Comments-on-Draft-amendments-in-NTP-.pdf

Suggestions for Amendment in the Tariff Policy, 2016 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion All future requirement of power s...

Suggestions for Amendment in the Tariff Policy, 2016 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion All future requirement of power should continue to be All future requirement of power should 1. The Policy objective clearly mentions the procured competitively by distribution licensees except in continue to be procured competitively by availability of electricity to consumers at cases of expansion of existing projects or where there is a distribution licensees reasonable and competitive rates. Hence company owned or controlled by the State Government or any exception to power procurement Central Government as an identified developer and where through Competitive Bidding is not aligned regulators will need to resort to tariff determination based to policy objective. Hence all future power on norms provided that expansion of generating capacity by procurement shall be through competitive private developers for this purpose would be restricted to bidding without any exception. one time addition of not more than 100% of the existing 2. Policy advocates for price to be determined capacity. competitively in its General approach to Provided further that the Appropriate Commission, as tariff. Therefore there should not be any defined in the Electricity Act, 2003, compulsion to buy power from expansion of 5.2 shall ensure that in case of expansion of such projects, the existing plants on MoU basis; benefit of sharing of infrastructure of existing project and 3. Projects developed out of expansion of efficiency of new technology is passed on to consumers existing projects use already developed through tariff. facilities (e.g. roads, rail, reservoirs etc.), and Provided also that the State Government can notify a policy hence such projects should be able to to encourage investment in the State by allowing setting up compete at lower than the earlier of generating plants, including from renewable energy discovered tariff. Hence, there is no sources out of which a maximum of 35% of the installed rationale for determining tariff for such capacity can be procured by the Distribution Licensees of projects and it is suggested that all future that State for which the tariff may be determined under power procumbent to be on Competitive Section 62 of the Electricity Act, 2003. basis. Provided that notwithstanding the provision contained in para 5.11(j) of the policy, the tariff for such 35% of the 1 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion installed capacity shall be determined by SERC. However, the 15% of power outside long term PPAs allowed under para 5.7.1 of National Electricity Policy shall not be included in 35% allowed to be procured by Distribution Licensees of the State. The tariff of all new generation and transmission projects of The tariff of all new generation and MSEDCL suggests that in line with Clause 5.2 (all company owned or controlled by the Central Government transmission projects of company owned or power procurement through competitive shall continue to be determined on the basis of competitive controlled by the Central Government shall bidding), all new (intra as well as interstate) bidding as per the Tariff Policy notified on 6th January, 2006 continue to be determined on the basis of transmission projects should also come through unless otherwise specified by the Central Government on competitive bidding as per the Tariff Policy Competitive Bidding Only. It is also suggested 5.3 case to case basis. notified on 6th January, 2006. that Competitive bidding should also be Intra-state transmission projects shall be developed by State All new Intra-state transmission projects applicable to all Generation projects; hence the Government through competitive bidding process for shall be developed by State Government ‘Generation’ word to be retained. projects costing above a threshold limit which shall be through competitive bidding process only. decided by the SERCs. The Central Electricity Regulatory Commission in Needs to omitted 1. Since all future power procurement is consultation with Central Electricity Authority and other mandated under Competitive Bidding; such stakeholders shall frame within six months, regulations for provision is inconsistent with the Clause 5.2 of the Policy. Hence, purchase of electricity determination of tariff for generation of electricity from from projects using coal washery rejects projects using coal washery rejects. These regulations shall should also be done through Competitive 5.4 also be followed by State Electricity Regulatory Bidding only in order to reduce the Commissions. consumer tariffs; 2. If Government wants to encourage coal washery, considering the higher cost plus tariffs, such procurement should be made eligible for compliance of RPO under non- solar power. 2 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion 3. Government shall issue Standard Bidding Documents for such projects. No Feed-in- Tariff (FIT) shall be made applicable to such projects. The Central Commission would will notify, from time to The Central Commission will notify, from MSEDCL suggests that instead of consistent time, the rate of return on equity for generation and time to time, the rate of return on equity for higher rate of return, considering the reduction transmission projects keeping in view the assessment of generation and transmission projects in the interest rates of long term loans, the Rate overall risk and the prevalent cost of capital which shall be keeping in view the assessment of overall of return on equity should be linked to interest followed by the SERCs also. The rate of return notified by risk and the prevalent cost of capital which rates of long term loans and needs to be 4 to CERC for transmission may be adopted by the SERCs for shall be followed by the SERCs also. Such 5% more than 10 year benchmark bond yield distribution with appropriate modification taking into view rates shall necessarily be linked to 10 year (G. Sec 10 year). Further in cost plus regime, 5.11 (a)- the risks involved. For uniform approach in this matter, it