BRIHANMUMBAI ELECTRIC SUPPLY AND TRANSPORT UNDERTAKING (BEST)

Transcription

1 Before the Maharashtra Electricity Regulatory Commission Filing of the Petition for Aggregate Revenue Requirement and Tariff Proposal for FY under Maharashtra Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations 2005 along with other guidelines and directions issued by the MERC from time to time AND under Part VII (Section 61 to Section 64) of the Electricity Act, 2003 read with the relevant Guidelines. Filed by:- BRIHANMUMBAI ELECTRIC SUPPLY AND TRANSPORT UNDERTAKING (BEST)

2 Table of Contents 1. Introduction Overview of BEST Key Initiatives Special Status of BEST Undertaking History of Petition Filing Tariff Petition for the First Control Period FY to FY and related Orders APR for FY , Tariff Determination for FY and related Orders APR for FY , Tariff Determination for FY and related Orders APR for FY , Tariff Determination for FY and related Orders True Up for FY and provisional True Up for FY Aggregate Revenue Requirement and Tariff Proposal for FY Inclusion of deficit pertaining to transport operations History of the case Proposed recovery of transport deficit Organization of the petition Executive Summary True Up for FY & Provisional True Up for FY True Up of FY Provisional True Up for FY Summary of revenue gap to be passed on to FY Aggregate Revenue Requirement for FY Components of Aggregate Revenue Requirement Distribution losses System load factor Energy balance Power Purchase Expense Operations and Maintenance Expenses i

3 4.1.6 Depreciation Capital Expenditure Interest on long term/ short term capital Interest on Working Capital Interest on Consumer Security Deposit Contribution to Contingency Reserves Other Expenses Return Applicable to BEST Return as Interest on Internal Funds Non-Tariff Income Inclusion of Deficit in Transport Operations on the basis of Supreme Court Ruling Carrying cost Aggregate Revenue Requirement for FY Tariff philosophy and tariff proposal for FY Revenue recovery through fuel adjustment charge (FAC) Tariff philosophy Tariff proposal Time-of-the-Day Tariff Prayer ii

4 List of Tables Table 1: Network Infrastructure Growth... 2 Table 2: Distribution Transformer Failure Rate... 2 Table 3: Reliability Indices... 4 Table 4: Vigilance Cases... 4 Table 5: Contents of the petition Table 6: ARR for FY (Rs crore) Table 7: Summary of Revenue Gap Table 8: True Up for FY (Rs. crore) Table 9: Revenue Gap for FY (Rs. crore) Table 10: Provisional True Up of FY (Rs crore) Table 11: Revenue Gap for FY (Rs. crore) Table 12: Summary of revenue gap for FY Table 13: Estimation of system load factor Table 14: Derivation of energy sale CAGR Table 15: Estimation of energy requirement and sale Table 16: Power Purchase Agreement/Assessment in Progress Table 17: Gross generation capacity allocated to BEST from TPC-G (MW) Table 18: Net generation capacity available to BEST from TPC-G (MW) Table 19: Computation of energy purchased from external sources Table 20: Net energy available from TPC-G Table 21: Energy Purchases from All Sources (MUs) Table 22: Energy purchase from RE sources at G-T interface Table 23: Projected Power Purchase Expense Table 24: O&M Expenses (Rs. crore) Table 25: Impact due to Wage agreement (Rs. crore) Table 26: Total O&M Expenses for FY (Rs. crore) Table 27: Employee Expenses (Rs. crore) Table 28: A&G Expenses (Rs. crore) Table 29: R&M Expenses (Rs. crore) Table 30: Voltage wise Segregation of Assets (Rs. Lakhs) Table 31: Depreciation Rates Table 32: Depreciation (Rs. crore) Table 33: CAPEX Plan (Rs. crore) Table 34: Capitalization Values (Rs. crore) Table 35: Interest on long/short term loan (Rs. Crores) Table 36 Normative Interest on Working Capital (Rs. crore) Table 37: Actual Interest on Working Capital ( Rs crore) Table 38: Interest on Consumer Deposits (Rs. crore) iii

5 Table 39: Contingency Reserve (Rs. crore) Table 40: Other Expenses (Rs. crore) Table 41: Return on Regulatory Equity (Rs. crore) Table 42Interest on Internal Funds Table 43: Non - Tariff Income for (Rs. crore) Table 44: Estimated Deficit in Transport Division (Rs. crore) Table 45: Computation of carrying cost (Rs. crore) Table 46: Aggregate Revenue Requirement (Rs. crore) Table 47: Estimation of FAC Table 48: Summary of revenue gaps at existing and proposed tariffs Table 49: Tariff proposal for FY Table 50: Existing TOD tariff rate Table 51: Proposed TOD tariff rate List of Figures Figure 1: Distribution loss reduction trajectory Figure 2: Typical Load Curve for BEST - 31st May iv

