TaxTMI 
TaxTMI 
2016 (11) TMI 1698
X X X X Extracts X X X X
X X X X Extracts X X X X
....tition No. 91 of 2015 filed by the Appellant. In its Petition, the Appellant sought Final True-up of FY 2014-15, Provisional True-up for FY 2015-16 and determination of the Aggregate Revenue Requirement (ARR) for FY 2015-16 and Multi Year Tariff for FY 2016-17 to FY 2019-20 under Sections 61 and 62 of the Electricity Act, 2003 and the State Commission's Multi Year Tariff (MYT) Regulations 2011 and 2015. 2. The Appellant is a generating company within the meaning of Section 2 (28) of Electricity Act 2003 and is engaged in generation of electricity and has developed a 600 MW (2 x 300 MW) coal-fired Thermal Power Plant at the Maharashtra Industrial Development Corporation (MIDC) Butibori Industrial Area, District Nagpur, Maharashtra. 3. The Respondent No 1 is the Electricity Regulatory Commission for the State of Maharashtra exercising jurisdiction and discharging functions in terms of the Electricity Act 2003. 4. The Power from the Appellant's generating station is being supplied to Reliance Infrastructure Limited i.e. Respondent No. 2, which is a distribution licensee in a part of suburban Mumbai, under a long term PPA with effect from 01.04.2014 as approved by the Stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d queries raised by the State Commission. D) The State Commission on 20.06.2016 passed the Impugned Order in Case No.91 of 2015. E) Aggrieved by the Impugned Order, the Appellant preferred the present Appeal. 7. QUESTIONS OF LAW As per Appellant, following questions of law arise in the present Appeal: A) Whether the Appellant, is entitled to claim the fuel costs incurred by it due to delay in execution of Fuel Supply Agreement (FSA) with Coal India Limited ("CIL") and its subsidiaries for reasons not attributable to the Appellant in its tariff to Respondent No.2, with whom there is a valid, duly approved Power Purchase Agreement, in accordance with the applicable Tariff Regulations of the State Commission? B) Whether Respondent No.1 has ignored the inordinate delay on part of various Government Authorities and Public Sector Companies which are not within the control of the Appellant and /or are force majeure events which in turn has delayed execution of the FSA between the Appellant and WCL despite all efforts on part of the Appellant? C) Whether the 1st Respondent could have disallowed such cost of fuel incurred by reason of there....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he generator from other sources must be given a pass through? K) Whether the 1st Respondent in passing the Impugned Order has failed to appreciate the true import behind Tariff determination under Section 62 of the EA03? L) Whether the 1st Respondent in passing the Impugned Order has failed to consider the foundation behind a regulated regime where the Regulator such as the Regulatory Commission is mandated under law to balance the interest of the Consumer as well as the private generator to protect the investment in the Power Sector? M) Whether the 1st Respondent in passing the Impugned Order has failed to consider the impact thereof which has made the entire project of the Appellant completely commercially unviable and would resultantly lead to the asset becoming non-operational which would not only be a loss to the Appellant but would also be a loss to the State of Maharashtra? N) Whether the 1st Respondent has failed to appreciate that in terms of the PPA signed between the Appellant and Respondent No.2, the Appellant in the absence of an FSA was not barred from sourcing coal from other sources to meet its supply obligation to Respondent No.2....
X X X X Extracts X X X X
X X X X Extracts X X X X
....would supply to industries within the area being a Group Captive Power Plant, ("GCPP") and one unit would be an Independent Power Plant "(IPP"). Ii. The Government of India, Ministry of Coal by an Office Memorandum dated 18.10.2007 issued the New Coal Distribution Policy ("NCDP"). The NCDP contemplated issuance of a Letter of Assurance (loa) to applicants including Captive Power Plants as well as Independent Power Plants requiring such allottees to fulfil certain stipulated conditions and meet the milestones within the specified period and thereafter approach the coal company for entering into a Fuel Supply Agreement (FSA) covering the commercial arrangement for supply of coal. It was contemplated that such FSA would be executed within a period of three months on fulfilment of the said stipulations for supply of the entire normative quantity of coal either domestically or by import on achievement of milestones set out therein. Iii. The Standing Linkage Committee - Long Term (SLC) comprising of representatives of Ministry of Coal, Ministry of Power, the Central Electricity Authority and others on 06.11.2007 approved issuance of loa for the Appellant's Unit I. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....th Tariffs relied in Case 1 competitive bids. Rlnfra-D submitted the comparison of levelised Tariff of VIPL with the Levelised Tariffs realized in Case- 1 bids in the State of Maharashtra (assuming that escalable components of case-1 Tariff quoted by the bidders are escalated till FY 2012-13 based on payment escalation rates published by CERC and thereafter, escalated on current CERC evaluation escalation rates. Table : Levelised Tariff comparison of Bids received in Maharashtra Distribution Licensee Bidding year Bidder Capacity in MW Levelised Tariff (Rs/ kwh) MSEDCL 2009 Adani Power 1200 4.15 MSEDCL 2009 Emcowarora 200 3.74 MSEDCL 2009 Indiabulls Power 1200 4.31 Rinfra 2011 Vandanavidyut 150 5.15 Rinfra 2011 Dhariwal Infrastructure Ltd. 200 5.82 Rinfra 2011 PTC -MB Power 200 5.82 Rinfra 2011 Rkmpowergen Pvt. Ltd. 300 4.49 Rinfra 2011 Indiabulls Power Ltd. 490 6.55 Rinfra 2011 PTC -DB Power 150 7.22 Rinfra 2011 Reliance Power Ltd. 1000 4.16 Rinfra 2011 VIPL Proposal 3.9 Vii. It w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d fsas of CIL are under revision. VIPL