Before the Maharashtra Electricity Regulatory Commission Filing of the Petition for Aggregate Revenue Requirement and Tariff Proposal for FY 2011-12 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)
Table of Contents 1. Introduction... 1 1.1 Overview of BEST... 1 1.1.1 Key Initiatives... 1 1.2 Special Status of BEST Undertaking... 7 1.3 History of Petition Filing... 9 1.3.1 Tariff Petition for the First Control Period FY 2007-08 to FY 2009-10 and related Orders 9 1.3.2 APR for FY 2007-08, Tariff Determination for FY 2008-09 and related Orders... 9 1.3.3 APR for FY 2008-09, Tariff Determination for FY 2009-10 and related Orders... 10 1.3.4 APR for FY 2009-10, Tariff Determination for FY 2010-11 and related Orders... 10 1.3.5 True Up for FY 2009-10 and provisional True Up for FY 2010-11... 10 1.3.6 Aggregate Revenue Requirement and Tariff Proposal for FY 2011-12... 10 1.4 Inclusion of deficit pertaining to transport operations... 11 1.4.1 History of the case... 11 1.4.2 Proposed recovery of transport deficit... 13 1.5 Organization of the petition... 14 2. Executive Summary... 15 3. True Up for FY 2009-10 & Provisional True Up for FY 2010-11... 18 3.1 True Up of FY 2009-10... 18 3.2 Provisional True Up for FY 2010-11... 20 3.3 Summary of revenue gap to be passed on to FY 2011-12... 22 4. Aggregate Revenue Requirement for FY 2011-12... 23 4.1 Components of Aggregate Revenue Requirement... 23 4.1.1 Distribution losses... 23 4.1.2 System load factor... 24 4.1.3 Energy balance... 24 4.1.4 Power Purchase Expense... 25 4.1.5 Operations and Maintenance Expenses... 30 i
4.1.6 Depreciation... 32 4.1.7 Capital Expenditure... 34 4.1.8 Interest on long term/ short term capital... 36 4.1.9 Interest on Working Capital... 37 4.1.10 Interest on Consumer Security Deposit... 38 4.1.11 Contribution to Contingency Reserves... 38 4.1.12 Other Expenses... 39 4.1.13 Return Applicable to BEST... 39 4.1.14 Return as Interest on Internal Funds... 40 4.1.15 Non-Tariff Income... 40 4.1.16 Inclusion of Deficit in Transport Operations on the basis of Supreme Court Ruling 41 4.1.17 Carrying cost... 41 4.2 Aggregate Revenue Requirement for FY 2011-12... 44 5. Tariff philosophy and tariff proposal for FY 2011-12... 45 5.1 Revenue recovery through fuel adjustment charge (FAC)... 45 5.2 Tariff philosophy... 46 5.3 Tariff proposal... 47 5.4 Time-of-the-Day Tariff... 48 6. Prayer... 50 ii
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... 14 Table 6: ARR for FY 2011-12 (Rs crore)... 15 Table 7: Summary of Revenue Gap... 16 Table 8: True Up for FY 2009-10 (Rs. crore)... 19 Table 9: Revenue Gap for FY 2009-10 (Rs. crore)... 20 Table 10: Provisional True Up of FY 2010-11 (Rs crore)... 21 Table 11: Revenue Gap for FY 2010-11 (Rs. crore)... 22 Table 12: Summary of revenue gap for FY 2011-12... 22 Table 13: Estimation of system load factor... 24 Table 14: Derivation of energy sale CAGR... 24 Table 15: Estimation of energy requirement and sale... 25 Table 16: Power Purchase Agreement/Assessment in Progress... 26 Table 17: Gross generation capacity allocated to BEST from TPC-G (MW)... 27 Table 18: Net generation capacity available to BEST from TPC-G (MW)... 27 Table 19: Computation of energy purchased from external sources... 27 Table 20: Net energy available from TPC-G... 28 Table 21: Energy Purchases from All Sources (MUs)... 28 Table 22: Energy purchase from RE sources at G-T interface... 28 Table 23: Projected Power Purchase Expense... 30 Table 24: O&M Expenses (Rs. crore)... 30 Table 25: Impact due to Wage agreement (Rs. crore)... 31 Table 26: Total O&M Expenses for FY 2011-12 (Rs. crore)... 31 Table 27: Employee Expenses (Rs. crore)... 31 Table 28: A&G Expenses (Rs. crore)... 32 Table 29: R&M Expenses (Rs. crore)... 32 Table 30: Voltage wise Segregation of Assets (Rs. Lakhs)... 33 Table 31: Depreciation Rates... 33 Table 32: Depreciation (Rs. crore)... 34 Table 33: CAPEX Plan (Rs. crore)... 35 Table 34: Capitalization Values (Rs. crore)... 36 Table 35: Interest on long/short term loan (Rs. Crores)... 36 Table 36 Normative Interest on Working Capital (Rs. crore)... 37 Table 37: Actual Interest on Working Capital ( Rs crore)... 38 Table 38: Interest on Consumer Deposits (Rs. crore)... 38 iii
Table 39: Contingency Reserve (Rs. crore)... 38 Table 40: Other Expenses (Rs. crore)... 39 Table 41: Return on Regulatory Equity (Rs. crore)... 40 Table 42Interest on Internal Funds... 40 Table 43: Non - Tariff Income for (Rs. crore)... 40 Table 44: Estimated Deficit in Transport Division (Rs. crore)... 41 Table 45: Computation of carrying cost (Rs. crore)... 43 Table 46: Aggregate Revenue Requirement (Rs. crore)... 44 Table 47: Estimation of FAC... 45 Table 48: Summary of revenue gaps at existing and proposed tariffs... 46 Table 49: Tariff proposal for FY 2011-12... 47 Table 50: Existing TOD tariff rate... 48 Table 51: Proposed TOD tariff rate... 49 List of Figures Figure 1: Distribution loss reduction trajectory... 23 Figure 2: Typical Load Curve for BEST - 31st May 2011... 48 iv
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 1905. 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. 1.1.1 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 2010-11. 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 2010-11. [1]
BEST s network infrastructure has been growing over the years as elaborated upon in the table below: Table 1: Network Infrastructure Growth Particulars FY 1979-80 FY 1989-90 FY 1999-00 FY 2008-09 FY 2009-10 FY 2010-11 Area of Electric Supply (sq. km.) 59 60 60 69 69 69 Number of Consumers 552,000 701,000 847,980 978,914 989,762 998,007 Connected Load (MW) 1,353 1,906 2,906 3,492 3548 3,607 Maximum Demand (MVA) 311 502 671 873 876 913 Units Purchased (T-D) (MU) 1,468 2,339 3,442 4,523 4546 4,635 Units Sold (MU) 1,333 2,106 3,144 4,103 4,121 4,267 Number of Receiving sub-stations 16 24 38 45 47 52 Capacity of Power Transformers (MVA) 424 788 1,186 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) 145 241 312 382 401 415 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 2007-08 2,706 30 1.11% FY 2008-09 2,756 25 0.91% FY 2009-10 2,811 36 1.28% FY 2010-11 2,914 24 0.82% 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]
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]
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 2010-11 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-10 16.54 0.48 34.19 May-10 12.59 0.36 34.84 Jun-10 19.75 0.51 38.78 Jul-10 14.89 0.45 32.97 Aug-10 11.08 0.36 30.36 Sep-10 11.25 0.43 25.87 Oct-10 10.41 0.34 30.59 Nov-10 8.88 0.32 27.36 Dec-10 8.56 0.28 30.93 Jan-11 6.57 0.21 31.44 Feb-11 5.75 0.2 29.16 Mar-11 11.49 0.38 30.00 FY 2010-11 (YTD) 137.76 4.32 31.89 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 2006-07 658 967.56 2 FY 2007-08 1359 1761.19 3 FY 2008-09 1173 2002.83 4 FY 2009-10 2131 2619.05 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]
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 2009-10 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]
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, 33-22 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 18001 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 www.bestundertaking.net 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]
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 (www.cgrfbest.org.in), where complaints can be registered online. This dedicated website was inaugurated for public use on 14 th August, 2009. 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 2003. 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]
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]
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 2003. 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 19. 1.3 History of Petition Filing 1.3.1 Tariff Petition for the First Control Period FY 2007-08 to FY 2009-10 and related Orders BEST submitted ARR and Multi Year Tariff (MYT) Petition for the first Control Period from FY 2007-08 to FY 2009-10, on December 11, 2006 numbered as Case No. 66 of 2006. The Commission issued the MYT Order for BEST for the first Control Period on April 3, 2007, which came into effect from April 1, 2007 and the tariffs were valid up to March 31, 2008, which was later extended till the revised revenue requirement was determined for FY 2008-09, vide the Commission s Order dated April 1, 2008, in Case No. 102 of 2007. 1.3.2 APR for FY 2007-08, Tariff Determination for FY 2008-09 and related Orders BEST submitted its Petition for Annual Performance Review (APR) for FY 2007-08 and Tariff Determination for FY 2008-09 on December 17, 2007 numbered as Case No. 73 of 2007. The Commission issued the APR Order for BEST on June 6, 2008, which came into effect from June 1, 2008, and the tariffs were initially valid up to March 31, 2009, which was later extended till the revised revenue requirement was determined for FY 2009-10, vide the Commission s Order dated April 15, 2009 in Case Nos. 152, 153 and 154 of 2008. [9]