6 1. Introduction 1.1 Overview of BEST The Brihanmumbai Electric Supply and Transport Undertaking (BEST) is an undertaking of Brihanmumbai Mahanagarpalika and is in the business of distributing electricity to consumers in the old city limits and providing public road transport (Bus transport) in the entire city limits as well as in some adjoining areas of Mumbai city. BEST distributes electricity from Colaba in South Mumbai to Sion/Mahim in the North. The erstwhile Bombay Electric Supply & Tramways Company started supplying electricity to the Bombay city in Until 1926, the BEST had been generating its own electricity for distribution to its consumers. Later, the BEST started purchasing electricity from M/s Tata Electric Company (now Tata Power).In 1947 the Company was municipalised and came to be known as Bombay Electric Supply and Transport Undertaking, which was later changed to Brihanmumbai Electric Supply and Transport Undertaking (BEST). The Undertaking is now well known in India for providing cost effective electricity with minimum interruptions and at stable voltage. BEST is well appreciated for the quick restoration of supply in the event of any faults developing in the distribution system. BEST also designs and executes schemes for provision and improvement of street lights in the distribution licensee area on behalf of Municipal Corporation of Greater Mumbai (MCGM) to enhance safety of road users by providing uninterrupted street lighting while also ensuring energy conservation. BEST also provides temporary street lighting during festivals on behalf of MCGM Key Initiatives Network Infrastructure Growth and Reliability Mumbai city is considered as the financial capital of the country and the license area of BEST includes the financial district of Mumbai. For effective working of the financial hub, BEST as the distribution licensee has the challenging task of providing high quality and reliable power to all its consumers. BEST Undertaking adheres to high standards of maintenance of its equipment in the system, in order to provide efficient services to its consumers. BEST has made sustained efforts for improving its distribution system and facilities. For maintaining redundancy in the system and to meet the increasing load requirements in its area, BEST has commissioned 5 nos. of 33kV receiving substations during FY Commissioning of these substations has added 73 MVA capacities at its 33 kv substations. For strengthening its cable network, BEST has laid 14kms of 33 kv cables during FY [1]

7 BEST s network infrastructure has been growing over the years as elaborated upon in the table below: Table 1: Network Infrastructure Growth Particulars FY FY FY FY FY FY Area of Electric Supply (sq. km.) Number of Consumers 552, , , , , ,007 Connected Load (MW) 1,353 1,906 2,906 3, ,607 Maximum Demand (MVA) Units Purchased (T-D) (MU) 1,468 2,339 3,442 4, ,635 Units Sold (MU) 1,333 2,106 3,144 4,103 4,121 4,267 Number of Receiving sub-stations Capacity of Power Transformers (MVA) ,186 1,547 1,627 1,700 No. of Distribution sub stations 1,144 1,393 1,843 2,053 2,091 2,129 Capacity of Distribution Transformers (MVA) 711 1,007 1,811 2,208 2,265 2,313 Length of EHV Cable (km) Length of HV Cable (km) 853 1,084 1,474 1,769 1,800 1,834 Length of LV Cable (km) 3,084 3,883 5,816 7,388 7,594 7,769 The high standard of maintenance carried out is clear from the table below which shows the very low % failure rate of distribution transformer during last four years: Table 2: Distribution Transformer Failure Rate Particulars No. of Transformers No. of Transformers Failed % Failure FY , % FY , % FY , % FY , % To keep the system ready to meet the load growth, especially with the expected development of mill land areas (where high end housing societies and posh malls are being developed), BEST has commissioned its first 33/0.415 kv transforming substation with 3.2 MVA capacity transformer at Morarji Mill, Lalbaug and the performance of the same is being monitored and has been satisfactory so far. BEST will be commissioning more numbers of such substations. Introduction of 33/0.415 kv transformer will avoid the double transformation i.e. 33/11 kv and 11 kv/415 V by which the space requirement will be [2]

8 reduced drastically, eliminate the 11 kv network and minimize the length of Low Voltage (LV) (415 V) cable to help to control the distribution losses. Besides this, it would also reduce the number of substations for meeting the load requirements. Network Expansion: Commissioning of new Receiving Sub-Stations (RSS) and revamping of existing RSS Commissioning of new Distribution Sub-Station (DSS) and augmentation and alteration to existing DSS, including procurement of package type compact DSS, up gradation of the transforming voltages and capacities of distribution transformers and implementation of automation system for controlling and monitoring substations. BEST has procured 4 package type compact DSS on trial basis. Introduction of such package type DSS enables to commission distribution substations with minimum space and reduces the time of commissioning of DSS. There are about 2300 no of distribution substation (DSS) in BEST s 11kV distribution network. The 11kV distribution cable network emanating from 11 kv bus of Receiving Substations (RSS) is connected in ring and operated in radial. Up till now the monitoring and control of these DSS was carried out manually. The manual monitoring and controlling of these DSS is time consuming and laborious and there is inevitable delay in the restoration of supply which causes inconvenience to BEST s esteemed consumers and loss of revenue to the Undertaking. Hence a need was felt to automate the DSS. BEST had taken up the work of distribution automation of 100 DSS in South Zone. The work is almost completed and under observation for ascertaining the performance. Further BEST proposes to automate 400 distribution substations in South (287 DSS) & Central South Zone (113 DSS) in a phased manner. This automation will enable BEST to operate the system in trying times of traffic jams, heavy monsoon and many emergency situations without visiting the substations. Metering Plan Changeover from electro-mechanical to electronic meters Implementation of the Automatic Meter Reading (AMR) /Remote Meter Reading RMR projects Procurement of fully automatic meter test benches for testing single phase & three phase energy meters NABL accreditation for its lab testing and calibration of energy meters, gain credibility on the testing methods adopted by it and increase the confidence level in the test results Other activities Procurement of distribution transformer with amorphous cores that have no load loss of about 50% of that of conventional Cold-Rolled Grain Oriented Silicon Steel(CRGO)core transformers, for loss reduction purpose [3]