further submitted that the Cabinet Committee on Economic Affairs (CCEA) has given in-principle approval on 5th February 2013 for pooling of coal prices and as VIPL has more than one year before the supply starts to Rinfra-D, price pooling mechanism will be implemented by then and VIPL would be able to meet its coal requirements from CIL. VIPL submitted that the four scenarios in this regard as summarized below: Table: Energy Charges (Rs/kwh) under various scenarios as submitted by VIPL. Scenario FY 14-15 FY 15-16 Optimistic (Entire Annual contracted quantity of E grade coal from coal India) 1.32 1.4 Realistic Scenario with 100% Annual Contracted quantity delivery from Coal India but price changed to pooling principles 1.43 1.53 Realistic Scenario with 80% Annual Contracted Quantity Delivery from Coal India at price charged on pooling principles and VIPL to arrange the remaining coal from market sources such as E-Auction/Imports 1.64 1.75 Pessimistic Scenario with Coal India supplying 65% of the committed coal in FY 15 and 70% in FY 16 and VIPL has to arrange remaining coal from market sources suc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Appellant and Respondent No.2 for supply under the two ppas for Units I and II to be treated as supply from Power Station as a whole, and such approval was given by the State Commission by an Order dated 19.07.2013 and directed the Appellant to submit a final PPA after incorporating the modification as set out in the said order. The Consolidation Agreement was also approved by the State Commission by the said order. A further direction was given by the State Commission as : "The Commission advised VIPL to accordingly intimate the concerned authorities/departments and obtain the approval from concerned authorities/ departments regarding the conversion of status of Unit-1 from Group Captive to IPP. The Commission further directs VIPL to submit the status of the same within one month from the date of this Order. Further, the Commission also directs VIPL to submit the halfyearly status report of loa/FSA of Unit-1 as IPP till FSA is signed, and also submit the copy of signed FSA of Unit 1 and Unit 2 of VIPL within one month of signing the FSA to the Commission." Ix. In the meantime due to acute shortage in availability of domestic coal, the Cabinet Committee on Econ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cuting the fsas so as to ensure the availability of linkage coal by the date of commencement of supply under the regulated business from 1 April, 2014". "Summary of Findings V) The Commission observes that fsas for the project have not been executed. The Commission directs VIPL to expedite the process of executing the fsas so as to ensure the availability of linkage coal by the date of commencement of supply under the regulated business from 1 April, 2014. Viii) The Commission observes that the fsas for the project are yet to be executed. The Commission, at this stage, has computed the Energy Charge for VIPL considering 100% domestic coal for FY 2014-15 and FY 2015-16 as submitted by the Petitioner in its Petition. The Commission directs VIPL to submit the fsas executed for the project along with its Petition for determination of final Tariff Ix) The Commission has considered the calorific value of fuels as submitted by VIPL. The Commission has considered the landed fuel prices of fuels as submitted by VIPL for FY 2014-15. The Commission has not considered the escalation in fuel prices for projecting the fuel prices for FY 2015-16, as any variati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d to execute a mine specific FSA with WCL on 06.01.2015 for supply of coal from cost-plus mine being New Majri Sector-IA and Sector-IIA Extn OC for an ACQ of 6,00,000 tons out of the total quantity of 11,10,800 tons. The balance 5,10,800 tons continued to be supplied under the said mou dated 30.09.2014 as revised and amended mou on 02.01.2015 and further revised on 17.04.2015. Xv. The Appellant commenced supply of power to Respondent No.2 with effect from 01.04.2014. Coal supply commenced from WCL from October 2014 onwards in respect of Unit II and till then the Appellant arranged coal for generation from alternate sources. Xvi. As far as Unit I is concerned, there was no FSA and supply to Respondent No.2 was by procuring coal from alternate sources. However, the Appellant continued its efforts by following up with the relevant authorities for execution of the FSA in respect of Unit-I. Considering that coal at notified price of WCL was not available, the Appellant requested WCL for change in the source of supply for Unit-I. By a letter dated 11.11.2014, WCL addressed a letter to South Eastern Coalfields Ltd. (SECL) with regard to change of source of coal from itse....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ve. The Appellant enclosed the CEA's letter dated 03.12.2015 by which CEA had clarified that the Appellant's Unit I has been commissioned and is covered in the firm loa holders by the Ministry of Coal and accordingly is also covered in the balance 30,000 MW capacity (Out of total capacity of 1,08,000 MW from which 78,000 MW were covered under the Presidential Directive dated 17.07.2013). The Appellant also gave all necessary particulars of loa and Work Orders for procurement of coal from spot e-auction and forward e-auction, open market and import in the said Petition. Xx. The State Commission by the Impugned Order has, for the purposes of Truing-Up of Fuel Cost for FY 2014-15 and for Provisional Truing-Up of Fuel Cost for FY 2015-16 notionally considered 100% supply of coal on cost-plus basis from WCL for Unit II for the period April 2014 to October 2014 and 100% supply of linkage coal from SECL for Unit I. This basis has been followed for the purpose of determining the Multi-Year Tariff for fys 2016-17 and 2019-20. The State Commission has thus for the aforesaid period disallowed all procurements done or to be done from e-auction of WCL, through domestic open mar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in