1.3.3 APR for FY 2008-09, Tariff Determination for FY 2009-10 and related Orders BEST submitted its Petition for Truing-up for FY 2007-08, APR for FY 2008-09 and Tariff Determination for FY 2009-10 on December 11, 2008 numbered as Case No. 118 of 2008. The Commission issued the APR Order for BEST on June 15, 2009, which came into effect from June 1, 2009. 1.3.4 APR for FY 2009-10, Tariff Determination for FY 2010-11 and related Orders BEST submitted its Petition for Truing-up for FY 2008-09, APR for FY 2009-10 and Tariff Determination for FY 2010-11 on December 31, 2009. The Commission held a Technical Validation Session (TVS) for BEST s Petition on February 8, 2010. The Commission issued the APR Order for BEST on September 12, 2010, which came into effect from September 1, 2010. 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. 1.3.5 True Up for FY 2009-10 and provisional True Up for FY 2010-11 As per the directives of the Hon ble Commission vide its email reference number MERC/Tariff/20112012/00947 dated July 7, 2011, BEST submitted its petition for true up of FY 2009-10 and provisional true up of FY 2010-11 on 26 th August 2011. 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 2009-10. The Aggregate Revenue Requirement of BEST for FY 2010-11 and revenue from sale of electricity submitted in the petition was on the basis of provisional accounts for FY 2010-11. 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 2011. The ARR numbers have been provided in section 2 of this petition. 1.3.6 Aggregate Revenue Requirement and Tariff Proposal for FY 2011-12 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 2011-12 as per MERC (Terms and Conditions of Tariff) Regulations 2005. 2. 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, 2004. In furtherance to the commission s directive vide its letter MERC/Tariff/20112012/01954 dtd. 8 th November 2011. 4. Approve the propose Aggregate Revenue Requirement for FY 2011-12. 5. Approve recovery of Aggregate Revenue Requirement for FY 2011-12 through the category-wise tariff revision plan proposed for FY 2011-12. [10]
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 1.4.1 History of the case BEST humbly informs that in the ARR and Tariff petition for FY 2004-05 and FY 2005-06 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 2003. 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]
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 2004-05 and FY 2005-06, BEST had included the deficit amount of Transport division in the ARR amounting to Rs. 231.08 crore for FY 2004-05 and Rs. 140.30 crore for FY 2005-06. The Hon ble Commission has disallowed the deficit of the Transport Division as a part of the ARR in its Order dated 09.03.2006. 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 09.03.2006; 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 18.08.2006 in Appeal No. 61 of 2006. The APTEL has held as follows: [12]
On point II, we sustain the interpretation placed by the MERC on Section 51 of the Electricity Act, 2003. 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 2007. The Undertaking has sought the following relief: Allow the appeal by setting aside the impugned final Order and Judgment dated 18.08.2006 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 08.02.2011 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. 1.4.2 Proposed recovery of transport deficit On the basis of the judgment and order by the Hon ble Supreme Court dated 08.02.2011 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 2011-12. The deficits pertaining to three years i.e. FY 2009-10 (Rs. 504.88 crores), FY 2010-11 (Rs. 400.38 crores) and FY 2011-12 (Rs. 324.00 crores) amounts to Rs. 1225.20 crores, which has been considered in the ARR of FY 2011-12. [13]
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 2009-10 & Provisional True Up for FY 2010-11 3 Aggregate Revenue Requirement for FY 2011-12 4 Tariff philosophy and tariff proposal for FY 2011-12 5 Prayers [14]
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 2011-12. The gap towards the electricity supply business along with the deficit on account of transport division pertaining to FY 2009-10 and FY 2010-11 has been carried forward to ARR of FY 2011-12. The details of ARR for FY 2009-10, FY 2010-11 and FY 2011-12 is provided below:- Table 6: ARR for FY 2011-12 (Rs crore) S.No. Particulars FY 09-10 (Actual) FY 10-11 (Actual) FY 11-12 (Projected) 1 Power Purchase Expenses (including External Power Purchase) 1,736.43 1,706.54 2,317.88 2 Operation & Maintenance Expenses 281.16 316.79 438.16 2.1 Employee Expenses 174.76 199.32 313.37 2.2 Administration & General Expenses 77.39 82.75 88.56 2.3 Repair & Maintenance Expenses 29.01 34.72 36.23 3 Depreciation, including advance against depreciation 46.56 51.62 57.71 4 Interest on Long-term/ Short-term Loan Capital 23.31 13.15 16.40 5 Interest on Working Capital (Normative) 16.40 11.79 0.00 5.1 Interest on Working Capital ( Actual) 3.21 1.59 7.79 5.2 Interest on Security Deposit 13.35 13.79 13.90 6 Bad Debts Written off 0.03 0.00 0.00 7 Other Expenses 128.51 54.63 65.45 8 Income Tax 0.00 0.00 0.00 9 Stand-by charges payable to MSEDCL 106.91 109.63 109.63 10 Transmission Charges payable to MSETCL 91.39 111.11 116.67 11 Annual SLDC fees & charges 0.51 0.69 0.72 12 Contribution to contingency reserves 7.04 7.77 8.70 13 Incentive for Reduction in Distribution loss 13.89 30.20 0.00 14 Total Revenue Expenditure 2,468.70 2,429.30 3,153.02 15 Return on Equity Capital 114.38 121.42 130.45 16 Return as Interest on Internal funds 5.19 5.28 5.28 [15]
S.No. Particulars FY 09-10 (Actual) FY 10-11 (Actual) FY 11-12 (Projected) 17 Aggregate Revenue Requirement 2,588.27 2,556.00 3,288.74 18 Less: Non-Tariff Income 62.65 71.56 75.14 20 Add: Deficit in Transport division 504.88 400.38 324.00 21 Add: Truing up for FY 2007-08 225.79 0.00 0.00 22 Add: Truing up for FY 2008-09 323.66 0.00 0.00 23 Impact of Review Order (Case no. 44 of 2009) 0.00 11.95 0.00 24 25 Impact due to truing up for FY 2007-08, after costbenefit analysis Add: Truing up of FY 2009-10 & Provisional truing-up of FY 2010-11 0.00-1.34 0.00 0.00 0.00 901.20 26 Add: Carrying Cost 170.34 27 Aggregate Revenue Requirement from Retail Tariff 3,579.95 2,895.40 4,609.15 28 Revenue from Sale of Power 2,896.57 2,677.57 2,421.89 BEST would like to recover the revenue requirement through revision in tariff. The gap after the new tariff proposed is in tune of Rs 993.62 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 2011-12 Standalone ARR for electricity supply business 3,383.95 Previous Year Gap of FY 2009-10 and FY 2010-11 901.20 Transport division deficit FY 2011-12 324.00 Total ARR to be recovered from tariffs 4,609.15 Revenue at existing tariffs 2,421.89 Revenue from FAC 209.98 Gap/ (surplus) at existing tariffs 1,977.28 Revenue from proposed tariffs 3,405.56 Gap/ (surplus) at proposed tariffs 993.61 [16]
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, 2004. 2. Approve the aggregate revenue requirement for FY 2011-12; 3. Approve recovery of aggregate revenue requirement for FY 2011-12 through the category-wise tariff revision plan proposed for FY 2011-12; 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]
3. True Up for FY 2009-10 & Provisional True Up for FY 2010-11 This section summarizes the True Up for FY 2009-10 and provisional True Up for FY 2010-11 determined in line with Maharashtra Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations 2005. The gap derived from these two years has been added to the Aggregate Revenue Requirement (ARR) of FY 2011-12. The gap towards the electricity supply business along with the deficit on account of transport division pertaining to FY 2009-10 and FY 2010-11 has been carried forward to ARR of FY 2011-12. 3.1 True Up of FY 2009-10 BEST had submitted the petition for true up of FY 2009-10 and provisional true up of FY 2010-11 as per directives of the Hon ble Commission vide its email ref. no. MERC/Tariff/20112012/ 00947 dated July 7, 2011 on August 26, 2011. 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 2009-10, the true up amount for FY 2009-10 was determined as a gap of Rs. 178.50 crores. As mentioned earlier, the deficit of Rs. 504.88 crores pertaining to the transport division has not been considered. The true up for FY 2009-10 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]