9 BEST maintains the efficient and high standard in the upkeep of the distribution network. BEST also maintains high standard in operation and services. The table below depicts the reliability indices for FY of BEST. These indices clearly indicate that BEST has been able to maintain its network at a high level of performance despite the unique challenges of supplying power through completely underground cable network in the congested city like Mumbai where footpaths are dug up frequently by various utilities resulting in damages to underground cable and getting permission for excavation is big hurdle in repairing the underground cables. Table 3: Reliability Indices Month SAIDI (in min) 1 SAIFI 2 CAIDI (in min) 3 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar FY (YTD) BEST adopted stringent measures for detecting theft of electricity, pilferage, etc. The efforts being taken has helped to bring down the distribution loss besides increasing amount recovered each year by the Vigilance department. The table given below shows the details of vigilance cases detected and amount recovered during last four years: Table 4: Vigilance Cases S.No. Financial Year Number of Cases Detected Amount Recovered (Rs. Lakhs) 1 FY FY FY FY The amount received shown above are the amount paid by the errant consumer based on the claim made by BEST in the estimated loss of revenue to BEST due to malpractice as well as penalty. However, the final amount to be paid by the errant consumer is decided after detailed investigation, hearing all the parties 1 System Average Interruption Duration Index 2 System Average Interruption Frequency Index 3 Customer Average Interruption Duration Index [4]

10 involved, etc. Thus, its final assessment after review and the actual settlement recovery amount from the consumer is a long drawn process. After completing the said process, the final amount against the vigilance drive is considered under the respective monthly revenue earning of the BEST Undertaking. BEST informs that amount recovered through vigilance drives under Section 126 and/or Section 135 of the Electricity Act 2003 is initially provisional in nature. It is further pertinent that under Section 126, the person against whom such a case is registered is required to be given a reasonable opportunity of being heard and thereafter the final assessment is required to be done to complete the process of recovery. Out of total recovery made by BEST in FY towards vigilance cases, electricity duty & taxes are also required to be paid to the State Government after the vigilance recovery amount is settled. Hence, BEST requests the Hon ble Commission that the amount recovered through vigilance drive should not be considered as an additional income for BEST while processing this Petition. Enterprise Resource Planning: Information Technology (IT) Infrastructure and Integrated Solution BEST has initiated a project known as the Project for Electric Supply Automation and Customer E-service. This project is known as PEACE and is currently under implementation. The PEACE project includes Connection Management (CM), Meter Management, Remote Metering for High Tension (HT) and up-to Distribution Transformer (DT) level, Customer Relationship Management (CRM), Billing, Revenue Management, Asset Management (AM), Network Management, Outage Information System (OIS), Consumer Indexing, Load Flow Analysis (ETAP software), Load Forecasting and ABT Modules and Energy Accounting. Billing software has also been developed under PEACE and parallel running of old (legacy) and new billing system is in progress. It is expected that PEACE will be implemented within one year. Other key IT initiatives include: Interactive Voice Response System (IVRS) for call management center has been commissioned from 2 nd November, 2010 and is operational for attending technical complaints. Digitization of underground cable records: Underground cable records (numbering about 800) were earlier maintained in the physical form in city survey maps (cadastral survey sheets). These maps had the inherent drawbacks of records in physical forms such as tendency to physically deteriorate, inability to show enlarged views, difficulties in updating, inability to support multiple accessibility etc. These physical records have now been digitized and are available at computer terminals. Viewing, updating, etc have become quicker. BEST is in correspondence with PFC for funding under R-APDRP for following limited IT projects Web-enabling of digitized maps: Work for web based accessibility of digitized city survey maps has been initiated. Presently remote terminals have been provided to south, central south and supervisory control of Dadar for the operations and maintenance departments. It is proposed to provide access to digitized data of block plans to other departments as well. [5]

