its Order dated 30 November, 2010 in
Case No. 73 of 2010, approved capitalisation of Rs 553.94 crore for FY 2008-09
vis-a-vis Rs 663.88 crore claimed in the Petition. Further, MSETCL submitted that
following the Commission’s directions, MSETCL clubbed some non-DPR schemes
to form DPR schemes and sought post facto In-principle approval of the
Commission for the same. MSETCL submitted that post facto approval had been
granted to such schemes. In the present Petition, MSETCL requested the
Commission to approve claim of Rs 73.35 crore on disallowed capitalisation for FY
2008-09 as mentioned in the table below:
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Table 7: Claim on disallowed capitalisation for FY 2008-09 by MSETCL (Rs
crore)
FY 2008-09
Case No. 103 of 2009
Disallowed
Capitalisation
Claimed in
present
Petition* Claimed Approved
DPR approved 380.11 334.02 46.09 46.09
DPR schemes submitted
for approval 126.32 94.55 31.77 7.76
MSEB period 58.33 33.05 25.28 12.70
Non DPR 99.12 92.32 6.80 6.80
Total 663.88 553.94 109.94 73.35
*Balance to be allowed due to post facto approval granted to schemes of non-DPR clubbed into DPR schemes
and also due to commissioning of schemes in pursuance to the direction of the Commission.
3.3.2. Further, MSETCL has re-computed the opening GFA, loan balance and equity of
FY 2008-09 considering the approved disallowed capitalisation of FY 2007-08 and
then calculated the impact on ARR for FY 2008-09 as Rs 43.17 crore. Further,
MSETCL claimed for increase in ARR for FY 2008-09 as given in the table below:
Table 8: Impact of claim on disallowed capitalisation for FY 2008-09 submitted
by MSETCL (Rs crore)
Particulars
FY 2008-09
Approved Revised Claim Difference RoE 397.94 409.34 11.40
Depreciation including AAD 323.13 323.13 0.00
Interest on long-term loan capital 158.76 187.52 28.76
Interest on working capital and on
consumer security deposits 27.03 27.93 0.90
Contribution to contingency reserves 22.75 24.09 1.34
Incentive for higher availability 17.02 17.80 0.78
Total 946.63 989.80 43.17
3.3.3. The Commission’s analysis of the above disallowed capitalisation and the
corresponding impact on ARR has been outlined in Section 3.6 and Section 3.7
below.
3.4. Impact of Disallowed Capitalisation of Assets for FY 2007-08 and FY 2008-09
in FY 2009-10
3.4.1. MSETCL submitted that in accordance with the claims on disallowed capitalisation
made in for FY 2007-08 and FY 2008-09 on disallowed capitalisation, it has
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calculated the impact on ARR of FY 2009-10 by re-computing the depreciation on
the revised opening GFA, interest on the revised opening loan balance and RoE on
the revised opening equity. MSETCL submitted the following table showing the
impact of such disallowed capitalisation of FY 2007-08 and FY 2008-09 on ARR of
FY 2009-10:
Table 9: Impact of claim on disallowed capitalisation for FY 2009-10 submitted
by MSETCL (Rs crore)
Particulars
FY 2009-10
Approved Revised Claim Difference RoE 419.83 432.26 12.43
Depreciation including AAD 389.88 389.88 0.00
Interest on long-term loan capital 71.68 100.43 28.75
Interest on working capital and on
consumer security deposits 25.96 26.50 0.54
Contribution to contingency reserves 24.81 25.65 0.84
Incentive for higher availability 23.58 24.13 0.55
Total 955.74 998.85 43.11
3.4.2. The Commission’s analysis of the above disallowed capitalisation and the
corresponding impact on ARR has been outlined in Section 3.6 and 3.7 below.
3.5. Impact of Disallowed Capitalisation of Assets for FY 2010-11
3.5.1. MSETCL submitted that the Commission in its Order dated 18 May, 2012 in Case
No. 169 of 2011 approved capitalisation of Rs 2231.95 crore vis-a-vis Rs 2502.28
crore claimed in the Petition for FY 2010-11. However, subsequent to the
Commission’s Order in Case No. 169 of 2011, MSETCL had submitted cost benefit
analysis of some of the schemes to the Commission. Some of the schemes were
disallowed by the Commission on account of the fact that such schemes were not
put to use. In this regard, MSETCL submitted that these schemes have been put to
use in FY 2011-12 and requested the Commission to allow part capitalisation for
such schemes in FY 2010-11. MSETCL submitted the following summary of claim
on disallowed capitalisation for FY 2010-11.
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Table 10: Claim on disallowed capitalisation for FY 2010-11 by MSETCL (Rs
crore)
FY 2010-11
Case No. 169 of 2011
Case No. 106 of
2012
Balance
to be
claimed
Claimed in
present
Petition* Claimed Approved
Additional
approval in
Review Order
DPR approved 1,602.41 1,297.73 156.79 147.89 44.21
DPR schemes
submitted for
approval 291.79 286.95 3.70 1.14 0.74
MSEB period 116.22 91.79 22.31 2.12 2.12
Non DPR 491.86 335.43 36.56 119.87 9.41#
Total 2,502.28 2,011.9 219.36 271.02 56.48
*Note: Balance to be allowed due to capitalisation of partly capitalised schemes of FY 2010-11 in FY 2011-12.
#Considering 20% of the amount pertaining to DPR schemes claimed in this Petition
3.5.2. MSETCL requested the Commission to approve the claim of Rs. 56.48 crore on
disallowed capitalisation for FY 2010-11.
3.5.3. MSETCL submitted the following table showing the impact of disallowed
capitalisation on ARR of FY 2010-11.
Table 11: Impact of claim on disallowed capitalisation for FY 2010-11
submitted by MSETCL (Rs crore)
Particulars
FY 2010-11
Approved Revised Claim Difference
RoE 464.42 477.64 13.22
Depreciation including AAD 362.79 362.79 0.00
Interest on long-term loan capital 296.98 325.31 28.33
Interest on working capital and on
consumer security deposits 32.39 32.90 0.51
Contribution to contingency reserves 27.36 28.21 0.85
Incentive for higher availability 42.64 43.43 0.79
Total 1,226.58 1,270.27 43.69
3.5.4. Considering the impact of disallowed capitalisation on ARR as detailed in above
paragraphs, MSETCL requested the Commission to consider net True up
requirement of Rs 145.16 crore and include the amount in ARR of FY 2013-14.
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Table 12: Summary of Impact due to Disallowed Capitalisation submitted by
MSETCL (Rs crore)
Particulars FY
2007-08 FY
2008-09 FY
2009-10 FY
2010-11 Total
RoE 3.69 11.40 12.43 13.22 40.73
Depreciation including
AAD - - - - -
Interest on Long-term
Loan Capital 11.08 28.76 28.75 28.33 96.91
Interest on Working
Capital and on consumer
security deposits 0.29 0.90 0.54 0.51 2.24
Contribution to
contingency reserves 0.00 1.34 0.84 0.85 3.02
Incentive for higher
availability 0.13 0.78 0.55 0.79 2.25
Total 15.19 43.17 43.11 43.69 145.16
3.6. Disallowed capitalisation approved by the Commission
3.6.1. In the past True up Orders of FY 2007-08, FY 2008-09 and FY 2010-11, the
Commission had disallowed certain capitalisation claimed by MSETCL. During FY
2007-08, MSETCL had initiated certain non-DPR schemes approved by the
erstwhile MSEB. The Commission in its Order dated 28 May, 2009 in Case No. 114
of 2008 opined that since such schemes were started at the time, when the
Commission’s Guidelines for approval of capital investment were in force. Thus,
MSETCL ought to obtain the Commission’s approval for such schemes. The
Commission also directed MSETCL to package similar or related non-DPR
schemes together to form DPR schemes, so that In-principle approval can be sought
from the Commission in accordance with the guidelines specified by the
Commission. In addition, the Commission directed MSETCL to undertake cost
benefit analysis to validate the prudence of each scheme and submit the report of the
same to the Commission.
3.6.2. Accordingly, MSETCL has now got approval of the above referred disallowed
capitalisation after clubbing non-DPR schemes into DPR schemes and has
submitted cost-benefit analysis of the same. MSETCL, further submitted that the
disallowed schemes are capitalized now and MSETCL claimed the impact of such
schemes on ARR from the date such assets were put to use, i.e., from the date of
capitalisation. MSETCL vide its e-mail dated 1 April, 2013 submitted details of
such schemes with capitalization year, objectives and benefits derived from the
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schemes.
3.6.3. Further, the Commission had assigned M/s Engineering Staff College of India
(ESCI), Hyderabad the task of undertaking techno-economic evaluation of the
capital expenditure and capitalisation for some of the schemes submitted for post
facto In-principle approval by MSETCL. The main objectives of the techno-
economic evaluation study were viz., (a) Assessment for achievement of the
objectives and benefits envisaged for justification of the schemes; and (b) to verify
the capital expenditure and capitalisation claimed.
3.6.4. Under the sample evaluation study, M/s ESCI had organised visits to the sub-station
sites and the concerned field offices for verification of the following:-
a. Establishment of 132 kV sub-station at Kinwat, District Nanded.
b. Establishment of 220 kV sub-station Chikli, District Buldhana.
3.6.5. M/s ESCI after evaluation of the above referred schemes concluded the following:-
a. Both the schemes were found beneficial to transmission network by
improvement in the voltage profile and reduction in overloading and
interruptions.
b. Transmission losses have reduced due to up-gradation of transmission
voltage at both the sub-stations, thus improving the reliability of supply.
3.6.6. The Commission found the report submitted by M/s ESCI to be satisfactory which
was also considered during the post-facto approval of disallowed capitalisation in
the present Order. The details of this approval is as follows:-
a. 18 schemes worth Rs 463.80 crore approved by the Commission vide letter
dated 11 January, 2013;
b. 23 schemes worth Rs 600.50 crore approved by the Commission vide letter
dated 29 September, 2013; and
c. 5 schemes still under scrutiny of the Commission.
3.6.7. Based on the information and cost-benefit analysis provided by MSETCL, the
Commission approved these schemes according to the year in which the scheme is
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commissioned. The Commission observed that MSETCL had considered part-
capitalisation of few schemes in a year, while the scheme got commissioned in later
years. However, the Commission considered capitalisation of the scheme in a year
in which the scheme is commissioned. The disallowed capitalisation approved by
the Commission in this Order is given in the table below:
Table 13: Disallowed capitalisation approved by the Commission (Rs crore)
Particulars
Submitted by MSETCL Approved in this Order
DPR Non-DPR Total DPR Non-DPR Total
FY 2007-08 192.5 70.80 263.30 83.99 70.80 154.79
FY 2008-09 66.55 6.80 73.35 62.06 6.80 68.86
FY 2009-10 - - - 80.60 - 80.60
FY 2010-11 47.07 9.41 56.48 25.43 9.41 34.84
FY 2011-12 - - - 51.41 - 51.41
FY 2012-13 - - - 2.62 - 2.62
Total 306.12 87.01 393.13 306.12 87.01 393.12
3.6.8. Accordingly, the Commission calculated impact of such disallowed capitalisation
on components of ARR as detailed in the below section.
3.7. Impact of disallowed capitalisation analysed by the Commission
3.7.1. The Commission observed that due to approval of additional capitalisation, there is
increase in GFA of respective years, which further leads to increase to loan balances
and equity balances. It should be noted that the Commission had previously
disallowed capitalisation in Order dated 28 May, 2009 in Case No. 114 of 2008 and
Order dated 10 September, 2010 in Case No. 103 of 2009 of Rs 513.88 crore as
MSETCL did not seek the Commission’s In-principle approval before undertaking
such schemes. It also did not submit adequate documentary evidence in relation to
these schemes. Subsequently, MSETCL sought In-principle approval of the
Commission and submitted DPR and other relevant documents of the schemes, on
the basis of which, the Commission has approved capitalisation for those years in
this Order as per para 3.6.
3.7.2. As precedence, in the Order dated 30 November, 2012 in Case No. 73 of 2010, the
Commission allowed a portion of the capitalisation disallowed earlier for the
respective years. In the said Order, the Commission also stated that, the additional
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depreciation, return on equity and interest on loans should be allowed on the
additional capitalisation amount. Thereby, the Commission approved the
corresponding impact on depreciation, interest on loans and return on equity due to
approval of disallowed capitalisation in FY 2007-08. The Commission computed
the additional impact of such capitalisation and included it in ARR of FY 2008-09.
In the similar manner, the Commission computed impact of disallowed
capitalisation on the components of ARR in respective years in the present Order.
Further, the additional capitalisation in a year has an impact of addition on the
components, such as, GFA, equity, loan, etc., of the subsequent years. Therefore,
these additions have also been considered while calculating ARR of subsequent
years.
3.7.3. For the above purpose and to give additional impact to the ARR of respective years,
the Commission considered following True up Orders as mentioned in the table
below:
Table 14: Past True up Orders considered in analysis
Particulars Order
FY 2007-08 Case No. 114 of 2008 dated 28 May, 2009
FY 2008-09
Case No. 103 of 2009 dated 10 September, 2010 and Review Order in
Case No. 73 of 2010 dated 30 November, 2010
FY 2009-10 Case No. 102 of 2011 dated 29 December, 2011
FY 2010-11
Case No. 169 of 2011 dated 18 May, 2012 and Review Order in Case No.
106 of 2012 dated 14 December, 2012
3.7.4. The detailed analysis of such increase in ARR is given in the following paragraphs.
Depreciation
3.7.5. MSETCL submitted its claim for increase in depreciation due to additional
capitalisation in the respective years.
3.7.6. The Commission computed increase in depreciation due to additional capitalisation
while considering the opening GFA of FY 2007-08 and determined the depreciation
rate to be 3.51% from the respective True up Order. Further, the Commission also
considered impact of increase in capitalisation on AAD and verified that AAD is
less than 1/10th of principal amount to be repaid in the same year less depreciation.
The revised closing balance of FY 2007-08 is considered as revised opening balance
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of FY 2008-09. Similarly, revised closing balance of FY 2008-09, FY 2009-10 is
considered as revised opening balance of FY 2009-10 and FY 2010-11,
respectively. Accordingly, the Commission approved depreciation and AAD for the
period under consideration as given below:
Table 15: Depreciation for FY 2007-08 approved by the Commission (Rs crore)
Particulars
FY 2007-08
Approved in
Case No. 73 of
2010
Submitted by
MSETCL
Revised approved
in this Order
Opening GFA for FY 2007-08 8,965.25 8,965.25 8,965.25
Add: Approved Capitalisation
during FY 2007-08 513.88 777.18 668.67
Less: Decapitalisation due to
Migration for FY 2005-06, FY
2006-07 and FY 2007-08 107.22 107.22 107.22
Less: Assets Written Off 1.12 1.12 1.12
Closing GFA for FY 2007-08 9,370.79 9,634.09 9,525.58
Depreciation rate 3.48% 3.48% 3.51%
Loan Repayment 337.68 337.68 337.68
Depreciation 321.88 323.85 324.51
AAD 15.80 13.83 13.17
Depreciation including AAD 337.68 337.68 337.68
Table 16: Depreciation for FY 2008-09 approved by the Commission (Rs crore)
Particulars
FY 2008-09
Approved in
Case No. 73 of
2010
Submitted by
MSETCL
Revised approved
in this Order
Opening GFA for FY 2008-09 9,370.79 9,634.09 9,525.58
Add: Additional Capitalisation
during FY 2008-09 553.94 627.29 622.8
Closing GFA for FY 2008-09 9,924.73 10,261.38 10,148.38
Depreciation rate 2.94% 2.94% 2.94%
Depreciation 279.88 298.55 289.21
Loan Repayment 323.13 323.13 323.13
AAD 43.25 24.58 33.92
Depreciation including AAD 323.13 323.13 323.13
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Table 17: Depreciation for FY 2009-10 approved by the Commission (Rs crore)
Particulars
FY 2009-10
Approved in
Case No. 102 of
2011
Submitted by
MSETCL
Revised approved
in this Order
Opening GFA for FY 2009-10 9,924.73 10,261.38 10,148.38 Add: Additional Capitalisation
during FY 2009-10 1,112.95 1,112.95 1,193.55
Less: Retirement 91.75 91.79 91.75
Closing GFA for FY 2009-10 10,945.93 11,282.54 11,250.18
Depreciation rate 2.91% 2.91% 2.91%
Depreciation 303.23 313.01 311.35
Loan Repayment 389.88 389.88 389.88
AAD 86.65 76.87 78.53
Depreciation including AAD 389.88 389.88 389.88
Table 18: Depreciation for FY 2010-11 approved by the Commission (Rs crore)
Particulars
FY 2010-11
Approved in
Case No. 106 of
2012
Submitted by
MSETCL
Revised approved
in this Order
Opening GFA for FY 2010-11 10,945.93 11,282.54 11,250.18
Add: Additional Capitalisation
during FY 2010-11 2,231.95 2,288.43 2,266.79
Less: Retirement 151.87 151.87 151.87
Closing GFA for FY 2010-11 13,026.01 13,419.10 13,365.10
Depreciation rate 2.8% 2.8% 2.8%
Depreciation 335.61 345.82 344.61
Loan Repayment 362.79 362.79 362.79
AAD 27.18 16.97 18.18
Depreciation including AAD 362.79 362.79 362.79
3.7.7. However, the Commission on analysis found that there would be no change in the
total amount of depreciation including AAD. This was due to the restriction of AAD
to 1/10th
of the principal amount of loan for the year less depreciation. The increase
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in depreciation led to the setting of AAD amount, due to which the total amount of
depreciation and AAD has remained same in all the years under consideration.
Therefore, the Commission hasn’t considered any impact on ARR due to
depreciation of approved disallowed capitalisation.
Interest on loan
3.7.8. MSETCL submitted its claim for increase in interest expenses on long term loan due
to additional capitalisation, and therefore, increase in loan balances in the respective
year.
3.7.9. The Commission computed increase in loan balance due to additional capitalisation
and considered opening loan balance of FY 2007-08, interest rate, repayment, debt:
equity ratio of 80:20, IDC and SLDC apportionment from the respective True up
Order. Similarly, the Commission computed interest expenses for FY 2008-09. It
should be noted that for FY 2008-09, the computation of interest expenses not only
included impact due to increased capitalisation for FY 2008-09, but also increase in
opening loan balance due to increased capitalisation for FY 2007-08. The
Commission computed interest on long term loan for FY 2009-10 and FY 2010-11
in the same manner.
3.7.10. Accordingly, interest expenses on long term loan approved by the Commission is
given below:
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Table 19: Interest expenses for FY 2007-08 approved by the Commission (Rs
crore)
Particulars
FY 2007-08
Approved in
Case No. 73 of
2010
Submitted by
MSETCL
Revised
approved in this
Order
Opening Balance of Loan for
FY 2007-08 1,941.18 1,941.18 1,941.18
Add: Additions during the year
in Case No. 114 of 2008 91.05 91.05 91.05
Add: Debt portion of
additional capitalisation
allowed during the year in
Case No. 73 of 2010 215.06 215.06 215.06
Add: Debt portion of
additional capitalisation
allowed in this Order 0.00 210.64 123.83
Less: Repayment during the
year 337.68 337.68 337.68
Closing Balance of Loan for
FY 2007-08 1,909.6 2,120.25 2,033.45
Less: Debt portion of
Decapitalisation due to
migration for FY 05-06, FY
06-07 and FY 07-08 85.78 85.78 85.78
Revised Closing Balance of
Loan for FY 2007-08 1,823.8 2,034.47 1,947.67
Gross Interest Expense for FY
2007-08 202.55 213.63 209.01
Less IDC 10.38 10.38 10.38
Less SLDC Apportionment 0.96 0.96 0.96
Net Interest Expenses for FY
2007-08 191.21 202.29 197.67
Table 20: Interest expenses for FY 2008-09 approved by the Commission (Rs
crore)
Particulars
FY 2008-09
Approved in
Case No. 73 of
2010
Submitted by
MSETCL
Revised
approved in this
Order
Opening Balance of Loan for
FY 2008-09 1,823.84 2,034.47 1,947.67
Add: Additions during the year 360.68 419.36 415.77
Less: Repayment during the 323.13 323.13 323.13
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Particulars
FY 2008-09
Approved in
Case No. 73 of
2010
Submitted by
MSETCL
Revised
approved in this
Order
year
Closing Balance of loan for
FY 2008-09 1,861 2,130.70 2,040.30
Gross Interest expenses for FY
2008-09 202.69 231.45 219.34
Less: SLDC apportionment 0.56 0.56 0.56
Less: IDC 45.11 45.11 45.11
Less: Effect of migration of
accounts (1.74) (1.74) (1.74)
Net Interest expenses for FY
2008-09 158.76 187.52 175.41
Table 21: Interest expenses for FY 2009-10 approved by the Commission (Rs
crore)
Particulars
FY 2009-10
Approved in
Case No. 102 of
2011
Submitted by
MSETCL
Revised approved
in this Order
Opening Balance of Loan for
FY 2009-10 1,861.40 2,130.70 2,040.30
Add: Additions during the year 890.36 890.36 954.84
Less: Repayment during the
year 389.88 389.88 389.88
Closing Balance of loan for FY
2009-10 2,357.77 2,627.07 2,601.15
Gross Interest expenses for FY
2009-10 225.22 253.97 247.76
Less: SLDC apportionment (0.56) (0.56) (0.56)
Less: IDC (existing loan) (152.98) (152.98) (152.98)
Less: IDC (new loan) 0.00 0.00 0.00
Net Interest expenses for FY
2009-10 71.68 100.43 94.22
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Table 22: Interest expenses for FY 2010-11 approved by the Commission (Rs
crore)
Particulars
FY 2010-11
Approved in
Case No. 106 of
2012
Submitted by
MSETCL
Revised
approved in this
Order
Opening Balance of Loan for
FY 2010-11 2,357.77 2,627.07 2,601.15
Add: Additions during the year 1,779.03 1,824.22 1,806.90
Less: Repayment during the
year 362.79 362.79 362.79
Closing Balance of loan for
FY 2010-11 3,774.02 4,088.50 4,045.27
Gross Interest expenses for FY
2010-11 297.54 325.87 322.51
Less: SLDC apportionment 0.56 0.56 0.56
Less: IDC 0.00 0.00 0.00
Net Interest expenses for FY
2010-11 296.98 325.31 321.95
3.7.11. Based on the above computations, net increase in interest expenses on long term
loan due to impact of disallowed capitalisation approved in this Order is
summarised in the table below:
Table 23: Net increase in interest expenses approved by the Commission (Rs
crore)
Particulars
Interest on long term loan
Approved in
previous Orders
Revised
approved in
this Order Difference
FY 2007-08 191.21 197.67 6.46
FY 2008-09 158.76 175.41 16.65
FY 2009-10 71.68 94.22 22.54
FY 2010-11 296.98 321.95 24.97
Total increase
70.62
Return on equity
3.7.12. MSETCL submitted its claim for increase in equity balance in the respective year
due to additional capitalisation, and therefore, increase in return on equity.
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3.7.13. The Commission computed increase in equity balance due to additional
capitalisation at 20% of equity and considered opening equity balance of FY 2007-
08 and rate of return on equity at 14% as prescribed in the Tariff Regulations, 2005.
Similarly, the Commission computed RoE for FY 2008-09, FY 2009-10 and FY
2010-11.