Table 8: True Up for FY 2009-10 (Rs. crore) S.No. 1 Particulars Power Purchase Expenses (including External Power Purchase) Approved Actual Difference (A) (B) (C)=(A-B) 1,717.8 1,736.43 (18.63) 2 Operation & Maintenance Expenses 255.49 281.16 (25.67) 2.1 Employee Expenses 152.44 174.76 (22.32) 2.2 Administration & General Expenses 76.48 77.39 (0.91) 2.3 Repair & Maintenance Expenses 26.56 29.01 (2.45) 3 Depreciation, including advance against depreciation 47.32 46.56 0.76 4 Interest on Long-term/ Short-term Loan Capital 14.68 23.31 (8.63) 5 Interest on Working Capital (Normative) 18.33 16.40 1.93 5.1 Interest on Working Capital ( Actual) 0.00 3.21 (3.21) 5.2 Interest on Security Deposit 12.94 13.35 (0.41) 6 Bad Debts Written off 0.04 0.03 0.01 7 Other Expenses 56.00 128.51 (72.51) 8 Income Tax 0.00 0.00 0.00 9 Stand-by charges payable to MSEDCL 106.91 106.91 0.00 10 Transmission Charges payable to MSETCL 91.39 91.39 0.00 11 Annual SLDC fees & charges 0.46 0.51 (0.05) 12 Contribution to contingency reserves 3.56 7.04 (3.48) 13 Incentive for Reduction in Distribution loss 0.00 13.89 (13.89) Total Revenue Expenditure 2,324.92 2,468.70 (143.78) 14 Return on Equity Capital 99.16 114.38 (15.22) 15 Return as Interest on Internal funds 5.19 5.19 0.00 16 Aggregate Revenue Requirement 2,429.26 2,588.27 (159.01) 17 Less: Non-Tariff Income 82.26 62.65 19.61 18 Add: Deficit in Transport division 0.00 504.88 (504.88) 19 Aggregate Revenue Requirement from Retail Tariff 2,347.00 3,030.50 (683.50) 20 Truing up for F.Y.2007-08 225.79 225.79 0.00 21 Truing up for F.Y.2008-09 323.66 323.66 0.00 22 Net ARR 2,896.45 3,579.95 (683.38) [19]
BEST during the year FY 2009-10 has earned revenue of Rs. 2,896.57 crore by sale of power to its consumers against the approved amount of Rs. 2,911.18 crore. The resulting revenue gap, being the difference between Net ARR and the Revenue from Sale of Power for FY 2009-10 is as given below: Table 9: Revenue Gap for FY 2009-10 (Rs. crore) S.No. Particulars Approved Actual (A) (B) 1 Net Revenue Requirement 2,896.45 3,579.95 2 Revenue from Sale of Power 2,911.18 2,896.57 3 Revenue Gap/(Surplus) of FY 2009-10 (14.73) 683.38 3.2 Provisional True Up for FY 2010-11 As specified above, BEST had submitted the Petition for true up of FY 2009-10 and provisional true up of FY 2010-11 as per directives of the Hon ble Commission vide its email ref. no. MERC/Tariff/20112012/ 00947 dated July 7, 2011 on August 26, 2011. In the petition, on the basis of provisional accounts of BEST for FY 2010-11, the true up amount for FY 2010-11 was determined as a surplus of Rs. 14.73 crores. The deficit of Rs. 400.38 crores pertaining to the transport division has been considered. The provisional true up for FY 2010-11 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]
Table 10: Provisional True Up of FY 2010-11 (Rs crore) S.No. 1 Particulars Power Purchase Expenses (including External Power Purchase) Approved Actual (Unaudited) Difference (A) (B) (C)=(A-B) 1867.02 1706.54 160.48 2 Operation & Maintenance Expenses 275.41 316.79 (41.37) 2.1 Employee Expenses 165.38 199.32 (33.94) 2.2 Administration & General Expenses 81.85 82.75 (0.90) 2.3 Repair & Maintenance Expenses 28.17 34.72 (6.55) 3 Depreciation, including advance against depreciation 48.92 51.62 (2.70) 4 Interest on Long-term/ Short-term Loan Capital 16.71 13.15 3.56 5 Interest on Working Capital ( Normative) 9.81 11.79 (1.98) 5.1 Interest on Working Capital (Actual ) 0.00 1.59 (1.59) 5.2 Interest on Consumer Deposits 15.77 13.79 1.98 6 Bad Debts Written off 0.04 0.00 0.04 7 Other Expenses 57.00 54.63 2.37 8 Income Tax 0.00 0.00 0.00 9 Stand-by charges payable to MSEDCL 109.63 109.63 0.00 10 Transmission Charges payable to Transmission licensee 111.10 111.11 (0.01) 11 Annual SLDC fees & charges 1.14 0.69 0.47 11 Contribution to contingency reserves 3.88 7.77 (3.89) 12 Incentive for reduction of distribution loss 30.20 (30.20) 13 Total Revenue Expenditure 2516.42 2429.30 87.12 14 Return on Equity Capital 99.16 121.42 (22.26) 15 Return as Interest on Internal funds 5.28 5.28 0.00 16 Aggregate Revenue Requirement 2620.86 2,556.00 64.86 17 Less: Non-Tariff Income 90.49 71.56 18.93 18 Add: Deficit in Transport division 0 400.38 (400.38) 19 Aggregate Revenue Requirement from Retail Tariff 2530.37 2884.82 (354.45) 20 Impact of Review Order (Case no. 44 of 2009) 11.95 11.95 0.00 21 Impact due to truing up for FY 2007-08, after costbenefit analysis (1.34) (1.34) 0.00 22 Revenue gap / (surplus) after truing-up of FY 2009-10 (14.73) 0.00 (14.73) 23 Net Aggregate Revenue Requirement 2526.27 2895.41 (369.16) [21]
BEST during the year FY 2010-11 has earned revenue of Rs. 2677.57 crore by sale of power to its consumers on provisional basis against the approved amount of Rs. 2528.06 crore. The resulting revenue surplus, being the difference between Net ARR and the Revenue from Sale of Power for FY 2010-11 is as given below: Table 11: Revenue Gap for FY 2010-11 (Rs. crore) S.No. Particulars Approved Actual (A) (B) 1 Net Aggregate Revenue Requirement 2526.27 2895.39 2 Revenue from Sale of Power 2528.06 2677.57 3 Revenue Gap/ (Surplus) of FY 2010-11 (1.79) 217.82 3.3 Summary of revenue gap to be passed on to FY 2011-12 As per true-up of FY 2009-10, BEST has a revenue gap of Rs. 683.38 crore for FY 2009-10. In FY 2010-11 it has provisionally a revenue gap of Rs. 217.82 crore. Therefore the net revenue gap at the end of FY 2010-11 is Rs 4.22 crore which has to be passed on in the ARR of FY 2011-12. Table 12: Summary of revenue gap for FY 2011-12 S.No. Particulars Amount (Rs. crores) 1 Revenue gap/ (surplus) of FY 2009-10 (audited) 683.38 2 Revenue gap/ (surplus) of FY 2010-11 (provisional) 217.82 3 Total revenue gap/ (surplus) 901.20 [22]
4. Aggregate Revenue Requirement for FY 2011-12 This section outlines the description of ARR of BEST for FY 2011-12 based on expenses estimated as per the Maharashtra Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations 2005. The true up amount derived from actual expenses & revenue (audited) of FY 2009-10 and actual expenses & revenue (unaudited) for FY 2010-11, has been added to the ARR. Further, transport deficit pertaining to FY 2011-12, FY 2009-10 and FY 2010-11 has been added. 4.1 Components of Aggregate Revenue Requirement 4.1.1 Distribution losses The level of distribution losses maintained by BEST is the best in the country. The historical trajectory of distribution losses is as seen in the graph below. Figure 1: Distribution loss reduction trajectory BEST has proposed a distribution loss of 9.50% for FY 2011-12. It is observed that this figure is lower than the 6-year and 5-year historical average of 10.24% and 9.69%. It needs to be mentioned that, this distribution loss of 9.5% is considered as a performance yardstick loss for distribution licensee in Mumbai region and any loss which will be achieved by the Undertaking below this parameter shall be considered for incentive as has been proposed by us repeatedly in our tariff petitions. It may be mentioned that, this 9.5% distribution loss itself is much lower than that allowed to the neighboring distribution licensee with similar load and network profile. [23]
4.1.2 System load factor BEST has proposed a system load factor of 59.27% for FY 2011-12. This value is based on 15-year average of system load factors. The table below shows the estimation of the system load factor. Table 13: Estimation of system load factor No. Year System load factor (%) Units purchased (MU) 1 1995-96 57.00% 3,062 2 1996-97 55.90% 3,102 3 1997-98 58.70% 3,262 4 1998-99 58.50% 3,394 5 1999-00 59.60% 3,442 6 2000-01 59.20% 3,545 7 2001-02 60.40% 3,622 8 2002-03 59.80% 3,781 9 2003-04 59.70% 3,883 10 2004-05 59.00% 3,962 11 2005-06 59.80% 4,156 12 2006-07 61.90% 4,293 13 2007-08 58.00% 4,396 14 2008-09 59.70% 4,523 15 2009-10 60.20% 4,546 Weighted average 59.27% 4.1.3 Energy balance To estimate the energy sale for FY 2011-12, BEST has applied the five year CAGR for the period FY 2004-05 to FY 2009-10 to the sale figure of FY 2010-11. Table 14: Derivation of energy sale CAGR FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 CAGR 3,633.37 3,789.48 4,019.78 4,103.15 4,121.17 4,267.11 3.27% Thus the total energy sale estimated for FY 2011-12 works out to be 4,406.55 MU. The energy balance has been computed based on the energy sale forecast as estimated above and transmission and distribution losses in the system. The following assumptions are made: Normative intra-state transmission losses of 4.85% have been considered [24]
The Energy Balance is as tabulated below: Table 15: Estimation of energy requirement and sale No. Particulars FY 2011-12 1 Energy sale (MU) 4,406.55 2 Distribution loss (%) 9.50% 3 Energy Purchase at T-D interface (MU) 4,869.11 4 InSTS loss (%) 4.85% 5 Energy purchase at G-T interface (MU) 5117.30 BEST humbly requests the Hon ble Commission to approve the same. 4.1.4 Power Purchase Expense BEST procures power from Tata Power Company Limited (TPCL) to meet majority of its demand. The receiving voltages for BEST are 110 kv and 22/33 kv. BEST had a PPA with TPC-G for 800 MW of generation capacity in FY 2007-08. During FY 2008-09, TPC-G commissioned its Unit-8 of 250 MW. As per the PPA the capacity allocated to BEST from Unit 8 is 100 MW. However, subsequent to the commissioning of Unit-8, Unit-4 was shut down and retained for contingency situations. The net capacity available for BEST from TPC-G is 832.50 MW. In addition, BEST has made an agreement with TPC-G for 100 MW for units other than Unit 8 of M/s TPC, thus taking the total to 932.50 MW from April 01, 2010. BEST already has long term power purchase agreement with TPC for 932.50 MW and the peak power shortages are at present met by making bilateral agreement for buying power through power exchanges in a judicious manner to reduce the power purchase cost to a reasonable level. The Undertaking has also submitted its long term power procurement plan to the Commission which has been approved by the Commission. For procuring sufficient power to meet the present and future requirements, BEST has the following power purchase agreements in place / has initiated the process for entering into these agreements: [25]