11 Establish a data center and a data recovery center (DC & DR center) Integration of GIS with other applications like consumer billing, SCADA, etc. Automatic meter reading of HV consumers and selected LV consumers Other IT initiatives include: SCADA project for receiving substations: IT based SCADA system is a tool which facilitates control operation and continuous supervision of performance of various equipment in the 110 kv, KV level Receiving Substations. This enables quick restoration of electric supply in case of system disturbances, which directly leads to improvement of reliability and consumers satisfaction level. BEST has initiated the process for up-gradation of its SCADA system in its various operational zones with latest technologies. Intelligent Electronic Device (IED) based SCADA system is already operational in 22 Nos. of Receiving Substations in South and Central South operational zones. As a step further, BEST has undertaken a SCADA project for revamping its existing SCADA system and making provisions of SCADA system for recently commissioned Receiving Substations, along with up-gradation of System protection, in 24 Nos. of Receiving Substations covering North and Central North operational zones. Also, up-gradation of communication system for the SCADA system by redundant communication media is undertaken. Establishing a centralised Unified Load Monitoring Centre (ULMC) for its operational zones is also being implemented under this project. The State-of-the-art technology of Numerical Relay based SCADA system is being implemented in this new SCADA project. The system engineering of the project is mostly completed and implementation of the project is in progress. The implementation of this project will further boost the reliability and quality of electric supply to the electricity consumers. Customer Service Improvement BEST has a separate customer care department to look after all aspects related to customer care such as ensuring electric connections to applicants, ensuring proper metering and billing, attending to consumer complaints and collection of electricity charges. Currently, every month meters are read manually and departmental personnel deliver the bills. BEST does not foresee outsourcing of this activity. Bill collection centers are located at different locations. In addition, service providers are appointed for collection of bills. Payment of electricity bill through ECS facility is also available to consumers. BEST also plans to obtain accreditation with OHSAS / IS in line with its aim to achieve Zero Accident Rate. The following plans for enhanced customer care are proposed/in progress/implemented: Billing and collection: For the benefit of our consumers, a new secured website is hosted. By logging on to this website, the consumers can view their electricity bills and other related information. BEST has also introduced online billing payment system for the consumers who wish to make [6]

12 the payment through credit/debit/internet banking. In order to control receiving of fake notes, fake note detection machines are being procured. BEST also has plan of implementing Automatic meter reading and testing. Initially, it will be implemented for HT consumers and High billing LT consumers. This process is underway. Consumer Grievance Redressal Forum (CGRF) is working in the BEST Undertaking from June, 2004 onwards. In order to give easier and quick response to consumer grievances through CGRF, Its approachability has been enhanced with hosting of a dedicated website ( where complaints can be registered online. This dedicated website was inaugurated for public use on 14 th August, The work of installation of DT metering is in process IT enabled systems for keeping track of commercial losses are being implemented. Improvement at service position: In order to make improvement in service position, BEST has installed MCBs in place of cut-outs on experimental basis. After attaining experience, the same would be installed in remaining service position in stages. BEST is procuring electronic meters as per CEA Regulations. ToD meters & AMR/RMR meters are being installed. 1.2 Special Status of BEST Undertaking BEST is an undertaking of Brihanmumbai Mahanagarpalika and is in the business of providing electricity in the old city limits and public transport (Bus transport) covering the entire city and suburbs and some areas of the Mumbai Metropolitan region. BEST is recognised as a Local Authority under the Electricity Act Historically there was a common administration set up for both the business activities, i.e. the Electric Supply division and the Transport division. Prior to enactment of the Electricity Act, 2003, the revenue of electricity utilities was determined in accordance with Section 57 of the Electricity Supply Act, 1948 and as per Schedule VI contained in that Act. This Schedule VI incorporated all the financial principles of an electricity utility including limits of reasonable return. However this entire Schedule VI was not applicable in the case of Local Authorities like BEST. BEST was therefore free to determine its tariffs as per MMC Act and was able to fulfill its statutory obligations. Thus, BEST being a Local Authority, and with the objective of providing better and essential services of electricity supply and transport to the citizens of Mumbai as its social obligation, the surplus generated by the Electric Supply Division, if any, was used for subsidising the Transport business of the Undertaking. Almost similar provision been incorporated into the EA, 2003 by which a Local Authority (like BEST) carrying on business of supplying electricity prior to commencement of the Act, is placed on a special pedestal. [7]

