Before the Maharashtra Electricity Regulatory Commission
Mumbai

Filing No.:
Case No.:

MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LIMITED (hereinafter referred to as “MSEDCL”), FILES FOR DECIDING ON THE APPROVAL OF RECOVERY OF CHARGES FOR MITIGATING LOAD SHEDDING IN PUNE CIRCLE.

THE MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY RESPECTFULLY SUBMITS

1. The petitioner MSEDCL, is a company incorporated under the provisions of the Indian Companies Act, VII of 1913, with its registered office at Prakashgad Bandra (E) Mumbai. The State of Maharashtra has initiated an aggressive process of reforms in the power sector with an aim to achieve “availability”, “accessibility” and “affordability” of electricity of high quality and reliability, for all the consumers through high level of efficiencies in operations and consumer satisfaction. In order to provide required impetus to the functional areas and as part of this process, the vertically integrated Maharashtra Electricity Board (MSEB), a statutory body, has been disaggregated w.e.f June 6, 2005, into separate functional corporate entities namely Maharashtra State Electricity Distribution Company Limited (MSEDCL), a distribution utility in the State. MSEDCL has been granted a license to distribute the electricity in the Maharashtra region under section 14 of the Electricity Act 2003.

2. At present Maharashtra State is facing unprecedented severe power shortage. While the demand is showing a significant surge, supply constraints have prevailed and scarcity of power availability as well as transmission constraints.

3. MERC in its order on Principles and Protocol of Load Shedding has recommended usage of surplus captive capacity as an option for managing the deficit situation.

4. MSEDCL is taking efforts to overcome the situation by way of emergency load shedding, excess usage of Koyana water, additional Power Purchase MoUs with various Generators & Traders, even at higher costs, and other measures. Though the efforts are taken the situation is deteriorating.

5. MERC in its order dated 25th January 2006, the Hon’ble Commission has accepted the CII proposal to utilize surplus captive power during peak hours and making available the grid power for supply to other consumers. However, all the incremental costs of this proposal needs to be internalized by the consumers of Pune Urban Circle.

6. MERC in its order dated 25th January 2006 & 1st March 2006, has acknowledge that MSEDCL may not be able to bear the additional cost, in the absence of recovery of additional costs through tariff applicable to the consumers of Pune Urban circles.

7. MSEDCL hereby submits this petition to the Hon’ble Commission to allow MSEDCL to recover the charges from Pune circle for the power generated by CPP in & around Pune so as to mitigate the Load shedding in the City.

PRAYER TO THE HON’BLE COMMISSION

In view of the above the petitioner respectfully prays that the Hon’ble Commission may

• Examine the proposals of the petitioner for a favorable dispensation

• Allow to recover the additional cost as a Reliability Charges from Pune Circle Consumers to mitigate the load shedding position as the liquidity position is very critical.

• Condone any inadvertent omissions/errors/shortcomings and permit MSEDCL to add/change/modify/alter this filing and make further submissions as may be required at a future date.

• 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.

Maharashtra State Electricity Distribution Company Limited

 Petitioner

Mumbai
Dated:

Ex. Director – II (Dist-Comml.)

 1 Background

1.1 The petitioner MSEDCL, is a company incorporated under the provisions of the Indian Companies Act, VII of 1913, with its registered office at Prakashgad Bandra (E) Mumbai. The State of Maharashtra has initiated an aggressive process of reforms in the power sector with an aim to achieve “availability”, “accessibility” and “affordability” of electricity of high quality and reliability, for all the consumers through high level of efficiencies in operations and consumer satisfaction. In order to provide required impetus to the functional areas and as part of this process, the vertically integrated Maharashtra Electricity Board (MSEB), a statutory body, has been disaggregated w.e.f June 6, 2005, into separate functional corporate entities namely Maharashtra State Electricity Distribution Company Limited (MSEDCL), a distribution utility in the State.

1.2 Maharashtra has been experiencing significant growth in power consumption during last few years. Such increased demand has resulted in significant surge in the peak demand both during morning and evening.

1.3 Despite various efforts put in by MSEB to meet the demand in the State, the growth in supply has not been sufficient to cater to the rising demand. The supply shortage has been practically throughout the day.

1.4 MSEDCL, the successor company of the erstwhile MSEB and the State owned distribution licensee, had in various correspondence to the Hon’ble Commission had sought various directions to alleviate the situation. The Commission in its order dated January 10, 2006 regarding Revision in the Principles & Protocols for Load Shedding by MSEDCL had issued various directives in this regard which inter alia included that Commission is proposing a strategy to utilise captive generation capacity to meet the shortfall in such urban and industrial conglomerations.

1.5 MSEDCL in the past had attempted to purchase power from the CPP Project holders. However the response was not encouraging. Subsequently various high level meetings were held with the CPP representatives in presence of GoM, and the State Govt. has impressed upon the CPPs the need for coming to agreement on the issue. Accordingly the CPP holders have expressed their willingness to sell their CPP surplus power to MSEDCL till the power deficit situation becomes manageable.