benchmark bond yield (G. Sec 10 year). The there is no rationale for specifying separate 2ndpara would be desirable to arrive at a consensus through the rate of return notified by CERC for norms for G, T and D. Same criteria needs to be Forum of Regulators. transmission may be adopted by the SERCs followed for G, T and D for rate of return. for distribution with appropriate modification taking into view the risks involved. For uniform approach in this matter, it would be desirable to arrive at a consensus through the Forum of Regulators. The State Commission may consider ‘distribution and supply The State Commission may consider All legitimate costs should be allowed to margin’ as basis for allowing returns in the distribution ‘distribution and supply margin’ as basis for DISCOMs. business at an appropriate time. The State Commission may allowing returns in the distribution business also consider price cap regulation based on comprehensive at an appropriate time. The Forum of 5.11 (a)- 4th study. The Forum of Regulators should evolve a Regulators should evolve a comprehensive para comprehensive approach in this regard. The considerations approach in this regard. The considerations while preparing such an approach would, inter-alia, include while preparing such an approach would, issues such as reduction in Aggregate Technical and inter-alia, include issues such as reduction in Commercial losses, improving the standards of performance Aggregate Technical and Commercial losses, 3 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion and reduction in cost of supply. improving the standards of performance and reduction in cost of supply. c) Depreciation c) Depreciation 1. It is observed that generators whose Energy ….. Purchase Agreement term is on the verge of ….. Benefit of reduced tariff after the assets have been fully expiry or already expired are approaching Benefit of reduced tariff after the assets depreciated shall remain available to the consumers. MSEDCL for contracting power for further have been fully depreciated shall remain Notwithstanding the above, power from those plants of a period. available to the consumers. generating company, where either whose PPAs have expired 2. Since, such projects have already recovered Notwithstanding the above, power from or plants have completed their useful life, may be bundled its legitimate cost through Feed-In-Tariff; the those plants of a generating company, with power from renewable generating plants to be set up real ownership of such projects is with where either whose PPAs have expired or through the process of bidding or for which the equipment DISCOM consumers and they shall practically plants have completed their useful life for setting up such plant is procured through competitive get the benefit of it by way of lower tariff. necessarily be procured through process of bidding. In such cases, power from such plants can be competitive bidding and /or operating cost 3. Bundling of such projects with other reallocated to beneficiaries purchasing power from competitively bid projects may lead to undue recovery principle. The Appropriate 5.11 c) renewable energy generating plants on the principles to be profiteering by such developers and Commission may specify principles in the decided by Appropriate Government. The Obligated Entities additional cost to consumers through tariff. said matter and ceiling tariff on case to case which finally buy such power shall account towards their basis. 1. It is necessary to assess different tariff renewable purchase obligation to the extent of power options that might be considered post bought from renewable energy generating plants. EPA/PPA expiry period of various types of RE/other conventional Projects, and the principles & modalities of the same may be laid down by the appropriate commission. 2. MSEDCL proposes that operating cost recovery principle shall be adopted for such wind projects and competitive bidding models for other technologies such as Co- gen, Biomass etc. 4 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion 3. Ceiling tariff for such cases may be determined by appropriate commission. 5.11 g) Renovation and modernization of generation plants While deciding cost benefit of R&M of (including repowering of wind generating plants) need to be generation plant, cost implications for adhering encouraged for higher efficiency levels even though they to improved environmental norms should also may have not completed their useful life. be considered. …. Considering the falling cost of RE power, viability of encouraging R & M of old generating plants needs to be reconsidered. 6.2 (1) A two-part tariff structure should shall be adopted for all No Comments 1. MSEDCL welcomes the proposed long-term and medium-term contracts to facilitate Merit amendment. Order dispatch. According to National Electricity Policy, the 2. MSEDCL suggests that a transparent Availability Based Tariff (ABT) is also to be introduced at method may be devised to implement State level. This framework would be extended to proposed clause and it would prove to be generating stations (including grid connected captive plants beneficial to the consumers. Government of India may take lead on this subject. of capacities as determined by the SERC). The Appropriate Commission shall introduce differential rates of fixed charges for peak and off peak hours for better management of load within a period of two years. 6.2 (4) After the award of bids, if there is any change in domestic After the award of bids, if there is any 1. Bids submitted by developers and Power duties, levies, charges, surcharges, cess and taxes imposed change in domestic duties, levies, charges, purchase agreement are two important by Central Government, State Governments/Union surcharges, cess and taxes imposed by document that stipulates and drives Territories or by any Government instrumentality leading to Central Government, State recourse action to tide over any corresponding changes in the cost, the same may be treated Governments/Union Territories or by any eventualities such as change in law. as “Change in Law” and may unless provided otherwise in Indian Government instrumentality leading 2. MSEDCL suggest that the ambit of such the PPA, be allowed as pass through. subject to approval of to corresponding changes in the cost, the change in law situations should be limited to the Appropriate Commission. The Appropriate Commission same may be treated as “Change in Law” changes in law/taxation made by any Indian 5 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion shall lay down the principle and procedure for the same. and may unless provided otherwise in the government instrumentality. Provided further that Appropriate Commission shall also PPA, be allowed as pass through, subject to 3. Supreme Court in Civil appeal number 5399- allow and establish mechanism for reimbursement of approval of the Appropriate Commission. 