Table 16: Power Purchase Agreement/Assessment in Progress S.No. Particulars Details 1 Agreement with M/s. Tata Power Co. (TPC-G) 2 300 MW of power through bid process 3 Renewable Purchase Obligation (RPO) BEST has PPAs for 932 MW with M/s TPC (G). MERC has approved 832 MW and 100 MW PPA is conditionally approved. The MERC has approved BEST s long-term power procurement proposal for 400 MW. Against this, BEST has entered into a PPA for 100 MW from TPC-G, hence the balance requirement is reduced to 300 MW. BEST plans to procure this power through joint venture with MSEDCL or through medium term power purchase contracts (since long term power purchase rates are high at this point of time). As part of its efforts to fulfill its RPO, BEST has entered into an energy purchase agreement, as per the terms and conditions prescribed by MERC, with M/s Spark Green Energy Limited. As per the agreement, BEST will procure energy of 25 MW each from the two plants of Spark Green to be established at Ahmednagar and Satara. These plants are biomass-based and are currently under construction. They are expected to be operational from FY 2012-13 onwards. BEST also plans to procure solar power and power from mini/micro hydro sources to meet its RPO obligation towards solar power and mini/micro hydro power BEST will also procure RE either by entering into Long Term Power Purchase / Short Term Power Purchase agreement or through REC route as per applicable MERC rules and regulations in force. BEST signed a PPA with MAHAGENCO to procure solar energy from the two proposed projects of 10 MW. The projects are proposed to be commissioned by the last quarter of FY 2011-12. 4 Short term power purchase (if any) BEST has become a member of Indian Energy Exchange and Power Exchange India Limited (PXIL) to meet short term power requirement, and if necessary BEST may even go for bilateral purchase. [26]
The following table provides the breakup of the total capacity allocated to BEST from TPC-G: Table 17: Gross generation capacity allocated to BEST from TPC-G (MW) Source Installed Capacity (MW) BEST Share (%) BEST Share (MW) TPC-G: Unit-4 150.00 45.02% 67.53 TPC-G: Unit-5 500.00 51.17% 255.85 TPC-G: Unit-6 500.00 51.17% 255.85 TPC-G: Unit-7 180.00 51.17% 92.11 TPC-G: Unit-8 250.00 40.00% 100.00 TPC-G: Hydel 447.00 51.17% 228.73 Total 2,027.00 932.50 4 The above capacity is available on a gross basis at the G-T interface. The net capacity available to BEST at the T- D interface is computed in the following table. Table 18: Net generation capacity available to BEST from TPC-G (MW) Particulars Capacity (MW) Gross at G-T interface 932.50 Gross at G-T after considering availability of 100% 932.50 Net at G-T after considering auxiliary consumption of 4.98% 886.05 Net at T-D after considering transmission losses of 4.85% 843.08 Energy purchase from external sources BEST has to purchase energy from external sources since its contracted capacity from TPC-G is not enough to meet the peak demand. The energy required to be purchased from external sources is computed from BEST s load curve by observing the time duration for which the contracted capacity is not able to fulfill the peak demand. The computation is described in the table below. Table 19: Computation of energy purchased from external sources No. Particulars Value A Total peak demand (MW) 929.95 B TPC-G contracted capacity (MW) 843.08 C Ratio of Peak capacity available to Peak Demand 90.66% D Energy factor for load above the peak capacity (from BEST s load curve) 0.15% E Energy purchase at T-D interface (MU) ( A x D x 8.76) 12.02 F Energy purchase at G-T interface (MU) (after applying transmission losses of 4.85%) 12.63 [27]
The total generation from the allocated capacity of TPC-G to BEST has been computed in the following table using certain assumptions for plant load factors and auxiliary consumption: Table 20: Net energy available from TPC-G Generating Station Capacity (MW) PLF (%) Gross generation (MU) Auxiliary Consumption (%) Auxiliary Consumption (MU) Net generation (MU) Unit-5 255.85 80.00% 1,793.00 5.50% 98.61 1,694.38 Unit-6 255.85 80.00% 1,793.00 3.50% 62.75 1,730.24 Unit-7 92.11 80.00% 645.48 2.75% 17.75 627.73 Unit-8 100.00 80.00% 700.80 9.50% 66.58 634.22 Hydel 228.73 38.31% 767.55 0.50% 3.84 763.71 Total 932.54 5,699.82 249.53 5,450.29 Energy purchase from TATA Power Company- Generating (TPC-G) Once the power purchase from RPS (as per RPO) and external sources is deducted from the total requirement, the remaining power would be scheduled from TPC-G such that the total power purchase does not result in surplus of energy. BEST s total power purchase from all sources at T-G interface (MU) is thus as given below: Table 21: Energy Purchases from All Sources (MUs) Particulars FY 2011-12 Energy requirement 5,117.30 Renewable energy purchase 296.00 RPS - Solar 4.00 RPS - Mini/Micro Hydro 0.00 RPS - Other non-solar, non-mini/micro hydro 292.00 External power purchase 12.63 Balance Energy Purchase (to be sourced from TPC-G) 4808.67 Energy purchase from renewable sources BEST plans to procure energy from various renewable (RE) sources such as solar and other non-solar sources in FY 2011-12. The details of energy available from these sources are shown in the table below. Table 22: Energy purchase from RE sources at G-T interface Source MUs procured Solar 4.00 Other non-solar sources 292.00 Total 296.00 [28]
Power Purchase Cost for BEST Undertaking BEST has considered the final power purchase quantum as given in the above table for procurement as explained in the above paragraphs. BEST has adopted the following approach to compute the power purchase cost for the future periods: The average unit charge of power procurement from TPC-G for FY 2011-12 is taken as Rs. 4.46 per unit as per the data provided by TPC-G for FY 2011-12 vide. letter REG/BEST/2011/291 dated 28 th October 2011. Along with which the net generation for unit-8 has been considered on the basis of 150 MW (Annexure A). The unit rate of power procurement from Solar PV sources is taken as Rs. 15.61. The unit rate of power procurement from mini/micro hydro and other renewable sources for FY 2011-12 is taken as Rs. 5.37 per unit. No sale to external beneficiaries is assumed as marginal rates will be very high and there will be no buyer for this power.. Standby charges payable to MSEDCL are considered equal to the standby charges of FY 2010-11. SLDC charges of Rs. 0.69 crore are used as the base figure for FY 2010-11 and an escalation of 5.00% is assumed year on year for FY 2011-12. Transmission charges of Rs. 111.11 crore are used as the base figure for FY 2010-11 and an escalation of 5.00% is assumed year on year for FY 2011-12. The following table shows the base power purchase cost from the various sources and the escalation in the cost for future years. The projected power purchase expenses thus calculated are as given in the table below: [29]
Table 23: Projected Power Purchase Expense Particulars Particulars FY 2011-12 Requirement (MU) TPC-G 4808.67 TPC-G RPS-Solar RPS Non Solar External Purchase to meet Peak Demand deficit Average Cost per Unit (Rs /Unit) 4.46* Total Cost (Rs crore) 2144.66 Requirement (MU) 4.00 Unit charge (Rs / kwh) 15.61** Total Cost (Rs crore) 6.24 Requirement (MU) 292.00 Unit charge (Rs / kwh) 5.37 Total Cost (Rs crore) 156.80 Requirement (MU) 12.63 Purchase Price (Rs. /Unit) 8.05 Power Purchase Cost (Rs. crore) 10.16 Total Power Purchase Cost (Rs crore) 2317.88 Average Power Purchase Cost (Rs / kwh) 4.53 *Including fixed charges as per the TPC-G letter dated 28 th October 2011 and also considering charges and units for unit 8 are based on considering 150 MW only. **Also includes statutory charges like wheeling charges and open access charges. BEST humbly requests the Hon ble Commission to approve the above Power Purchase Cost and Quantum for FY 2011-12. 4.1.5 Operations and Maintenance Expenses The O&M expenses are calculated as a sum of the Employee expenses, A&G expenses and R&M expenses. Following is the summary of forecast of components of O&M expense considering norms as proposed in the following sections: Table 24: O&M Expenses (Rs. crore) Particulars FY 2011-12 Employee Expenses 313.37 A&G Expenses 88.56 R&M Expenses 36.23 Total O&M Expenses 438.16 BEST is likely to enter into a wage agreement with its employees for the period from FY 2006-07 to FY 2011-12 and from FY 2011-12 to FY 2015-16. BEST has proposed to spread the pay revision impact i.e. Rs. 127 crores for [30]