3.7.14. Accordingly, return on equity approved by the Commission is given below:
Table 24: Return on equity for FY 2007-08 approved by the Commission (Rs
crore)
Particulars
FY 2007-08
Approved in
Case No. 73 of
2010
Submitted by
MSETCL
Revised approved
in this Order
Regulatory Equity at beginning
of FY 07-08 2,742.22 2,742.22 2,742.22
Net Capitalisation during the
year for ROE calculation 382.65 645.95 537.44
Capitalisation during the year 513.88 777.18 668.67
Less: Consumer Contribution 51.23 51.23 51.23
Less: Grants 80.00 80.00 80.00
Equity portion of net
capitalisation during year 76.53 129.19 107.49
Regulatory equity at end of FY
2007-08 2,818.75 2,871.41 2,849.71
Less: Equity portion of De-
capitalisation due to migration
for FY 05-06, FY 06-07 and
FY 07-08 21.44 21.44 21.44
Total RoE for the Year 387.86 391.54 390.02
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Table 25: Return on Equity for FY 2008-09 approved by the Commission (Rs
crore)
Particulars
FY 2008-09
Approved in
Case No. 73 of
2010
Submitted by
MSETCL
Revised approved
in this Order
Revised Equity at beginning of
FY 2008-09 2,797.31 2,871.41 2,828.27
Net Capitalisation during the
year 450.85 524.20 519.71
Capitalisation during FY 2008-
09 553.94 627.29 622.80
Less: Consumer contribution 75.85 75.85 75.85
Less: grants 27.24 27.24 27.24
Equity portion of net
capitalisation during year 90.17 104.84 103.94
Regulatory equity at end of FY
2008-09 2,887.48 2,976.25 2,932.21
RoE at the beginning of the
year 391.62 402.00 395.96
RoE during the Year 6.31 7.34 7.28
Total RoE for the Year 397.94 409.34 403.23
Table 26: Return on Equity for FY 2009-10 approved by the Commission (Rs
crore)
Particulars
FY 2009-10
Approved in
Case no. 102 of
2011
Submitted by
MSETCL
Revised approved
in this Order
Opening Equity at beginning
of FY 2009-10 2,887.48 2,976.25 2,932.21
Net Capitalisation during the
year excluding consumer
contribution, grants, etc. 1,112.95 1,112.95 1,193.55
Capitalisation during FY 2009-
10 1,112.95 1,112.95 1,193.55
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Particulars
FY 2009-10
Approved in
Case no. 102 of
2011
Submitted by
MSETCL
Revised approved
in this Order
Less: Consumer contribution - - -
Less: grants - - -
Equity portion of net
capitalisation during year 222.59 222.59 222.59
Regulatory equity at end of FY
2009-10 3,110.07 3,198.84 3,154.80
RoE at the beginning of the
year 404.25 416.67 410.51
RoE during the year 15.58 15.58 15.58
Total RoE for the year 419.83 432.26 426.09
Table 27: Return on Equity for FY 2010-11 approved by the Commission (Rs
crore)
Particulars
FY 2010-11
Approved in
Case No. 106 of
2012
Submitted by
MSETCL
Revised approved
in this Order
Opening Equity at beginning
of FY 2010-11 3,110.07 3,198.84 3,154.80
Net Capitalisation during the
year 2,223.79 2,280.27 2,258.63
Capitalisation during FY 2010-
11 2,231.95 2,288.43 2,266.79
Less: Consumer contribution 8.16 8.16 8.16
Less: grants - - -
Less: Equity portion of Retired
Assets 30.37 30.37 30.37
Equity portion of net
capitalisation during year 444.76 456.05 451.73
Regulatory equity at end of FY 3,524.45 3,654.89 3,576.15
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Particulars
FY 2010-11
Approved in
Case No. 106 of
2012
Submitted by
MSETCL
Revised approved
in this Order
2010-11
RoE at the beginning of the
year 435.41 447.84 441.67
RoE during the Year 29.01 29.80 29.49
Total RoE for the Year 464.42 477.64 471.17
3.7.15. Based on the above computations, net increase in RoE due to impact of disallowed
capitalisation approved in this Order is summarised in the table below:
Table 28: Net increase in Return on Equity approved by the Commission (Rs
crore)
Particulars
Return on equity
Approved in
previous Orders
Revised
approved in
this Order Difference
FY 2007-08 387.86 390.02 2.17
FY 2008-09 397.94 403.23 5.30
FY 2009-10 419.83 426.09 6.26
FY 2010-11 464.42 471.17 6.75
Total increase
20.48
Interest on working capital
3.7.16. MSETCL has submitted impact of additional capitalisation on working capital
requirements, and hence interest on working capital. However, the Commission is
of the view that there will be no impact of additional capitalisation on interest on
working capital. As per Tariff Regulations, 2005, interest on working capital is
computed as below:
“50.6.1 The Transmission Licensee shall be allowed interest on the estimated level
of working capital for the financial year, computed as follows:
(a) One-twelfth of the amount of operation and maintenance expenses for such
financial year; plus
(b) One-twelfth of the sum of the book value of stores, materials and supplies
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Including fuel on hand at the end of each month of such financial year; plus
(c) One and a half months equivalent of the expected revenue from transmission
charges at the prevailing tariffs; minus {Emphasis added}
(d) Amount, if any, held as security deposits from Transmission System Users.”
3.7.17. It can be seen from the above Regulation that interest on working capital is
approved considering approved O&M expenses, actual revenue received from
transmission Tariff, sum of book value of stores, materials and supplies and security
deposit held by MSETCL in the respective year. None of these heads will be
impacted because of additional capitalisation allowed in this Order. Though
increase in additional capitalisation has an impact on the ARR of the respective
year, the revenue for the purpose of calculating working capital requirements is the
expected revenue collected as transmission charges at prevailing Tariffs as specified
in the Regulations above, and not at revised ARR. Hence, there will be no impact of
additional capitalisation on interest on working capital for any of the year under
consideration.
Contribution to Contingency Reserve
3.7.18. MSETCL has submitted impact of additional capitalisation on contribution to
contingency reserve, as contribution to contingency reserve is linked to opening
GFA of a year. The relevant portion of the Tariff Regulations, 2005 is reproduced
below:
“50.7.1 Where the Transmission Licensee has made an appropriation to the
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 :
Provided that where the amount of such Contingencies Reserves exceeds five (5 per
cent of the original cost of fixed assets, no such appropriation shall be allowed
which would have the effect of increasing the reserve beyond the said maximum:
Provided further that the amount so appropriated shall be invested in securities
authorized under the Indian Trusts Act, 1882 within a period of six months of the
close of the financial year.” {Emphasis added}
3.7.19. It is clear from the above Regulation that contribution to contingency reserve is
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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allowed to be included in the ARR to compensate for the amount (0.25% to 0.5% of
opening GFA) set aside by the utility for investment in securities within 6 months
from the close of the corresponding financial year. However, as the additional
capitalisation claimed by MSETCL for the respective year is being approved only in
this Order, MSETCL had neither set aside any amount corresponding to the
additional capitalisation for contingency reserve nor invested the amount in
securities within 6 months of closing of respective year into consideration.
3.7.20. At this stage the Commission does not find any necessity of allowing additional
contingency reserve for the previous years, as this does not impact MSETCL in
meeting its operational expenses or profits. These amounts are anyway kept as a
reserve to meet future contingencies.
3.7.21. Therefore, the Commission hasn’t considered any additional impact on contribution
to contingency reserves due to approval of disallowed capitalisation.
Incentive on transmission system availability
3.7.22. MSETCL has submitted impact of additional capitalisation on incentive on
transmission system availability, as it is linked to the ARR and ARR has increased
due to impact of additional capitalisation in the respective year.
3.7.23. The Commission is of the view that due to increase in ARR, incentive on
transmission system availability needs to be recalculated for each of the years and
the increase should be included as revenue gap to be carried forward for recovery in
FY 2013-14. The Commission considered actual availability and ARR allocation
approved by the Commission in the respective True up Order and considered
increase in ARR approved as per above paragraphs. Therefore, the Commission
computed impact on incentive on transmission system availability and approved the
same.
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Table 29: Net increase in incentive on transmission system availability
approved by the Commission (Rs crore)
Particulars
Incentive on transmission system availability
Approved in
previous Orders
Revised
approved in
this Order Difference
FY 2007-08 6.57 6.60 0.03
FY 2008-09 17.02 17.22 0.20
FY 2009-10 26.17 26.54 0.37
FY 2010-11 42.64 43.22 0.58
Total
1.18
Sharing of gains and losses
3.7.24. MSETCL requested the Commission to consider sharing of gains and losses on
controllable items due to increased capitalisation, such as, interest on working
capital.
3.7.25. However, the Commission considered impact of increase in capitalisation only on
depreciation, interest on long-term loans, return on equity and incentive on
transmission system availability, none of which is controllable item. Thus, the
Commission hasn’t considered sharing of gains and losses.
Summary of impact of disallowed capitalisation
3.7.26. The impact of disallowed capitalisation on various heads of ARR items for the
periods as approved by the Commission is provided below.
Table 30: Impact of disallowed capitalisation as approved by the Commission (Rs
crore)
Particulars
FY
2007-08
FY
2008-09
FY
2009-10
FY
2010-11 Total
RoE 2.17 5.30 6.26 6.75 20.48
Depreciation including
AAD 0.00 0.00 0.00 0.00 0.00
Interest on Long-term
Loan Capital 6.46 16.65 22.54 24.97 70.62
Interest on Working
Capital and on consumer
security deposits 0.00 0.00 0.00 0.00 0.00
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Particulars
FY
2007-08
FY
2008-09
FY
2009-10
FY
2010-11 Total
Contribution to
contingency reserves 0.00 0.00 0.00 0.00 0.00
Incentive for higher
availability 0.04 0.20 0.37 0.58 1.18
Total 8.66 22.15 29.17 32.30 92.28
3.8. Carrying Cost on increase in ARR due to impact of disallowed capitalisation
3.8.1. MSETCL submitted that on account of disallowance of capitalisation in past years,
it could not recover the required revenue for those years. MSETCL requested the
Commission to consider appropriate carrying cost on the impact of disallowed
capitalisation of the past years and allow the same to be recovered.
3.8.2. The Commission opined that MSETCL hasn’t been able to recover the revenue for
the past years because MSETCL did not seek the Commission’s In-principle
approval before executing the scheme. Hence, the schemes were initially disallowed
by the Commission and later, approval was granted based on submission of relevant
documents by MSETCL. The delay in getting approval is on account of MSETCL’s
delayed submission. The Commission calculated impact of disallowed capitalisation
on ARR as and when the capitalisation is approved and pass on the impact on ARR
in the Tariff of subsequent years. Thus, the Commission hasn’t allowed any
carrying cost on the impact of disallowed capitalisation of previous years as the
delay in recovery is attributed to MSETCL alone.
3.8.3. Therefore, the net impact of Rs 92.28 crore without any carrying cost would be
added to the cumulative revenue gap and recovered in the subsequent Tariff.
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4. TRUING UP OF AGGREGATE REVENUE REQUIREMENT FOR
FY 2011-12
4.1. Background
4.1.1. In the present Petition, MSETCL has sought approval for Truing up for FY 2011-12
based on the actual annual expenditure and revenue as per the audited annual
accounts. MSETCL also submitted reasons for variation in the actual expenses for
FY 2011-12, as compared to the approved expenses as per ARR Order dated 18
May, 2012 in Case No. 169 of 2011 and Review Order dated 14 December, 2012 in
Case No. 106 of 2012. MSETCL also submitted that it has considered expenses
pertaining to MSLDC based on the expenses approved by the Commission for FY
2011-12 in Order dated 22 March, 2013 in Case No. 133 of 2012.
4.1.2. The detailed analysis for approval of Truing up for FY 2011-12 by the Commission
is provided in the following sections.
4.2. Change of Accounting Policy
4.2.1. In the Order dated 10 September, 2010 in Case No. 103 of 2009, the Commission
had taken cognizance of the fact that MSETCL has migrated its accounting system
from ESAAR to ICAI Guidelines under the Companies Act, 1956. As a result, the
Commission assessed the impact due to change in accounting policies and
accounted for the same in phased manner by amortising it in five subsequent years,
rather than passing on the whole impact in one single year. Accordingly, the
Commission adjusted impact of such change in FY 2008-09, FY 2009-10 and FY
2010-11 in their respective True up Orders. The balance amount to be amortised is
adjusted in FY 2011-12 and FY 2012-13 in the present Order.
4.3. Truing up of O&M expenses for FY 2011-12
4.3.1. Operation and Maintenance (O&M) expenses comprise of Employee expenses,
Administrative & General (A&G) expenses and Repair & Maintenance (R&M)
expenses. The summary of the expenses incurred by MSETCL is as below:
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Table 31: O&M expenses submitted by MSETCL (Rs crore)
Particulars
FY 2011-12
MERC Approved (Review Order
in Case No. 106 of 2012) Audited
Operation & Maintenance
Expenses 1,040.66 967.20
Employee expenses 605.79 581.61
A&G expenses 108.92 181.37
R&M expenses 325.95 204.21
4.3.2. MSETCL submitted that actual O&M expenses have decreased vis-a-vis approved
expenses, except A&G expenses. MSETCL also submitted that the Commission
revised the base expenses for FY 2011-12 to account for increase in transformation
capacity. However, MSETCL claimed that the Commission revised base expenses
for FY 2011-12 on the basis of the approved base expenses for FY 2010-11, which
was further based on the approved expenses for FY 2006-07 and not on the basis of
actual expenses. Thus, MSETCL requests the Commission to consider this aspect
while approving O&M expenses for FY 2011-12.
4.3.3. The Commission observed that A&G expenses submitted in the Petition are
different from that of audited annual accounts. In response to the Commission’s
query, MSETCL submitted that the audited annual accounts provide for ‘Other
Expenses’, which include some heads of A&G expenses mentioned in the Petition.
The difference in individual head of O&M expenses in the Petition and audited
annual accounts is due to the requirement of submission of specific heads of O&M
expenses in the requisite formats of the Petition. Due to which, few heads which
were part of ‘Other Expenses’ in audited annual accounts are included in the A&G
expenses of the Petition, explaining the difference. The overall O&M expenses
claimed in the Petition remains the same as that of the audited annual accounts, as
demonstrated by the reconciliation given below:
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Table 32: Reconciliation of O&M expenses submitted in the Petition and
audited annual accounts as submitted by MSETCL (Rs crore)
Particulars As per Formats As per Audited Accounts
Employee Expenses 570.59 579.40
A&G 165.91 238.09
Other Expenses* 81.00 -
R&M Expenses 203.73 203.73
Total 1,021.22# 1,021.22
*Other expenses in Format F7 excluding prior period expenses
#Excluding effect of migration impact allowed in Order from FY 2008-09 onwards
4.3.4. MSETCL’s submissions on each of these expenditure heads, and the Commission’s
ruling are detailed in the following sections.
4.4. Employee expenses for FY 2011-12
4.4.1. MSETCL submitted that it has incurred Rs 581.61 crore as net employee expenses
in FY 2011-12 as against Rs 605.79 crore approved in the Review Order dated 14
December, 2012 in Case No. 106 of 2012. MSETCL further submitted that
employee expenses have increased in FY 2011-12 vis-a-vis FY 2010-11 for which
MSETCL has provided the explanation in the Petition as described below:
a. Basic salaries have increased by Rs 1.30 crore vis-a-vis FY 2010-11, due to
promotions and annual increments.
b. Regular upward revision in the rate of Dearness Allowance (DA) has
resulted in increase in salaries of staff. For instance, the weighted average
DA rate during FY 2011-12 was higher at 58% vis-a-vis 44% during FY
2010-11.
c. Provision for leave encashment reduced in FY 2011-12, i.e., Rs (19.14)
crore as compared to Rs 29.98 crore during FY 2010-11. MSETCL
submitted that liability for leave encashment is provided for on the basis of
the actuarial valuation. In FY 2011-12, there was a change in the actuarial
computation technique which has also resulted in decrease in the leave
encashment liability. However, MSETCL submitted that though there is a
decrease in leave encashment liability during FY 2011-12, MSETCL
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expects substantial increase in liability towards leave encashment in FY
2012-13 due to significant retirements throughout FY 2012-13.
Accordingly, MSETCL prayed before the Commission to consider future
liability towards leave encashment on the basis of the audited annual
accounts.
4.4.2. The Commission scrutinized the submissions made by MSETCL and conducted
component-wise analysis of employee expenses for FY 2011-12 vis-a-vis FY 2010-
11 as specified in the following table:
Table 33: Deviation analysis of Employee expenses for FY 2011-12 (Rs crore)
S.
No. Particulars FY 2010-11 FY 2011-12 Difference
1 Basic Salary 263.84 265.14 1.30
2 Dearness Allowance (DA) 99.28 142.21 42.93
3 House Rent Allowance 28.82 30.32 1.50
4 Compensatory Local Allowance 1.07 1.25 0.18
5 Leave Travel Allowance 0.37 0.46 0.09
6 Earned Leave Encashment 11.43 5.38 (6.05)
7 Other Allowances 29.12 29.09 (0.03)
8 Medical Reimbursement 1.27 1.72 0.45
9 Overtime Payment 17.65 22.71 5.06
10 Bonus/Ex-Gratia Payments 6.35 8.85 2.50
11 Interim Relief / Wage Revision - - -
12 Staff welfare expenses 3.41 1.97 (1.44)
13 Board's contribution to ESI fund - - -
14 Other expenses (4.28) - 4.28
15
Payment under Workmen's
Compensation Act 0.32 0.07 (0.25)
Gross Employee Costs excluding
terminal benefits 458.65 509.16 50.51
16 Terminal Benefits - - -
16.1 Provident Fund Contribution 45.95 49.00 3.05
16.2 Provision for PF Fund - - -
16.3 Pension Payments 0.03 0.04 0.01
16.4 Gratuity Payment 34.32 76.48 42.16
16.5 P.F. Insp. & Govt. charges 0.67 0.73 0.06
16.6 Leave Encashment on Retirement 20.52 23.48 2.96
16.7 Provision for PF Interest shortfall 2.56 - (2.56)
16.8 Provision for Leave Encashment 29.98 (19.14) (49.12)
17 Fringe benefit tax paid - - -
18 Others 0.04 - (0.04)
Gross Employee Expenses
excluding adjustments 592.72 631.07 38.35
19 Adjustments of deferred provision of 23.27 - (23.27)
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S.
No. Particulars FY 2010-11 FY 2011-12 Difference
leave encashment for FY 06-07
20 Effect of creation of new posts - - -
21
Effect of creation of new posts in
Projects Division - - -
22 Effect of migration impact 19.71 19.71 -
23 Gross employee expenses 635.70 650.78 15.08
24 Less: expenses capitalised 71.48 69.17 (2.31)
25
Total adjusted net employee
expenses 564.22 581.61 17.39
4.4.3. The Commission observed that dearness allowance has increased significantly in
FY 2011-12 vis-a-vis FY 2010-11, the reason of which has been provided by
MSETCL as explained in para 4.4.1.b. The Commission accepts the reason
provided by MSETCL and opines that increase in DA is an uncontrollable factor for
MSETCL. Thus, the Commission approves dearness allowance as per MSETCL’s
submission.
4.4.4. Further, the Commission observed that there has been significant reduction in
provision for leave encashment in FY 2011-12 vis-a-vis FY 2010-11. In response to
the Commission’s query, MSETCL submitted its actuarial computation report,
wherein, the Commission noted that the discount rate used in actuarial computations
for FY 2011-12 is 8.50%, which is higher than the discount rate used for FY 2010-
11, i.e., 8.25%. The Commission accepts that due to increase in discount rate, the
liability towards leave encashment would reduce, leading to reduction in provision
for leave encashment. Further, the Commission observed that provision for leave
encashment was higher in FY 2010-11, vis-a-vis FY 2009-10 due to high number of
retirements. Since, provision for leave encashment is dependent upon the number of
retirements, which is an uncontrollable factor for MSETCL, the Commission
considers the provision for leave encashment as submitted by MSETCL in Truing
up for FY 2011-12.
4.4.5. The Commission observed that gratuity payment has increased by Rs 42.16 crore in
FY 2011-12 vis-a-vis FY 2010-11. However, the Commission notes that payment
towards gratuity is an uncontrollable expense, hence, the Commission approves the
same.
4.4.6. The Commission also considered the expense on account of effect of migration
amounting to Rs 19.71 crore, which was approved in Order dated 10 September,
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2010 in Case No. 103 of 2009. Further, the Commission considered employee
expenses capitalised as submitted by MSETCL, which is same as that of audited
annual accounts.
4.4.7. The Commission observed that the employee expenses submitted by MSETCL in
FY 2011-12 are lower than the approved expenses by Rs 24.18 crore. However, the
Commission noted that this decrease in employee expenses is on account of
uncontrollable factors, such as change in assumptions of actuarial computation.
Accordingly, the employee expenses approved by the Commission for FY 2011-12
is given in the table below:
Table 34: Employee expenses approved by the Commission for FY 2011-12 (Rs
crore)
Particulars
Approved in
Case No. 106 of
2012
Submitted in
the Petition
Approved in
this Order
Gross employee expenses 664.77 631.07 631.07
Add: Effect of migration 19.71 19.71 19.71
Less: employee expenses capitalized 78.68 69.17 69.17
Net employee expenses 605.79 581.61 581.61
4.5. Administrative and general expenses
4.5.1. MSETCL submitted that the administrative and general (A&G) expenses incurred in
FY 2011-12 were Rs 181.37 crore vis-a-vis Rs 108.91 crore approved in the Review
Order dated 14 December, 2012 in Case No. 106 of 2012. MSETCL submitted that
its asset base has increased significantly over the past few years, leading to an
increase in electricity charges, vehicle running and hiring expenses, security
expenses and other A&G expenses. MSETCL submitted details of asset base over
the past four years is the following table:
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Table 35: Asset base submitted by MSETCL
Particulars FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12
Transformation capacity in
MVA 66,118 73,791 82,619 82,619
Lines in Ckt. Km 36,716 37,133 38,068 39,764
Number of sub-stations 515 520 536 560
4.5.2. MSETCL submitted that increase in A&G expenses is on account of following
reasons:
a. Security expenses: MSETCL submitted that in ARR Order dated 18 May,
2012 in Case No. 169 of 2011, the Commission approved increased
security expenses for FY 2011-12 based on the projected expenditure of FY
2009-10, rather than actual expenses incurred in FY 2009-10. MSETCL
requested before the Commission to consider this aspect while approving
security expenses. Further, MSETCL submitted that as per the requirement,
12 guards and 2 gunmen for each 400 kV sub-station, 9 guards for each 220
kV sub-station and 6 guards for each 132 kV and below sub-station are
deployed. Further, MSETCL submitted that there is requirement of one
outsourced supervisor for every ten outsourced guards for better and
effective management of the security and vigilance system. Further,
MSETCL submitted that increase in line length and number of sub-stations
in higher in FY 2010-11 and FY 2011-12 as compared to FY 2009-10, as
represented in the table below.
Table 36: Year-wise increment of assets submitted by MSETCL
Particulars FY 2009-10 FY 2010-11 FY 2011-12
Increase in line length in ckt km 417 935 1696
Increase in number of sub-stations 5 16 24
b. Training expenses: MSETCL submitted that it has designed training
policy for its employees considering National Training Policy, which
mandates power sector organizations to ensure training for a minimum
period of one week for each employee annually. Further, the Policy
mandates that each department of the organisation set apart 1.5% of the
salary budget solely for training. MSETCL submitted that it has decided to
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establish and operate Regional Training Centre (RTC) at each zone for its
Group III & IV employees and a Corporate Training Centre (CTC) for its
Group I & II employees. MSETCL submitted that it has already established
7 regional training centres and a State of the Art training centre is being
established at Lonavala. Further, it has adopted five Industrial Training
Institutes under the sponsorship of the Government of India to create more
skilled manpower in the field of power sector. It has provided training to
total 3939 employees out of total strength of 12,683 during FY 2011-12,
wherein, 98,190 man-days were utilised for training activities. Due to this,
training expenses during FY 2011-12 increased. Thus, MSETCL prayed
before the Commission to approve the training expenses incurred as actual.
c. Electricity charges: MSETCL submitted that due to significant increase in
the asset base and addition in new offices and necessary office equipments
(including IT hardware and other office equipments) during FY 2011-12,
electricity charges have increased during FY 2011-12. Further, certain
software and hardware equipment required round the clock operations,
which has also increased consumption of electricity. Further, MSETCL
submitted that due to multiple Tariff revisions by Distribution Licensees,
electricity charges have increased significantly, as given in the table below:
Table 37: Electricity charges submitted by MSETCL (Rs crore)
Particulars
FY
2006-07
FY
2007-08
FY
2008-09
FY
2009-10
FY
2010-11
Electricity charges
(approved) 4.39 4.62 4.90 5.17 5.65
Electricity charges
(actual) 4.39 5.14 5.51 7.44 24.52
d. Vehicle hiring and running expenses: MSETCL submitted due to 4.48%
increase in number of sub-stations and 4.46% in length of transmission
network, vehicle running and hiring expenses have increased. Further, the
expansion of network has occurred in remote areas of Maharashtra, thereby
increasing the travel cost. Further, MSETCL submitted that increase in fuel
expenses have also led to an increase in the vehicle running and hiring
costs.