13 These provisions are as follows: Section 51: 51. (1) A distribution licensee may, with prior intimation to the Appropriate Commission, engage in any other business for optimum utilization of its assets: Provided that a proportion of the revenues derived from such business shall, as may be specified by the concerned State Commission, be utilized for reducing its charges for wheeling: Provided further that the distribution licensee shall maintain separate accounts for each such business undertaking to ensure that distribution business neither subsidies in any way such business undertaking nor encumbers its distribution assets in any way to support such business. Provided also that nothing contained in this section shall apply to a local authority engaged, before the commencement of this Act, in the business of distribution of electricity. Section 42(3): (3) Where any person, whose premises are situated within the area of supply of a distribution licensee, (not being a local authority engaged in the business of distribution of electricity before the appointed date) requires a supply of electricity from a generating company or any licensee other than such distribution licensee, such person may, by notice, require the distribution licensee for wheeling such electricity in accordance with regulations made by the State Commission and the duties of the distribution licensee with respect to such supply shall be of a common carrier providing non-discriminatory open access. Section 43: 43. (1) Save as otherwise provided in this Act, every distribution licensee, shall, on an application by the owner or occupier of any premises, give supply of electricity to such premises, within one month after receipt of the application requiring such supply : Provided that where such supply requires extension of distribution mains, or commissioning of new substations, the distribution licensee shall supply the electricity to such premises immediately after such extension or commissioning or within such period as may be specified by the Appropriate commissioning or within such period as may be specified by the Appropriate Commission. Provided further that in case of a village or hamlet or area wherein no provision for supply of electricity exists, the Appropriate Commission may extend the said period as it may consider necessary for electrification of such village or hamlet or area. (2) It shall be the duty of every distribution licensee to provide, if required, electric plant or electric line for giving electric supply to the premises specified in sub-section (1): [8]

14 Provided that no person shall be entitled to demand, or to continue to receive, from a licensee a supply of electricity for any premises having a separate supply unless he has agreed with the licensee to pay to him such price as determined by the Appropriate Commission. (3) If a distribution licensee fails to supply the electricity within the period specified in sub-section (1), he shall be liable to a penalty which may extend to one thousand rupees for each day of default. Section 13: 13. The Appropriate Commission may, on the recommendations, of the Appropriate Government, in accordance with the national policy formulated under section 5 and in public interest, direct, by notification that subject to such conditions and restrictions, if any, and for such period or periods, as may be specified in the notification, the provisions of section 12 shall not apply to any local authority, Panchayat Institution, users association, cooperative societies, nongovernmental organizations, or franchisees: Since, BEST undertaking is a local authority engaged in the business of distribution of electricity under electricity act BEST is exempted from distribution open access as per section 42(3) of the EA 2003 and also MERC (Distribution Open Access) Regulation 2005, Regulation History of Petition Filing Tariff Petition for the First Control Period FY to FY and related Orders BEST submitted ARR and Multi Year Tariff (MYT) Petition for the first Control Period from FY to FY , on December 11, 2006 numbered as Case No. 66 of The Commission issued the MYT Order for BEST for the first Control Period on April 3, 2007, which came into effect from April 1, 2007 and the tariffs were valid up to March 31, 2008, which was later extended till the revised revenue requirement was determined for FY , vide the Commission s Order dated April 1, 2008, in Case No. 102 of APR for FY , Tariff Determination for FY and related Orders BEST submitted its Petition for Annual Performance Review (APR) for FY and Tariff Determination for FY on December 17, 2007 numbered as Case No. 73 of The Commission issued the APR Order for BEST on June 6, 2008, which came into effect from June 1, 2008, and the tariffs were initially valid up to March 31, 2009, which was later extended till the revised revenue requirement was determined for FY , vide the Commission s Order dated April 15, 2009 in Case Nos. 152, 153 and 154 of [9]

15 1.3.3 APR for FY , Tariff Determination for FY and related Orders BEST submitted its Petition for Truing-up for FY , APR for FY and Tariff Determination for FY on December 11, 2008 numbered as Case No. 118 of The Commission issued the APR Order for BEST on June 15, 2009, which came into effect from June 1, APR for FY , Tariff Determination for FY and related Orders BEST submitted its Petition for Truing-up for FY , APR for FY and Tariff Determination for FY on December 31, The Commission held a Technical Validation Session (TVS) for BEST s Petition on February 8, The Commission issued the APR Order for BEST on September 12, 2010, which came into effect from September 1, BEST has filed an appeal against this order with the Appellate Tribunal under the Case No. 4 of 2011for the disallowances of certain expenditure and order to that effect is yet to be received from the Appellate Tribunal True Up for FY and provisional True Up for FY As per the directives of the Hon ble Commission vide its reference number MERC/Tariff/ /00947 dated July 7, 2011, BEST submitted its petition for true up of FY and provisional true up of FY on 26 th August BEST submitted its Annual accounts for the period 1st April 2009 to 31st March 2010 audited by the Municipal Auditor for the purpose of truing up of expenses and revenue for FY The Aggregate Revenue Requirement of BEST for FY and revenue from sale of electricity submitted in the petition was on the basis of provisional accounts for FY The Hon ble Commission raised certain queries on the submitted petition to which BEST has already responded. BEST is in the process of submitted the revised petition on 22 nd November The ARR numbers have been provided in section 2 of this petition Aggregate Revenue Requirement and Tariff Proposal for FY BEST, in this petition, humbly requests the Hon ble Commission to: 1. BEST herby submits its petition for approval of Aggregate Revenue Requirement and Tariff for FY as per MERC (Terms and Conditions of Tariff) Regulations In the circumstance and for the reason aforesaid, BEST respectfully submits its pray for the following relief: 3. Admit this petition under section 32 and 93 of Maharashtra Electricity Regulatory Commission (Conduct of Business) regulation, In furtherance to the commission s directive vide its letter MERC/Tariff/ /01954 dtd. 8 th November Approve the propose Aggregate Revenue Requirement for FY Approve recovery of Aggregate Revenue Requirement for FY through the category-wise tariff revision plan proposed for FY [10]