the first period over the years FY 2011-12, FY 2012-13 and FY 2013-14 which works out to Rs. 42.33 crores per year. Further for the second period, the impact of wage revision has been ascertained by BEST to be Rs. 54.80 crores for FY 2011-12. Thus the total impact of wage agreement for the FY 2011-12 is Rs. 97.13 crores: Table 25: Impact due to Wage agreement (Rs. crore) Particulars FY 2011-12 Impact Due to Wage Agreement 97.13 The projected total O&M expense for FY 2011-12 is as under: Table 26: Total O&M Expenses for FY 2011-12 (Rs. crore) Particulars FY 2011-12 Impact Due to Wage Agreement 97.13 O&M Expenses as per norms proposed by BEST 341.03 Total O&M Expenses 438.16 BEST humbly requests the Hon ble Commission to approve the same. The following sections explain in detail, the derivation of employee, R&M and A&G expenses. 4.1.5.1 Employee Expenses To calculate employee expense for the FY 2011-12 and escalation factor of 8.49% (as per MERC order in Case No. 95 of 2009, dated September 12, 2010) has been used. The employee expense as per the above methodology has been tabulated below: Table 27: Employee Expenses (Rs. crore) Particulars FY 2011-12 Employee Expenses 216.24 BEST requests the Hon ble Commission to approve the estimated employee cost considering the following factors affecting the employee expense: 1. BEST has to maintain high reliability in service considering that the license area is the financial capital of the country 2. The license area of BEST is one of the costliest places in Mumbai for living. The living cost is very high which in turn affects the employee remuneration. 3. All the activities are carried out in-house (no outsourcing). 4. To retain the employees, higher remuneration is required. 4.1.5.2 Administrative & General Expenses [31]
BEST has used 7.02% as escalation factor for calculating A&G expenses (as per MERC order in Case No. 95 of 2009, dated September 12, 2010). The A&G expense for the FY 2011-12 as per the above methodology has been tabulated below: Table 28: A&G Expenses (Rs. crore) Particulars FY 2011-12 A&G Expenses 88.56 BEST humbly requests the Hon ble Commission to approve the same. 4.1.5.3 Repair &Maintenance Expenses BEST has used escalation factor of 6.05% in R&M expenses year-on-year (as per MERC order in Case No. 95 of 2009, dated September 12 th, 2010), the projections for BEST s R&M expenses are as below: Table 29: R&M Expenses (Rs. crore) Particulars 2011-12 R&M Expenses 36.23 BEST humbly informs the Hon ble Commission that these R&M expenses claimed by BEST does not include any other charges other than material and reinstatement charges for repairs and maintenance. At present these charges approved by the Hon ble Commission are very low (Rs. 0.06 per unit of energy sale) considering the fact that the BEST system comprises of totally underground cable system. In addition, MCGM keeps on concretizing and changing the surface of many roads, which automatically increases the reinstatement charges. BEST maintains very good reliability level and keeps maximum of its network always in service. The overtime expense paid to employees to attend the breakdown immediately is not even included in the R&M expenses but is included in the employee expenses. BEST therefore humbly requests the Hon ble Commission to approve the R&M expense as proposed and in light of the above argument, approve the employee expense accordingly. 4.1.6 Depreciation BEST has undertaken voltage-wise segregation of its gross fixed assets as on 31 st March 2011. The voltage-wise segregation is as below: [32]
Table 30: Voltage wise Segregation of Assets (Rs. Lakhs) Particulars 33 KV and Above 11 KV to 33 KV Below 11 KV Total Land 9.30 177.75 42.48 229.53 Building 1,325.28 2,809.79 1,375.46 5,510.52 Plant & Machinery*** 9,474.06 21,309.45 41,941.32 72,724.83 Cables 12,307.34 12,731.93 35,149.58 60,188.85 Other Materials - - 24,998.31 *24,998.31 Total 23,115.98 37,028.91 1,03,507.2 1,63,652 Common Assets 1,439.88 2,307.69 6,449.9 **10,197.47 Grand Total 24,555.86 39,336.6 1,09,957.1 1,73,849.5 *This includes Rs 18773 lacs (Meters), Rs 4256.05 lacs (Street Lighting lamps), Rs1,968.47 lacs (pillars) **This includes DEA on Hire (Rs 4.65 lacs), M V (Rs1424.55lacs), Tools & Equip (Rs 1798.07 lacs), Furniture & Office Equip (Rs2186.35lacs) &Share of G/A (Rs4783.85 lacs) ***SRC Equipment, Transformers, Switchgears, Capacitors The rates applied for the FY 2010-11 for computing depreciation is tabulated below: Table 31: Depreciation Rates Depreciation for FY 2010-11 Rates applied Building 1.82% Plant and Machinery 3.09% Cables and Mains 2.53% Meters and Installation 4.57% Street Lighting Lamps 4.44% Motor Vehicles 10.63% Tools and Equipments 4.76% Furniture and Office Equipment 7.05% The depreciation computation for FY 2011-12 has been made based on the ratio of depreciation to the average of opening and closing balance of Gross Fixed Assets (GFA) for each category in the year FY 2010-11 as shown in the above table. The percentage is applied to the average of opening and closing balance of GFA in FY 2011-12 to determine the depreciation for each category. The depreciation thus computed is as follows: [33]
Table 32: Depreciation (Rs. crore) Particulars FY 2011-12 Depreciation 57.71 BEST humbly requests the Hon ble Commission to approve the same. 4.1.7 Capital Expenditure BEST s policy has been to develop adequate system capacity that meets the entire requirement and builds adequate reserves in the system in all its CAPEX projects so that the network is able to meet all the demand during any unforeseen outages. BEST strives to sustain efforts to maintain and improve its distribution system / facilities for providing the best service to its consumers by: Maintaining adequate redundancy in the system Maintaining safety of operations Maintaining low distribution losses in the network Maintaining the power factor of the system as specified in the State grid code Undertaking remote operations of receiving substations, automation of distribution substations and IT related applications Undertaking metering as per CEA Regulations IT application for automating the business process of customer care and related activities Over the years, BEST has developed well laid down procedures and norms for preparation of capital schemes for electricity distribution system. The capital schemes are broadly classified into two categories. (1) Capital schemes to meet the bulk load and anticipated load growth as requisitioned by the applicants. (2) Capital schemes to remove the overloads in the systems by upgrading the system parameters and to buildup redundancy in the system in such a manner that in the event of failure of any equipment /cable network, the supply can be restored promptly. Apart from the above, capital schemes are also prepared for replacement of old and obsolete equipment, which have completed their useful life, with new technology. The Capital Expenditure is linked with load growth and improvement in the performance in terms of lower level of distribution loss and better reliability indices. BEST has already achieved a low level of distribution loss which is amongst the best in the country. For most distribution licensees in India, whose losses are high, there is a scope for reduction of the distribution loss level by upgrading the network. However, in the case of BEST further reduction of distribution losses is costly. Historically, the concept of replacement of aged system was not an adopted practice in BEST. The practice followed earlier was to undertake replacement only when the [34]
system breaks down and hence majority of the cables are over 50 years old. In order to maintain the existing lower level of distribution loss itself, capital expenditure is required, especially for an underground distribution system of BEST, which is almost a century old. The system augmentation has to be in place for utilities with low distribution loss, in order to prevent the system deteriorating from its current performance levels by adopting measures like augmenting its existing infrastructure, replacement of old and obsolete equipment, constant up gradation of technology, etc. Therefore, BEST has proposed capital expenditure in revamping of existing substations and augmenting existing network. Details of capital works pertaining to new receiving substation commissioning; augmenting existing receiving substations; new distribution substation commissioning; augmentation and alteration to existing distribution substations; laying of HV/LV/service cables and associated equipment; SCADA, automation, digitization &communication; distribution loss reduction; demand side management activities; infrastructure development works is presented in the business plan submitted to the Hon ble Commission. The synopsis of the CAPEX proposed for all of the schemes for FY 2011-12 is given in the table below: Table 33: CAPEX Plan (Rs. crore) Scheme Particulars FY 2011-12 DPR 1 New Receiving Substations commissioning 33.52 DPR 2 Augmenting existing Receiving Substations 22.17 DPR 3 New Distribution Substations and augmentation and alteration to existing Distribution Substations 49.61 DPR 4 Laying of HV & LV cables and associated equipment 64.72 DPR 5 SCADA, Digitisation & Communications 42.35 DPR 6 Energy Meters 41.91 DPR 7 Energy Efficiency and Demand Side Management (DSM) Projects 1.52 Office Equipment, Vehicles, Software, etc. 15.21 Street lighting (lamps & cables) 3.31 Total 272.80 The capitalization values (including IDC) for each of the schemes is as per below: [35]