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e. Fees & Subscription Expenses: MSETCL submitted that in FY 2011-12,
it has incurred a one-time expenditure of Rs 2 crore as filing fee towards
the Ministry of Corporate Affairs to increase its Authorised Share Capital
from Rs 5 lakh to Rs 5000 crore.
f. Service Tax towards Lease Rent: MSETCL submitted that it has incurred
payments of Rs 88.28 lacs towards service Tax during FY 2011-12, which
should be considered for reimbursement at the time of Truing up as per the
Order dated 14 December, 2012 in Case No. 106 of 2012.
4.5.3. The Commission conducted component-wise analysis of A&G expenses as given in
the following table:
Table 38: Deviation analysis of A&G expenses for FY 2011-12 (Rs crore)
S.
No. Particulars FY 2010-11 FY 2011-12 Difference
1 Rent Rates & Taxes 23.31 20.80 (2.51)
2 Insurance 0.87 1.42 0.55
3 Telephone & Postage, etc. 3.88 3.95 0.07
4 Legal charges & Audit fee 1.02 1.34 0.32
5
Professional, Consultancy, Technical
fee 9.05 5.01 (4.04)
6 Conveyance & Travel 15.63 8.48 (7.15)
7 Electricity charges 24.52 36.98 12.46
8 Water charges 4.23 3.80 (0.43)
9 Security arrangements 28.07 38.40 10.33
10 Fees & subscription 0.51 2.96 2.45
11 Books & periodicals 0.05 0.12 0.07
12 Computer Stationery 0.09 0.26 0.17
13 Printing & Stationery 2.87 2.52 (0.35)
14 Advertisements 1.42 1.67 0.25
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S.
No. Particulars FY 2010-11 FY 2011-12 Difference
15
Purchase Related Advertisement
Expenses 1.08 2.95 1.87
16 Contribution/Donations 0.00 0.00 0.00
17 License Fee and other related fee 0.18 0.17 (0.01)
18
Vehicle Running Expenses Truck /
Delivery Van 0.64 4.61 3.97
19
Vehicle Hiring Expenses Truck /
Delivery Van 4.08 9.05 4.97
20 Cost of services procured - - -
21
Outsourcing of metering and billing
system - - -
22 Freight On Capital Equipments 0.20 0.73 0.53
23 V-sat, Internet and related charges 0.00 - -
24 Training 0.00 4.95 4.95
25 Bank Charges 0.34 - (0.34)
26 Miscellaneous Expenses 0.00 - -
27 Office Expenses 5.08 7.94 2.86
28 Others 12.01 15.19 3.18
29 Gross A&G Expenses 139.13 170.92 31.79
30 Less: Expenses Capitalised 8.53 9.78 1.25
31 Net A&G Expenses 130.60 161.14 30.54
32 Effect of migration impact allowed 20.23 20.23 -
33 Net Adjusted A&G Expenses 150.83 181.37 30.54
4.5.4. The Commission observed there is significant increase in electricity charges,
security expenses, vehicle hiring and running expenses and training expenses, the
reasons of which have been provided by MSETCL. The Commission analysed the
reasons provided by MSETCL for deciding if any uncontrollable factor has resulted
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into the deviation in the cost.
4.5.5. Further, the Commission observed that the actual weighted average inflation rate of
WPI and CPI is 8.07% (March 2012 vis-a-vis March 2011), while in Order dated 18
May, 2012 in Case No. 169 of 2011, the Commission considered 7.16%. Therefore,
for the purpose of this Order, the Commission recomputed escalated A&G expenses
by considering 8.07% inflation rate over approved A&G expenses of FY 2010-11
and further, adjusted it for base effect by using escalation rate of 5.78% as done in
previous ARR Order. In the following paragraphs, the Commission has analysed the
uncontrollable factors and approved them over and above the revised escalated
A&G expenses, wherever deemed appropriate.
4.5.6. As regards security expenses, the Commission noted MSETCL’s submission and
acknowledges that it is necessary to deploy sufficient measures for enhancing
security of the transmission network. Also, in Order dated 18 May, 2012 in Case
No. 169 of 2011, the Commission considered increase in security expenses in FY
2010-11 due to additional security measures as uncontrollable. Therefore, the
difference in actual security expenses claimed by MSETCL has been considered by
the Commission. The Commission has allowed the above based on the
substantiation provided by MSETCL in “Security Expenses” section of Para 4.2.1.1
of the Petition. However, the Commission directs MSETCL to undertake only
prudent expenditure on account of security measures in future years.
4.5.7. As regards increase in training expenses, the Commission understands that National
Training Policy of 1996 recommended each organization to set aside 1.5% of salary
budget for training needs, which is revised to 2.5% of salary budget in National
Training Policy 2012 released on 19 January, 2012 by Ministry of Personnel, Public
Grievances and Pensions. However, the Commission observed that MSETCL didn’t
incur any training expense in FY 2009-10 and FY 2010-11, instead incurred Rs 4.95
crore towards training expenses in FY 2011-12. Further, MSETCL submitted that it
received the Commission’s In-principle clearance for setting up Corporate Training
Center at Lonawala with cost of Rs 12.72 crore vide letter
MERC/CAP/DPR/11/09/2803 dated 11 December, 2009. MSETCL clarified that
this expense has been claimed as part of capitalisation. Since, training is
recommended in the National Training Policy, 1996 and 2012; the Commission
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approves the training expenses incurred by MSETCL in FY 2011-12.
4.5.8. As regards increase in electricity charges, MSETCL claimed that increase in
electricity charges are due to increase in asset base and increase in electricity Tariff.
The Commission has scrutinised the claim of MSETCL and finds that due to
reasons such as increase in consumption at new asset facilities created by MSETCL,
increase in retail Tariffs, etc. the expenditure has become inevitable. Hence, the
Commission has considered this expenditure over and above the approved
expenditure.
4.5.9. The vehicle running and hiring expenses has increased beyond the control of
MSETCL due to the higher asset base and also increase of fuel prices. Therefore,
the Commission has considered this expenditure while approving the A&G
expenses.
4.5.10. As regards increase in fees and subscription expenses, the Commission opines that
statutory fees/levy is an uncontrollable item for MSETCL as per Regulation 17.6 of
Tariff Regulations, 2005. Since, MSETCL incurred Rs 2 crore towards filing fee for
increase in its authorised share capital, the Commission approves such increase as
this is one-time expenditure and is an uncontrollable expenditure.
4.5.11. As regards service tax towards lease rent, the Commission had provided following
ruling in Order dated 14 December, 2012 in Case No. 106 of 2012:
“.....The Commission observes that the service tax on lease rental for FY 2011-12
and FY 2012-13 will be reimbursed at actual at the time of Truing up exercise.”
4.5.12. The Commission verified the payment of service tax from the documentary
evidence provided by MSETCL and approved Rs 0.88 crore towards service tax on
lease rental in True up of FY 2011-12.
4.5.13. Further, the Commission considered capitalised A&G expenses as per audited
annual accounts. Accordingly, the Commission approved the A&G expenses as
provided in the table below:
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Table 39: A&G expenses approved for FY 2011-12 by the Commission (Rs
crore)
Particulars
Approved
in Case No.
106 of 2012
Submitted
in the
Petition
Approved
in this
Order
Gross administrative and general
Expenses 98.1 170.92 170.92
Add: Effect of migration 20.23 20.23 20.23
Less: Expenses capitalised 9.42 9.78 9.78
Net administrative and general
Expenses 108.92 181.37 181.37
4.6. Repair and Maintenance(R&M) expenses
4.6.1. MSETCL submitted that the actual R&M expenses for FY 2011-12 are lower than
the amount approved by the Commission. Further, MSETCL submitted that this
may be considered as a one year incidence as MSETCL will incur higher costs for
maintaining its vintage assets and expanding transmission network in the coming
years.
4.6.2. The Commission conducted component-wise deviation analysis of R&M expenses
for FY 2011-12 vis-a-vis FY 2010-11 as specified in the following table:
Table 40: Deviation analysis of R&M expenses for FY 2011-12 (Rs crore)
S.
No. Particulars FY 2010-11 FY 2011-12 Difference
1 Plant & Machinery 201.13 203.55 2.42
2 Buildings 6.71 - (6.71)
3 Civil Works 33.70 - (33.70)
4 Hydraulic Works 0.08 - (0.08)
5 Lines & Cable Networks 43.36 - (43.36)
6 Vehicles 1.02 0.83 (0.19)
7 Furniture & Fixtures 0.14 0.08 (0.06)
8 Office Equipment 1.50 1.41 (0.09)
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S.
No. Particulars FY 2010-11 FY 2011-12 Difference
9 Gross R&M Expenses 287.64 204.82 (82.82)
10 Less: Expenses Capitalised 0.64 2.13 1.49
11 Add: Effect of migration impact 1.53 1.53 0.00
12 Net R&M Expenses 288.53 204.21 (84.32)
4.6.3. It is observed that R&M expenses have decreased significantly in FY 2011-12 vis-a-
vis FY 2010-11 due to no R&M expense in civil works and line and cable networks.
Upon seeking reasons for the same, MSETCL replied that these are as per audited
annual accounts.
4.6.4. However, in the ARR Order dated 18 May, 2012 in Case No. 169 of 2011, the
Commission approved R&M expenses applying inflation factor of 6.89% over
Trued up R&M expenses for FY 2010-11 and also considered asset base increase
factor of 5.78%. In addition, the Commission had allowed for provision created on
account of the effect of migration of accounts to ICAI guidelines. As a result, the
approved R&M expenditure was Rs 325.95 crore, which is much higher than the
claimed expenditure of Rs 203.29 crore. The Commission also observed that R&M
expenses have reduced from Rs 305.27 crore in FY 2009-10 to Rs 288.53 crore in
FY 2010-11. Further reduction in R&M expenses from Rs 288.53 crore in FY 2010-
11 to Rs 204.21 in FY 2011-12 is on account of certain factors, which at this point
of time, MSETCL hasn’t provided clarification to the Commission. Therefore, it
can’t be ascertained that such decrease is on account of controllable or
uncontrollable factors and whether such decreased level of expenses is sustainable
in future or not.
4.6.5. Further, it appears that there is no need of giving base effect in R&M expenses as
the claim in this regard made in the Case No. 169 of 2011 doesn’t stand any longer
due to a lower actual expense. Hence, for the purpose of this Order, the Commission
approves R&M expenses by applying escalation due to inflation to the approved
expenses of FY 2010-11. Thus, the Commission escalated approved R&M expenses
of FY 2010-11 using actual WPI inflation rate of 7.69% (March 2012 vis-a-vis
March 2011) and arrived at approved R&M expenses for FY 2011-12. Accordingly,
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the sharing of gains and losses are approved by the Commission. However, the
Commission understands that R&M expenses approved for FY 2011-12 will have
impact on approved R&M expenses of FY 2012-13. Thus, MSETCL is directed to
provide detailed justifications of this decrease in R&M expenses and reasons of
no R&M expenses in civil works and line and cable networks in FY 2011-12, at
the time of Truing up of FY 2012-13.
4.6.6. Accordingly, R&M expenses are approved by the Commission as provided in the
table below:-
Table 41: Net R&M Expenses approved for FY 2011-12 by the Commission (Rs
crore)
Particulars
Approved in
Case No. 106 of
2012
Submitted in
the Petition
Approved in this
Order
Gross R&M Expenses 325.23 204.82 309.77
Less: Expenses Capitalised 0.81 2.13 2.13
Add: Effect of Migration impact
allowed 1.53 1.53 1.53
Net R&M Expenses 325.95 204.21 309.16
Total O&M expenses
4.6.7. Based on the above discussion, the Commission approves O&M expenses as
detailed below:
Table 42: Net O&M expenses approved for FY 2011-12 by the Commission (Rs crore)
Particulars
Approved
in Case
No. 106 of
2012
MSETCL's
submission
Approved in
this Order
Employee expenses 605.79 581.61 581.61
A&G expenses 108.92 181.37 181.37
R&M expenses 325.95 204.21 309.16
Total O&M expenses 1,040.66 967.20 1,072.15
4.7. Capital Expenditure and Capitalisation
4.7.1. MSETCL submitted actual capitalisation in FY 2011-12 as Rs 2261.32 crore as
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mentioned in the table below.
Table 43: Capital Expenditure and Capitalisation for FY 2011-12 submitted by
MSETCL (Rs crore)
Particulars
MSETCL
submission in
Case No. 169 of
2011
MERC
Approved (Case
No. 106 of 2012)
Actual as per
Audited A/c for
FY 2011-12
MERC Approved Schemes
(DPR Schemes) 2,549.39 2,538.40 1,855.76
Schemes submitted to MERC
for Approval 457.16 359.26 104.84
Schemes sanctioned in MSEB
period costing Rs 10 crore &
Above (In the process of
Submission to MERC) 21.12 21.12 7.09
Schemes sanctioned costing
<Rs 10 crore (Non-DPR
Schemes) 263.89 263.89 274.34
Intangible Assets - - 19.50
Total 3,291.69 3,182.67 2,261.43
SLDC - - 0.11
Actual Capitalisation net of
SLDC - - 2,261.32
4.7.2. MSETCL submitted that it has duly followed the regulatory procedures for getting
approval of capital expenditure schemes. MSETCL further mentioned that for
capital expenditure schemes costing upto Rs 10 crore, internal approval is taken
from competent authority as per Board delegation, while schemes costing more than
Rs 10 crore have been forwarded to the Commission for approval. MSETCL
requested the Commission to approve the actual capitalisation for FY 2011-12.
4.7.3. The Commission while approving the capitalisation for DPR schemes has
considered schemes submitted by MSETCL in Form 4.4 (Actual FY 12), for which
In-principle approval has been granted by the Commission or request for In-
principle approval has been submitted to the Commission. The DPR schemes
approved were scrutinised for cost benefit analysis and status of these schemes as
on the end of FY 2011-12 was also verified by the Commission.
4.7.4. While scrutinising the submissions of MSETCL, the Commission observed that
capital expenditure of few Non-DPR schemes was higher than the cut-off limit of
Rs 10 crore. Since MSETCL didn’t submit sufficient justifications regarding such
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schemes, the Commission has disallowed such schemes.
4.7.5. In response to the Commission’s query related to wind evacuation schemes,
MSETCL submitted the details of wind evacuation schemes vide email/letter dated
14 November, 2013, wherein, MSETCL submitted that there is only one wind
scheme “220kV Karad-Sadawaghapur Line” capitalised in FY 2011-12. However,
MSETCL didn’t submit information related to the take-over of assets and receipt of
the payment made to the developer. Therefore, the aforesaid scheme is not
considered by the Commission in FY 2011-12.
4.7.6. Based on the directive “Assets put to use” vide Order dated 18 May, 2012 in Case
No. 169 of 2011, the Commission sought information on bays unutilised by the
distribution companies. MSETCL vide its letter dated 11 June, 2013 submitted
details of unutilised bays in different zones. After scrutiny, the Commission found
that 229 No. of 33 kV bays, 34 No. of 22 kV bays and 6 No. of 11 kV bays has
remained unutilised.
4.7.7. The Commission directed MSETCL for scheme-wise details of spare bays that have
been capitalised but not utilised by MSETCL. Accordingly, as per the reply from
MSETCL, the Commission has disallowed Rs. 46.52 crores of capitalisation in FY
2011-12, corresponding to the spare bays.
4.7.8. Further, the Commission disallowed capitalisation related to returned back schemes,
JV schemes, schemes pertaining to other Licensees, consumer funded schemes and
schemes which are not be commissioned in this Control Period. The capitalisation
for FY 2011-12 approved by the Commission after prudent check are given in the
table below:
Table 44: Capital Expenditure and Capitalisation for FY 2011-12 approved by
the Commission (Rs crore)
Particulars Approved in Case
No. 106 of 2012 MSETCL's
submission
Approved
in this
Order Capitalisation 3,182.67 2,261.32 2,263.61
4.7.9. The above capitalisation of Rs 2263.61 crore approved by the Commission
comprises of Rs 2212.20 crores pertaining to capitalisation for FY 2011-12 and Rs
51.41 crore pertaining to the earlier dis-allowed capitalisation as provided in Table
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13 above.
4.8. Depreciation including advance against depreciation (AAD)
4.8.1. MSETCL submitted the claim for depreciation and advance against depreciation to
meet the loan repayment obligations. MSETCL further submitted that in Review
Order dated 14 December, 2012 in Case No. 106 of 2012, the Commission
restricted AAD to the difference between 1/10th
of the principal amount of loans to
be repaid and approved depreciation. However, MSETCL prayed before the
Commission to allow depreciation including AAD as mentioned in the table below:
Table 45: Depreciation including advance against depreciation for FY 2011-12
submitted by MSETCL (Rs crore)
Particulars
MSETCL
submission in
Case No. 169 of
2011
Approved in
Case No. 106 of
2012
Actual as per
Audited A/c
(excluding
SLDC)
Depreciation 433.05 407.97 421.79
Loan Payment During the
Year 798.03 798.03 745.15
Advance against Depreciation 364.98 224.04 323.36
Depreciation including AAD 798.03 632.01 745.15
4.8.2. For approving depreciation, the Commission considered closing GFA of FY 2010-
11 approved in para 3.7.6 of Section 3 of the present Order. Accordingly, opening
GFA for FY 2011-12 has been considered as Rs. 13,365.10 crore. Further, addition
in assets in FY 2011-12 is considered as per the capitalisation approved in para
4.7.9.
4.8.3. Further, the Commission approved 3.14% as depreciation rate for FY 2011-12 based
on the portfolio of assets submitted by MSETCL as per the audited annual accounts
for FY 2011-12 and depreciation rates prescribed in the Tariff Regulations, 2005.
The Commission also considered retirement of assets during the year to arrive at
closing balance of assets. Based on average of opening and closing GFA and
approved depreciation rate, depreciation for FY 2011-12 is computed.
4.8.4. Further, the Commission notes that the Tariff Regulations, 2005, provides for
advance against depreciation, the excerpts of which are reproduced below for
reference:
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“48.3 Where the actual amount of loan repayment in any financial year exceeds the
amount of depreciation allowable under Regulation 50.4.1, the Transmission
Licensee shall be allowed an advance against depreciation for the difference
between the actual amount of such repayment and the allowable depreciation for
such financial year:
Provided that the advance against depreciation shall be restricted to 1/10th of the
principal amount of loans that are to be repaid in such financial year minus the
amount of depreciation allowable under Regulation 50.4.1:” {Emphasis Added}
4.8.5. The Commission computed AAD and restricted it to the extent of 1/10th
of principal
amount to be repaid in that year less depreciation computed above. Though the
AAD claimed by MSETCL is higher due to actual repayment obligations, the
Commission has restricted it as per the provisions of the Tariff Regulations, 2005.
Accordingly, the Commission has approved depreciation including AAD for FY
2011-12 as summarised in the following table:-
Table 46: Depreciation including AAD for FY 2011-12 approved by the Commission (Rs
crore)
Particulars Approved in Case No.
106 of 2012
MSETCL's
submission
Approved in this
Order
Opening balance of GFA 13,026.01 13,859.83 13,365.10
Addition in GFA 3,182.67 2,261.43 2,263.61
Retirement of GFA 164.4 42.19 41.75
Closing balance of GFA 16,044.28 16,079.06 15,586.96
Depreciation rate 2.81% 2.82% 3.14%
Depreciation 407.97 421.79 454.01
Advance against
Depreciation 224.04 323.36 131.60
Depreciation including
Advance Against
Depreciation 632.01 745.15 585.62
4.9. Interest on Long term Loans
4.9.1. MSETCL submitted that the capital expenditure incurred in FY 2011-12 was
financed through long-term borrowings from major Financial Institutions (FI), viz.,
(PFC), JICA, (REC), Bank of Baroda, Union Bank of India, Bank of Maharashtra
and Oriental Bank of Commerce. MSETCL submitted actual gross long-term
interest expense for FY 2011-12, excluding SLDC apportionment, as Rs 657.81
crore.
4.9.2. In response to the Commission’s query, MSETCL submitted the loan documents
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which were perused by the Commission for the analysis. The loan documents
submitted by MSETCL contained the proof of interest rates, tenure of loan,
repayment, receipts of payment of interest and repayment, etc. The Commission
verified the repayment amount and interest rates from the loan documents submitted
by MSETCL. During the scrutiny, the Commission observed that the interest
amount submitted by MSETCL in the Petition and mentioned in the audited annual
accounts is higher than the amount verified from the interest payment receipts.
During subsequent interactions, MSETCL clarified that the actual interest expenses
recognised in the audited annual accounts and in the Petition are higher than the
actual interest payments due to provision created to calculate annualised interest
expenses on pro-rata basis, as actual interest payments may not be true reflection of
actual interest expenses incurred by an entity during a financial year. The
Commission accepts the clarification provided by MSETCL regarding the same.
4.9.3. For determining opening balance of loan for FY 2011-12, the Commission
considered closing balance of loan approved for FY 2010-11 in para 3.7.10 of
Section 3.
4.9.4. It may be noted that till FY 2006-07, the interest expenses were approved based on
the actual gross interest expenses less actual IDC as per the audited annual accounts.
This was subsequently changed in FY 2007-08 to normative gross interest expenses
calculated considering opening balance as per previous year’s closing balance and
addition in loan on account of increase in capitalisation. Further, IDC was deducted
to arrive at approved interest expenses. Subsequently, the Commission, on request
of MSETCL, stopped deducting IDC as addition in loan was considered only on
account of capitalised assets. However, it was observed that some portion of loan
due to work-in-progress remained included in the opening balance of loan, whose
impact was not getting neutralised as IDC was not reduced from interest expenses
calculated. Therefore, the Commission has adjusted opening balance of FY 2011-12
downwards by Rs 273.79 crore, calculated as grossed up capitalised interest
expenses of FY 2006-07 by average interest rate of that year. The Commission has
made this adjustment to reduce loans pertaining to work-in-progress to arrive at
adjusted loan balance, which considered addition in loan due to disallowed
capitalisation as detailed in para 3.7.10 of Section 3.
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4.9.5. The Commission considered debt: equity ratio of 80:20 for capitalisation of FY
2011-12. The Commission further considered approved opening balance of loan
from each source of loan as per Order dated 18 May 2012 in Case No. 169 of 2011
and considered addition in loan at 80% of the approved capitalisation. As per
MERC Tariff Regulations, 2005, the Commission considered repayment of
normative loan as approved depreciation including AAD for calculating interest
expenses. The interest rate for each source of loan is considered as per MSETCL’s
submission. For this, the Commission verified the loan documents provided by
MSETCL. Accordingly, the Commission calculated interest expenses for FY 2011-
12.
4.9.6. Further, the Commission noticed that in the ARR chapter for Second Control Period
of the Petition, MSETCL has requested the Commission not to deduct the loan
amount by 80% of the retired assets. MSETCL stated that considering 80% debt
funding and repayment equal to depreciation (i.e., @ depreciation rate of 5.28%,
considering rate of plant and machinery which comprises of majority of its assets),
the loan would be repaid in 16th
year itself, implying that no outstanding loan is left
at the end of the life of the asset.
4.9.7. The Commission analysed that at the end of life of the asset, assets gets depreciated
to the extent of 90%. Assuming debt: equity ratio of 80: 20 and considering debt
repayment equal to the depreciation amount, it can be deduced that the entire debt
pertaining to the asset gets repaid during the life of the asset itself, since total
depreciation allowed on an asset is higher than the debt taken for creating the asset.
Thus, at the end of life of the asset when the asset is retired, reducing debt on
account of retired asset is not necessary. Only equity pertaining to the retired assets
is left in the books, which needs to be deducted while computing return on equity.