16 6. Condone any inadvertent omission/ errors and grant the liberty to BEST to add/ change/ modify/ alter this petition and make further submission as may be required at a further date; and 7. Pass such further and other orders, as the Hon ble Commission may deem fit and proper keeping in view the facts and circumstances of the case. 1.4 Inclusion of deficit pertaining to transport operations History of the case BEST humbly informs that in the ARR and Tariff petition for FY and FY in chapter 2 (Support to transport business legal provisions), it has submitted as under for approval of deficit in transport operation of the Undertaking : 2 Support to transport business Legal Provisions 2.1 Electricity Act 2003 The Electricity Act 2003, which came into effect on June 10, 2003, has specific exemptions for local authorities in the business of electricity distribution, to ensure that their revenue from supply of electricity is not unduly affected. Therefore, the specific provision that prevents a distribution licensee from transferring its losses from other businesses to the electricity supply business has not been applied to BEST and other local authorities by the Parliament. Similarly the provision allowing open access to consumers has not been applied to consumers in the area of license of local authorities. This has primarily been done because the local authorities provide services that, at present, are not profitable by themselves and need to be supported by the electricity supply business. 2.2 Transport business of BEST: Lifeline for Mumbai BEST not only supplies electricity but also carries out transport operations in Mumbai. The transport business caters to more than forty-five lakh commuters and is the lifeline of Mumbai along with the rail network. As in other developing and even developed countries, the tariff for bus service is subsidized to ensure that the service is affordable for all sections of society. Further, it is essential to provide a good quality of public transport so that the use of private transport is minimized. This not only decongests cities but also reduced pollution to a large extent. Hence, the support to the transport business is essential for the welfare of general public. 2.3 Legal provision exempts local authority The support to other businesses of an electricity distribution utility is governed by Section 51 of the Electricity Act The text is as follows: Section 51: Other businesses of distribution licensees A distribution licensee may, with prior intimation to the Appropriate Commission, engage in any other business [11]

17 for optimum utilization of its resources PROVIDED that a proportion of the revenues derived from such business shall, as may be specified by the concerned State Commission, be utilized for reducing its charges for wheeling: PROVIDED FURTHER that the distribution licensee shall maintain separate accounts for each such business undertaking to ensure that distribution business neither subsidises in any way such business undertaking nor encumbers its distribution assets in any way to support such business: PROVIDED also that nothing contained in this section shall apply to a local authority engaged before the commencement of this Act, in the business of distribution of electricity. 2.5 Surplus is being used for a social cause The surplus transferred to the transport division is being used for a social cause and is returned to the people of Mumbai through the transport services. In order to provide the required support to the people of Mumbai, it is necessary that the electricity undertaking is not adversely impacted financially and continues with its existing operations. Accordingly, in the ARR of FY and FY , BEST had included the deficit amount of Transport division in the ARR amounting to Rs crore for FY and Rs crore for FY The Hon ble Commission has disallowed the deficit of the Transport Division as a part of the ARR in its Order dated The Commission has held as follows: The inference that exemption from the requirement of Section 51 of the Electricity Act, 2003 to BEST (if at all BEST can be termed as Local Authority ) allows BEST to pass on Rs. 200 crore for its transport business as expenses to be claimed as a revenue gap for determination of tariff is incorrect which cannot be accepted. The Undertaking thereafter filed appeal against the order of the MERC before the Appellate Tribunal for Electricity (APTEL) and sought the following reliefs: a) That this Hon ble Tribunal be pleased to quash and set aside the impugned tariff order dated ; b) That this Hon ble Tribunal be pleased to determine the ARR of the appellant as per the ARR submitted by the appellant to the MERC and issue a fresh tariff order fixing the tariff of the appellant accordingly; c) For such further and other relief as this Hon ble Tribunal may deem fit and proper in the nature and circumstances of the case. The APTEL thereafter disposed of the above said appeal by Judgment and Order dated in Appeal No. 61 of The APTEL has held as follows: [12]