Case No.91 of 2013 which related to determination of Provisional Tariff for FY 2014-15 and 2015-16 which has been Trued-Up in the order impugned in the present Appeal, in paragraphs 4.6.42 and 4.6.43 the Appellant had specifically submitted that it was taking all necessary steps for expediting the signing of the FSA. At the relevant time when the order dated 17.01.2014 was passed there was no FSA in place even for Unit II. Thus the submission of the Appellant that it had submitted the PPA as approved by the State Commission to WCL on 01.04.2013 and that the FSA is expected shortly is also recorded in the said order. The submissions with regard to the process of conversion of Unit I from GCPP to IPP have also been recorded. In this regard the State Commission's findings are as follows: "Commission's Analysis 4.6.44 The Commission observes that fsas for the project have not been executed. The Commission directs VIPL to expedite the process of executing the fsas so as to ensure the availability of linkage coal by the date of commencement of supply under the regulated business from 1 April, 2014. " Thus at the time of approval of the Provisional Ta....
X X X X Extracts X X X X
X X X X Extracts X X X X
....incorporated under the Tariff Regulations of the State Commission prior to actual determination of Tariff. The relevant extracts of Section 61 are being reproduced as follows: - "61. The Appropriate Commission shall, subject to the provisions of this Act, specify the terms and conditions for the determination of tariff, and in doing so, shall be guided by the following, namely:- A) the principles and methodologies specified by the Central Commission for determination of the tariff applicable to generating companies and transmission licensees; B) the generation, transmission, distribution and supply of electricity are conducted on commercial principles; C) the factors which would encourage competition, efficiency, economical use of the resources, good performance and optimum investments; D) safeguarding of consumers interest and at the same time, recovery of the cost of electricity in a reasonable manner; E) the principles rewarding efficiency in performance; F) multi year tariff principles; G) that the tariff progressively reflects the cost of supply of electricity and also, reduces and eliminates cross-subsidi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ments; C) Promote transparency, consistency and predictability in regulatory approaches across jurisdictions and minimise perceptions of regulatory risks; D) Promote competition, efficiency in operations and improvement in quality of supply; E) Promote generation of electricity from Renewable sources; F) Promote Hydroelectric Power generation including Pumped Storage Projects (PSP) to provide adequate peaking reserves, reliable grid operation and integration of variable renewable energy sources; G) Evolve a dynamic and robust electricity infrastructure for better consumer services; H) Facilitate supply of adequate and uninterrupted power to all categories of consumers; I) Ensure creation of adequate capacity including reserves in generation, transmission and distribution in advance, for reliability of supply of electricity to consumers. ............ Multi Year Tariff ............ 4) 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 accoun....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fuel cost for FY 2014-15 and FY 2015-16 mainly attributable to procurement of fuel at a rate higher than and on a different basis from that considered while approving the PPA with Rlnfra-D. The relevant portions of the Impugned Order are reproduced below: "2.10.13 The Commission had approved the PPA for supply of power to rinfra-D from Unit 2 of VIPL-G's Generating Station vide its Order dated 20 February, 2013 in Case No. 2 of 2013. Regarding the fuel for power generation, the Order stated as follows: "30. ...Admittedly, the present Petition is for the purpose of expediting the fulfilment of the condition of an approved power purchase agreement in order to secure a fuel supply agreement from the Ministry of Coal. Considering the fact that the request made by the Petitioners as the prayer to approve the provisional tariff may require publication of the details of the provisional tariff in newspapers, inviting suggestions and objections from the public and the holding of public hearings in the areas of supply of Rlnfra-D, the process of securing a fuel supply agreement from the Ministry of Coal may get delayed and may perhaps get defeated on account of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en and VIPL would be able to meet its coal requirements from CIL. VIPL submitted the four scenarios in this regard" 2.10.14 While approving the PPA through its Order in Case No. 2 of 2013, the Commission recorded VIPL-G's submission that the new standard esas of CIL were under revision; that the Cabinet Committee on Economic Affairs (CCEA) had given in principle approval for pooling of coal prices; and that, as VIPL-G had more than one year before starting supply to rinfra-D, the price pooling mechanism would be implemented by then and VIPLG would be able to meet its coal requirements from CIL. 2.10.15 In their Petition for approval of PPA, rinfra-D and VIPL-G had submitted that, even in the pessimistic scenario of CIL supplying only the minimum guaranteed supply of committed coal in FY 2014-15 and FY 2015-16 and VIPL-G having to arrange the balance from market sources such as e-auction and/or imports, the Variable Charges would be Rs. 1.74 per kwh. 2.10.16 Considering these submissions, the commission, vide its subsequent Order dated 19 July, 2013 in Case No. 76 of 2013 had also approved the PPA for supply of power from Unit 1 (earlier envisaged as a Group CPP) of VIP....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ed on the submissions of V1PL-G, as against the Energy Charge of Rs. 1.25/kwh and Rs. 1.32/kwh for FY 2014-15 and FY 2015-16 proposed by VIPL-G based on 100% domestic coal. 2.10.19 In the above Case No. 91 of 2013, VIPL-G had also submitted the Energy Charge of Rs. 1.85/kwh and Rs. 1.95/kwh considering 65% linkage coal, and the balance coal being met through imports and eauction in the ratio of 50:50. 