1.6 Accordingly, MSEDCL had submitted a petition vide dated 2 nd February 2006 for approval of rates for power purchase from CPP project holder from Maharashtra under section 86 of the Electricity Act 2003.

1.7 CII, Pune had filed a petition wherein a scheme was proposed to mitigate load shedding in Pune city by utilizing the Captive Power Plants established by some industries. Elaborate discussions were held with various stakeholders including the consumer representatives from Pune and the Commission has issued an order on the said petition accepting the proposal and outlining the modalities to implement the same.

1.8 Further, the Hon’ble Commission vide its order dated 2 nd March 2006 had approved the normative fuel efficiency and the Variable cost of generation for facilitating generation of additional power by captive units of Pune during the peak hours and making available the grid power for supply to other Consumers. It is however submitted here that purchase of power from CPPs and it sale to consumers are two different transactions and would need a differential treatment going forward.

1.9 Thus, this petition is made before the Commission for seeking approval for recovery of this additional cost from the consumer of the Pune Circle for mitigating the load shedding in their area.

2. MERC Directives

2.1 The Commission Vide its order dated 10 th January 2006 on Revision on Principles & protocols of Load shedding have stated that:

18 (viii) The Commission is proposing a strategy of establishing captive generation capacity to meet the shortfall in such urban and industrial conglomerations, provided all the incremental cost is internalized by the consumers within those areas.

2.2. T he Commission vide its order dated 25 th January 2006, has directed as under:

52.a) Considering that the demand-supply gap is expected to prevail to a certain extent for the next five years at least, there is an urgent need to see how best the situation can be mitigated. The CII proposal to utilise surplus captive power during peak hours and making available the grid power for supply to other consumers is a well-intentioned proposal to mitigate the load shedding in certain areas of the State, provided all the incremental cost is internalized by the consumers residing within those areas. Based on the responses received from stakeholders in writing as well as during public hearing, the Commission has observed that a broad majority of consumers have welcomed this CII initiative. …………. However, all the incremental costs of this proposal needs to be internalized by the consumers of Pune Urban Circle.”

 52.f ) In the meantime, however, MSEDCL should operationalise this proposal, based on the rate to be determined by the Commission, by making the necessary metering arrangements. The payment to be made by MSEDCL to the captive generators, till such time as the Tariff Order for MSEDCL is issued, may have to be funded by MSEDCL through a special grant/loan taken for this purpose, as otherwise the MSEDCL may not be able to bear the additional cost, in the absence of recovery of additional costs through tariff applicable to the consumers of Pune Urban circles. The total payment made by MSEDCL to the captive generators, including the interest on the loan taken for funding the same, if any, will be considered while processing the ARR and tariff Petition of MSEDCL.

2.2 Also, Commission in its order dated 2 nd March 2006, has approved the normative fuel efficiency and the variable cost of generation for facilitating generation of additional power by captive units Pune during the peak hours and making available the grid power supply to other consumers.

2.3 Commission vide its order dated 2 nd March 2006, has stated as follows,
“ 12. The payment to be made by the MSEDCL to the captive generators, till such time as the tariff order for MSEDCL is issued may have to be funded through a special loan taken for this purpose, as otherwise MSEDCL may not be able to bear the additional cost, in the absence of the recovery of additional costs through tariff applicable to Pune Consumers.”

2.4 As per the given order, Commission have directed MSEDCL to pay captive generators the difference in the normative price of generation determined above and the peak hours tariff applicable to the industrial units for the reduction in the quantum of electricity consumed from the grid.

2.5 The Hon’ble Commission acknowledges the critical liquidity position of MSEDCL vide its order dated 2 nd March 2006 in para 12. and has therefore considered an option for special loan for this purpose.

2.6 MSEDCL would also like to quote here a critical para from the National Tariff Policy which recognizes the need for speedy recovery of the costs incurred by the licensees in providing electricity supply to the consumers, as under:

“ Uncontrollable costs should be recovered speedily to ensure that future consumers are not burdened with past costs. Uncontrollable costs would include (but not limited to) fuel costs, costs on account of inflation, taxes and cess, variations in power purchase unit costs including on account of hydro-thermal mix in case of adverse natural events.”

3. Submission by MSEDCL.

3.1 MSEDCL would like the hon’ble Commission to note that while the normal Load Shedding in Pune is of the range of 1200 MWh / day, efforts are being undertaken for the Demand Side Management, which is likely to bring down the load shedding in Pune to approximately 1000 – 1100 MW/Day.

3.2 The MSEDCL, as per the order dated 2 nd March 2006 by the Hon’ble Commission, stating an option to avail for a special loan, has submitted a letter to The Secretary (Energy) dated 02 nd February 2006, requesting the Government of Maharashtra to sanction a special grant loan for this scheme.

3.3 The same has been intimated to the Commission vide letter dated 02 nd February 2006.

3.4 It is unlikely that Government will sanction this loan and it will be very difficult for MSEDCL to raise funds to operationalise the given scheme of CII proposal due to position being very critical. In case Government sanctions the loan in future, the same will be considered in subsequent ARR.