Table 34: Capitalization Values (Rs. crore) CAPEX Scheme FY 2012 New Receiving Substations commissioning 25.18 Augmenting existing Receiving Substations 22.75 New Distribution Substations and augmentation and alteration to existing Distribution Substations 37.94 Laying of HV & LV cables and associated equipment 41.32 SCADA, Digitisation & Communications 38.08 Energy Meters 26.91 Demand Side Management (DSM) 0.76 Infrastructure Development Works 7.80 Street Lighting 3.26 Old Schemes 6.18 Total 210.19 BEST humbly requests the Hon ble Commission to approve the same. 4.1.8 Interest on long term/ short term capital BEST arranges funds from local available banks. BEST being one of the oldest utilities and having a good repayment record, fetches loan at a reasonable rate of interest. Therefore for new loans, an interest rate of 11.50% has been considered. Also, the debt equity ratio for financing the CAPEX scheme is considered as 70:30. The outstanding loan amounts and interest cost of loans taken by BEST from various entities is provided in the table below. Table 35: Interest on long/short term loan (Rs. Crores) Loan name Opening balance Addition Repayment Closing balance Interest Public Loan 0.50 0.00 0.50 0.00 0.12 DPDC 1.76 0.00 0.16 1.60 0.25 APDRP 37.98 0.00 0.00 37.98 3.11 Short term financial assistance 142.06 0.00 142.06 0.00 5.39 Proposed short term loan 0.00 140.00 70.00 70.00 7.53 Total 182.30 140.00 212.72 109.58 16.40 The proposed loan has been calculated as under: Total capitalization in FY 2011-12 Rs. 210.19 crores [36]
Less: Consumer contribution of Rs. 12 crores Total: Rs. 198.19 crores 70% of above amount = Rs. 140.00 crores The principle of raising short term finance for Capital expenditure was principally agreed by the Hon ble Commission as BEST had submitted that it has to adhere to the stringent provisions of MMC Act, 1888 for raising of any long term loan, under which BEST has to follow the provisions of Section 106 and procedure laid under the said Act wherein approval of the Government of Maharashtra is a necessity. The approval being a time consuming activity, to avoid any short fall in funding requirements BEST has to rollover the short term loan thereby effectively using it as a long term fund till BEST gets exemption under Section 106 of MMC Act. The proposal to that effect has already been forwarded to Government of Maharashtra. The Hon ble Commission during the hearings on previous tariff petitions directed BEST to take-up the matter with the State Government and seek exemption, for taking any permission for raising long term loans towards execution of CAPEX schemes. BEST informs the Hon ble Commission that it has already initiated steps in this matter and the approval of the BEST Committee and Corporation has already been obtained vide BCR No.215 dated 10/9/09 and CR no. 746 dated 5/11/2009 respectively. Now it is already forwarded to the GoM for necessary action in respect of amendment to the MMC Act, 1888. Till all approvals are in place, the present condition of arrangement of short term funding to undertake Capital Scheme of BEST may please be permitted. 4.1.9 Interest on Working Capital The working capital for FY 2011-12 consists one-twelfth of the amount of operating and maintenance expense, one-twelfth of the sum of the book value of stores, two months of the expected revenue from sale of electricity at the prevailing tariffs, while security deposit from consumers is deducted. The book value of stores and consumer contribution for FY 2011-12 is computed considering 5% escalation on the previous year values. The interest on working capital is assumed at 12.75% and is estimated as in the table below:- Table 36 Normative Interest on Working Capital (Rs. crore) Particulars FY 2011-12 1/12 th of O&M expenses 36.54 1/12 th of book value of stores, materials and supplies 1.13 1/6 th of expected revenue from prevailing tariffs 403.64 Less: Security deposit 231.68 1/12 th of cost of power purchase 193.16 Total Working Capital 16.51 Normative Interest on Working Capital (12.75%) 2.10 [37]
From the above table the normative working capital is computed at Rs 2.10 crore which less than the actual working capital of Rs 7.79 crore as shown below:- Table 37: Actual Interest on Working Capital ( Rs crore) Name of the Opening Rate of Amount Amount paid Interest Balance at Bank Balance Interest % raised during the the end of (FY 2010- year the year 11) Canara Bank 69.00 13.50 0.00 11.50 7.79 57.50 Canara O.D. 225.00 10.75 0.00 0.00 0.00 225.00 Total: 294.00 0.00 11.50 7.79 282.50 The major working capital requirement is for the payment of cost of bulk power purchase. BEST humbly requests the Hon ble Commission to approve the actual working capital of Rs 7.79 crore same. 4.1.10 Interest on Consumer Security Deposit The consumer security deposit in FY 2010-11 was Rs. 220.65 crore. For estimation of consumer deposit for FY 2011-12, an escalation of 5.00% is considered thus the security deposit works out to be Rs. 231.68 crores. Further, an interest rate of 6% is used on the consumer deposit to estimate the interest. The projections are as below: Table 38: Interest on Consumer Deposits (Rs. crore) Particulars FY 2011-12 Interest on Consumer Deposits 13.90 BEST humbly requests the Hon ble Commission to approve the same. 4.1.11 Contribution to Contingency Reserves BEST does not have any equity in the traditional sense and funding is mainly done through internal resources. Contingency reserve for BEST is considered only from March 2009 onwards. The contingency reserve has been estimated at 0.50% of the opening GFA for FY 2011-12 in compliance with the APR order for FY 2009-10. The projections for contingency reserve are as below: Table 39: Contingency Reserve (Rs. crore) Particulars FY 2011-12 Contingency Reserve 8.70 BEST humbly requests the Hon ble Commission to approve the same. [38]
4.1.12 Other Expenses For projections of other expenses in FY 2011-12, an escalation of 2.00% has been assumed for Prompt payment discount, Power Factor Incentive, ECS discount and Load factor Incentive over respective expenses incurred in FY 2010-11. Table 40: Other Expenses (Rs. crore) S.No. Particulars FY 2011-12 1 Prompt Payment Discount 10.00 2 Power Factor Incentive 54.00 3 ECS Discount 0.45 4 Load Factor Incentive 1.00 Total 65.45 BEST humbly requests the Hon ble Commission to approve the same. 4.1.13 Return Applicable to BEST As per the regulations under Maharashtra Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations 2005 the return on equity for distribution utilities has been provided at 16%. The total capitalization is calculated by using the following: Details of the scheme-wise capital investment plan as covered earlier Details of the capitalization plan and capitalization values for each scheme as covered earlier Debt equity ratio of 70:30 for financing the CAPEX schemes 16% return has been considered for estimating the return on equity for the BEST Undertaking The RoE for the FY 2011-12 is thus worked out as below: [39]
Table 41: Return on Regulatory Equity (Rs. crore) Particulars FY 2011-12 Regulatory Equity at the beginning of the year 784.30 Capitalisation during the year 210.19 Equity portion of capitalisation during the year 63.06 Consumer Contribution and Grants used during the year of Capitalisation 12.00 Reduction in Equity Capital on account of retirement / Replacement of Assets Regulatory Equity at the end of the year 834.28 Return Computation Return on Regulatory Equity at the beginning of the year 125.49 Return on Equity portion of capital expenditure 4.96 Total Return on Regulatory Equity 130.45 BEST humbly requests the Hon ble Commission to approve the same. 4.1.14 Return as Interest on Internal Funds BEST as Local Authority is eligible to claim Return as Interest on Internal funds at the rate of 6%. The Hon ble Commission in its APR order for FY 2009-10 has approved Interest on Internal funds at 6%.In view of this, BEST proposes to claim the Return as Interest on Internal funds at 6% for FY 2011-12. BEST s total interest on internal funds at 6% considering no grants will be received is tabulated below: Table 42Interest on Internal Funds Particulars FY 2011-12 Interest on internal funds (6%) 5.28 BEST humbly requests the Hon ble Commission to approve the same. 4.1.15 Non-Tariff Income For projection of non-tariff income in FY 2011-12, an escalation of 5% has been assumed over Non-Tariff income earned in FY 2010-11. The projection for Non- Tariff Income is as given below: Table 43: Non - Tariff Income for (Rs. crore) Particulars FY 2011-12 Non-Tariff Income 75.14 BEST humbly requests the Hon ble Commission to approve the same. [40]