2.10.20 Thereafter, VIPL-G filed a Petition on 30 May, 2014 (Case No, 115 of 2014) for approval of Capital Cost and final Tariff or FY 2014-15 and FY 2015-16 in which it projected the Energy Charge at Rs. 1.91/kwh considering linkage coal and cost-plus coal. Vide its Order dated 9 March, 2015, the Commission approved the Capital Cost and final Tariff for FY 2014-15 and FY 2015-16. Regarding the fuel for power generation, the Order states that: "4.11.7. The Commission directed VIPL to submit the status of coal supply agreements.* Units 1 and 2 and a detailed note on the coal procurement for these Units in order to achieve the variable cost estimated in the Petition. VIPL submitted that the FSA for Unit 2 for 1.11 MTPA was signed with WCL on.10 March, 2014 along with a Si....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... SECL mines. VIPL has considered the Wani mine of WCL us the loading point, and the distance of 150 km to the Butibori plant has been considered for transportation of coal from WCL. The Commission has referred to the freight charges computations and relevant documents submitted by VIPL. The Commission notes that VIPL has submitted freight charges of Rs. 978/MT for SECL coal and Rs. 405/MT for WCL coal. 4.12.6. For the computation of Energy Charge for FY 2014-15, the Commission has considered the landed price of all fuels as submitted by VIPL..." 2.10.21 In that Order, the Commission approved the Energy Charge of Rs. 1.91/kwh for FY 2014-15 and FY 2015-16 considering the fuel prices and GCV as proposed by VIPL-G. Importantly, though VIPL-G filed its Petition in that Case on 30 May, 2014, i.e., two months after the commencement of power supply under the regulated business and despite linkage coal not being available as directed by the Commission, it proposed in its Petition Energy Charge of Rs. 1.91/kwh for FY 2014-15 considering a substantial part of the coal requirement to be met from linkage coal. 2.10.22 From the above Orders, it is clear that, in all these proceed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g fuel from other sources (at a higher cost) from April, 2014 onwards and began supplying power to Rlnfra-D. Before doing so, it did not approach or intimate the Commission regarding the impact of utilisation of such alternative coal on the Energy Charge. 2.10.25 The actual Energy Charge for FY 2014-15, as submitted by VIPL-G, works out to Rs. 3.62/kwh, which is almost double the rate of Rs. I.23/kwh to Rs. 1.91/kwh put forward by VIPL-G in its various Petitions for approval of PPA and Tariff: Further, the basic premise of securing coal linkage on the basis of which the PPA was approved under the option provided under Section 62 of the EA, 2003 has not been achieved till now. At the Energy Charge of Rs. 3.62/kwh, procurement of power by Rlnfra-D from VIPL-G is not at all competitive vis-a-vis the prices discovered elsewhere through competitive bidding that were presented by the Parties while seeking PPA approval in Case No.2 of 2013. The actual Energy Charge of Rs. 3.62/kwh claimed is more than double the rate of Rs. 1.74/kwh projected by them (for FY 2014-15) under the pessimistic scenario presented during the PPA approval proceedings. 2.10.26 In the light of these facts and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... value, as considered by VIPL-G in its Petition in Case No. 115 of 2014 for approval of final tariff " ii. Taking into account the Commission's analysis of the fuel costs and other elements of the ARR, para. 31.1 of the impugned Order sets out the Summary of the approved True-up and the Revenue Surplus determined as Rs. 434.70 crore for FY 2014-15 and directed the Appellant to refund this surplus of Rs. 434.70 Crore to Rlnfra-D in six monthly instalments. For the Provisional True-up for FY 2015-16, on the issue of Fuel cost the Commission, consistent with its approach in the True-up of FY 2014-15, after determining a Revenue Surplus of Rs. 405.89 Crore, taking into account its analysis of fuel costs and other elements, directed the Appellant to refund the Revenue Surplus of FY 2015-16, to Rlnfra-D in 6 monthly instalments. iii. The Appellant has contended that it had provided the details of actual fuel cost incurred through its Fuel Adjustment Charge (FAC) submissions to the State Commission. However, it is important to note that the FAC is intended only to enable recovery of that variation in fuel prices and calorific value which is legitimate and due as against the v....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re coal to the extent of shortfall in quantity of coal supplied and/or deficient quality coal supplied, as the case may be, by WCL under the FSA. V. While approving the PPA, the underlying premise was to get power at a lower cost on a longer term basis for Mumbai. In its Petition for approval of the PPA, the Appellant had stated that even in the pessimistic scenario of CIL supplying only the minimum guaranteed supply of committed coal in FY 2014-15 and FY 2015-16 and the Appellant having to arrange the balance from market sources such as e-auction and/or imports, the Variable Charges would be Rs. 1.74 per kwh. A-III After having a careful examination of all the aspects related to Issue No 1 i.e. Disallowance of fuel cost for the period FY 2014-15 and 201516 brought before us for our consideration, our observations on the Issue No 1 are as follows:- A) The State Commission vide its Order dated 20.02.2013 in Case 2 of 2013 had approved the Power purchase Agreement of the Appellant with Respondent No 2 for supply of 300 MW power from Unit-II (IPP) of the Appellant Power Plant. While approving the PPA, the State Commission had asked the Appellant about the Scenario Analy....