18 On point II, we sustain the interpretation placed by the MERC on Section 51 of the Electricity Act, We answer this point against the appellant. Aggrieved by the order of the APTEL, the Undertaking has filed second appeal before the Hon ble Supreme Court that is Civil Appeal No. 848 of The Undertaking has sought the following relief: Allow the appeal by setting aside the impugned final Order and Judgment dated passed by the Appellate Tribunal for Electricity, New Delhi in Appeal No. 61 of 2006 to the extent it holds that the last of the provisions appearing in Section 51 in no way enables the appellant to subsidize it s any other business form the electricity business and also holding that the words :nothing contained in this Section applied to a Local Authority:, appearing in the last of the provisions would take in the main Section 51 and it has to be confined in the main section alone and not to the other two provisos which impose certain conditions in respect of new business enabled under Section 51. The Hon ble Supreme Court thereafter by Judgment and Order dated allowed the appeal filed by the Undertaking and observed as follows: In our opinion in view of the third proviso to Section 51 of the Act a certain limited electricity distribution licensees are exempt from the operation of the Section insofar as the requirement of prior intimation to the commission or the obligations of the first and second proviso are concerned. The appellant is admittedly doing the business of transport besides electricity distribution for several decades. On the facts of the case, we are of the opinion that the third proviso to Section 51 of the Act applies and hence the impugned Judgment and Order cannot be sustained. The appeal is allowed. The impugned Judgment and Order is set aside Proposed recovery of transport deficit On the basis of the judgment and order by the Hon ble Supreme Court dated as detailed above, the deficit from transport operations has been included in the estimation of the total ARR to be recovered from tariffs in the FY The deficits pertaining to three years i.e. FY (Rs crores), FY (Rs crores) and FY (Rs crores) amounts to Rs crores, which has been considered in the ARR of FY [13]

19 1.5 Organization of the petition This petition is structured as per the table below: Table 5: Contents of the petition Chapter No. Particulars 1 Introduction 2 True Up for FY & Provisional True Up for FY Aggregate Revenue Requirement for FY Tariff philosophy and tariff proposal for FY Prayers [14]

20 2. Executive Summary BEST Undertaking (BEST) being a Local Authority is a Distribution Licensee supplying electricity in the old city limits of Mumbai and providing public transport in the entire city limits as well as some adjoining areas of Mumbai city. In accordance with Section 61 and 62 of the Electricity Act 2003 and in compliance with Regulation MERC (Terms and Conditions of Tariff) Regulations, 2005 is filing the ARR and Tariff Petition for FY The gap towards the electricity supply business along with the deficit on account of transport division pertaining to FY and FY has been carried forward to ARR of FY The details of ARR for FY , FY and FY is provided below:- Table 6: ARR for FY (Rs crore) S.No. Particulars FY (Actual) FY (Actual) FY (Projected) 1 Power Purchase Expenses (including External Power Purchase) 1, , , Operation & Maintenance Expenses Employee Expenses Administration & General Expenses Repair & Maintenance Expenses Depreciation, including advance against depreciation Interest on Long-term/ Short-term Loan Capital Interest on Working Capital (Normative) Interest on Working Capital ( Actual) Interest on Security Deposit Bad Debts Written off Other Expenses Income Tax Stand-by charges payable to MSEDCL Transmission Charges payable to MSETCL Annual SLDC fees & charges Contribution to contingency reserves Incentive for Reduction in Distribution loss Total Revenue Expenditure 2, , , Return on Equity Capital Return as Interest on Internal funds [15]

21 S.No. Particulars FY (Actual) FY (Actual) FY (Projected) 17 Aggregate Revenue Requirement 2, , , Less: Non-Tariff Income Add: Deficit in Transport division Add: Truing up for FY Add: Truing up for FY Impact of Review Order (Case no. 44 of 2009) Impact due to truing up for FY , after costbenefit analysis Add: Truing up of FY & Provisional truing-up of FY Add: Carrying Cost Aggregate Revenue Requirement from Retail Tariff 3, , , Revenue from Sale of Power 2, , , BEST would like to recover the revenue requirement through revision in tariff. The gap after the new tariff proposed is in tune of Rs crore which BEST would like to propose it to be converted into regulatory asset and its recovery be allowed over a period of 3 years as per directions of the APTEL. Table 7: Summary of Revenue Gap Particulars (Rs. crores) FY Standalone ARR for electricity supply business 3, Previous Year Gap of FY and FY Transport division deficit FY Total ARR to be recovered from tariffs 4, Revenue at existing tariffs 2, Revenue from FAC Gap/ (surplus) at existing tariffs 1, Revenue from proposed tariffs 3, Gap/ (surplus) at proposed tariffs [16]

22 BEST respectfully prays to the Hon ble Commission to: 1. Admit this petition under section 32 and 93 of Maharashtra Electricity Regulatory Commission (Conduct of Business) Regulations, Approve the aggregate revenue requirement for FY ; 3. Approve recovery of aggregate revenue requirement for FY through the category-wise tariff revision plan proposed for FY ; 4. That the Hon ble Commission pending the hearing and final disposal of this case / petition, be pleased to make appropriate order to provide appropriate revenue recovery mechanism to enable BEST to bridge or recoup the revenue gap in view of the critical financial situation of the Undertaking. 5. Condone any inadvertent omission / errors and grant the liberty to BEST to add/ change/ modify /alter this petition and make further submissions as may be required at a future date. 6. Pass such further and other orders, as the Hon ble Commission may deem fit and proper keeping in view the facts and circumstances of the case. [17]