4.1.16 Inclusion of Deficit in Transport Operations on the basis of Supreme Court Ruling The Hon ble Supreme Court in its judgment dated 8th February 2011, in the matter of civil appeal number 848 of 2007 between the Municipal Corporation of Greater Mumbai (MCGM) (Appellant) and the Maharashtra Electricity Regulatory Commission (MERC) and Others has observed as under: Undisputedly the appellant was engaged inter alia in the business of distribution of electricity prior to the commencement of the Act. In our opinion it would not be correct to hold that despite the third proviso to Section 51 of the Act, the distribution licensee must not only maintain separate accounts for each of its businesses but must also ensure that the electricity distribution business should not subsidize the other business undertakings. Hence the view of the Tribunal in paragraphs 56 and 57 of its order is not correct. In our opinion and 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 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. BEST humbly informs the Hon ble Commission that it proposes to recover the Transport division deficit for FY 2011-12 by including it in the ARRs. In addition to the above transport deficit pertaining to FY 2011-12, BEST also proposes to recover the deficit pertaining to FY 2009-10 (Rs. 504.88 crores) and FY 2010-11 (Rs. 400.38 crores). In its true-up petition the Transport Division deficit for FY 2011-12 is as given below: Table 44: Estimated Deficit in Transport Division (Rs. crore) Particulars FY 2011-12 Deficit pertaining to FY 2011-12 324.00 BEST humbly requests the Hon ble Commission to approve the same. 4.1.17 Carrying cost BEST submits that it has carried revenue gaps for past years as shown in the table below. On the issue of entitlement of interest of Carrying Cost for the deferred recoveries; APTEL in its judgments has upheld the principle that any deferred recovery of dues/entitlement involves time value of money and hence such recoveries have to be made along with the carrying cost, irrespective whether the dues have to be made along with the carrying cost; irrespective of whether the dues are to be paid or to be recovered. Some of the judgments are as under: 1.0 In the Judgment dated 29.09.2010 passed in Appeal No. 28 of 2008, Delhi Transco Limited vs. DERC & Others. The relevant observation is as follows: [41]
The first issue relates to carrying cost. According to the Appellant, the State Commission having allowed the power purchase cost for the FY 2005-06 and RLDC/ULDC charges for FY 2006-07, the carrying cost for the same has not been allowed, which is wrong. According to the Respondent, this is a new point raised for the first time in this Appeal and the same was not raised by the Appellant before the State Commission and, therefore, the State Commission could not have granted relief which has not been specifically prayed. As pointed out by the Appellant, the carrying cost is a consequential order to be passed for the deprivation of legitimate amount to the Appellant. It is settled law that whenever the tariff is revised, the carrying cost, which is a consequential order, has to be allowed. 2.0 The next judgment is dated 06.10.2009 passed in Appeal No. 36 of 2008 reported in 2009 ELR (APTEL) 880). Relevant extracts are quoted herein below: 116. Before parting with the judgment we have to remind the Commission of the observation in our judgment in Appeal No. 265 of 2006, 266 of 2006 and 267 of 2006 in the case of North Delhi Power Limited Vs. Delhi Electricity Regulatory Commission in which we said the following: 60. Before parting with the judgment we are constrained to remark that the Commission has not properly understood the concept of truing up. While considering the Tariff Petition of the utility the Commission has to reasonably anticipate the revenue requested by a particular utility and such assessment should be based on practical considerations.. The truing up exercise is meant (sic) to fill the gap between the actual expenses at the end of the year and the anticipated expenses at the beginning of the year. When the utility gives its own statement of anticipated expenditure, the Commission has to accept the same except where the Commission has reason to differ with the statement of the utility and records reasons thereof of where the Commission is able to suggest some method of reducing the anticipated expenditure. This process of restructuring the claim of the utility by not allowing the reasonably anticipated expenditure and offering to do the needful in the truing up exercise is not prudence 117. All projection and assessments have to be made as accurately as possible. Truing up is an exercise that is necessarily to be done as no projection can be so accurate as to equal the real situation. Simply because the truing up exercise will be may on some day in future the Commission cannot take a casual approach in making its projections. We do appreciate that the Commission intends to keep the burden on the consumer as low as possible. At the same time one has to remember that the burden of the consumer is not ultimately reduced by under estimating the cost today and truing it up in future as such method also burdens the consumer with carrying cost. BEST has worked out the total Carrying Cost of Rs 170.34 crore for the revenue gaps of past years as shown in following table. BEST humbly request the Hon ble Commission to consider the total Carrying Cost of Rs 170.34 crore in the ARR and Tariff Petition for FY 2011-12. [42]
Table 45: Computation of carrying cost (Rs. crore) S.No Year Disallowances/ Revenue gap MERC order date Financial year SBI PLR rate (Wtd. Average) Carrying cost 0.00 1 2004-05 & 2005-06 Truing up under Case 4 of 2004 Disallowance of Return on Equity amount of Rs. 72.62 crores. Carrying cost is claim in lieu of Aptel judgment dated 29/09/2010 passed in Appeal no. 28 of 2008 i.e. Delhi Transco v/s DERC & Others Aptel order 27/8/2007 and hence carrying cost is calculated from FY 20078-08 2007-08 2008-09 2009-10 2010-11 12.72% 12.79% 11.87% 12.26% 9.24 9.29 8.62 8.90 ------- 36.05 2 2006-07 Trying up under Case 73 of 2007 Revenue gap as per petition Rs. 292.33 crores Revenue gap allowed by MERC Rs. 276.38 crores Carrying cost is claimed in lieu of Aptel judgment dated 06/10/2009 passed in appeal no. 36 of 2008 reported in 2009 ELR (Aptel) 880 06/06/2008 2008-09 (9 mnths) 2009-10 2010-11 12.79% 11.87% 12.26% 26.51 32.81 33.88 ------- 93.20 3 2007-08 Truing up under case 118 of 2008 Revenue gap as per petition Rs. 301.76 crores Revenue gap allowed by MERC Rs. 225.79 crores Carrying cost is claimed in lieu of Aptel judgment dated 06/10/2009 passed in appeal no. 36 of 2008 reported in 2009 ELR (Aptel) 880 15/06/2009 2009-10 (6 mnths) 2010-11 11.87% 12.26% 13.40 27.69 ------- 41.09 Total ( Rs crore) 170.34 [43]
4.2 Aggregate Revenue Requirement for FY 2011-12 The proposed Aggregate Revenue Requirement for FY 2011-12 is as given below: Table 46: Aggregate Revenue Requirement (Rs. crore) S.No Particulars 2011-12 1 Power Purchase Expenses (including External Power Purchase) 2,317.88 2 Operation & Maintenance Expenses 438.16 a Employee expense 313.37 b Admin & General expense 88.56 c Repair & Maintenance expense 36.23 3 Depreciation Expenses 57.71 4 Interest on Long-term/ Short-term Loan Capital 16.40 5 Interest on Working Capital 7.79 6 Interest on Consumer Deposits 13.90 7 Bad Debts Written off 0.00 8 Other Expenses 65.45 9 Income Tax 0.00 10 Contribution to contingency reserves 8.70 11 Stand-by charges payable to MSEDCL 109.63 12 Transmission Charges payable to Transmission licensee 116.67 13 Annual SLDC fees & charges 0.72 14 Total Revenue Expenditure 3153.02 15 Return on Equity Capital 130.45 16 Return as Interest on Internal Funds 5.28 17 Aggregate Revenue Requirement 3288.74 18 Less: Non-Tariff Income 75.14 19 Less: Income from Other Business 0.00 20 Aggregate Revenue Requirement from Retail Tariff 3213.61 21 Add: Deficit in Transport operations 324.00 22 Add: Truing up for FY 2009-10 & FY 2010-11 901.20 23 Add: Carrying cost 170.34 Total Aggregate Revenue Requirement from Retail Tariff, including deficit in Transport operations 4609.15 BEST humbly requests the Hon ble Commission to approve the above Aggregate Revenue Requirement for FY 2011-12. [44]