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ll get adjusted in the fuel cost adjustment mechanism. Any variation in Price and Gross Calorific Value of coal vis-a-vis approved values for computing the provisional Energy Charge shall be recoverable through Adjustment of rate of energy charge (REC) (Fuel surcharge Adjustment)in accordance with the provisions of Regulation 49.6 of MERC MYT Regulations, 2011." D) The Appellant commenced supply of power to Respondent No.2 with effect from 01.04.2014 using coal from alternate sources as Coal supply commenced from WCL from October 2014 onwards in respect of Unit II. E) In the Impugned Order, the State Commission has notionally considered 100% supply of domestic coal on cost-plus basis from WCL for Unit II for the period April 2014 to October 2014 and 100% supply of linkage coal from SECL for Unit I for the purposes of Truing-Up of Fuel Cost for FY 2014-15 and for Provisional Truing-Up of Fuel Cost for FY 2015-16. This basis has been followed for the purpose of determining the Multi-Year Tariff for fys 2016-17 and 2019-20. F) The State Commission has not allowed the actual fuel cost for FY 2014-15 and FY 2015-16 incurred by the Appellant on the gro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der various scenario, which is not the case under present consideration. Once the State Commission has approved the PPA under Section 62, the basic principles of Tariff determination as per Section 62 have to be followed by the State Commission. J) Even as per the provisions of the Tariff Policy 2016, in case of Competitively Bid projects under Section 63 of the Electricity Act, the cost of imported/ market based e-auction coal procured for making up the shortfall due to reduced quantity of domestic coal supplied by CIL, vis-a-vis the assured quantity or quantity indicated in Letter of Assurance/ FSA, has been made a pass through by the Appropriate Commission on a case to case basis. K) The basic philosophy of allowing such additional coal cost as pass through in the Tariff is to deal with the situations where the shortfall in coal supply is beyond the control of the Developer/Generator. Here in the present case the Appellant, in absence of supply of Domestic coal at notified prices, was forced to use Cost Plus coal as well as use coal from other sources ( e-Auction/ Imported) .To safeguard the interest of the consumers, the prudence check of the Appropriate Commi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....whom there is a valid, duly approved Power Purchase Agreement, in accordance with the applicable Tariff Regulations of State Commission, in favour of the Appellant for allowing cost of coal for Unit-I limiting to the extent of what has been allowed/is being allowed by the State Commission for the corresponding period for the supply under FSA arrangement for the generation from Unit-II of the Appellant to Respondent No.2. N) On the related issue at para 7 (b) above i.e. Whether Respondent No.1 has ignored the inordinate delay on part of various Government Authorities and Public Sector Companies which are not within the control of the Appellant and /or are force majeure events which in turn has delayed execution of the FSA between the Appellant and WCL despite all efforts on part of the Appellant, this issue gets covered as per our decision as above. O) On the other related issue i.e. Whether the 1st Respondent could have disallowed such cost of fuel incurred by reason of there being no FSA in favour of the Appellant, this issue stands decided as per para m) above. P) The next related issue i.e. Whether the Impugned Order could have been passed disallowing ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... COD of Unit I was declared on 04.04.2013 and Unit II on 28.03.2014. The State Commission by its Order dated 17.01.2014 in Case No. 91 of 2013 for approval of Provisional Tariff for FY 2014-15 and FY 2015-16 allowed additional Auxiliary Energy Consumption of 0.13% over and above the normative Auxiliary Energy Consumption of 9% for Reverse Osmosis (RO) Plant and additional water pumping system considering the installation of RO Plant to comply with the moef's direction for achieving zero effluent discharge system and additional water pumping system. iv. By its order dated 09.03.2015 in Case No. 115 of 2014 while approving the Final Tariff for FY 2014-15 and FY 2015-16, the State Commission recorded the Appellant's submission that additional water pumping system was put to use from 01.04.2014 and that the RO Plant was at an advanced stage of commissioning and in absence of actual energy consumption pattern for these systems for a considerable stable operating period, the State Commission should consider normative auxiliary consumption of 9%. The said Order specifically stated that the State Commission would take a view in the matter at the time of truing up based on ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reases the auxiliary consumption, in % terms, significantly. During FY 2014-15 actual backing down received by VIPL was 11.01% of schedule generation which led to significant increase in percentage of auxiliary consumption. Viii. The Appellant had also submitted through additional submission that as per fourth amendment in IEGC dated 06.04.2016, CERC under clause 6.3B(ii) has also recognised the degradation of Auxiliary Power Consumption(`APC') due to partial loading and suggested correction for the various bands of PLF and as per the same correction 0.65% in APC is allowed for the Machine Loading Band of 65 -74.99% corresponding to the Appellant's actual PLF for FY 14-15. Ix. Considering the actual Auxiliary Energy Consumption as 9.61%, the availability for the year works out to be 85.40% which is more than the Target Availability and consequently, the Appellant is entitled for recovery of entire Annual Fixed Charges for FY 2014-15. B-II On this Issue raised in the present Appeal, the learned counsel for the State Commission has made the following submissions for our consideration; i. The Appellant has contended that higher Auxiliary Consumpti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d