As precedence, the Commission didn’t consider reduction in loan due to retirement
of assets for Tata Power Company – Transmission in its Order vide dated 30 March,
2013 in Case No. 178 of 2011.
4.9.8. However, to ascertain whether assets retired are fully depreciated at the time of
retirement, the Commission asked MSETCL to provide the year in which each of
the retired assets was capitalised. Upon analysis of the information provided by
MSETCL, the Commission found that the some of the assets retired by MSETCL in
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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FY 2011-12 were not fully depreciated before retirement. The Commission
computed the normative remaining loan corresponding to such assets by taking
difference of the initial loan drawn for such asset and accumulated depreciation till
the time of retirement. The Commission deducted the remaining loan balance of
such assets from the loan portfolio, i.e., Rs 21.89 crore and adjusted the loan
balance downwards on account of retirement of assets.
4.9.9. Further, the Commission considered submissions made by MSETCL for SLDC
apportionment. Accordingly, the Commission approved the net interest expense for
FY 2011-12 as given in the table below:
Table 47: Interest on long term loans for FY 2011-12 approved by the Commission (Rs
crore)
Particulars
Approved in Case
No. 106 of 2012
MSETCL's
submission Approved in this Order
Opening Balance 3,774.01 5,839.64 3,771.50
Additions 2,546.14 2,041.12 1,810.89
Repayments 798.03 745.15 585.62
Reduction in loan
due to retirement of
assets - - 21.89
Closing Balance 5,522.11 7,135.61 4,974.88
Interest rate
approved 8.99% - 10.96%
Gross Interest
Expenses 417.95 657.81 479.26
Less: SLDC
Apportionment - 0.18 -
Less: Expenses
Capitalised 0.00 273.16 -
Less: IDC - - -
Net Interest
Expenses 417.95 384.47 479.26
4.10. Other Interest & Finance Charges
4.10.1. MSETCL submitted that debt funding of the capital investments plan requires
guarantee from the Government of Maharashtra (GoM). Therefore, it will have to
pay guarantee charges to GoM for the guarantee provided by GoM for raising
finance. MSETCL submitted that other finance charges mainly comprise of
guarantee fee payable to GoM, stamp duty and service fee for raising finances,
commitment charges, bank commission, etc. and requested the Commission to
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consider the same on actual basis.
4.10.2. The Commission in the Order dated 18 May, 2012 in Case No. 169 of 2011 had
approved guarantee charges as per the estimates of MSETCL and finance charges as
0.5% of the loan drawn for the corresponding year as approved by the Commission.
The Commission observed that the actual guarantee charges for FY 2011-12
claimed for True up amounts to Rs 5.68 crore, which is slightly lower than that
approved by the Commission in Order dated 18 May, 2012 in Case No. 169 of
2011. Further, the Commission verified whether finance charges claimed by
MSETCL is within 0.5% of the approved loan drawn, i.e., 0.5% of Rs 1810.89 crore
= Rs 9.05 crore. The Commission found that the actual finance charges claimed for
True up is within the limit approved by the Commission. Therefore, the
Commission approves the actual finance charges claimed by MSETCL.
Table 48: Other Interest and Finance Charges for FY 2011-12 approved by the
Commission
Particulars
Approved in Case
No. 106 of 2012
MSETCL's
submission
Approved in this
Order
Guarantee Charges 5.69 5.68 5.68
Finance Charges 12.73 7.92 7.81
Total 18.42 13.61 13.49
4.11. Interest on Working Capital (IoWC)
4.11.1. MSETCL submitted that interest on working capital has been computed based on
the norms specified in Tariff Regulations, 2005 and audited O&M expenses, book
value of stores, materials and supplies and revenue from transmission charges.
Further, MSETCL submitted that it has considered short term Prime Lending Rate
of State Bank of India prevailing at the time of filing of Tariff Petition, i.e., 14.75%
as normative interest rate for calculating interest on working capital.
4.11.2. Further, MSETCL submitted that as per audited annual accounts, actual interest paid
for working capital loans is Rs 20.99 crore and interest on working capital approved
by the Commission is Rs 66.58 crore.
4.11.3. MSETCL has also considered the difference of IoWC computed based on norms
and actual IoWC as efficiency gain to be shared with the transmission system users.
Thus, MSETCL prayed before the Commission to approve the net entitlement under
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IoWC, after sharing the gain/ loss, as Rs 51.54 crore for FY 2011-12.
4.11.4. The Commission scrutinised the submissions of MSETCL in regard to the
computation of interest on working capital and estimated normative working capital
requirement as the summation of following items:-
a. One-twelfth of the amount of operation and maintenance expenses for such
financial year,
b. One-twelfth of the sum of the book value of stores, materials and supplies
including fuel on hand at the end of each month of such financial year,
c. One and a half months equivalent of the expected revenue from
transmission charges at the prevailing Tariff, and less
d. Amount, if any, held as security deposits from Transmission System Users
4.11.5. Further, in accordance with the Tariff Regulations, 2005, the interest rate as on the
date of application for determination of Tariff is to be considered for approval of the
interest on working capital. Thus, interest rate of 14.75% has been considered for
estimation of interest on working capital, which was the Prime Lending Rate of
State Bank of India (SBI PLR) as on date of filing of ARR Petition, i.e., 29
November, 2011 in Case No. 169 of 2011.
4.11.6. As regards sum of book value of stores, materials and supplies, the Commission
considered the book value of store, materials and supplies as reflected in the audited
annual accounts for FY 2011-12. However, the Commission adjusted closing
balance of FY 2011-12 by Rs 152.48 crore for inventory discovered during SAP
implementation while considering book value of stores for FY 2011-12.
4.11.7. Revenue from transmission charges were levied on the transmission system users
(TSUs) as per the InSTS Tariff Order dated 10 September, 2010 in Case No. 120 of
2009 during FY 2011-12. According to this Order, MSETCL received Rs 188.69
crore per month as revenue from 1 April, 2011 to 31 March, 2012. The Commission
has considered the same for the purpose of estimating working capital requirement.
4.11.8. As regards O&M expenses, the Commission considered approved O&M expenses
in the previous Order rather than actual O&M expenses claimed by MSETCL.
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4.11.9. As regards security deposits from consumers, MSETCL clarified that security
deposit mentioned in the audited annual accounts is taken from vendors and not
from consumers. Hence, the Commission didn’t consider any security deposit from
users of transmission system.
4.11.10. However, in its response to the Commission’s query, MSETCL corrected actual
interest paid for working capital loans and requested the Commission to consider Rs
20.04 crore as actual interest on working capital loans. Accordingly, the
Commission has considered efficiency gains based on actual interest paid by
MSETCL on working capital requirements as described in para 4.19.4.
4.11.11. The Commission approves interest on working capital for FY 2011-12 as
given below:
Table 49: Interest on Working Capital for FY 2011-12 as approved by the Commission
(Rs crore)
Particulars Approved in Case No.
106 of 2012
MSETCL's
submission
Approved in this
Order
Interest on Working
Capital 66.58 66.10 57.99
4.12. Other Expenses
4.12.1. MSETCL submitted the details of Other Expenses for FY 2011-12 in the table
below:
Table 50: Break-up of other expenses submitted by MSETCL (Rs crore)
Particulars Amount
Compensation for injuries, death and
damages 0.58
Loss on Obsolescence of Fixed Assets 0.16
Deficit on Exchange Rate Variation 79.90
Sundry Expenses 0.20
Material Cost Variance 0.00
Bad & Doubtful Debts written-off 0.16
Adjustments for Prior Period 28.52
Other Expenses Total 109.52
4.12.2. MSETCL requested the Commission to True up other expenses of Rs 109.52 crore
as per the audited annual account for FY 2011-12.
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4.12.3. The Commission noted that MSETCL has provided reconciliation of Rs 81.00 crore
of Other expenses, while providing reconciliation of O&M expenses as explained in
para 4.3.3. The rest of the ‘Other expenses’ comprise of Prior period expenses.
Upon the Commission’s query on prior period expenses, MSETCL responded that
these are adjustments due to errors or omissions in the financial statements of
previous years and accounted under the head ‘prior period items’. The details as
provided by MSETCL is given below:
Table 51: Prior period expenses submitted by MSETCL (Rs crore)
Particulars (in Rs. crore)
As per Audited
a/c of FY 2011-12
Considered in the
MYT Petition
Prior Period Expenses
Operating expenses 15.49 15.49
Employee costs 2.14 2.14
Administration and other expenses 5.03 5.03
Materials related expenses relating to prev. Year 0.75 0.75
Short Provision of Depreciation for prior period 2.30 2.30
Interest and other finance charges 10.84 10.84
A) Sub Total 36.54 36.54
Prior Period Income
Other income 7.99 7.99
Excess Provision of Depreciation for Prior Periods 0.03 0.03
Income Due to Revaluation in Stock 152.48 0.00*
B) Sub Total 160.50 8.02
Net Adjustments for Prior Period Expenses
considered in the Petition (A-B)
(123.96) 28.52
* MSETCL proposed to treat income due to revaluation of stock in a phased manner in five years as explained
in section of non-tariff income in the Petition
4.12.4. Of these, operating expenses of Rs 15.49 crore are due to short provisions for earlier
years towards water charges, insurance, electricity charges, and various
supplier/contractors payments. Interest and other finance charges of Rs 10.84 crore
are due to short provisions booked toward JICA and other loans.
4.12.5. The Commission opines that such expenses, being O&M in nature, is not considered
in this Order, as prudent O&M expenses of previous years were approved by the
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Commission in previous True-up Orders after detailed scrutiny. Allowing prior
period O&M expenses in this Order will lead to approval of certain imprudent
expenses disallowed previously. Similarly, prior period expenses on account of
interest and finance charges need not be considered as interest expenses were
approved in previous Orders on the basis of normative loan balance and considering
prior period interest expenses will lead to approval of interest expenses over and
above the normative interest, which is not desirable. Hence, the Commission
disallows prior period expenses claimed by MSETCL in the Petition.
4.12.6. However, the Commission observed that MSETCL has mentioned ‘Other income’
of Rs 7.99 crore as prior period income. The Commission considered this income in
this Order and deducted it from the ‘Other expenses’ to arrive at approved ‘Other
expenses’. It should be noted that the Commission hasn’t considered prior period
income on account of ‘excess provision of depreciation’ as the Commission had
approved depreciation on normative basis, rather than considering audited annual
accounts.
4.12.7. Thus, the ‘Other expenses’ as approved by the Commission is given in the table
below:
Table 52: Other Expenses for FY 2011-12 approved by the Commission (Rs crore)
Particulars Approved in Case No.
106 of 2012
MSETCL's
submission
Approved in this
Order
Compensation for
injuries, death and
damages
Not
Appli
cable
0.58 0.58
Loss on
Obsolescence of
Fixed Assets 0.16 0.16
Deficit on
Exchange Rate
Variation 79.90 79.90
Sundry Expenses 0.20 0.20
Material Cost
Variance 0.00 0.00
Bad & Doubtful
Debts written-off 0.16 0.16
Adjustments for
Prior Period 28.52 (7.99)
Other Expenses
Total 87.87 109.52 73.00
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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4.13. Return on Equity
4.13.1. MSETCL submitted that it has calculated RoE in accordance with the Regulation
50.1 of the MERC Tariff Regulations, 2005 as detailed in the table below:
Table 53: Return on Equity for FY 2011-12 submitted by MSETCL (Rs crore)
Particulars
Approved in Case No.
106 of 2012
MSETCL’s
submission
Regulatory Equity at the Beginning of
the Year 3,524.45 3,772.41
Equity portion of the capitalisation
during the year 636.53 452.29
Reduction in Equity Capital on account
of retirement / replacement of assets 32.88 8.44
Regulatory Equity at the End of the Year 4,128.11 4,216.25
Return on Regulatory Equity at the
Beginning of the Year 493.42 528.14
Return on Equity portion of the
capitalisation during the year 42.26 31.07
Total Return on Regulatory Equity 535.68 559.21
4.13.2. The Commission adopted the principle specified in the Tariff Regulations, 2005 for
calculating return on equity. The Commission observed that MSETCL has
erroneously considered Rs 3772.41 crore as opening balance of equity for FY 2011-
12. However, the Commission considered closing balance of regulatory equity for
FY 2010-11 as approved in para 3.7.14 of Section 3, i.e., Rs 3,576.15 crore as
opening balance of equity for FY 2011-12. Further, addition in equity due to
approved capitalisation in FY 2011-12 is considered at the rate of 20% of
capitalisation.
4.13.3. Further, the Commission considered retirement of assets as submitted by MSETCL
and reduced equity to the extent of 20% of the value of retired assets. Also, the
Commission computed RoE using 14% as rate of return on equity, prescribed as per
Tariff Regulations, 2005. Approved RoE for FY 2011-12 is provided in the table
below:
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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MERC, Mumbai Page 82 of 143
Table 54: Return on equity approved for FY 2011-12 approved by the
Commission (Rs crore)
Particulars
Approved in Case
No. 106 of 2012
Submitted
by
MSETCL
Approved
in this
Order
Regulatory Equity at the Beginning of
the Year 3,524.45 3,772.41 3,576.15
Capitalisation during the Year 3,182.67 2,261.43 2,263.61
Equity portion of the capitalisation
during the year 636.53 452.29 452.72
Consumer contribution and Grants used
during the year for Capitalisation - - -
Reduction in Equity Capital on account
of Retirement/ Replacement of assets 32.88 8.44 8.35
Regulatory Equity at the End of the
Year 4,128.11 4,216.25 4,020.52
Return on Equity Computations
Return on Regulatory Equity at the
Beginning of the Year 493.42 528.14 500.66
Return on Equity portion of the
capitalisation during the year 42.26 31.07 31.11
Total Return on Regulatory Equity 535.68 559.21 531.77
4.14. Income Tax
4.14.1. MSETCL requested the Commission to consider actual income tax of Rs 179.67
crore for FY 2011-12, instead of considering the approved income tax expense of
Rs 133.98 crore.
4.14.2. The Commission verified Rs 176.50 crore as income tax expense in the audited
annual accounts. Upon the Commission’s query regarding the difference in income
tax expense claimed by MSETCL and that of audited annual accounts, MSETCL
replied that in the audited annual accounts, provision for income tax is provided,
while final assessment for income tax is carried out after the finalisation of the
audited annual accounts. Due to this, there are chances of variation in the provision
made in the audited annual accounts vis-a-vis the actual income tax liability and
payment. MSETCL provided the Income Tax Return Acknowledgement (ITR-V)
for AY 2012-13 to verify the same. The Commission scrutinised the ITR-V
submitted by MSETCL and found it satisfactory. Thus, the Commission approves
income tax expense as submitted by MSETCL in the Petition.
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Table 55: Income Tax for FY 2011-12 as approved by the Commission (Rs
crore)
Particulars Approved in Case No.
106 of 2012
Submitted by
MSETCL
Approved in this
Order
Income Tax 133.98 179.67 179.67
4.15. Contribution towards contingency reserves
4.15.1. MSETCL requested the Commission to approve contribution towards contingency
reserves on the basis of the audited annual accounts, i.e., Rs 33.39 crore.
4.15.2. Further, MSETCL submitted that in accordance with directions of the Commission
vide Order dated 10 September, 2010 in Case No. 103 of 2009, it has appropriated,
an amount of Rs 32 crore towards contingency reserves and Rs 1.37 crore towards
short provision of contingency reserves.
4.15.3. MSETCL further submitted that to comply with the directives issued by the
Commission, MSETCL, vide Board Resolution No. 60/22 dated 7 February, 2011,
had to prematurely encash FDs of Rs 98.76 crore (IDBI bank), Rs 10.32 crore
(Central Bank of India), Rs 6.62 crore (Corporation Bank) and Rs 9.37 crore
(Oriental Bank of Commerce) carrying interest of 7.08%, 8.61%, 8.60% and 7.30%
p.a. respectively to invest the same amount in securities authorised under the Indian
Trusts Act, 1882.
4.15.4. The Commission has verified that the accumulated contingency reserves of
MSETCL do not exceed 5% of the original cost of fixed assets as stipulated in the
Tariff Regulations, 2005. Further, MSETCL submitted the documentary evidence
showing that the above amount has been invested in the approved class of securities.
4.15.5. For calculation of contingency reserves, the Commission adjusted the approved
opening GFA of FY 2011-12 by deducting approved amount of disallowed
capitalisation. The Commission has made this adjustment as the Tariff Regulations,
2005 states that
“50.7.1 Where the Transmission Licensee has made an appropriation to the
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........”
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4.15.6. The Commission opined that since disallowed capitalisation for previous years has
been approved in the present Order, MSETCL wouldn’t have set aside its
contribution towards contingency reserves for such capitalisation in FY 2011-12.
Hence, the Commission computed contribution to contingency reserves at 0.25% of
approved opening GFA for FY 2011-12 less approved disallowed capitalisation of
past years. Accordingly, contribution to contingency reserve approved by the
Commission is shown in the table below:-
Table 56: Contribution towards Contingency Reserves for FY 2011-12
approved by the Commission (Rs crore)
Particulars Approved in Case
No. 106 of 2012
Submitted by
MSETCL
Approved in this
Order
Contribution towards
Contingency Reserves 32.57 33.39 32.57
4.16. Revenue from Transmission Charges
4.16.1. MSETCL submitted that for computing the revenue gap for FY 2011-12, MSETCL
has considered actual revenue recovered which is based on average monthly Tariff
of Rs 188.69 crore as approved by the Commission in the InSTS Tariff Order dated
10 September, 2010 in Case No. 120 of 2009. This amounts to Rs 2264.28 crore
from transmission Tariff for FY 2011-12. MSETCL submitted the following table
on revenue from transmission Tariff:
Table 57: Revenue from Transmission Charges for FY 2011-12 submitted by
MSETCL (Rs crore)
Particulars
Submission in
Case No. 169 of
2011
Approved in
Case No. 106 of
2012
As per Audited
A/c
Revenue from Transmission
Tariff 2264.28 2264.28 2264.25
Income from Wheeling
Central Sector power to Goa 20.52 20.52 20.58
Income from Wheeling
Central Sector power to Dadra
Nagar - - 5.72
4.16.2. MSETCL submitted that the revenue earned for wheeling central power to Goa is
according to the principle enunciated by Western Regional Power Committee
(WRPC), which has been endorsed by the Hon’ble ATE's Judgement dated
December 17, 2007 in Appeal No. 150 of 2007.
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4.16.3. The Commission verified MSETCL’s submission from the audited annual accounts
and considered the same as revenue recovered from transmission charges and
income from Goa and Dadra Nagar wheeling charges.
Table 58: Revenue from Transmission Charges for FY 2011-12 as approved by
the Commission (Rs crore)
Particulars Approved in Case
No. 106 of 2012
Submitted by
MSETCL
Approved in this
Order
Revenue from
Transmission Charges 2,264.28 2,264.25 2,264.25
Income from Goa &
Dadra Nagar wheeling
charges 20.52 26.30 26.30
4.17. Non-Tariff Income
4.17.1. MSETCL submitted the following table indicating non-tariff income earned in FY
2011-12:
Table 59: Non-Tariff income for FY 2011-12 submitted by MSETCL (Rs crore)
S. No Particulars Audited
1 Interest on Contingency Reserve
investments 13.00
2 Interest on Other Investments 4.35
3 Other/ Miscellaneous receipts 148.70
4 Other Receipts 1.40
5 Interest on Staff loans and
Advances 0.29
6 Sale of Scrap 24.64
7 Excess provision written back 7.67
8 Rent 0.81
9 Revenue from Open Access
Charges 107.99
Total 308.84*
* Revised to Rs 304.56 crore by MSETCL in its further correspondence with the Commission
4.17.2. MSETCL submitted that the main reason for high non-tariff income is the interest
earned on other income as compared to FY 2010-11, which is a year specific results
of market returns earned by MSETCL and is not sustainable for future years.
4.17.3. MSETCL further submitted that the item under the head “Other/ Miscellaneous
Receipts” for FY 2011-12 includes an amount of Rs 48 crore towards non-
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refundable deposits from previous years which were transferred to P&L in FY
2011-12 and is not repetitive in nature.
4.17.4. Further, MSETCL submitted that the non-tariff income claimed in the Petition is
different from the income shown in audited annual accounts due to non-
consideration of income under following heads:
a. Valuation of stores and spares: MSETCL submitted that certain stores and
spares parts amounting to Rs 152.48 crore which had been charged to
R&M expenses were not actually consumed in earlier years. This was
found when MSETCL installed SAP as ERP platform and conducted
physical verification of inventories. Accordingly, MSTECL credited this
amount as prior period income in audited annual accounts. However,
MSETCL requested the Commission not to consider this impact in single
year and requested to spread it over five years, as such unutilized stores
will not be consumed within a year and will be consumed in future years
for carrying out R&M expenses. Therefore, MSETCL has spread this
revenue over five years starting from FY 2013-14 onwards as Rs 30.50
crore per year.
b. Income from sale of assets: MSETCL submitted that it has considered Rs
20.51 crore from sale of scrap in its P&L Account under the head "other
operating income" and Rs 4.13 crore as profit on sale of scrap is also
considered separately. MSETCL submitted that scrap is essentially 10%
residual value of assets and the balance 90% have already been charged as
depreciation. MSETCL further submitted that since recovery of value of
asset through depreciation is allowed only to the extent of 90% of original
cost, residual value of asset as scrap should not be considered as non-tariff
income as it is not recovered from consumers in any form. Only profit/loss
on account of sale of such asset should be considered.
4.17.5. The Commission analysed various components of non-tariff income. Upon analysis,
the Commission found MSETCL’s claim that main reason for high non-tariff
income is the ‘interest earned on other income’ is flawed. The interest income for
MSETCL is not significant and interest income doesn’t vary significantly across
years, hence, it is not a year-specific result.
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4.17.6. Further, the Commission asked MSETCL to reconcile the difference between non-
tariff income claimed in the Petition and given in the audited annual accounts.
While replying, MSETCL found that there has been an error, wherein, non-tariff
income was computed by deducting income pertaining to MSLDC, i.e., SLDC fees,
rescheduling charges and other receipts as approved by the Commission in Order
dated 22 March, 2013 in Case No. 133 of 2012, instead of considering the actual
income earned as per audited annual accounts. Accordingly, MSETCL submitted
revised claim of Rs 304.56 crore as non-tariff income by deducting actual income
pertaining to MSLDC as per audited annual accounts.
4.17.7. However, on analysis, the Commission found that MSETCL has submitted Rs
107.99 crore as revenue from open access charges, wherein, revenue towards short-
term open access charges of Rs 4.10 crore has been added and SLDC rescheduling
charges have been deducted. The revenue towards short-term open access charges
were later clarified as SLDC fees in MSETCL’s reconciliation of non-tariff income.
Therefore, the Commission didn’t consider such open access charges of Rs 4.10
crore and rescheduling charges of Rs 1.68 crore as non-tariff income as these are
attributed to SLDC. As provided by MSETCL in the reconciliation statement,
‘Other receipts’ of Rs 0.05 crore is pertaining to SLDC and is included in the non-
tariff income of MSETCL in audited annual accounts. The Commission considered
this and reduced non-tariff income of MSETCL by Rs 0.05 crore.
4.17.8. As regards valuation of stores, the Commission opines that there is no merit in
spreading an amount of Rs 152.48 crore over five years. This amount was treated as
R&M expense in previous years, which was passed on to the consumers by way of
higher Tariff. Treating this expense over a period of five years from FY 2013-14
onwards will not only result in delay in passing of this income to the consumers, but
will also fail to reduce the revenue gap of MSETCL on which carrying cost is levied
while determining transmission Tariff for future years. The Commission opines that
expense incurred in a year should be passed on to the consumers as far as possible
in True up of the same year. Similarly, benefit from income earned in a year should
also be passed on to the consumers as far as possible in the same year in which True
up is conducted. As a result, the Commission considers this entire amount of Rs
152.48 crore as Prior period income and considered while determining ARR of FY
2011-12.
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MERC, Mumbai Page 88 of 143
4.17.9. Upon the Commission’s query on break-up of miscellaneous income as given in
Schedule-25 of audited annual accounts, MSETCL responded with the following
table, explaining that the increase in miscellaneous income in FY 2011-12 vis-a-vis
FY 2010-11 is on account of increase in the short-term open access charges, rebate
on prompt payment from REC and PFC towards timely payment of loan and interest
and other miscellaneous receipts.