5. Tariff philosophy and tariff proposal for FY 2011-12 5.1 Revenue recovery through fuel adjustment charge (FAC) BEST has estimated the revenue (over and above the approved tariffs) recovered and proposed to be recovered through fuel adjustment charge (FAC) mechanism. Table 47: Estimation of FAC Particulars FAC recovered from April to October 2011 (considering cap rate of p. 51.77 per unit and as per petition in this regard submitted by BEST to MERC) FY 2011-12 (Rs. crores) 36.44 Under-recovery of FAC from April 2011 to October 2011 84.97 FAC estimated for November 2011 to March 2012 (@ p. 51.77 per unit) 88.57 Total revenue estimated from FAC 209.98 This revenue has been added to the revenue recovered through tariffs to compute the net gap/ surplus for BEST. The BEST Undertaking humbly informs the Hon'ble Commission that, after August, 2011, the Power Purchase Cost has risen very high. This is due to the rises in fuel prices which is beyond the control of distribution utility, who is getting most of the power from MERC approved PPAs. In addition, while the generating companies are allowed to recover the entire fuel cost variation by FAC, a distribution licensee is imposed a cap of maximum 10% of its cost of supply to be recovered as FAC in each month without prior approval of the Commission. Thus, huge amount of Rs. 84 crores has remained un-recovered from April to October 2011 and the amount of un-recovered FAC for months from November 2011 to March 2012 is likely to be remain high. In order to recover this variation in power purchase cost, the BEST Undertaking has filed a petition on 22nd November 2011 before this Hon'ble Commission for recovery of un-recovered FAC and also for prior approval to recover the expected huge difference between approved cost and actual cost based on the current trends for the next few months i.e. upto March 2012 (Annexure B). The BEST Undertaking humbly submits to the Hon'ble Commission that, it has taken into consideration the revenue as expected according to the petition which is legitimate and also with the hope that the Commission will permit the same. [45]
BEST humbly requests the Commission to consider any variation in this, based on the Commission s decision in the matter. Any variation would also have its related consequences in the working capital requirements and any shortfall in the working capital requirements on account of this variation may also have to be approved with the associated interest on working capital on actual basis incurred by BEST. 5.2 Tariff philosophy The revenue gap for FY 2011-12 is estimated as difference between proposed ARR for FY 2011-12 and the revenue at existing tariff (tariff structure as per the Order of Hon ble Commission dated 12 th September 2010). The proposed ARR includes standalone ARR of FY 2011-12, impact of truing up of FY 2009-10 & FY 2010-11 and transportation deficit for FY 2011-12 only. The above revenue gap is planned to be bridged by proposing revised tariff rates. BEST proposes to adopt a tariff revision plan wherein, for FY 2011-12 a set of tariff rates for each category of the consumer are proposed so as to bridge the revenue gap for FY 2011-12 only as an interim measure until filing of the multi-year tariff petition under the Maharashtra Electricity Regulatory Commission (Multi Year Tariff) Regulations, 2011. Only the energy charges are proposed to be modified in order to recover the revenue gap. Fixed charges and demand charges applicable for different consumer categories have been retained at existing levels. The table below summarizes the revenue gap as per existing tariffs and bridging of the gap through proposed tariffs. Table 48: Summary of revenue gaps at existing and proposed tariffs Particulars (Rs. crores) FY 2011-12 Standalone ARR for electricity supply business 3383.95 Previous Year Gap of FY 2009-10 and FY 2010-11 901.20 Transport division deficit FY 2011-12 324.00 Total ARR to be recovered from tariffs 4609.15 Revenue at existing tariffs 2421.89 Revenue from FAC 209.98 Gap/ (surplus) at existing tariffs 1977.28 Revenue from proposed tariffs 3,405.56 Gap/ (surplus) at proposed tariffs 993.61 The average billing rate as per proposed tariffs works out to be Rs. 7.72 per unit as against an average cost to supply of Rs. 10.46 per unit. BEST proposes that the gap of Rs. 985.80 crore be converted into regulatory asset and its recovery be allowed over a period of 3 years as per directions of the APTEL. [46]
5.3 Tariff proposal The tariff rates proposed by BEST for FY 2011-12 are summarized in the following table. The resultant percentage increase in category-wise tariffs is also shown. Table 49: Tariff proposal for FY 2011-12 Energy Charge (Rs./kWh) Tariff Category Slab Existing Proposed % increase Fixed/Demand Charge LT Category BPL 0 30 0.40 0.40 0.00% Rs. 3 / Month LT I 0-100 1.55 2.86 84.52% Rs. 30 / Month 101-300 3.30 4.86 47.27% Rs. 50 or Rs. 100/ Month 301-500 5.30 6.84 29.06% Rs. 50 or Rs. 100/ Month > 501 6.80 7.9 16.18% Rs. 100 / Month LT - II (a) 0-300 4.00 7.95 98.75% Rs. 200 / Month 301-500 6.00 7.95 32.50% Rs. 200 / Month 501-1000 6.90 7.95 15.22% Rs. 200 / Month > 1000 7.60 7.95 4.61% Rs. 200 / Month LT - II (b) all units 7.30 10.26 40.55% Rs. 150 per kva / Month LT - II (c) all units 7.55 10.91 44.50% Rs. 150 per kva / Month LT III 0-300 3.70 7.76 109.73% Rs. 250 / Month 301-500 5.50 7.76 41.09% Rs. 300 / Month 501-1000 5.95 7.76 30.42% Rs. 350 / Month > 1000 6.40 7.76 21.25% Rs. 350 / Month LT - IV (a) all units 5.40 7.41 37.22% Rs. 150 per kva / Month LT - IV (b) all units 5.30 7.41 39.81% Rs. 150 per kva / Month LT V all units 11.40 17.66 54.91% Rs. 300 / Month LT VI all units 5.30 8.31 56.79% Rs. 150 per kva / Month LT - VII (a) all units 2.85 3.81 33.68% Rs. 150 / Month LT - VII (b) all units 8.75 15.81 80.69% Rs. 150 / Month LT VIII all units 2.65 3.81 43.77% Rs. 150 / Month HT Category HT I all units 5.05 7.56 49.70% Rs. 200 per kva / Month HT II all units 5.35 8.41 57.20% Rs. 200 per kva / Month HT III all units 3.00 4.5 50.00% Rs. 200 per kva / Month HT IV all units 8.20 11 34.15% Rs. 200 / Month Note: [47]
00:00 01:00 02:00 03:00 04:00 05:00 06:00 07:00 08:00 09:00 10:00 11:00 12:00 13:00 14:00 15:00 16:00 17:00 18:00 19:00 20:00 21:00 22:00 23:00 BEST demand in MW Brihanmumbai Electricity Supply and Transport Undertaking a. Tariffs are subject to revision and/or surcharge that may be levied by BEST from time to time as per the directives of MERC b. The tariffs are exclusive of Tax on Sale of Electricity, Electricity duty, excise duty, taxes and other charges as levied by Government or other competent authorities and the same, as applicable, will be payable by the consumers in addition to the charges levied as per the tariff mentioned above Fuel Adjustment Cost charge will be applicable to all consumers, and will be charged over and above the tariffs mentioned above, on the basis of FAC formula prescribed by the commission. BEST would like to submit that the tariffs rates for BEST have been historically lower than other utilities in Maharashtra in spite of operating in a city like Mumbai where costs of operations are considerably higher. 5.4 Time-of-the-Day Tariff The present TOD tariff of BEST is as per the table below: Table 50: Existing TOD tariff rate Time Duration TOD Tariff (Rs./kWh) (in addition to base tariff) 0600 to 0900 hours 0.00 0900 to 1200 hours 0.50 1200 to 1800 hours 0.00 1800 to 2200 hours 1.00 2200 to 0600 hours (0.75) As depicted in the load curve below, peak demand for BEST occurs in day generally during 1200 hours to 1600 hours. But there is no TOD charge for consumption during this period. Figure 2: Typical Load Curve for BEST - 31st May 2011 1000 800 880MW 600 400 200 0 Time interval [48]
Demand drops gradually from 1600 hours onwards and remains low up to 0900 hours. However there is a TOD charge of Rs. 1.00 per unit for consumption during the period 1800 hours to 2200 hours. From 0900 hours to 1200 hours, demand increases gradually and there is TOD surcharge of 50 paisa per unit for this time zone. BEST humbly request the Hon ble Commission to remove TOD surcharge for the time zone 0900 hours to 1200 hours in order to encourage people to start working from early hours in the morning, to flatten the load curve. With this, certain demand of the peak period (1200 hours to 1600 hours) would shift to the morning period. Further, BEST requests Hon ble Commission to introduce TOD surcharge of Rs. 1 per unit during the peak period of 1200 hours to 1600 hours to discourage use of electricity during the peak period. As there is no peak demand during the evening hours, present TOD surcharge of Re 1 per unit is requested to be reduced to 50 paisa per unit. Also, rebate of 75 paise per unit during 2200 hours to 600 hours would be availed by high end commercial consumers. The Hon ble Commission is humbly requested to reduce the same to 50 paise per unit. As discussed above, BEST humbly proposes TOD surcharge to the Hon ble Commission as per the table below and request approval of the same: Table 51: Proposed TOD tariff rate Time Duration TOD Tariff (Rs./kWh) (in addition to base tariff) 0600 to 0900 hours 0.00 0900 to 1200 hours 0.00 1200 to 1800 hours 1.00 1800 to 2200 hours 0.50 2200 to 0600 hours (0.50) [49]
6. Prayer 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, 2004. 2. Approve the aggregate revenue requirement for FY 2011-12; 3. Approve recovery of aggregate revenue requirement for FY 2011-12 through the category-wise tariff revision plan proposed for FY 2011-12; 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. [50]