consumers of the Discoms which should not be permitted considering the relevant provisions in this regard given in the Electricity Act,2003.Consequently this Issue No.c) is also decided against the appellant." iii. The Appellant Citing the fourth amendment in Indian Electricity Grid Code (IEGC) dated 06 April, 2016, the Appellant has stated that the Central Electricity Regulatory Commission (CERC) in clause 6.3 B (ii), has also recognized the degradation of Auxiliary Power Consumption (`APC') due to partial loading and suggested correction for various bands of Plant Load factor (PLF) and as per the same correction of 0.65% in APC is allowed for Machine Loading band of 65 - 74.99% corresponding to the Appellant's actual PLF for FY 2014-15. The Appellant is seeking retrospective effect of the above provision for relaxation of Auxiliary Consumption for FY 14-15. The Supreme Court in the matter of State of Madhya Pradesh vs. Tikam Das (1975) 2 SCC 100 held that subordinate legislation cannot be given retrospective effect unless specifically so authorized under the parent statute. iv. The Respondent Commission in the Impugned Order has given the reas....
X X X X Extracts X X X X
X X X X Extracts X X X X
....llant. C Issue No.3: Approval of Gross Station Heat Rate of 2401 kcal/kwh in paragraph 2.7 of the Impugned Order as against 2457 kcal/kwh for FY 2014-15 as proposed by the Appellant; C-I On the issue regarding Station Heat Rate raised in the present Appeal, the learned senior counsel for the Appellant has made the following submissions for our consideration; i. Based on the methodology to determine Station Heat Rate (`SHR') as per Regulation 44.3 of the Tariff Regulations, 2011, the SHR for the Appellant's generating station works out to 2401 kcal/kwh. ii. At the time of passing its Order on Provisional Tariff for FY 2014-15 and FY 2015-16 in Case No.91 of 2013, by an Order dated 17.01.2014, the State Commission held that it would take a view with regard to the submissions of the Appellant for variation in the SHR from the design SHR based on the performance guarantee test report. iii. The State Commission by its Order dated 09.03.2015 relating to the Final Tariff of FY 2014-15 and FY 2015-16 in Case No.115 of 2014 by its Order dated 09.03.2015 considered the Station Heat Rate on its computation as per the Tariff Regulations, 2011, i.e. 2401....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e Issue No 3 regarding Station Heat Rate raised in the present Appeal, the learned counsel for the State Commission has made the following submissions for our consideration. i. The Appellant had claimed relaxation on Station Heat Rate (SHR) of the Generating Station mainly due to the following reasons: A. Initial teething problems faced during stabilisation B. Backing down of Units due to low demand in grid and C. Tripping of Units ii. In its Judgment dated 18 September, 2015 in Appeal No. 196 of 2014 and 326 of 2013 (HPGCL V/s HPERC) on the issue of SHR on account of backing down instructions from SLDC, the Tribunal has decided the issue against the Appellant. Relevant extract of the Judgment at para 13 (ii) is reproduced below: "Order. Therefore, there is no merit in the contentions of the Appellant, regarding the issues of SHR, which deserves to be rejected." ii. The Appellant has also contended that the Respondent Commission has accounted for transitional problems during the stabilization period for various new Plants commissioned by the Maharashtra State Power Generation Company Ltd (MSPGCL) in the Order dated 4 Se....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re, are considered for True-up irrespective of whether they are better or worse in comparison to the normative performance parameters, it would result in VIPL-G and the consumers foregoing their legitimate share of any efficiency gain on account of better performance, and loading of any efficiency loss on the consumers on account of under-performance. Hence, the Commission had specified the mechanism of approving the normative parameters and sharing of gains and losses for better/underperformance in the Tariff Regulations in final True-up. " iii. Further the reference has been made by the Appellant on the provisions of fourth amendment in Indian Electricity Grid Code (IEGC) dated 06 April, 2016 which are related to part load compensation on Station Heat rate. iv. The compensation as per IEGC amendments is described under Sub Regulation 6.3 B. Further as per Notification dated 6.4.2016, the IEGC fourth amendment Regulations shall come into force with effect from date of publication in Official Gazette except Sub-Regulation 6.3B which shall come into force on such date as the Commission may appoint by notification in the Official Gazette. Hence these IEGC Amendments....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... internal accruals are deployed, they carry a cost which a generating company or a licensee is entitled to. iv. This Tribunal in various Judgments (e.g., Appeal No.173 of 2009,137 of 2008, 111 of 2008) has held that internal accruals utilized for working capital carry a cost and the Appellant is entitled to be compensated. The State Commission has erred in coming to the conclusion that the said judgments will not be applicable in the present case on the alleged ground that the said Judgments pertain to entities doing multiple business. These findings of the State Commission are exfacie illegal as this Tribunal in the said judgments has not differentiated between entities doing multiple businesses and entities such as the Appellant, which are solely into Generation of Electricity. As long as an entity utilizes its internal accruals towards meetings its working capital requirements, it is entitled to costs on such capital utilized. v. Once having recognized that there is a requirement of funds to manage operations in business, it cannot be implied that the same has been met through operational efficiency as has been held by the State Commission in the Impugned Order....