Table 60: Details of miscellaneous receipts for FY 2011-12 submitted by
MSETCL (Rs crore)
Particulars FY 2010-11 FY 2011-12
Registration fee 0.31 1.01
Sundry credit balances written back 1.66 1.77
Discount received on prompt payment to Vendor 0.77 1.28
Income from Supervisory Charges (For ORC Projects) 0.03 0.004
Fees from library members 0.16 -
Recovery for Transport/Vehicle Exp. Other than emp. 0.0009 0.002
Rebate for prompt Payment from REC - 0.04
Rebate for prompt Payment from PFC - 4.37
Other Miscellaneous Receipts 49.70 140.23
Liquidated Damages Recovered from Contractor/Supp 0.51 -
Short Term Open Access Charges - 105.45
Recoveries from transport facilities 1.66 0.01
Misc. Recoveries from Employees - -
Total Misc. Income 54.80 254.15
4.17.10. The Commission accepted MSETCL’s submission regarding the same.
4.17.11. As regards income from JV partners, MSETCL replied to the Commission’s query
that MSETCL entered into JV with Sterlite Technologies Ltd., for which actual
potential of OPGW business is being ascertained presently. As actual potential has
not been established yet, MSETCL hasn’t estimated other income due to this yet.
MSETCL submitted that it shall include its impact in ARR, once actual potential is
ascertained. The Commission will take this into consideration in subsequent Orders
of MSETCL.
4.17.12. As regards income from sale of scrap, the Commission opines that in case of sale of
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scrap of capitalised asset, only profit from sale of scrap should be considered as
non-tariff income, instead of considering total revenue proceeds. This is because
when a fully depreciated asset is sold as scrap, the proceeds from sale comprise of
following two components:
a. Salvage value of the asset; and
b. Any gain/loss on sale of asset, i.e., sale price – salvage value.
4.17.13. Out of these, the salvage value is in lieu of the capital invested by the transmission
Licensee at the time of purchase of asset. Assuming debt towards purchase of asset
is repaid till the time assets is fully depreciated, any salvage value remained is on
account of equity invested by the transmission licensee. Considering salvage value
as non-tariff income and deducting non-tariff income from ARR will tantamount to
giving equity invested by the transmission licensee to the consumers, which is not
desirable. Thus, the Commission opines that salvage value in case of capitalised
asset need not be considered as non-tariff income.
4.17.14. However, the Commission opines that any revenue realised from sale of scrap,
wherein, the scrap belongs to items which are of revenue expenditure in nature,
such as, replacement of conductor or cable, should be considered as non-tariff
income. This is because such revenue expenditure would have been recovered from
the consumers in the form on ARR and any proceeds from sale of such items should
be passed onto the consumers.
4.17.15. Therefore, the Commission directed MSETCL to furnish details of items sold as
scrap and classify them in capitalised asset and revenue expenditure. The
Commission scrutinised the details submitted by MSETCL and classified them in
the following manner:
Table 61: Classification of scrap
Particulars Rs crore
Scrap- capitalised asset 9.39
Scrap- revenue expenditure 10.49
Other adjustments 0.63
4.17.16. Based on the above, only the value of scrap of Rs 10.49 crore corresponding to
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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scrap from revenue expenditure and the profit on sale of scrap of Rs 4.13 crore is
approved by the Commission.
4.17.17. Accordingly, non-tariff income approved by the Commission is given below:
Table 62: Non-Tariff income for FY 2011-12 approved by the Commission (Rs crore)
S. No Particulars Approved
1
Interest on Contingency Reserve
and other investments 17.64
3 Other/ Miscellaneous receipts 150.05
4 Other Receipts -
5
Interest on Staff loans and
Advances -
6 Sale of Scrap 14.62
7 Excess provision written back 7.67
8 Rent 0.80
9
Revenue from Open Access
Charges 105.45
Total 296.23
4.18. Incentive on Transmission Availability
4.18.1. MSETCL requested the Commission to approve incentive on transmission system
availability as submitted in the table below:
Table 63: Incentive on transmission availability for FY 2011-12 submitted by MSETCL
(Rs crore)
Particulars
Actual
Availability
(%)
Target
Availability
(%)
ARR of
FY
2011-12
%
Allocation
of ARR
ARR
Allocation Incentive
HVAC 99.72 98.00 3,058.30 85.04 2,600.78 45.65
HVDC 96.55 95.00 14.96 457.52 7.46
4.18.2. The Commission verified the actual availability claimed by MSETCL from the
MSLDC certification submitted by MSETCL and found it satisfactory. The
Commission allowed incentive on transmission system availability as follows:
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Table 64: Incentive on transmission availability for FY 2011-12 approved by the
Commission (Rs crore)
Particulars
Actual
Availability
(%)
Target
Availability
(%)
ARR of
FY 2011-
12
%
Allocation
of ARR
ARR
Allocation Incentive
HVAC 99.72 98.00 2,598.03 85.04 2,209.36 38.78
HVDC 96.55 95.00 14.96 388.67 6.33
4.19. Sharing of gains/losses
4.19.1. MSETCL categorised all the expenditure, except interest on working capital, as
uncontrollable and hence, did not compute the gains and losses for other
controllable heads of expenditure. As regards interest on working capital, MSETCL
has treated this expense as efficiency gains in line with the Commission’s treatment
of interest on working capital in the Order dated 18 May, 2012 in Case No. 169 of
2011. The relevant provisions under the Tariff Regulations, 2005 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. … 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:
..........
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:
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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.”
4.19.2. The Commission specifies that the deviation on all other items have not been
considered as controllable. Therefore, the components where deviation is of
controllable in nature, i.e., O&M expenses and interest on working capital, the
sharing of gains/ losses has been computed.
O&M expenses
4.19.3. As regards O&M expenses, the actual audited expenditure of Rs 967.20 crore is
lower than Rs 1040.66 crore approved in the Review Order dated 14 December,
2012 in Case No. 106 of 2012. MSETCL has made an efficiency gain in R&M
expenses as actual R&M expenses are lower than the Trued up amount. Deviation in
employee expenses and A&G expenses were treated uncontrollable, hence not
considered any efficiency gain/loss. Accordingly, efficiency gains/loss is computed
and shared with MSETCL in accordance with the Tariff Regulations, 2005 as
reproduced above.
Interest on Working Capital
4.19.4. The actual interest on working capital incurred by MSETCL during FY 2011-12 is
Rs 20.04 crore and the normative interest on working capital approved by the
Commission after considering other elements of expenses and revenue as approved
after Truing up, is Rs 57.99 crore. The Commission has considered the entire
normative interest on working capital above the actual expense of Rs 20. 04 crore as
an efficiency gain and has considered sharing of 1/3rd of the same with the
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consumers, 1/3rd is considered for special reserve created to offset future losses due
to controllable factors (if any), and 1/3rd is allowed to be retained by MSETCL.
4.20. Summary of efficiency gains/ (losses) for FY 2011-12
4.20.1. The summary of sharing of efficiency gains/(losses) is shown in the table below:
Table 65: Sharing of Efficiency Gains/(Losses) due to variation in O&M Expenses &
Interest on Working Capital for FY 2011-12 (Rs crore)
Particulars
Previous
Order
Actual
(A)
Entitlement as
per
Regulations/
Order (B)
Gain/
(Loss)
(B - A)
Efficiency
Gains/(Losses)
shared with
TSUs
Net
entitlement
of
MSETCL
O&M
expenses 1,040.66 967.20 1,072.15 104.95 34.98 1,037.16
Employee
expenses 605.79 581.61 581.61 0.00 0.00 581.61
A&G
expenses 108.92 181.37 181.37 0.00 0.00 181.37
R&M
expenses 325.95 204.21 309.16 104.95 34.98 274.18
Interest on
working
capital 66.58 20.04 57.99 37.95 12.65 45.34
Total 1,107.24 987.24 1,130.13 142.90 47.63 1,082.50
4.20.2. The total efficiency gains shared with MSETCL is Rs 47.63 crore, out of which
MSETCL is directed to retain Rs 15.88 crore in a special reserve for the purpose of
absorbing the impact of any future losses on account of controllable factors, as per
Regulation 19.1 of Tariff Regulations, 2005.
4.21. Revenue (Gap)/ surplus till FY 2011-12
4.21.1. According to the above analysis, the Commission determined revenue gap to be
considered in ARR for FY 2013-14 as per the table below:
Table 66: Cumulative revenue (Gap)/ surplus till FY 2011-12 (Rs crore)
Particulars
Submitted
by
MSETCL Approved in this Order
Aggregate Revenue Requirement from
Transmission Tariff 2,708.12 2,502.86
Revenue from Existing Tariff 2,264.25 2,264.25
Revenue (Gap)/ Surplus for the Current (443.87) (238.61)
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Particulars
Submitted
by
MSETCL Approved in this Order
year
Revenue (Gap)/ Surplus till previous year (752.9) (752.90)
Add: impact of disallowed capitalisation (92.28)
Cumulative Revenue Gap (1,196.77) (1,083.80)
(add) Incentive on Transmission
Availability of HVAC System 45.65 38.78
(add) Incentive on Transmission
Availability of HVDC System 7.46 6.33
Cumulative Revenue Gap till the year (1,249.88) (1,128.91)
4.22. Summary of Truing up including Sharing of Gains & Losses for FY 2011-12
4.22.1. The summary of the net ARR and efficiency gains as approved by the Commission
for FY 2011-12 is given in the following table:
Table 67: Summary of True up for FY 2011-12 approved by the Commission
(Rs crore)
Particulars
Submitted
by
MSETCL
Approved
in this
Order
Efficiency
gains/losses
shared with
TSUs
Net
Entitlement
after
efficiency
gain/loss Operation & Maintenance
Expenses 967.20 1,072.15 34.98 1,037.16
a. Employee expenses 581.61 581.61 0 581.61
b. A&G expenses 181.37 181.37 0 181.37
c. Employee expenses 204.21 309.16 34.98 274.18
Depreciation 421.79 454.01 454.01
Advance against
depreciation 323.36 131.60 131.60
Interest on Long-term Loan
Capital 384.47 479.26 479.26
Interest on Working Capital
and on consumer security
deposits 51.06 57.99 12.65 45.34
Other Interest and finance
charges 13.61 13.49 13.49
Other Expenses 109.52 73.00 73.00
Income Tax 179.67 179.67 179.67
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Particulars
Submitted
by
MSETCL
Approved
in this
Order
Efficiency
gains/losses
shared with
TSUs
Net
Entitlement
after
efficiency
gain/loss Contribution to contingency
reserves 33.39 32.57 32.57
Total Revenue
Expenditure 2,484.06 2,493.74 2,446.11
Return on Equity Capital 559.21 531.77 531.77
Aggregate Revenue
Requirement 3,043.26 3,025.51
2,977.87
Less: Non Tariff Income 308.84 296.23
296.23
Less: Income from Goa &
Dadra Nagar wheeling
charges 26.30 26.30
26.30
Less: Amortisation of
Income due to Revaluation
of Stocks 0
152.48
152.48
Aggregate Revenue
Requirement from
Transmission Tariff 2,708.12 2,550.50
2,502.86
Revenue from Transmission
Tariff 2,264.25 2,264.25
2,264.25
Revenue (Gap)/surplus for
current year (443.87) (286.25)
(238.61)
Revenue (Gap)/surplus till
previous year (752.90) (752.90)
(752.90)
Impact of past period
disallowed capitalisation (92.28)
(92.28)
Cumulative Revenue Gap (1,196.77) (1,131.43) (1,083.80)
(add) Incentive on
Transmission Availability of
HVAC System 45.65 38.78 38.78
(add) Incentive on
Transmission Availability of
HVDC System 7.46 6.33
6.33
Cumulative Revenue
(Gap)/surplus till the year (1,249.88) (1,176.54)
(1,128.91)
4.23. Performance Parameters
Transmission Loss
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4.23.1. MSETCL submitted that the Commission in the APR Order dated 10 September,
2010 in Case No. 103 of 2009 had approved transmission loss of 4.85% as
normative loss for InSTS and also observed that the same will be reviewed once the
ABT metering at all the interface points gets completed.
4.23.2. MSETCL submitted the status of metering till 8 March, 2013 in the table given
below:
Table 68: Status of ABT meters installed for interface locations
ABT Meter Installation Status
Utility Type of
Interface
Metering
Location Installed Balance
MSETCL G<->T 239 239 0
T<->D 1,193 1,193 0
EHV Cons 222 221 1
RInfra G<->T 4 4 0
T<->D 116 116 0
TPCL G<->T 35 35 0
T<->D 185 185 0
BEST G<->T 0 0 0
T<->D 92 92 0
Total 2,086 2,085 1
4.23.3. MSETCL submitted that the actual transmission loss for FY-2011-12 is 4.17%.
Also, MSETCL submitted that losses in the transmission lines depend on factors,
such as, shift of load centres, energy injection and withdrawal from the network and
the extent of inherent technical loss pertaining to the transmission equipment in use.
Further, MSETCL submitted the trend in transmission loss over the past four years
as per the following table:
Table 69: Transmission loss for InSTS for FY2011-12 submitted by MSETCL
S.
No Year
Energy Input
(MU)
Energy Output
(MU)
Transmission
Loss
1 FY 2008-09 95,477.956 90,815.816 4.88%
2 FY 2009-10 1,01,872.316 97,195.234 4.59%
3 FY 2010-11 1,07,810.082 1,03,162.694 4.31%
4 FY 2011-12 1,17,534.520 1,12,634.492 4.17%
4.23.4. MSETCL submitted that it has maintained the transmission losses to near normative
level in spite of increase in the volume of electricity handled by its transmission
network.
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4.23.5. The Commission asked MSETCL that the actual Transmission Loss submitted in
the Petition is 4.17%. Whereas, the MSLDC accounted loss for FY 2011-12 for
InSTS as 4.25%. MSETCL replied that due to revision in the energy accounting by
MSEDCL circle offices and other distribution utilities, the energy accounting for
FY 2011-12 was revised by SLDC, Kalwa. MSETCL submitted the revised data on
transmission loss for FY 2011-12 as follows:
Table 70: Revised Transmission Loss of InSTS for FY 2011-12 Submitted by MSETCL
S.
No Year
Energy Input
(MU)
Energy Output
(MU)
Transmission
Loss
1 FY 2011-12 1,17,555.044 1,12,561.678 4.25%
4.23.6. The Commission accepted the Transmission loss submitted by MSETCL. Also,
the Commission directs MSETCL to undertake a detailed study to determine
feasible options for reduction of losses in its transmission network including
technical solutions and best practices/benchmarking of such solutions in other
States. The study report shall be submitted to the Commission within a period
of one year from date of issue of the present Order.
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5. ANNUAL PERFORMANCE REVIEW FOR FY 2012-13
5.1. Background
5.1.1. In the present Petition, MSETCL has sought Annual Performance Review for FY
2012-13 based on the actual expenditure incurred in first six months of FY 2012-13
starting from 1 April, 2012 to 30 September, 2012 and projected expenditure for the
period starting from 1 October, 2012 to 31 March, 2013. MSETCL also submitted
reasons for variation in the submitted expenses for FY 2012-13, as compared to the
expenses approved in ARR Order dated 18 May, 2012 in Case No. 169 of 2011 and
Review Order dated 14 December, 2012 in Case No. 106 of 2012.
5.2. O&M Expenses for FY 2012-13
5.2.1. MSETCL submitted that O&M expenses are claimed as per the Business Plan Order
dated 11 January, 2013 in Case No. 137 of 2011, which is same as that of O&M
expenses approved in Review Order dated 14 December, 2012 in Case No. 106 of
2012.
5.2.2. MSETCL further submitted that though leave encashment liability decreased during
FY 2011-12, a significant number of retirements is expected during FY 2012-13 as
estimated on the basis of age of the existing employees of MSETCL. This would
lead to a substantial increase in the provision for leave encashment during FY 2012-
13. Accordingly, MSETCL requested the Commission to consider the liability
towards leave encashment in FY 2012-13 as per the audited annual accounts at the
time of final Truing up.
5.2.3. Additionally, MSETCL submitted that dearness allowance (DA) will increase at the
prevailing DA rate of 71%, which is at the highest level in last two-three years.
5.2.4. Further, MSETCL submitted that on account of addition of assets during FY 2012-
13 and inflation, expenses such as security expenses, electricity charges, training
expenses, vehicle running and hiring charges will increase during FY 2012-13.
Also, MSETCL requested the Commission to consider the service tax on lease
rentals on actual basis at the time of final Truing up.
5.2.5. MSETCL submitted that the actual R&M expenses for FY 2011-12 is less than that
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approved by the Commission in Order dated 14 December, 2012 in Case No. 106 of
2012. However, due to the maintenance of vintage assets and expanding
transmission network, MSETCL requested the Commission to consider the actual
R&M expense at the time of final Truing up. Accordingly, O&M expenses
submitted by MSETCL is mentioned in the table below:
Table 71: O&M Expenses for FY 2012-13 submitted by MSETCL (Rs crore)
Particulars Submitted in Petition
Total O&M Expenses 1,115.42
5.2.6. The Commission scrutinized the submissions made by MSETCL and conducted
component-wise analysis of O&M expenses. The Commission observed that the
actual expenditure incurred by MSETCL during first six months of FY 2012-13 is
much lower than the projected O&M expenses for next six months of FY 2012-13,
as summarised in the table below:
Table 72: Component-wise O&M expenses submitted by MSETCL (Rs crore)
Particulars Apr-Sep 2012 Oct 2012-Mar 2013 Difference
Employee expenses 314.41 337.46 23.06
A&G expenses 90.50 24.79 (65.71)
R&M expenses 116.73 231.58 114.85
Total O&M
expenses 521.64 593.83 72.20
5.2.7. Upon the Commission’s query on the same, MSETCL replied that it has computed
projected O&M expenses for period Oct 2012-March 2013 by deducting actual
expenses incurred during April-Sep 2012 from O&M expenses approved in the
Review Order dated 14 December, 2012 in Case No. 106 of 2012. MSETCL replied
that it has followed this methodology so that the total projected expenses for FY
2012-13 are same as that of the expenses earlier approved by the Commission.
5.2.8. However, the Commission has projected O&M expenses for full year FY 2012-13
on the basis of the Trued up expenses of FY 2011-12. The component-wise
estimation as conducted by the Commission is explained in below paragraphs.
5.2.9. Employee expenses: For estimating employee expenses for FY 2012-13, the
Commission escalated approved employee expenses for FY 2011-12 by 11.44%,
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equivalent to the rate of increase in CPI of March 2013 vis-a-vis March 2012.
Further, the Commission approved an additional amount of Rs 19.71 crore as an
adjustment for the effect of migration from ESAAR to ICAI accounting system, as
allowed in Order dated 10 September, 2010 in Case No. 103 of 2009. Capitalisation
of employee expenses are considered as per the approved figures given in Order
dated 14 December, 2012 in Case No. 106 of 2012, which will be Trued up based
on the actual capitalised expenses at the time of Truing up.
5.2.10. A&G expenses: To estimate the gross A&G expenses for FY 2012-13, the
Commission escalated approved gross A&G expenses for FY 2011-12 by 7.97%,
which is the weighted average rate of increase of WPI and CPI of March 2013 vis-
a-vis March 2012. The Commission didn’t consider uncontrollable expenses of Rs
0.88 crore for service tax towards lease rent and one-time expenditure of Rs 2 crore
towards fees and subscription, while escalating A&G expenses of FY 2011-12. The
Commission will consider actual service tax towards lease rent for FY 2012-13 at
the time of actual Truing up. As regard estimate of A&G expenses to be capitalised
in FY 2012-13, the Commission accepted the estimates provided by MSETCL,
which is in line with the capitalised A&G expenses approved by the Commission in
Order dated 14 December, 2012 in Case No. 106 of 2012. Further, the Commission
added an amount of Rs 20.23 crore on account of adjustment for the effect of
migration from ESAAR to ICAI accounting system.
5.2.11. R&M expenses: As explained in para 4.6.4 and 4.6.5 of Section 4, the Commission
has asked MSETCL to provide detailed reasons for decrease in R&M expenses.
Since, view needs to be formed on the basis of further submissions from MSETCL,
the Commission considered approved R&M expenses as per Order dated 18 May,
2012 in Case No. 169 of 2011 in APR. The same will be trued up on the basis of
further submissions of MSETCL and audited annual accounts. As regard estimate of
R&M expenses to be capitalised in FY 2012-13, the Commission accepted the
estimates provided by MSETCL, which is in line with the capitalised R&M
expenses approved by the Commission in Order dated 14 December, 2012 in Case
No. 106 of 2012. Further, the Commission added an amount of Rs 1.53 crore on
account of adjustment for the effect of migration from ESAAR to ICAI accounting
system.
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5.2.12. Accordingly, the Commission approves O&M expenses as given in the table below:
Table 73: O&M Expenses for FY 2012-13 approved by the Commission (Rs crore)
Particulars Approved in Case
No. 106 of 2012
Submitted by
MSETCL
Approved in this
Order
Employee expenses 651.87 651.87 640.08
A&G expenses 115.24 115.24 191.54
R&M expenses 348.30 348.30 348.30
Total O&M expenses 1,115.42 1,115.42 1,179.92
5.2.13. The Commission will consider actual O&M expenses based on the audited annual
accounts at the time of Truing up.
5.3. Capitalisation
5.3.1. MSETCL submitted that it has claimed capitalisation as approved by the
Commission in its Order dated 18 May, 2012 in Case No. 169 of 2011 as given in
the table below:
Table 74: Capitalisation for FY 2012-13 submitted by MSETCL (Rs crore)
Particulars Submitted in the Petition
DPR 3,732.25
Non-DPR 142.37
Capitalisation 3,874.62
5.3.2. However, MSETCL requested the Commission to consider actual capitalisation for
FY 2012-13 at the time of final Truing up. Also, MSETCL highlighted that
payments towards invoices raised by MSETCL has been less than the invoice
amount, due to which MSETCL is facing a cash flow problem and difficulty in
executing capital expenditure related works.
5.3.3. The Commission scrutinised the details of schemes submitted by MSETCL for
capitalisation in FY 2012-13. As mentioned in para 4.7.4 of Section 4, the
Commission hasn’t considered non-DPR schemes costing more than Rs 10 crore.
Also, the Commission observed that MSETCL didn’t submit scheme ‘110 kV
Pandharpur’, ‘220 kV Kalwa-Trombay’ and ‘132 kV Chopda -Shirpur’, but were
claimed in the present Petition.
5.3.4. It is observed that as per the guideline specified by the Commission, Licensees have
to seek In-principle approval for undertaking capital expenditure schemes above Rs
10 crore. Therefore, in the absence of details, the Commission has considered only
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schemes which were approved in principal. Accordingly, the capitalisation
approved by the Commission for FY 2012-13 is given in the table below:
Table 75: Capitalisation for FY 2012-13 approved by the Commission (Rs crore)
Particulars
Approved in Case No.
106 of 2012
Submitted by
MSETCL
Approved in this
Order
Capitalisation 3,874.62 3,874.62 3,783.63
5.4. Interest and Finance Charges
5.4.1. MSETCL proposed to fund its capital expenditure through debt: equity ratio of
80:20, which was approved by the Commission in Order dated 18 May, 2012 in
Case No. 169 of 2011. MSETCL considered its existing loan arrangements from
LIC, JICA, IFC, Bank of Maharashtra and Oriental Bank of Commerce, to fund its
capital expenditure plans. In addition, MSETCL submitted that loans from REC and
PFC have been considered in the ratio of 80:20 to meet its further debt requirement.
5.4.2. MSETCL submitted that existing rate of interest of 12.25% has been considered for
calculation of interest expenses on PFC and REC loans. MSETCL has also provided
details of loan drawl, repayment schedule, and interest rates of other agencies in
formats submitted with the Petition.
5.4.3. MSETCL submitted that loan balance is calculated on the basis of the actual loan
carried forward from FY 2011-12 and the estimated loan drawl during FY 2012-13.