23 3. True Up for FY & Provisional True Up for FY This section summarizes the True Up for FY and provisional True Up for FY determined in line with Maharashtra Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations The gap derived from these two years has been added to the Aggregate Revenue Requirement (ARR) of FY The gap towards the electricity supply business along with the deficit on account of transport division pertaining to FY and FY has been carried forward to ARR of FY True Up of FY BEST had submitted the petition for true up of FY and provisional true up of FY as per directives of the Hon ble Commission vide its ref. no. MERC/Tariff/ / dated July 7, 2011 on August 26, On the above petition Hon ble commission raised few queries on which BEST has made the required changes. In the petition, on the basis of audited accounts of BEST for FY , the true up amount for FY was determined as a gap of Rs crores. As mentioned earlier, the deficit of Rs crores pertaining to the transport division has not been considered. The true up for FY and the variation in actual expenditure vis-à-vis the approved amounts by the Hon ble Commission as provided in the APR order dated 12th September 2010 (case number 95 of 2009) is as shown in the table below: [18]

24 Table 8: True Up for FY (Rs. crore) S.No. 1 Particulars Power Purchase Expenses (including External Power Purchase) Approved Actual Difference (A) (B) (C)=(A-B) 1, , (18.63) 2 Operation & Maintenance Expenses (25.67) 2.1 Employee Expenses (22.32) 2.2 Administration & General Expenses (0.91) 2.3 Repair & Maintenance Expenses (2.45) 3 Depreciation, including advance against depreciation Interest on Long-term/ Short-term Loan Capital (8.63) 5 Interest on Working Capital (Normative) Interest on Working Capital ( Actual) (3.21) 5.2 Interest on Security Deposit (0.41) 6 Bad Debts Written off Other Expenses (72.51) 8 Income Tax Stand-by charges payable to MSEDCL Transmission Charges payable to MSETCL Annual SLDC fees & charges (0.05) 12 Contribution to contingency reserves (3.48) 13 Incentive for Reduction in Distribution loss (13.89) Total Revenue Expenditure 2, , (143.78) 14 Return on Equity Capital (15.22) 15 Return as Interest on Internal funds Aggregate Revenue Requirement 2, , (159.01) 17 Less: Non-Tariff Income Add: Deficit in Transport division (504.88) 19 Aggregate Revenue Requirement from Retail Tariff 2, , (683.50) 20 Truing up for F.Y Truing up for F.Y Net ARR 2, , (683.38) [19]

25 BEST during the year FY has earned revenue of Rs. 2, crore by sale of power to its consumers against the approved amount of Rs. 2, crore. The resulting revenue gap, being the difference between Net ARR and the Revenue from Sale of Power for FY is as given below: Table 9: Revenue Gap for FY (Rs. crore) S.No. Particulars Approved Actual (A) (B) 1 Net Revenue Requirement 2, , Revenue from Sale of Power 2, , Revenue Gap/(Surplus) of FY (14.73) Provisional True Up for FY As specified above, BEST had submitted the Petition for true up of FY and provisional true up of FY as per directives of the Hon ble Commission vide its ref. no. MERC/Tariff/ / dated July 7, 2011 on August 26, In the petition, on the basis of provisional accounts of BEST for FY , the true up amount for FY was determined as a surplus of Rs crores. The deficit of Rs crores pertaining to the transport division has been considered. The provisional true up for FY and the variation in actual expenditure vis-à-vis the approved amounts by the Hon ble Commission as provided in the APR order dated 12th September 2010 (case number 95 of 2009) is as shown in the table below: [20]

26 Table 10: Provisional True Up of FY (Rs crore) S.No. 1 Particulars Power Purchase Expenses (including External Power Purchase) Approved Actual (Unaudited) Difference (A) (B) (C)=(A-B) Operation & Maintenance Expenses (41.37) 2.1 Employee Expenses (33.94) 2.2 Administration & General Expenses (0.90) 2.3 Repair & Maintenance Expenses (6.55) 3 Depreciation, including advance against depreciation (2.70) 4 Interest on Long-term/ Short-term Loan Capital Interest on Working Capital ( Normative) (1.98) 5.1 Interest on Working Capital (Actual ) (1.59) 5.2 Interest on Consumer Deposits Bad Debts Written off Other Expenses Income Tax Stand-by charges payable to MSEDCL Transmission Charges payable to Transmission licensee (0.01) 11 Annual SLDC fees & charges Contribution to contingency reserves (3.89) 12 Incentive for reduction of distribution loss (30.20) 13 Total Revenue Expenditure Return on Equity Capital (22.26) 15 Return as Interest on Internal funds Aggregate Revenue Requirement , Less: Non-Tariff Income Add: Deficit in Transport division (400.38) 19 Aggregate Revenue Requirement from Retail Tariff (354.45) 20 Impact of Review Order (Case no. 44 of 2009) Impact due to truing up for FY , after costbenefit analysis (1.34) (1.34) Revenue gap / (surplus) after truing-up of FY (14.73) 0.00 (14.73) 23 Net Aggregate Revenue Requirement (369.16) [21]