X X X X Extracts X X X X
X X X X Extracts X X X X
....st of such accruals or funds could be less or more than the normative interest. In arriving at whether there was a gain or loss the Commission was required to take the total picture into consideration which the Commission has not done. It cannot be said that simply because internal accruals were used and there was no outflow of funds by way of interest on working capital and hence the entire interest on working capital was gain which could be shared as per Regulation No. 19. " In the Judgment cited for rinfra-G V/s MERC, the main contention of Rlnfra was it had not availed any loan for working capital and had funded such working capital through internal accruals. Hence, rinfra has not actually incurred any expenditure towards interest on working capital during FY 2006-07. The Tribunal in Judgement observed that the Commission could have looked into the source of such internal accruals and the cost of generating such accruals. Accordingly, the State Commission had sought the month-wise cash flow statement from VIPLG to substantiate that the internal accruals were utilised to meet the working capital requirement. However, in the present matter, the Interest on Working Capital as p....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e actual Interest on Working Capital for the purpose of sharing of gains. We do not find any infirmity in the decision of the State Commission in this matter. iv. Hence the issue (p) of para 7 i.e. Whether on a true and proper interpretation of the provisions of Regulation 35 read with Regulation 14, the 1st Respondent ought to have computed Efficiency Gain on IWC including the internal accruals deployed by the Appellant, has been decided against the Appellant. E On the Issue No.5: The computation of Income Tax as proposed by the Appellant instead of restatement of the same based on the Impugned Order for the period F.Y. 2014-15 onwards, we observe as follows; E-I On the Issue No 5 regarding computation of Income Tax raised in the present Appeal, the learned senior counsel for the Appellant has made the following submissions for our consideration; i. The State Commission in its Impugned Order had disallowed various costs such as fuel cost, etc. The State Commission ought to have allowed the Income Tax which the Appellant is entitled irrespective of such disallowance. However, the State Commission has erred in computation of Income Tax. ii. The State....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ich shall be subject to final Truing up". ii. Further the Regulation 34.2 of the MYT Regulation provides for the the reimbursement of difference between the actual and approved Income Tax at the time of final True -up. Therefore, the provisionally approved Income Tax for FY 2015-16 and the subsequent 3rd Control Period shall be subject to final truing up. Hence we are in agreement with the decision of the State Commission in this issue. iii. The issue at Para 7 (r) i.e. Whether the 1st Respondent has correctly computed Income Tax in accordance with Regulation 34 of the Tariff Regulations, 2011 for FY 2014-15, is decided against the Appellant. F. Issue No.6: Disallowance of Ash Utilization and Disposal Expenses and the findings in paragraph 3.14.10 of the Impugned Order for FY 2015-16. F-I On the Issue No 6 regarding Disallowance of Ash Utilization and Disposal Expenses raised in the present Appeal, the learned senior counsel for the Appellant has made the following submissions for our consideration. i. In accordance with the Ministry of Environment and Forestation (moef) Notification dated 03.11.2009 relating to utilization of ash, a generating stat....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the Appellant was inappropriate; the actual area of ash dyke was half the area considered in the DPR and as compared to the report of the CEA set out in the Impugned Order the area of 42 acres was inadequate. vi. The Appellant had stated that despite the fact that the DPR contemplated 84 acres of area for ash disposal, the actual area constructed was only 42 acres and such a deviation from the design in the DPR was for the following reasons. A) In the DPR, the Appellant had proposed 52 acres of Land for Phase-I and 32 acres of land for Phase-II. B) Subsequently, the State owned transmission company, i.e. MSETCL requested MIDC to allot land for construction of proposed new 220 KV Receiving Substation for facilitating evacuation of Power from the Appellant plant. C) In response to the request of MSETCL, MIDC allotted land to MSETCL approx 6 Acres from the said 52 acres identified for Phase-I and certain part of the 32 acres land identified for Phase-II. D) Above allotment of land to MSETCL resulted into reduction of land availability to Phase-I ash dyke to 46 acres which was further reduced to 42 acres due to creation of green belt for....