Further, MSETCL submitted that interest rate of 11.5% on the estimated debt
portion (80%) of closing work-in-progress has been considered to compute
capitalised interest.
5.4.4. MSETCL submitted that “Other interest and finance charges” have been considered
same as that approved by the Commission in its Order dated 14 December, 2012 in
Case No. 106 of 2012. The estimated interest expenses submitted by MSETCL for
FY 2012-13 are given in the table below:
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 103 of 143
Table 76: Estimated Interest Expenses for FY 2012-13 submitted by MSETCL (Rs
crore)
Particulars FY
2012-13
Gross Interest Expenses 965.49
Interest Capitalised 459.53
Total Interest Expenses 504.52
Other interest and finance charges 18.50
5.4.5. The Commission considered closing balance of loan for FY 2011-12 as opening
balance of loan for FY 2012-13. Further, 80% of approved capitalisation is
considered as addition in loan. Regarding reduction in loan due to retirement of
assets, the Commission observed that in FY 2011-12, MSETCL retired certain
assets within few years of their capitalisation. Thus, loan pertaining to such assets
wouldn’t have been completely paid off at the time of retirement. Therefore, for the
purpose of APR, the Commission considered 80% reduction in loan on account of
retirement of assets. The Commission considered MSETCL’s submission regarding
the amount of assets estimated to be retired in FY 2012-13. At the time of Truing
up, the Commission shall determine the amount of loan to be deducted pertaining to
such assets, by following the methodology described in para 4.9.8.
5.4.6. As regards interest expenses for FY 2012-13, the Commission computed interest
expenses as per the methodology followed in True up of FY 2011-12 described in
para 4.9.5. However, the same shall be trued up on the basis of the actual interest
expenses borne by MSETCL in FY 2012-13 at the time of final Truing up.
5.4.7. As regards interest capitalised, following the approach adopted in previous Order
dated 18 May, 2012 in Case No. 169 of 2011, the Commission hasn’t considered
any capitalisation of interest in this Order.
5.4.8. The Commission considered other interest and finance charges as submitted by
MSETCL, which is same as that approved by the Commission in Order dated 14
December, 2012 in Case No. 106 of 2012. However, the same will be Trued up
based on the audited annual accounts at the time of final Truing up.
5.4.9. Based on the above analysis, the Commission approved interest and finance charges
for FY 2012-13 as per the table below:
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 104 of 143
Table 77: Interest expenses for FY 2012-13 approved by the Commission (Rs crore)
Particulars Approved in Case
No. 106 of 2012
Submitted by
MSETCL
Approved in this Order
Opening Balance of
loan 5,522.11 7,135.61 4,974.88
Loan Additions 3,099.70 3,916.00 3,026.90
Loan Repayment 657.15 978.82 813.79
Reduction due to
retirement of assets - - 179.31
Closing balance of
loan 7,964.66 10,072.79 7,008.68
Interest Expense 464.41 965.49 668.09
Other interest and
finance charges 18.50 18.50 18.50
5.5. Depreciation
5.5.1. MSETCL submitted that depreciation for FY 2012-13 has been computed using
depreciation rates provided in the Tariff Regulations, 2005. Further, MSETCL
submitted that actual opening GFA and approved addition in asset during FY 2012-
13 have been considered to compute depreciation. MSETCL also considered AAD
along with depreciation for FY 2012-13 as given in the table below:
Table 78: Estimated depreciation for FY 2012-13 submitted by MSETCL (Rs crore)
Particulars Approved in
Case No. 106 of
2012
Submitted in
the Petition
Depreciation including AAD 657.15 978.82
Depreciation 501.50 560.49
Advance Against Depreciation 155.65 418.33
5.5.2. The Commission observed that both depreciation and advance against depreciation
submitted by MSETCL is higher than that approved by the Commission in Order
dated 14 December, 2012 in Case No. 106 of 2012. The Commission found that the
weighted average rate of depreciation considered by the Commission in Order dated
14 December, 2012 in Case No. 106 of 2012 was 2.81%, while in the Petition,
MSETCL has considered higher depreciation rate of 3.13% based on the actual
asset mix as on 1 April, 2012.
5.5.3. The Commission considered closing balance of GFA for FY 2011-12, which
includes adjustment on account of approval of disallowed capitalisation as opening
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 105 of 143
balance for FY 2012-13. The Commission considered addition in assets as per
approved capitalisation for FY 2012-13 and retirement of assets as submitted by
MSETCL, i.e., 1.39% of opening GFA. The Commission also observed that actual
retirement of assets in FY 2011-12 is 0.3% of opening GFA as on 1 April, 2012,
however, the Commission considered MSETCL’s submissions for the purpose of
APR. The same will be trued up based on audited annual accounts during the final
Truing up.
5.5.4. The Commission computed depreciation rate of 3.13% considering category-wise
addition in assets in the ratio of their opening balances of respective categories to
compute depreciation on the assets for FY 2012-13.
5.5.5. Further, the Commission also observed that MSETCL hasn’t restricted AAD to be
extent of difference between 1/10th
of principal amount to be repaid in that year and
depreciation. The Commission computed AAD based on the MSETCL’s
submissions and restricted it to the extent of difference between 1/10th
of principal
amount to be repaid in that year and depreciation computed in the above para.
5.5.6. Based on the explanation provided above, depreciation including AAD as approved
by the Commission is given in the table below:
Table 79: Depreciation for FY 2012-13 approved by the Commission (Rs crore)
Particulars
Approved in Case
No. 106 of 2012
Submitted by
MSETCL Approved in this Order
Opening Gross Fixed
Assets (GFA) 16,044.28 16,079.06 15,586.96
Addition of Gross
Fixed Assets 3,874.62 3,874.62 3,783.63
Asset Retirement 224.14 224.14 224.14
Closing Gross Fixed
Assets 19,694.76 19,695.92 19,146.45
Depreciation rate 2.81% 3.13% 3.11%
Depreciation 501.5 560.49 539.58
AAD approved 155.65 418.33 274.21
Depreciation
including AAD 657.15 978.82 813.79
5.6. Interest on working capital and consumer security deposit
5.6.1. MSETCL submitted that interest on working capital has been computed based on
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 106 of 143
the normative parameters prescribed in the Tariff Regulations, 2005. MSETCL
considered short-term SBI PLR of 14.75% for computing interest on working
capital, which was considered by the Commission in its Order dated 14 December,
2012 in Case No. 106 of 2012.
5.6.2. Further, MSETCL submitted that it does not envisage any security deposit to be
taken from the users of its transmission system and thus, interest on security deposit
is not considered by MSETCL for computing working capital requirement.
5.6.3. Accordingly, MSETCL submitted interest on working capital as Rs 80.43 crore for
FY 2012-13.
5.6.4. The Commission scrutinised the submissions of MSETCL in regard to the
computation of interest on working capital and estimated normative working capital
requirement as the summation of following items:-
a. One-twelfth of the amount of operation and maintenance expenses for such
financial year,
b. One-twelfth of the sum of the book value of stores, materials and supplies
including fuel on hand at the end of each month of such financial year,
c. One and a half months equivalent of the expected revenue from
transmission charges at the prevailing Tariff, and less
d. Amount, if any, held as security deposits from Transmission System Users
5.6.5. Further, in accordance with the Tariff Regulations, 2005, the interest rate as on the
date of application for determination of Tariff is to be considered for approval of the
interest on working capital. Thus, interest rate of 14.75% has been considered for
estimation of interest on working capital, which was the Prime Lending Rate of
State Bank of India (SBI PLR) as on date of filing the ARR Petition in Case No.
169 of 2011, i.e., 29 November, 2011.
5.6.6. As regards sum of book value of stores, materials and supplies, the Commission has
considered the amount approved for FY 2011-12 as explained in para 4.11.6. The
same will be trued up based on audited annual accounts for FY 2012-13 at the time
of final Truing up.
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 107 of 143
5.6.7. Transmission charges were levied on the transmission system users (TSUs) as per
the InSTS Tariff Order dated 10 September, 2010 in Case No. 120 of 2009 and
InSTS Tariff Order dated 21 May, 2012 in Case No. 51 of 2012 during FY 2012-13.
According to these Orders, MSETCL received Rs 188.69 crore per month as
revenue from 1 April, 2012 to 31 May, 2012 and Rs 296.07 crore per month as
revenue for the remaining financial year. The Commission has considered the same
for the purpose of estimating working capital requirement.
5.6.8. As regards security deposit is concerned, MSETCL clarified that it doesn’t envisage
taking security deposit from consumers. Hence, the Commission didn’t consider any
security deposit from users of transmission system.
5.6.9. Further, the Commission will consider efficiency gains on account of interest on
working capital based on actual interest paid by MSETCL on working capital
requirements at the time of final Truing up.
5.6.10. Accordingly, the Commission approves interest on working capital for FY 2012-13
as calculated below:
Table 80: Interest on working capital for FY 2012-13 approved by the Commission (Rs
crore)
Particulars
Approved in
Case No. 106
of 2012
Submitted
by
MSETCL
Approved in
this Order
Computation of Working Capital
One-twelfth of the amount of Operations
and Maintenance
Expenses 92.95 92.95 98.33
One-twelfth of the sum of the book value
of stores,
materials and supplies 19.64 27.12 20.77
One and a half months of the expected
revenue from transmission charges at the
prevailing Tariff 369.45 424.6 417.26
Total Working Capital 482.04 544.67 536.35
Computation of working capital interest
Rate of Interest (% p.a.) 14.75% 14.75% 14.75%
Interest on Working Capital 71.10 80.34 79.11
5.7. Return on Equity
5.7.1. MSETCL submitted that return on equity has been claimed as per the Tariff
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 108 of 143
Regulations, 2005, while considering 20% equity contribution for the capitalisation
estimated for FY 2012-13. Further, MSETCL also submitted that reduction in RoE
due to estimated asset retirement during the year is also considered as per the
approach stipulated in the Order dated 14 December, 2012 in Case No. 106 of 2012
and Business Plan Order dated 11 January, 2013 in Case No. 137 of 2011.
5.7.2. The Commission adopted the principles specified in the Tariff Regulations, 2005 for
computing the RoE. The Commission considered closing balance of equity of FY
2011-12 as approved in para 4.13.3 of Section 4 to be the opening equity for FY
2012-13. Further, addition in equity is considered at 20% of approved capitalisation
in FY 2012-13. Reduction in equity due to estimated retirement of assets in FY
2012-13 is considered as 20% of estimated retired assets. The same will be trued up
based on audited annual accounts at the final Truing up.
5.7.3. The Commission computed RoE using 14% as rate of return on equity, prescribed in
the Tariff Regulations, 2005. Approved RoE for FY 2012-13 is provided in the table
below:
Table 81: Return on equity for FY 2012-13 approved by the Commission (Rs crore)
Particulars
Approved
in Case
No. 106
of 2012
Submitted
by
MSETCL Approved in this Order
Regulatory Equity at the beginning
of the year 4,128.11 4,216.25 4,020.52
Capitalisation during the year 3,874.62 3,874.62 3,783.63
Equity portion of the capitalisation
during the year 774.92 774.92 756.73
Consumer contribution and Grants
used during the year for
Capitalisation - - -
Reduction in Equity Capital on
account of Retirement/ Replacement
of assets 44.83 44.83 44.83
Regulatory Equity at the End of the
Year 4,858.20 4,946.35 4,732.42
Return on Equity computations -
Return on Regulatory Equity at the
beginning of the year 577.94 590.28 562.87
Return on equity portion of the
capitalisation during the year 51.11 51.11 49.83
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 109 of 143
Particulars
Approved
in Case
No. 106
of 2012
Submitted
by
MSETCL Approved in this Order
Total Return on Regulatory
Equity 629.04 641.38 612.71
5.8. Other Expenses
5.8.1. MSETCL submitted that other expenses for FY 2012-13 have been estimated by
considering a nominal increase of 2% on actual expenses incurred in FY 2011-12.
MSETCL also submitted that prior period adjustments and loss on exchange rate
variation have not been considered for estimation during FY 2012-13.
5.8.2. The Commission accepted MSETCL’s submissions in this regard and didn’t
consider prior period adjustments and loss on exchange rate variation in other
expenses for FY 2012-13 as these expenses can’t be projected. The Commission
considered an increase of 2% on rest of the heads of ‘Other Expenses’ to project
‘other expenses’ of FY 2012-13. The ‘Other Expenses’ approved by the
Commission are given below:
Table 82: Other expenses for FY 2012-13 approved by the Commission (Rs crore)
Particulars
Approved in Case
No. 106 of 2012
Submitted by
MSETCL
Approved in
this Order
Other Expenses 1.23 1.12 1.12
5.9. Contribution to Contingency Reserves
5.9.1. MSETCL submitted that contribution to contingency reserves has been computed at
the rate of 0.25% of the opening GFA, following method adopted by the
Commission in Business Plan Order dated 11 January, 2013 in Case No. 137 of
2011.
5.9.2. As discussed in para 4.15.5, the Commission computed contribution to contingency
reserves at the rate of 0.25% of the approved opening GFA of FY 2012-13 after
adjusting for approved disallowed capitalisation. Further, the Commission ensured
that the accumulated contingency reserves have not increased beyond limit of 5% of
the opening GFA. Also, as detailed in para 4.15.4, the Commission verified that
MSETCL has invested contingency reserve in authorised securities. The
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 110 of 143
contribution to contingency reserves as proposed by MSETCL and as approved by
the Commission is given in the table below:
Table 83: Contingency Reserves for FY 2012-13 approved by the Commission (Rs
crore)
Particulars
Approved in Case
No. 106 of 2012
Submitted by
MSETCL
Approved in this
Order
Contingency Reserves 40.11 40.20 37.99
5.10. Income Tax
5.10.1. MSETCL submitted that it has claimed income tax as part of ARR for FY 2012-13
in accordance with the Tariff Regulations, 2005. MSETCL submitted that it has
estimated the income tax liability considering WDV depreciation as per Income Tax
Act and provided details in formats submitted with the Petition.
5.10.2. The Commission observed that MSETCL has computed profit after tax (PAT) based
on the expenses and revenue for FY 2012-13. However, for estimation of income
tax, the Commission followed the approach adopted in Order dated 18 May, 2012 in
Case No. 169 of 2011, where in, RoE earned by the transmission licensee is grossed
with the applicable MAT rate, i.e., 20.01% and then income tax is computed on this
grossed-up amount. The Commission will consider the actual income tax paid by
MSETCL in FY 2012-13 based on the audited annual accounts at the time of final
Truing up. The income tax expense as projected by MSETCL and as approved by
the Commission is given in the table below.
Table 84: Income Tax for FY 2012-13 approved by the Commission (Rs crore)
Particulars
Approved in Case
No. 106 of 2012
Submitted by
MSETCL
Approved in this
Order
Income tax 157.34 275.40 153.25
5.11. Non-Tariff Income
5.11.1. MSETCL submitted that while estimating non-tariff income, a nominal increase of
2% for components of non-tariff income for FY 2011-12 has been considered,
except interest income, for which MSETCL considered an average interest rate of
8%, i.e., rate of government securities on the forecasted balance of contingency
reserves and special reserves.
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Control Period
MERC, Mumbai Page 111 of 143
5.11.2. Further, MSETCL submitted that it hasn’t considered an amount of Rs 48 crore
towards non-refundable deposits and ‘excess provision written back’ in non-tariff
income for FY 2012-13 vis-a-vis FY 2011-12 as the same are not repetitive in
nature.
5.11.3. Also, MSETCL submitted that though it has considered value received from sale of
scrap as part of non-tariff income, it requested the Commission to consider only
profit on sale of scrap and not revenue from sale of scrap (i.e., salvage value of 10%
of the retired asset) as part of non-tariff income.
5.11.4. Further, MSETCL submitted that revenue from open access charges would reduce
in FY 2012-13 vis-a-vis actual revenue of Rs 109.56 crore during FY 2011-12. This
is due to change in methodology for levying open access charges to distribution
licensees procuring power on short-term basis as described in the Order dated 21
May, 2012 in Case No. 51 of 2012 in the matter of "Suo motu determination of
Transmission Tariff for Intra-State Transmission System (InSTS) for FY 2012-13 of
the second MYT Control Period". As a result, transmission charges will be levied
on short-term open access and power exchange transactions undertaken by entities
other than the distribution licensees. This will lead to a reduction in income from
open access charges from FY 2012-13 onwards. MSETCL requested the
Commission to approve revenue from open access charges as per Order dated 11
January, 2013 in Case No. 137 of 2011.
5.11.5. The Commission scrutinized MSETCL’s submissions in this regard and accepts the
rationale of assuming 2% increase on certain components of non-tariff income.
Further, the Commission agrees with MSETCL’s methodology of estimating
interest income earned on contingency reserves and special reserves. Also, the
Commission accepts MSETCL’s submission on not considering ‘excess provision
written back’ and ‘non-refundable deposits’ in non-tariff income for FY 2012-13
due to their non-recurring nature.
5.11.6. As regards to income from sale of scrap, the Commission considered an increase of
2% over the approved amount for FY 2011-12 to estimate income from sale of scrap
for FY 2012-13. As detailed in para 4.17.14, the income from sale of scrap
considered by the Commission doesn’t assume revenue proceeds from sale of scrap
items which are classified as capitalised assets. It comprises of profit earned on sale
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 112 of 143
of scrap and revenue proceeds from sale of scrap items which are classified as
revenue expenditure. Thus, the approved amount of FY 2011-12 is considered for
estimating income from sale of scrap for FY 2012-13. The same will be scrutinised
based on actual information at the time of Truing up of FY 2012-13.
5.11.7. Upon the Commission’s query, MSETCL provided details of open access charges
collected from transmission network users during FY 2012-13, which are
considered by the Commission in this Order. However, the Commission will
consider audited figures at the time of final Truing up.
5.11.8. The non-tariff income for FY 2012-13 approved by the Commission is provided
below:-
Table 85: Non Tariff Income for FY 2012-13 approved by the Commission (Rs crore)
Particulars
Approved in
Case No. 106
of 2012
Submitted by
MSETCL
Approved in this
Order
Interest on Contingency
Reserve Investments
Not
Appli
cable
17.25 17.09
Interest on Other
Investments 4.93 4.93
Other/Miscellaneous
receipts 100.70 102.42
Other receipts 1.42 0.00
Interest on staff loans &
Advances 0.30 0.00
Sale of Scrap 25.14 14.9
Rent income 0.82 0.81
Revenue from ST Open
Access Charges 82.05 52.04
Total 191.09 232.60 192.21
5.12. Income from wheeling received from Goa and Dadra Nagar
5.12.1. MSETCL submitted that income received from Goa and Dadra Nagar during FY
2011-12 has been considered during FY 2012-13 as well.
5.12.2. The Commission approves MSETCL’s submission in this regard. However, actual
income received from Goa and Dadra Nagar based on audited annual accounts will
be considered at the time of final Truing up.
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 113 of 143
Table 86: Income from wheeling received from Goa and Dadra Nagar for FY 2012-13
approved by the Commission (Rs crore)
Particulars Approved in Case
No. 106 of 2012
Submitted by
MSETCL
Approved in
this Order
Less: Income from Goa &
Dadra Nagar wheeling charges 20.52 26.30 26.30
5.13. Summary of Estimated Aggregate Revenue Requirement for FY 2012-13
5.13.1. Based on the discussion in the previous sections, the ARR projections approved by
the Commission for FY 2012-13 has been summarised below:
Table 87: Summary of Aggregate Revenue Requirement for FY 2012-13 approved by
the Commission (Rs crore)
Sr.
No. Particulars
Approved in
Case No. 106
of 2012
Submitted
by MSETCL
Approved in this
Order
1 Operation & Maintenance
Expenses 1,115.42 1,115.42 1,179.92
2 Depreciation Expenses
a) Depreciation 501.50 560.49 539.58
b) Advance against
depreciation 155.65 418.33 274.21
3 Interest on Long-term Loan
Capital 464.41 504.52 668.09
4 Interest on Working Capital
and on consumer security
deposits 71.1 80.34 79.11
5 Other Interest and finance
charges 18.50 18.50 18.50
6 Other Expenses 1.23 1.12 1.12
7 Income Tax 157.34 275.40 153.25
8 Contribution to contingency
reserves 40.11 40.20 37.99
9 Total Revenue
Expenditure 2,525.26 3,014.32 2,951.78
10 Return on Equity Capital 629.04 641.38 612.71
11 Aggregate Revenue
Requirement 3,154.30 3,655.70 3,564.49
12 Less: Non Tariff Income 178.15 232.60 192.21
13 Less: Income from Goa &
Dadra Nagar wheeling
charges 20.52 26.30 26.30
14 Aggregate Revenue
Requirement from
Transmission Tariff 2,955.63 3,396.80 3,345.98
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 114 of 143
5.14. Revenue Gap for FY 2012-13
5.14.1. The Commission calculated total revenue recovered by MSETCL during FY 2012-
13 in the following manner:
a. For first two months of FY 2012-13, MSETCL recovered transmission
Tariff as per InSTS Tariff Order dated 10 September, 2010 in Case No. 120
of 2009, i.e., Rs 188.69 crore per month.
b. From June 2012 onwards, transmission Tariff was recovered using InSTS
Tariff Order dated 21 May, 2012 in Case No. 51 of 2012, i.e., Rs 296.07
crore per month
5.14.2. Therefore, the total revenue from transmission Tariff recovered by MSETCL is Rs
3,338.08 crore.
5.14.3. Based on the ARR requirement, cumulative revenue gap till FY 2011-12 and
estimated revenue recovery during FY 2012-13, revenue gap is calculated as per the
table below:
Table 88: Cumulative Revenue Gap till FY 2012-13 approved by the Commission (Rs
crore)
Particulars FY 2012-13
Net ARR 3,345.98
Revenue from existing Transmission Tariff 3,338.08
Revenue (Gap)/surplus for current year (7.90)
Cumulative revenue gap till previous year (1,128.91)
Un-recovered cumulative Revenue (Gap)
till FY 2012-13 (1,136.81)
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 115 of 143
6. AGGREGATE REVENUE REQUIREMENT FOR MYT SECOND
CONTROL PERIOD
6.1. Background
6.1.1. MSETCL has submitted details of its projected expenses over the MYT Second
Control Period from FY 2013-14 to FY 2015-16 under various heads, viz., O&M
expenses, depreciation, interest on loans, interest on working capital, etc., in the
Petition. The Commission has carried out prudence check for approval of
expenditure for each of the above items and Aggregate Revenue Requirement of
MSETCL for the MYT Second Control Period from FY 2013-14 to FY 2015-16, in
the following sections.
6.2. O&M expenses
6.2.1. MSETCL submitted that the norms for O&M expenses for existing and new
transmission Licensees for the period from FY 2013-14 to FY 2015-16, are
prescribed in the MYT Regulations, 2011.
6.2.2. MSETCL stated that in the approach paper dated 25 September, 2009, the
Commission had proposed to consider actual O&M expense per bay and line based
on audited annual accounts for five years ending 31 March, 2006. This was
escalated considering CPI and WPI indices to arrive at O&M expenses for the
subsequent years.
6.2.3. MSETCL submitted that O&M expenses norms in MYT Regulations, 2011 are
insufficient to capture the escalation required to compensate for the increasing WPI
and CPI indices. In addition to the above, MSETCL pointed out the fact that during
the erstwhile MSEB era, the R&M expenses were on a lower side. As these
expenses were used as a base for computing the norms for O&M expenses for the
Second Control Period, the norms are not a true reflection of actual O&M expenses
incurred by MSETCL.
6.2.4. Further, MSETCL submitted that O&M expenses norms for MSETCL are way
below the norms of O&M expenses for TPC-T and RInfra-T in MYT Regulations,
2011. MSETCL stated that actual O&M expenses for the company are
comparatively much higher due to its vast network, presence in difficult terrain and
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 116 of 143
remote areas.