3.5 MSEDCL vide its letter dated 7 th March 2006, has communicated to the Commission that MSEDCL has decided to implement this proposal immediately and expects an additional cost of more than 250 crores per year which will have to be recovered from the consumers of Pune Circles.

3.6 Due to the liquidity problem, MSEDCL seeks to recover the same additional charges from Pune Consumers.

4.1 Proposal by MSEDCL

 4.1 Depending on the power shortage and the generation from CPPs, ten different scenarios have been worked out with reference to MW available with CPP’s and the number of hours of operation. Accordingly, additional cost per unit is works out as given in Annexure A.

4.2 This full scheme is devised to work out on the assumption that the CPP’s will give complete support in MW & MU terms so as to completely mitigate the Load shedding quantum of Pune City. In case of unexpected break downs in the CPPs there is likely to a short fall in MW and MU support. In such case, if MSEDCL is not utilizing Kawas Naptha power in the rest of the State part of it could be shared for consumers of Pune City as an emergency support. Accordingly, working has also been done for 50% power from CPP & 50% emergency support from Kawas. It is submitted that this support will be available only if he power is not used for rest of the State. (Details as per Annexure B)

4.3 It is further submitted that in case of an extreme event of failure of CPPs to supply the committed power and inability of MSEDCL to make power from Kawas available to the Pune City, MSEDCL would be left with no option but to impose the load shedding the city till the CPPs are able to make good the shortages.

4.4 The Annexures gives calculation details for different scenarios. Considering shortage of 100 MW per hour & running of CPP’s for will 10 hours in the day (Sr. no.3 of Annexure A & B). This would amount to 30 Mus per month as given in Column 6 at Sr.no.3 of Annexures A & B. Considering 20% T&D loss & Variable Cost at peak hours at Rs. 3.65 per unit as indicated, the additional cost burden on Pune Circle Consumers will be Rs. 266 crores (if total power is available from CPP’s) as per Annexure A translating to Rs. 0.84 per unit on the total billed units of Pune City.

4.5 The Commission may also consider the possibility of levying these charges only on those consumers whose monthly consumption is more than 300 units. Accordingly, the recovery amount per unit will go up substantially.

4.6 The above proposal is feasible only if MW or Mus is guaranteed by the CPP’s, since MSEDCL will require to assure that load shedding under normal circumstances will not be resorted to. The Hon’ble Commission may have to device certain methodologies or mechanism to ensure that CPP supplies the quantum of power & energy in terms of MW or Mus so as to completely mitigate the shortage of Pune City.

5 Powers to Issue Orders

 5.1 MSEDCL is making this petition under Section 62(3) and Section 62 (4) and section 92 (4) of the Electricity Act 2003 as detailed below:

5.2 Section 62(3) states that “ The Appropriate Commission shall not, while determining the tariff under this Act, show undue preference to any consumer of electricity but may differentiate according to the consumer's load factor, power factor, voltage, total consumption of electricity during any specified period or the time at which the supply is required or the geographical position of any area, the nature of supply and the purpose for which the supply is required.
It is submitted here that the case under consideration is special in nature and considering that the proposal is going to benefit a particular mass of consumers, it merits a separate “Tariff Dispensation” from other consumers in the same category.

5.3 Section 62(4) stipulates “No tariff or part of any tariff may ordinarily be amended more frequently than once in any financial year, except in respect of any changes expressly permitted under the terms of any fuel surcharge formula as may be specified.”

MSEDCL acknowledges that the change is tariff or levy of additional charge is governed by section 62 of the Electricity Act and it may not be possible to effect any change in the same more than once a year. However MSEDCL would like to humbly submit that the proposed scheme for Pune consumers is not an “ordinary” proposal within the normal business operations of MSEDCL and hence warrants a special treatment and speedy dispensation from the Commissions.

5.4 Section 94(4) states that “The Appropriate Commission shall have the powers to pass such interim order in any proceeding, hearing or matter before the Appropriate Commission, as that Commission may consider appropriate.”

The Commission has powers to issue interim orders on any matter as deemed appropriate. Considering the large cost incidence of the proposed scheme and the inability of MSEDCL to meet such financial burden, MSEDCL requests the hon’ble Commission to consider a separate order for the said proposal.

6 Prayer

In view of the above the petitioner respectfully prays that the Hon’ble Commission may

• Examine the proposals of the petitioner for a favorable dispensation

• Allow to recover the charges from Pune Circle Consumers to mitigate the load shedding position as the liquidity position is very critical.

• Condone any inadvertent omissions/errors/shortcomings and permit MSEDCL to add/change/modify/alter this filing and make further submissions as may be required at a future date.

• 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.

Maharashtra State Electricity Distribution Company Limited

Petitioner

Mumbai
Dated:

Ex. Director – II (Dist-Comml.)

ANNEXURE A : Power Shortage & Generation from CPP.

ANNEXURE B: 50% power from CPP & 50% emergency support from Kawas.