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... C) Copies of agreements for supply of ash to cement plants D) Supporting documents substantiating ash disposal expenses claimed for FY 2015-16. ii. In its reply, the Appellant submitted that, as per Section 5.4 of the DPR, the entire ash from the Generating Station was envisaged to be used by Reliance Cementation Pvt. Ltd. For its upcoming integrated cement plant at Mukutbun and grinding unit set up in Butibori MIDC Area. However, as the integrated cement plant has not yet been completed, ash is being lifted for the grinding unit at Butibori MIDC, whose requirement is not sufficient to utilise the entire fly ash generated. It is also observed that the actual area of ash dyke at the Generating Station is 42 acres. iii. The CEA guidelines stipulate a certain area requirement for ash disposal of a Generating Station. The Appellant is operating its Unit in a lesser area, which has resulted in recurring additional expenditure on account of ash disposal. The Appellant ought to have taken due cognizance of the CEA guidelines. Therefore the Appellant is fully responsible for this lapse and the impact of such disposal difficulties should not be passed on to....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ating Station on account of difficulties in ash disposal would not be passed on to the Beneficiaries." ii. The State Commission has not allowed the Ash disposal expenses on the ground of inappropriate design. The Ash disposal area is even not in accordance with the CEA guidelines. Therefore the Appellant was held fully responsible for this lapse and the impact of such disposal difficulties was not allowed to be passed on to the Beneficiaries. iii. Considering the facts and findings of the State Commission in the Impugned order, we are also of the opinion that impact of any such lapse in planning/ design of the Ash Utilization facilities should not be passed on to the Beneficiaries. Hence this issue is decided against the Appellant. G Issue No.7. Disallowance of Additional O&M expenses towards RO Plant as held in paragraph 4.18 of the Impugned Order. G-I On the Issue No 7 regarding Additional O&M expenses towards RO Plant raised in the present Appeal, the learned counsel for the Appellant has made the following submissions for our consideration; i. The Appellant with regard to the O&M expenses for RO Plant to be incurred for MYT period of F.Y. 2016-1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es for control period as per estimate mentioned above for FY 2016-17 and same is escalated at 5% per annum on year on year basis for balance control period. iv. The State Commission has erred in holding that additional O&M expenses incurred towards RO Plant fall under the existing category of O&M expenses. The said finding is without any reasons or basis more particularly when water charges have been allowed by the State Commission as "Other O&M Expenses" and in any event admittedly such O&M expenses do not relate to the main plant of the Appellant. V. The State Commission erred in referring to the earlier petitions being Case No.91 of 2013 and Case No.115 of 2013 in as much as during the period relevant to the said petitions the RO Plant was not at all commissioned and there was no question of seeking O&M expenses in regard to the same. There was no question of VIPL not being aware that the said plant would require additional expenditure or seeking the same in the said petitions. Vi. The State Commission has erred in holding that it has allowed additional Auxiliary Consumption of RO Plant since the actual considering the additional Auxiliary Consumption ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Auxiliary Consumption, including that of the RO Plant, being higher than the normative. However, the actual O&M expenses are substantially lower than the normative, and hence there is no need to separately allow the O&M expenses for the RO Plant. The Commission notes that it had given a similar treatment for FGD: the additional Auxiliary Consumption for FGD was allowed in its Orders for Rlnfra-G and Tata Power Company Ltd (Generation Business) (TPC-G), but no additional O&M expenses for FGD were allowed" ii. Considering the facts and analysis set out above, the State Commission did not find any merit in the representation of the Appellant. Hence the Respondent Commission has disallowed additional O&M Expenses for RO Plant and did not find it appropriate to pass them to the Consumers. G-III Our observations on the Issue No 7 regarding Additional O&M expenses towards RO Plant are as follows:- i. The State Commission in its Impugned Order has detailed out the issue related to additional O&M expenses for RO Plant as well as normative O&M expenses allowed in the Impugned Order. ii. We have perused the findings of the State Commission and do not find any inf....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e present Appeal, the learned counsel for the State Commission has made the following submissions for our consideration; i. The State Commission, in its Impugned Order dated 20 June, 2016 on that Petition in Case No. 91 of 2015, has given the reasons for requiring VIPL-G to refund the amount, in six monthly instalments, mainly attributable to procurement of fuel at a rate higher than and on a different basis from that considered while approving the Power Purchase Agreement (PPA) with Reliance Infrastructure Ltd. (Distribution) (rlnfrad). ii. Taking into account the State Commission's analysis of the fuel costs and other elements of the ARR, para. 2.31.1 of the Impugned Order sets out the Summary of the approved True-up and the Revenue Surplus determined as Rs. 434.70 crore for FY 2014-15. At para. 2.31.2, the State Commission has stated that "Although the net revenue surplus for FY 2014-15 has been determined as above, the entire amount cannot be considered as surplus to be adjusted from the ARR of FY 2016-17 as the Commission, in the midterm Review (MTR) of Rlnfra-D, has not, in the provisional Truing up for FY 2014-15, allowed the variation in Energ....