6.2.5. MSETCL submitted that in the present Petition, it has computed O&M expenses
considering norms specified in MYT Regulations, 2011. MSETCL also stated that
the number of bays and circuit kilometres of the transmission network considered in
this Petition are different from that projected in the Business Plan due to
consideration of Power Transformer and Station Transformer bays in the Petition
which was not considered during Business Plan submission. Hence, the O&M
expenses computed for the Second Control Period are slightly higher than O&M
expenses approved by the Commission in its Business Plan Order dated 11 January,
2013 in Case No. 137 of 2011. The summary of O&M expenses for the Second
Control Period as submitted by MSETCL is provided in the table below;
Table 89: O&M expenses submitted by MSETCL (Rs crore)
Particulars
Business
Plan
Order MYT
Petition
Business
Plan
Order MYT
Petition
Business
Plan
Order MYT
Petition
FY 2013-14 FY 2014-15 FY 2015-16
O&M cost for
Ckt. Kms.
Including HVDC
system 137.90 143.61 155.32 164.18 172.96 182.10
O&M cost for
Bays 1,191.91 1,257.63 1,361.20 1,469.03 1,584.36 1,696.55
Total O&M cost 1,329.81 1,401.24 1,516.12 1,633.21 1,757.32 1,878.65
6.2.6. Further, MSETCL submitted that the impact of wage agreement which happens
every five years also needs to be considered in O&M expenses, as it is an
uncontrollable factor. However, its impact is not included in the O&M norms
stipulated in the MYT Regulations, 2011. Thus, MSETCL prayed to consider the
same on actual basis over and above the O&M norms specified in MYT
Regulations, 2011.
6.2.7. The Commission has taken note of the submissions of MSETCL in regard to O&M
expenses. As regards MSETCL’s submission on O&M norms, the Commission
reiterates the stand taken in the Business Plan Order dated 11 January, 2013 in Case
No. 137 of 2011 that the norms for O&M expenses for MSETCL have been
specified in the MYT Regulations, 2011 after appropriate deliberations and
considering the submissions of MSETCL while formulating the said Regulations.
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 117 of 143
Further, the present proceedings have limited scope of modifying the provisions set
out in MYT Regulations, 2011. Hence, changes in the Regulations cannot be dealt
with in this proceeding and thereby, MSETCL’s claim for review of O&M norms is
not considered.
6.2.8. Further, the Commission would deliberate on the impact of wage revision on O&M
expenses at an appropriate stage in case wage revision is undertaken.
6.2.9. However, for computation of O&M expenses the Commission has deducted the no.
of bays and ckt. Km pertaining to disallowed capex. schemes and unutilised bays
for the respective years of MYT Second Control Period (FY 2013-14 to FY 2015-
16).
6.2.10. The Commission has considered the applicable O&M norms as per Regulation 61.6
of MYT Regulations, 2011, along with transmission line length (ckt-km) and bays
for schemes considered for approval of capitalisation by the Commission. The
O&M expenses as approved by the Commission are as follows:
Table 90: O&M expenses approved for the Second Control Period (Rs. crore)
O&M expenses Units FY 2013-14 FY 2014-15 FY 2015-16
For Line
Distance of line (Average)
HVDC Ckt km 1,504 1,504 1,504
765 KV Ckt km 0 50 100
400 KV Ckt km 7,515 8,020 8,462
>66 KV and <400 KV Ckt km 30,686 33,613 36,775
66 KV and less Ckt km 3,270 3,270 3,270
MERC Norm
HVDC Rs. Lakh/Ckt km 1,667 1,763 1,863
765 KV Rs. Lakh/Ckt km 0.83 0.88 0.93
400 KV Rs. Lakh/Ckt km 0.59 0.63 0.66
>66 KV and <400 KV Rs. Lakh/Ckt km 0.24 0.25 0.26
66 KV and less Rs. Lakh/Ckt km 0.14 0.15 0.16
For Bay
Number of bays (Average)
765 KV Number 0.00 4.50 163.94
400 KV Number 298.00 323.50 117.11
>66 KV and <400 KV Number 4,479.50 4,925.00 16.97
66 KV and less Number 6,390.50 6,794.00 3.55
MERC Norm
765 KV Rs. Lakh/ Bay 146.68 155.07 163.94
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 118 of 143
O&M expenses Units FY 2013-14 FY 2014-15 FY 2015-16
400 KV Rs. Lakh/ Bay 104.78 110.78 117.11
>66 KV and <400 KV Rs. Lakh/ Bay 15.19 16.06 16.97
66 KV and less Rs. Lakh/ Bay 3.17 3.36 3.55
O&M Expenses Rs. Crore 1,334.49 1,542.12 1,774.95
6.3. Capital expenditure and capitalisation
6.3.1. MSETCL submitted that in the present Petition, capitalisation is claimed at the same
level as that of capitalisation approved by the Commission in its Business Plan
Order dated 11 January, 2013 in Case No. 137 of 2011.
6.3.2. Further, MSETCL submitted that the capital expenditure plan submitted in the
Business Plan Petition was prepared based on the inputs received from STU, which
was presented before the Standing Committee.
6.3.3. MSETCL submitted the capitalisation for Second Control Period as given in the
table below:
Table 91: Capitalisation submitted by MSETCL (Rs crore)
Particulars
Business
Plan Order MYT
Petition
Business
Plan Order MYT
Petition
Business
Plan
Order MYT
Petition
FY 2013-14 FY 2014-15 FY 2015-16
DPR 3,362.27 3,362.27 3,901.02 3,901.02 3,121.91 3,121.91
Non-DPR 78.59 78.59 75.15 75.15 65.98 65.98
Total 3,440.86 3,440.86 3,976.17 3,976.17 3,187.89 3,187.89
6.3.4. The Commission conducted detailed scrutiny of the schemes provided by MSETCL
to be capitalised in Second Control Period from FY 2013-14 to FY 2015-16. The
Commission considered DPR schemes mentioned in Form 4.4 submitted by
MSETCL. During scrutiny, the Commission observed that MSETCL included
capital expenditure and capitalisation of three joint venture (JV) schemes, i.e., JVs
with JPTL, MEGPTCL and Sterlite in the present Petition. However, the
Commission views that these JVs are separate entities and capitalisation w.r.t these
entities would be submitted in their respective MYT Petitions. Therefore, the
Commission excluded capitalisation pertaining to these JVs in MSETCL’s
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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capitalisation.
6.3.5. Further, MSETCL claimed capitalisation for wind evacuation schemes namely, ‘
Evacuation of power from wind mills at Mogarpada, Gangapur, Shivajinagar, Ayne,
Aundhewadi, Khandke, Balsane, Kolegaon and Shrigonda’ and ‘Evacuation of
power from wind mills at Revangaon, Ghotikhurd, Ghatnandre, Gudepanchgani,
Tasgaon, Shirala, Sadawaghapur, Kas, Vita and Miraj’ during the Second Control
Period. In response to the query related to these schemes, MSETCL replied that
these schemes are yet to be capitalised in future years and the information related to
the assets taken over by MSETCL and payment made to the developer will be
submitted once the scheme is capitalised in future years. The Commission
understand that 50% of the funding of wind schemes is given by Maharashtra
Energy Development Agency (MEDA). Therefore, the Commission considered the
rest 50% of the amount of claimed capitalisation pertaining to such wind evacuation
schemes.
6.3.6. Further, the Commission observed that the scheme 400 kV 125 MVAR Bus
Reactors with Bay at “Karad, Nasik, Lonikand” s/s was not submitted to the
Commission for approval; therefore, the Commission disallowed the same.
6.3.7. In regard to capitalisation claimed in the MYT Second Control Period (FY 2013-14
to FY 2015-16) for schemes specified in para 5.3.3, the Commission has disallowed
the same on the basis as specified in para 5.3.4. The capitalisation amounts
disallowed in this regard were Rs 35.82 crore, Rs 43 crore and Rs 17.90 crore for
FY 2013-14, FY 2014-15 and FY 2015-16 respectively.
6.3.8. The Commission in order to ascertain a realistic capitalisation, enquired if there are
any schemes being proposed by MSETCL which might not get executed during the
MYT Second Control Period (FY 2013-14 to FY 2015-16). In reply MSETCL vide
email dated 13 December, 2013 informed that 11 No. sub-station schemes may not
get capitalised in this period. Hence, the Commission disallowed the capitalisation
of Rs 24.21 crore. Rs 48.01 crore and Rs 72.01 crores for FY 2013-14, FY 2014-15
and FY 2015-16 respectively.
6.3.9. Accordingly, capitalisation approved for the Second Control Period is given in the
table below:
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 120 of 143
Table 92: Capitalisation approved by the Commission (Rs crore)
Particulars
Petition Approved Petition Approved Petition Approved
FY 2013-14 FY 2014-15 FY 2015-16
Total 3,440.86 3,362.00 3,976.17 3,831.92 3,187.89 3,022.96
6.4. Depreciation
6.4.1. MSETCL submitted that it has computed depreciation considering depreciation
rates provided in MYT Regulations, 2011.
6.4.2. MSETCL also submitted that as per Regulation 33.3 of MYT Regulations, 2011,
repayment of long term loans is considered equivalent to the estimated depreciation.
6.4.3. MSETCL submitted that while approving depreciation for MSETCL in its Business
Plan Order dated 11 January, 2013 in Case No. 137 of 2011, the Commission had
computed depreciation based on rates as per MYT Regulations, 2011 and had not
considered AAD as a component of ARR.
6.4.4. MSETCL further submitted that it understands that the provision of AAD has been
removed by revising the depreciation rates. However, MSETCL has planned to fund
its capital expenditure requirement through 80% debt over the Second Control
Period. The main philosophy behind the concept of AAD in CERC Tariff
Regulations, 2004 was to bridge the gap between loan repayment and depreciation
in a year. Since MSETCL is funding 80% of capital expenditure by debt, the
depreciation calculated as per the depreciation rates mentioned in MYT
Regulations, 2011 will always be lesser than the actual repayment requirement of
loans. MSETCL pointed out that the depreciation rates provided in MYT
Regulation, 2011 remain same irrespective of the funding pattern of utility. Hence,
in case of Utilities having higher debt, loan repayment requirement will always be
more than the depreciation.
6.4.5. MSETCL submitted that it does not have any revenue source other than
transmission Tariff and hence if AAD is disallowed, it will either result in erosion
of equity of MSETCL or MSETCL might not be able to meet its repayment
obligation which will adversely impact the credit rating of MSETCL.
6.4.6. Therefore, MSETCL prayed before the Commission to approve AAD to facilitate
MSETCL to claim the excess of actual repayment made over the depreciation
amount approved for the year. As an alternative, MSETCL proposed that the
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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MERC, Mumbai Page 121 of 143
Commission may consider debt: equity ratio of 70:30 and approve 15.5% ROE on
balance 10% of its debt funding, while considering it as normative equity. MSETCL
stated that this approach will be consistent with MYT Regulations, 2011, as
depreciation rates for the said Regulations have been arrived at considering a debt:
equity ratio of 70:30.
6.4.7. Depreciation as submitted by MSETCL is provided below:
Table 93: Depreciation as submitted by MSETCL (Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16
Depreciation 1,102.75 1,285.25 1,455.87
Advance against depreciation 32.41 0.00 115.57
Depreciation including AAD 1,135.16 1,285.25 1,571.45
6.4.8. The Commission has taken note of the submission of MSETCL in regard to advance
against depreciation. However, the Commission opines that there is no provision for
AAD in the MYT Regulations, 2011 which was notified after appropriately
deliberating and considering the submissions of stakeholders, including MSETCL.
Therefore, the approach specified would not be subject to any change during the
current proceeding.
6.4.9. The Commission, for the purpose of the present Order has considered closing GFA
for FY 2012-13 as opening GFA for FY 2013-14. Capitalisation as approved in para
6.3.9 has been considered as addition in GFA for the years FY 2013-14 to FY 2015-
16.
6.4.10. Upon the Commission’s query on the basis for computation of retirement of assets,
MSETCL explained that it has submitted the same on the basis of approved
retirement of assets in the Business Plan Order dated 11 January, 2013 in Case No.
137 of 2011. Further, MSETCL stated that in the Business Plan Petition it had
computed retirement of assets by estimating average asset retirement for FY 2009-
10 and FY 2010-11 as a percentage of opening GFA and (i.e., 1.12% of the opening
GFA) and applying the same on estimated opening GFA for different years of the
Second Control Period. The Commission has derived asset retirement for different
years of the Second Control Period by computing average asset retirement as
percentage of opening GFA based on approved numbers for FY 2009-10, FY 2010-
11 and FY 2011-12 and then applying the same on estimated opening GFA for
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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MERC, Mumbai Page 122 of 143
different years of the Second Control Period. However, at the time of Truing up, the
Commission will consider actual retirement of assets on the basis of the audited
annual accounts.
6.4.11. The depreciation expense as approved by the Commission is as follows:
Table 94: Depreciation approved by the Commission (in Rs. crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16
Opening Gross Fixed Assets (GFA) 19,146.45 22,289.58 25,861.60
Addition of Gross Fixed Assets 3,362.00 3,831.92 3,022.96
Retirement of assets 218.87 259.90 310.43
Closing Gross Fixed Assets 22,289.58 25,861.60 28,574.13
Depreciation 1,072.61 1,250.94 1,411.53
6.5. Interest on long-term loans
6.5.1. MSETCL proposed to fund its capital expenditure requirement through a debt:
equity ratio of 80:20. However, MSETCL may revise the funding pattern to a debt:
equity ratio of 70:30 in case MSTECL’s cash flow increases due to change in
funding pattern.
6.5.2. MSETCL submitted that it has first considered existing loan agreements from LIC,
JICA, IFC, Bank of Maharashtra and Oriental bank of Commerce to fund capital
expenditure. The rest of the debt funding requirement is assumed to be funded from
REC and PFC.
6.5.3. MSETCL submitted that it has considered an interest rate of 12.25% for loans
proposed to be drawn from REC and PFC. For other sources of loan, it has
considered existing rates of interest as provided in Form 6 of the data formats
submitted with the Petition.
6.5.4. MSETCL submitted that the Commission had directed MSETCL to submit details
of outstanding loans pertaining to retired assets along with documentary evidence,
as per the first proviso to Regulation 33.1 of MYT Regulations, 2011, in its MYT
Petition. MSETCL submitted that it analysed its actual loan portfolio and observed
that none of its loans have repayment schedule of more than 17 years. Further,
MSETCL stated that majority of value of assets is towards plant and machinery for
which the applicable depreciation rate is 5.28%, which effectively means that the
life of the asset would be 17 years. MSETCL also provided an illustration in the
Petition to demonstrate that considering 80% debt and repayment equal to
depreciation, the loan would be repaid in 16th year itself. This implies that there
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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will be no loan outstanding at the end of the life of the asset.
6.5.5. Hence, MSETCL requested the Commission not to deduct loan on the estimated
retired assets during the Second Control Period. Further, MSETCL submitted that in
case there is any actual loan outstanding towards assets being retired or replaced,
the details of the same would be submitted to the Commission.
6.5.6. However, for the purpose of computation of interest expense, MSETCL submitted
that it has considered deduction of loan corresponding to 80% value of retired assets
in its submission.
6.5.7. Further, MSETCL submitted that it has considered an interest rate of 11.5% on
closing work in progress of respective years to compute interest expenses
capitalized. Thereafter, after accounting for capitalized interest expenses and
considering other interest and finance charges as approved by the Commission in its
Business Plan Order dated 11 January, 2013 in Case No. 137 of 2011, MSETCL has
submitted total interest expenses including interest and finance charges for the
Second Control Period as given in the following table:
Table 95: Interest expenses as submitted by MSETCL (Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16
Net interest expense (after capitalisation) 752.39 1,017.49 1,226.17
Other interest and finance charges 16.91 19.21 16.22
Total 769.30 1,036.7 1,242.39
6.5.8. The Commission has considered the closing balance of loan for FY 2012-13 as the
opening balance of loan for FY 2013-14. From FY 2013-14 to FY 2015-16, the
Commission has considered loan addition for each of the year as 80% of the
approved capitalisation for the respective year.
6.5.9. Further, the Commission noted that the Regulation 33 of the MYT Regulations,
2011 specifies that the repayment of loan shall be equal to the depreciation allowed
in the respective year and repayment to be considered from first year of commercial
operation of the project. The said Regulation is reproduced below:
“33.3 The repayment for the year of the tariff period FY 2011-12 to FY 2015-16
shall be deemed to be equal to the depreciation allowed for that year:
33.4 Notwithstanding any moratorium period availed by the Generating Company
or the Transmission Licensee or the Distribution Licensee, as the case may be, the
repayment of loan shall be considered from the first year of commercial operation
of the project and shall be equal to the annual depreciation allowed.”
6.5.10. Accordingly, the Commission has considered the repayment of loan equal to
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 124 of 143
depreciation as approved for respective years.
6.5.11. The Commission has considered reduction in loan at 80% of value of retired asset.
However, the same will be trued up based on the audited annual accounts at the time
of Truing up.
6.5.12. Regulation 33 of the MYT Regulations, 2011 specifies that the rate of interest used
for calculation of interest on long term loans shall be weighted average rate of
interest on the basis of actual loan portfolio at the beginning of each year. Further,
the interest expense should be calculated on the average loan availed in a particular
year. The said Regulation is reproduced below:
“33.5 The rate of interest shall be the weighted average rate of interest calculated
on the basis of the actual loan portfolio at the beginning of each year applicable to
the Generating Company or the Transmission Licensee or the Distribution
Licensee:
Provided that if there is no actual loan for a particular year but normative loan is
still outstanding, the last available weighted average rate of interest shall be
considered:
Provided further that if the Generating Company or the Transmission Licensee or
the Distribution Licensee, as the case may be, does not have actual loan, then the
weighted average rate of interest of the Generating Company or the Transmission
Licensee or the Distribution Licensee as a whole shall be considered.
33.6 The interest on loan shall be calculated on the normative average loan of the
year by applying the weighted average rate of interest.”
6.5.13. The Commission has computed the interest rate applicable for each year based on
the weighted average interest rate of actual loan portfolio admitted by the
Commission at the beginning of each year. Further, the Commission has applied the
weighted average interest rate to the average of opening balance and closing balance
of loan for each year to compute the interest expense on long term loans for Second
Control Period. The approved interest expense is as shown below
Table 96: Interest on long term loans approved by the Commission (in Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16 Opening balance of loan 7,008.68 8,450.57 10,057.24
Loan additions 2,689.60 3,065.54 2,418.37
Loan repayment 1,072.61 1,250.94 1,411.53
Closing balance of loan 8,450.57 10,057.24 10,815.74
Interest rate applicable 11.36% 11.58% 11.71%
Interest Expense 878.22 1,071.50 1,222.39
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 125 of 143
6.6. Interest on working capital
6.6.1. MSETCL submitted that it has computed interest on working capital based on the
normative parameters as per Regulation 35.2(b) of the MYT Regulations, 2011.
MSETCL further submitted that interest on working capital has been calculated
considering State Bank Advance Rate (SBAR), at the time of submission of the
Petition, i.e., 14.45%.
6.6.2. As regards the book value of stores for estimating working capital requirement,
MSETCL submitted that the Commission had considered 1% of GFA approved for
the respective year as sum of book value of stores in Business Plan Order dated 11
January, 2013 in Case No. 137 of 2011. However, actual value of one-twelfth of
book value of stores based on audited annual accounts for past years is much higher
than one-twelfth of 1% of opening GFA, as depicted in the table below:
Table 97: Comparison of 1/12th
of book value of stores as submitted by MSETCL (Rs
crore)
Particulars FY
2008-09
FY
2009-10 FY
2010-11 FY
2011-12 Actual value of 1/12 of book value of
stores, materials and supplies (A) 18.71 18.88 17.20 27.12
Approved opening GFA for the year (B) 9,370.79 9,924.73 10,945.93 13,026.01
1/12 of 1% of opening GFA (C ) 7.81 8.27 9.12 10.86
Difference D= A- C 10.90 10.61 8.08 16.26
6.6.3. MSETCL submitted that it is evident from the above table that actual value of 1/12
of book value of stores, materials and supplies in the previous years is much higher
than 1/12 of 1% of opening GFA for the year under consideration.
6.6.4. MSETCL further submitted that although it has considered the book value of store
based on 1% of the opening GFA during the year in accordance with the principle
adopted by the Commission in the Business Plan Order dated 11 January, 2013 in
Case No.137 of 2011, it requested the Commission to consider the One-Twelfth of
the Book Value of Stores, Materials and Supplies as Rs. 27.12.
6.6.5. MSETCL submitted that it does not envisage any security deposit to be taken from
the users of its transmission system and hence interest on security deposit is not
been considered for the purpose of computation of working capital requirement.
6.6.6. The detailed computation of interest on working capital as submitted by MSETCL
is provided in the table below;
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 126 of 143
Table 98: Interest on working capital as submitted by MSETCL (Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16
One-twelfth of the amount of Operations
and Maintenance Expenses 116.77 136.10 156.55
One-twelfth of the sum of the book value
of stores, materials and supplies 16.41 19.10 22.20
One and a half months of the expected
revenue from transmission charges at the
prevailing tariffs 518.67 615.38 722.69
Less:
Amount of Security Deposit
From Transmission System users 0.00 0.00 0.00
Total Working Capital 651.86 770.58 901.43
Computation of working capital interest
Rate of Interest (% p.a.) 14.45% 14.45% 14.45%
Interest on Working Capital 94.19 111.35 130.26
6.6.7. The Commission noted the submissions made by MSETCL and computed the total
working capital requirement in accordance with the provisions of the MYT
Regulations, 2011.
6.6.8. The Commission considered sum of book value of stores for FY 2013-14 to FY
2015-16 same as that approved for FY 2012-13. For FY 2013-14 to FY 2015-16,
the Commission considered interest rate on working capital as 14.45%, being State
SBAR at the time of filing the Petition. Further, instead of considering ARR for the
respective year as expected revenue from transmission charges, the Commission
considered annual recovery of ARR for MSETCL as approved by the Commission
in its InSTS Tariff Order dated 13 May, 2013 in Case No. 56 of 2013, as
transmission Tariff and actual recovery from transmission charges is according to
the InSTS Tariff Order. In case of any revision in Tariff in future, the same will be
considered as per the Tariff specified in InSTS Tariff Order for the respective year.
6.6.9. Further, as confirmed by MSETCL, the Commission didn’t consider any security
deposit from consumers for computation of working capital requirement.
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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MERC, Mumbai Page 127 of 143
Table 99: Interest on working capital as approved by the Commission (Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16
Interest on working
capital 113.05 112.15 127.39
6.7. Contribution to contingency reserves
6.7.1. MSETCL submitted that it has calculated contribution to contingency reserves at
0.25% of opening GFA as provided in the Regulation 61.1 of MYT Regulations,
2011. Contribution to contingency reserve as submitted by MSETCL is given in the
table below:
Table 100: Contribution to Contingency Reserves submitted by MSETCL (Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16
Contribution to contingency reserves 49.24 57.29 66.59
6.7.2. The Commission considered contribution to contingency reserves at 0.25% of the
opening GFA in accordance with the provisions of the MYT Regulations, 2011 and
based on the capitalisation approved by the Commission. Accordingly, the approved
contribution to contingency reserves is as follows:
Table 101: Contribution to contingency reserves as approved by the Commission (Rs
crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16
Contribution to contingency reserves 47.87 55.72 64.65
6.8. Return on equity (RoE)
6.8.1. MSETCL submitted that it has projected RoE from FY 2013-14 to FY 2015-16 in
accordance with the MYT Regulations, 2011. MSETCL has computed RoE on 20%
of capitalisation proposed for the period. Further, MSETCL has also considered
reduction in RoE on the estimated asset retirement during the period in accordance
with the approach stipulated in the Business Plan Order dated 11 January, 2013 in
Case No. 137 of 2011.
6.8.2. RoE projected by MSETCL for FY 2013-14 to FY 2015-16 is shown in the table
below:
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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MERC, Mumbai Page 128 of 143
Table 102: Return on Equity as submitted by MSETCL (Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16
Regulatory equity at the beginning of the
year 4,945.35 5,590.75 6,334.00
Capitalisation during the year 3,440.86 3,976.17 3,187.89
Equity portion of capitalisation during the
year 688.17 795.23 637.58
Consumer contribution and grants used
during the year for capitalisation 0.00 0.00 0.00
Reduction in equity capital on account of
retirement/ replacement of assets 43.77 51.98 62.09
Regulatory equity at the end of the year 5,590.27 6,334.00 6,909.49
Return on equity computations
Return on Regulatory equity at the
beginning of the year 766.68 866.57 981.77
Return on equity portion of capitalisation
during the year and reduction in RoE on
account of retirement / replacement of
assets 49.94 57.60 44.60
Total return on Regulatory equity 816.63 924.17 1,026.37
6.8.3. The Commission has computed RoE at the rate of 15.50 % of the equity, in
accordance with the MYT Regulations, 2011 on the opening equity of the year and
on 50% of the projected levels of equity portion of assets capitalised during each
year of the Second Control Period.
6.8.4. The Commission has considered regulatory equity at the end of FY 2012-13 as
approved by the Commission as the opening balance of regulatory equity for FY
2013-14.
6.8.5. Further, in accordance with the approach followed in Business Plan Order dated 11
January, 2013 in Case No. 137 of 2011, the Commission considered reduction in
equity on account of retirement of assets to the extent of 20%.
6.8.6. The return on equity as approved by the Commission for the Second Control Period
is as follows:
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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Table 103: Return on equity as approved by the Commission (Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16 Regulatory equity at the
beginning of the year 4,732.42 5,361.05 6,075.45
Equity portion of assets
capitalised during the year 672.40 766.38 604.59
Reduction in Regulatory equity
due to retirement of assets 43.77 51.98 62.09
Regulatory equity at the end of
the year 5,361.05 6,075.45 6,617.96
Return on regulatory equity at the
beginning of the year 733.53 830.96 941.69
Return on 50% of equity portion
of capital expenditure capitalised
during the year 48.72 55.37 42.04
Total return on regulatory
equity 782.24 886.33 983.74
6.9. Income tax
6.9.1. MSETCL submitted that the Commission in its Business Plan Order dated 11
January, 2013 in Case No. 137 of 2011 had considered income tax at the same level
as approved by the Commission for FY 2010-11, i.e., Rs 103.67 crore, since that
was the last year for which audited annual accounts have been provided and
prudence check has been undertaken by the Commission in accordance with
Regulation 34.1 of the MYT Regulations, 2011.
6.9.2. MSETCL submitted that now that audited statements are available for FY 2011-12,
it has considered income tax actually paid in FY 2011-12 as the income tax
obligation for each year of the Second Control Period.
6.9.3. Further, MSETCL prayed to the Commission to facilitate reimbursement of income
tax on a quarterly basis, in addition to the transmission charges for the period FY
2013-14 to FY 2015-16.
Table 104: Income tax calculation as submitted by MSETCL (Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16
Income tax 179.67 179.67 179.67
6.9.4. For computation of income tax for FY 2012-13 to FY 2015-16, the MYT
Regulations, 2011 specifies that the Commission may provisionally approve income
tax payable for each year of the Second Control Period based on the actual income
tax payable as per the latest audited annual accounts and the variation between the
actual and approved income tax shall be reimbursed at the time of mid-term
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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MERC, Mumbai Page 130 of 143
performance review. The said Regulation is reproduced below for reference:
“34.1 The Commission in its MYT Order shall provisionally approve Income Tax
payable for each year of the Control Period, if any, based on the actual income tax
paid on permissible return as allowed by the Commission relating to electricity
business regulated by the Commission, as per latest Audited Accounts available for
the applicant, subject to prudence check.
...
34.2 Variation between Income Tax actually paid and approved, if any, on the
income stream of the regulated business of Generating companies, Transmission
licensees and Distribution licensees shall be reimbursed to /recovered from the
Generating Companies, Transmission Licensees and Distribution Licensees, based
on the documentary evidence submitted at the time of Mid-term Performance
Review and MYT Order for the third Control Period, subject to prudence
check."{Emphasis added}
6.9.5. In accordance with the MYT Regulations, 2011, income tax for FY 2013-14 to FY
2015-16 will have to be considered at the same level as approved by the
Commission for FY 2011-12, i.e., Rs 179.69 crore. Further, the Commission will
consider actual income tax paid by MSETCL at the time of mid-term review.
6.9.6. The income tax considered by the Commission for FY 2013-14 to FY 2015-16 is
summarised in the table below:-
Table 105: Income tax approved by the Commission (Rs. crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16 Income tax 179.67 179.67 179.67
6.9.7. Further, as per Regulation 34 of the MYT Regulations, 2011, the transmission
company is required to bill income tax under a separate head called “Income Tax
Reimbursement”. However, if income tax is allowed as separate reimbursement, it
may lead to some problems in claiming expenses with income tax authorities. In
view of this, the Commission in exercise of its powers under Regulation 100
“Power to remove difficulties” of the MYT Regulations, 2011 hereby orders that the
difficulty in implementing Regulation 34 of MYT Regulations, 2011 stands
removed by allowing the inclusion of income tax expense as part of Aggregate
Revenue Requirement.
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 131 of 143
6.10. Non-Tariff income
6.10.1. MSETCL submitted that it has considered a nominal increase of 2% for non-tariff
income components other than interest income based on actual values of FY 2011-
12. For estimating interest income on contingency reserves, MSETCL has
considered an average interest rate of 8% on the forecasted balance of contingency
reserve for each year of the Second Control Period. For interest income on other
investments, MSETCL submitted that it has maintained the actual interest income
for FY 2011-12, over the entire Second Control Period, as future investments are
likely to be made only in government securities.
6.10.2. MSETCL submitted that the item under the head “Other/Miscellaneous Receipts”
for FY 2011-12 included an amount of Rs 48 crore towards non-refundable deposits
of past years transferred to P&L in FY 2011-12 and, therefore, the same is not
repetitive in nature. Hence, for projecting “Other/Miscellaneous Receipts” for
Second Control Period, MSETCL has considered “Other/Miscellaneous Receipts”
for FY 2012-13 as same as that for FY 2011-12 excluding Rs 48 crore. This was
then escalated at the same rate at 2% to arrive at the “Other/Miscellaneous
Receipts” for Second Control Period.
6.10.3. MSETCL submitted that it has considered value of sale of scrap including the profit
on sale of scrap as non-tariff income for different years of the Second Control
Period. However, MSETCL requested the Commission to consider only profit from
sale of scrap as non-tariff income and not the entire revenue from sale of scrap.
6.10.4. MSETCL further submitted that it has not considered “Excess provision written
back” of FY 2011-12 as part of non-tariff income as this item cannot be projected
for ensuing years of the Second Control Period.
6.10.5. MSETCL submitted that revenue from open access charges of Rs 109.56 crore in
FY 2011-12 would get reduced from FY 2012-13 onwards on account of change in
methodology for levying open access charges to Distribution Licensees procuring
power on short-term basis in accordance with the InSTS Tariff Order for FY 2012-
13, dated 21 May, 2012 in Case No. 51 of 2012. The relevant extract of the said
Order as produced by MSETCL in its Petition is reproduced below for easy
reference:
“21. It is clarified that the above transmission charges are payable by all long-term
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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MERC, Mumbai Page 132 of 143
transmission system users irrespective of their actual utilisation (peak demand)
recorded during the period of operation. In case, actual utilisation of transmission
capacity by any long-term TSU varies from the allocated transmission capacity (i.e.,
Base TCR) then, the same shall be governed as per Regulation 66.4 of MERC MYT
Regulations. The relevant Regulation is reproduced as below.
...
66.4 The charges for intra State transmission usage shall be shared among various
TSUs in the following manner:
a) Existing long term TSU with recorded demand upto Base TCR (i.e., average of
CPD and NCPD) shall not be subjected to payment of short term transmission
charges.
b) Long term TSU with recorded demand greater than Base TCR but lower than
Contracted Capacity shall make payment of short term Transmission charges for
the recorded demand in excess of Base TCR.
c) Where the recorded demand of long term TSU is greater than Contracted
Capacity (termed as Transmission Capacity Right - TCR), the TSU shall bear
additional transmission charges as specified in MERC (Transmission Open Access)
Regulations, 2005, as amended from time to time:
Provided that short term transmission charges and additional transmission charges,
if payable or paid, as applicable in accordance with the clauses (a), (b) and (c)
above, by long term TSUs, shall be adjusted during subsequent billing period upon
availability of information regarding actual recorded demand by such long term
TSUs.”
“I] Applicability of Order
30. This Order shall be applicable with effect from 1 June, 2012 ...”
6.10.6. MSETCL submitted that there will be no transmission charge on Inter-State and
Intra-State short term open access and power exchange transactions of distribution
licensees with effect from 1 June, 2012. However, transmission charges will be
levied on short-term open access and power exchange transactions by generators,
CPP customers, etc. other than the four distribution licences. Hence, MSETCL
stated that from FY 2012-13 onwards, there will be reduction in open access
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
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MERC, Mumbai Page 133 of 143
charges because of the applicability of Order dated 21 May, 2012 in Case No. 51 of
2012. Therefore, for estimating revenue from open access charges, MSETCL has
considered the same value as submitted in the Business Plan Petition in Case No.
137 of 2011.
6.10.7. Accordingly, MSETCL estimated non-tariff income for various years of the Second
Control Period as per the table provided below:
Table 106: Non-Tariff income as submitted by MSETCL (Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16
Interest on Contingency Reserve
Investments 20.82 25.09 30.04
Interest on Other Investments 4.93 4.93 4.93
Ancillary and Incidental Income 0.00 0.00 0.00
Other/Miscellaneous receipts 102.71 104.77 106.86
Other receipts 1.45 1.48 1.51
Interest on staff loans & Advances 0.30 0.31 0.31
Sale of Scrap 25.64 26.15 26.68
Income from Trading 0.00 0.00 0.00
Income from staff welfare activities 0.00 0.00 0.00
Revenue from ST Open Access
Charges 83.69 85.36 87.07
Rent 0.84 0.85 0.87
Total 240.39 248.94 258.28
6.10.8. The Commission accepts submissions made by MSETCL regarding non-tariff
income. The Commission also considered additional special reserve created as a
result of efficiency gains shared with MSETCL for FY 2011-12 to compute interest
on other investments for Second Control Period. Further, the Commission
considered 2% escalation factor per year submitted by MSETCL for projecting
other components of non-tariff income, which will be trued up based on the audited
annual accounts.
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 134 of 143
Table 107: Non-Tariff income as approved by the Commission (Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16 Interest on Contingency Reserve
Investments 20.53 24.67 29.49
Interest on Other Investments 4.93 6.83 8.74
Ancillary and Incidental Income 0.00 0.00 0.00
Other/Miscellaneous receipts 104.47 106.56 108.69
Other receipts 0.00 0.00 0.00
Interest on staff loans & Advances 0 0 0
Sale of Scrap 15.21 15.52 15.83
Income from Trading 0.00 0.00 0.00
Income from staff welfare activities 0.00 0.00 0.00
Rent 0.83 0.85 0.86
Revenue from Open Access Charges 53.08 54.14 55.22
Total 199.04 208.56 218.83
6.11. Income from wheeling charges received from Goa and Dadra Nagar
6.11.1. MSETCL submitted that income from Goa and Dadra Nagar has been considered
due to wheeling of power by Goa and Dadra Nagar. The estimated income from
Goa and Dadra Nagar for Second Control Period is considered as actual income
received in FY 2011-12 as provided below:
Table 108: Income from wheeling charges to be received from Goa and Dadra
Nagar as submitted by MSETCL (Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16 Income from Goa and Dadra Nagar
wheeling charges 26.30 26.30 26.30 6.11.2. The Commission has considered “income from wheeling charges to be received
from Goa and Dadra Nagar” for Second Control Period at the same level as
approved by the Commission for FY 2011-12, as provided in the table below:
Table 109: Income from wheeling charges to be received from Goa and Dadra
Nagar as approved by the Commission (Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16 Income from Goa and Dadra Nagar
wheeling charges 26.30 26.30 26.30
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 135 of 143
6.12. Aggregate revenue requirement
6.12.1. Based on the analysis detailed out in the above paragraphs, the Commission has
approved the ARR for MSETCL for the Second Control Period from FY 2013-14 to
FY 2015-16 as given below:
Table 110: ARR of MSETCL approved by the Commission for MYT Second
Control Period (Rs crore)
Particulars FY 2013-14 FY 2014-15 FY 2015-16
Expenditure
Operations & Maintenance
Expenses 1,334.49 1,542.12 1,774.95
Depreciation 1,072.61 1,250.94 1,411.53
Advance against Depreciation - - -
Interest on long-term loan capital 878.22 1,071.50 1,222.39
Interest on Working Capital 113.05 112.15 127.39
Other interest and finance charges 16.60 18.64 15.56
Other expenses 1.14 1.17 1.19
Income Tax 179.67 179.67 179.67
Contribution to contingency
reserves 47.87 55.72 64.65
Total Revenue Expenditure 3,643.65 4,231.90 4,797.34
Return on Equity 782.24 886.33 983.74
Aggregate Revenue
Requirement 4,425.90 5,118.23 5,781.08
Less: Non-Tariff income 199.04 208.56 218.83
Less: Income from Goa and
Dadra Nagar wheeling charges 26.30 26.30 26.30
Less: Amortization of Income due
to Revaluation of Stocks 0.00 0.00 0.00
Aggregate Revenue
Requirement from
Transmission Tariff 4,200.55 4,883.37 5,535.95
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 136 of 143
6.13. Transmission Tariff for Second Control Period
6.13.1. The Commission will consider the revenue gap till FY 2012-13 calculated in the
above para 5.14 while determining transmission Tariff in next Tariff Order.
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 137 of 143
7. SUMMARY OF DIRECTIVES ISSUED BY THE COMMISSION
AND COMPLIANCE STATUS
7.1. Background
7.1.1. The Commission issued certain directives to MSETCL in its Order dated 18 May,
2012 in Case No. 169 of 2011. The summary of those directives and compliance is
given in the following paragraphs:
7.2. Assets put to use
Directive
7.2.1. The Commission had observed that a total of 535 bays commissioned by MSETCL
had remained unutilized. During the proceedings of Case No. 169 of 2011 MSETCL
had submitted that non utilization of bays by the distribution companies and lower
load growth was the reason for keeping spare bays. However, the Commission
noted that the consumers don’t get benefit out of these unutilised bays/assets,
though they are required to pay for it. Hence, the Commission directed MSETCL to
take immediate action to take up the issue of unutilised bays with the distribution
companies. MSETCL was also directed to account for the issue in the future capital
expenditures and provide for only reasonable capital expenditure; subject to the
technical requirement such as spare bays.
MSETCL’s Response
7.2.2. MSETCL submitted that it has informed MSEDCL vide its letter dated 8 May, 2013
for utilisation of its 33kV unutilised bays. MSETCL also requested MSEDCL to
utilise these unutilised bays as source feeders for 33kV s/s being constructed by
MSEDCL under Infra Plan-II. Further, MSETCL vide its letter dated 11 June, 2013,
informed the Commission about its communication of utilisation of spare bays by
MSEDCL. MSETCL vide same letter has also submitted information of spare
33kV, 22kV and 11kV bays at its EHV s/s to the Commission. MSETCL also
submitted various correspondences undertaken with MSEDCL and the Commission
regarding the same.
Commission’s Observations/Ruling
7.2.3. The Commission observed that MSETCL has taken adequate steps to take up
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 138 of 143
this issue with MSEDCL and accordingly there is a higher utilisation of these
bays. MSETCL is directed to monitor and take appropriate steps for such kind
of non-utilisation of assets from time to time and bring to the notice of the
Commission, if necessary.
7.3. Submission of Business Plan
Directive
7.3.1. The Commission had directed MSETCL to submit its revised Business Plan Petition
immediately, without any delay and within a maximum time limit of 30 days from
the issue of the Order in Case No. 169 of 2011.
MSETCL’s Response
7.3.2. MSETCL replied that it had submitted Petition for Business Plan for the Second
Control Period from FY 2013-14 to FY 2015-16 and the Commission has already
issued Business Plan Order dated 11 January, 2013 in Case No. 137 of 2011.
Commission’s Observations/Ruling
7.3.3. MSETCL has complied with the directive issued by the Commission in this
regard.
7.4. Quantification of controllable and uncontrollable expenses
Directive
7.4.1. The Commission directed MSETCL to provide quantification of uncontrollable
expenses on each of the items identified by MSETCL, to be considered during the
scrutiny of the Petition for True up.
MSETCL’s Response
7.4.2. MSETCL submitted that it has provided rationale, justification and quantification of
uncontrollable expenses for Truing up of FY 2011-12 in the present Petition.
Further, MSETCL submitted comparison of each head of employee expenses vis-a-
vis FY 2010-11 and submitted reasons for the deviation in the response to the
compliance of directives. Further, MSETCL submitted the following tables wherein,
uncontrollable A&G expenses mentioned in the Petition have been quantified:
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 139 of 143
Table 111: Uncontrollable A&G expenses submitted by MSETCL for FY 2011-
12 (Rs crore)
Particulars FY 2011-12
Security Expenses 15.46
Electricity Charges 30.58
Filing fee to Ministry of Corporate Affairs 2
Service Tax for lease Rent 0.88
Training Expenses 4.95
Conveyance & travelling and Vehicle
running expenses 2.95
Total 56.82
7.4.3. MSETCL further submitted that considering the actual inflation rate for FY 2011-
12, A&G expenses should be escalated using inflation rate of 8.07% vis--vis 7.16%
considered in the Order dated 18 May, 2012 in Case No. 169 of 2011. Similarly,
R&M expenses should be escalated using inflation rate of 7.69%, rather than 6.89%
used in the previous Order. MSTECL mentioned that during FY 2011-12, R&M
expenses are lower than the approved expenses as MSETCL limited the R&M
expenses on need-basis.
Commission’s Observations/Ruling
7.4.4. The Commission appreciates that MSETCL has adequately explained reasons
for uncontrollable expenses in the Petition itself. However, the Commission
noticed that MSETCL hadn’t provided quantification of the uncontrollable
expenses in the Petition, which MSETCL has provided later as part of its reply
regarding compliance to directives. The Commission directs that the
quantification of such expenses in tabular format is provided while submitting
Petitions in future.
7.5. Information on theft of electrical lines, plants and installations
Directive
7.5.1. In the previous Order, the Commission directed MSETCL to submit past five year
details of cases involving theft of electrical lines, plants and installation and the
impact of the same on ARR.
MSETCL’s Response
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 140 of 143
7.5.2. MSETCL has provided the details vide letter No. MSETCL/MERC/MYT/2013-
14/15490 dated 9 December, 2013.
Commission’s Observations/Ruling
7.5.3. MSETCL has complied with the above directive.
7.6. Compliance report on investment of foreign exchange gain/loss in securities
Directive
7.6.1. The Commission during the proceeding of Case No. 169 of 2011 had observed that
the direction to invest the forex gain in securities authorised under the Indian Trust
Act 1882 has been issued to MSETCL on 29 December, 2011 and even after a time
period of 4 months which is sufficient to comply with the directive, MSETCL had
not complied with the directive. Hence, MSETCL was given a directive by the
Commission in the Order dated 18 May, 2012 in Case No. 169 of 2011 to comply
with the above mentioned directive at the earliest and submit the compliance report
to the Commission within 30 days from date of issue of the Order in Case No. 169
of 2011.
MSETCL’s Response
7.6.2. MSETCL submitted that after receipt of transmission charges for FY 2012-13 as
approved by the Commission in its Order in Case No. 51 of 2012 dated 21 May,
2012, investment of Rs. 111.20 crore which includes forex gain/loss has been made
in FY 2012-13 itself in securities authorized under the Indian Trust Act 1882.
7.6.3. MSETCL submitted that it had informed the Commission vide letter no. 13907
dated 28 September, 2012 that investment of forex gains/losses in securities will be
made only after recovery of full transmission charges for FY 2012-13 as allowed by
the Commission in the InSTS Tariff Order dated 21 May, 2012 in Case No. 51 of
2012, which was applicable from 1 June, 2012. MSETCL also submitted copies of
the various correspondences exchanged with the Commission in this regard in its
response to the compliance of this directive.
Commission’s Observations/Ruling
7.6.4. MSETCL has complied with the above directive issued by the Commission.
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 141 of 143
8. APPLICABILITY OF THE ORDER
8.1.1. This Order on the True up of FY 2011-12, APR of FY 2012-13 and ARR for MYT
Second Control Period from FY 2013-14 to FY 2015-16 shall come into force with
effect from its date of issuance and shall continue to be in force for the entire MYT
Second Control Period till 31 March, 2016. The Commission will undertake the
mid-term review of MSETCL’s performance during the third quarter of FY 2014-15
in accordance with the MERC (MYT) Regulations, 2011. MSETCL is directed to
submit its Petition for mid-term review of its performance during the third
quarter of FY 2014-15, with detailed reasons for deviation in performance,
latest by 30 November, 2014.
8.1.2. With the above, MSETCL’s Petition in Case No. 39 of 2013 stands disposed off.
Sd/- Sd/-
(Chandra Iyengar) (Vijay L. Sonavane)
Member Member
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 142 of 143
Appendix 1: List of persons who participated in the TVS held on 2 April, 2013
Sr. No. Name Organisation
1 Shri Pratap Mohite MSETCL
2 Shri S.J.Amberkar MSETCL
3 Ms A.S.Gupta MSETCL
4 Shri Tej Singh MSETCL
5 Shri Prashant Kandalgaonkar MSETCL
6 Shri Saurabh Jain MSETCL
7 Shri M.B.Mohire MSETCL
8 Shri Rajesh J. Pawor MSETCL
9 Ms Akshata Naik MSETCL
10 Ms Snehal Mathankar MSETCL
11 Shri Milind Bahadure MSETCL
12 Shri Kishor Jadhav MSETCL
13 Shri B.N.Khasale MSETCL
14 Ms A.M.Kumbhar MSETCL
15 Shri A.S.Kadam MSETCL
16 Shri S.G.Bhole MSETCL
17 Shri K.G.Mahabole MSETCL
18 Shri U.S.Bhagat STU
19 Shri Sanjay Kulkarni STU
20 Shri P.M.Buradkar MSLDC
21 Shri Amit Mittal IMACS
22 Shri Santosh Kumar Singh IMACS
Case No. 39 of 2013 MSETCL True up of FY 2011-12, APR FY 2012-13, MYT 2nd
Control Period
MERC, Mumbai Page 143 of 143
Appendix 2: List of persons who participated at Public Hearing held on 29
October, 2013
Sr. No. Name Organisation
1 Shri B.H. Gujrathi MSETCL
2 Shri Sonkavday M R MSETCL
3 Shri Rajesh Pawar MSETCL
4 Shri Prashant Kandalgaon MSETCL
5 Shri Shridhar R. Daftari MSETCL
6 Shri Walke M.C. STU/ MSETCL
7 Shri Santosh J. Ambekar MSETCL
8 Ms A.S. Gupta MSETCL
9 Shri Tej Singh MSETCL
10 Shri K.G. Mahabole MSETCL
11 Shri Sanjay S. Kulkarni STU/ MSETCL
12 Shri R.D. Chavan MSETCL
13 Shri S.G. Kelkar MSETCL
14 Shri Pratap Mohite MSETCL
15 Shri Sanjay R. Wagh MSETCL
16 Shri K.M.Jadhav MSETCL
17 Shri M.Q. Siddiqui MSETCL
18 Shri Prasad G. Narnaware MSETCL
19 Shri C.R. Bhosale MSETCL
20 Shri S.K. Ambekar MSETCL
21 Shri B.N. Khatale MSETCL
22 Ms A. M.Kumbhar MSETCL
23 Ms Akshata R. Naik MSETCL
24 Shri A.S.Kadam MSETCL
25 Ms Shriya MSETCL
26 Shri Kalpesh R MSETCL
27 Shri A.K. Lade MSLDC
28 Shri J.R. Kulkarni MSLDC
29 Shri George John Individual
30 Advocate Pavan P. Uttarwar Individual
31 Shri Saurabh Jain Individual
32 Ms Gauri Rane Individual
33 Shri Hasnain Rangnala Individual
34 Shri Ketan Patil IMaCS
35 Shri Himanshu Chawla IMaCS
36 Shri Abhijit Dhamdhe IPPAI