5400 of 2016 and batch dated 11thApril, carrying cost for the period from date of occurrence of The Appropriate Commission shall lay down 2017 has ruled that any change in foreign change in law and till the approval of Change in law by the the principle and procedure for the same. law does not translate to change in law Commission. Provided further that Appropriate events under PPA. Provided further that in case of dispute in implementation of Commission shall also allow and establish 4. From proposed amendment it seems that above procedure, principles the same may be referred to the mechanism for reimbursement of carrying Discoms and Generators needs to decide on Appropriate Commission. cost for the period from date of occurrence change in law cases based on the principles of change in law and till the approval of and procedures laid down by the Provided further that in case of any excess payment made, Change in law by the Commission. The Commission. The Role of the Commission is the same shall be reimbursed at the rate of carrying cost. Appropriate Commission shall decide issue only in case of disputes in implementation of reimbursement of carrying cost only of procedures laid by it. MSEDCL suggest after assessment of controllable and that the appropriate Commission is the only uncontrollable events involved therein. forum to decide whether a particular event Provided further that in case of dispute in is change in law or not. implementation of above procedure, the 5. While deciding issue of carrying cost same may be referred to the Appropriate incurred on account of change in Law Commission. events, the Commission needs to access Provided further that in case of any excess controllable and uncontrollable events payment made, the same shall be involved in the issue. Impact due to any reimbursed at the rate of carrying cost. controllable events shall not be passed on to Discoms. 6.4 (i) Pursuant to provisions of section 86(1)(e) of the Act, the Ministry of Power has already issued ‘Long 1. While adopting RPO trajectory, RE potential Appropriate Commission shall fix a minimum percentage of term growth trajectory of RPOs’ for non- and installed capacity in state needs to be the total consumption of electricity in the area of a solar as well as solar sources, uniformly for assessed. distribution licensee for purchase of energy from renewable all States/UTs, initially for three years from 2. Determination of terms and tariff of 6 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion energy sources, taking into account availability of such 2016-17 to 2018-19. Further Trajectory for distribution segment is prerogative of State resources and its impact on retail tariffs. Cost of purchase of the period till year 2022 and also further Commission. Just for sake of meeting RPO renewable energy shall be taken into account while beyond that, if required, shall be notified by target high cost of RE Power should not be determining tariff by SERCs. Long term growth trajectory of the Ministry of Power in consultation with passed on to the consumers. Renewable Purchase Obligations (RPOs) will be prescribed MNRE from time to time. All SERCs will 3. Hydro being the renewable in true sense, it by the Ministry of Power in consultation with MNRE. adopt the RPO trajectory issued by Central should be considered as renewable power Ministry of Power has already issued ‘Long term growth Government considering RE and should be accounted for meeting RPO trajectory of RPOs’ for non-solar as well as solar sources, potential/installed capacity in state and its obligations. uniformly for all States/UTs, initially for three years from impact on retail tariffs. 4. All renewable power except municipal waste 2016-17 to 2018-19. Further Trajectory for the period till Provided that the applicable base should be procured through competitive year 2022 and also further beyond that, if required, shall be consumption for assessment of RPO bidding (reverse auction). notified by the Ministry of Power in consultation with MNRE requirement and its compliance shall be 5. In order to extract the States’ RE potential from time to time. All SERCs will adopt the RPO trajectory worked out from total consumption by and to increase competitiveness, issued by Central Government. deducting the consumption from Hydro procurement of RE power from any state/UT Provided that the applicable base consumption for power. be allowed. It is also necessary for the assessment of RPO requirement and its compliance shall be Provided further that in case the obligated development of country-wide renewable worked out from total consumption by deducting the entity is an industry with captive generation, energy market. consumption from Hydro power. the consumption from captive generation 6. Increase flexibility to manage RPO/ Merging Provided further that in case the obligated entity is an from waste heat gases as a by-product of the of RPO Targets: industry with captive generation, the consumption from industrial process shall also be deducted Discoms want to meet their overall RPO captive generation from waste heat gases as a byproduct of from total consumption; through more cost effective RE, like wind in the industrial process shall also be deducted from total Provided further that in case of consumption short run and then shift to solar. However, consumption; from cogeneration from sources other than this is not possible with RE technology Provided further that in case of consumption from renewable sources, the same shall not be specific RPO. Hence Solar and Non-solar cogeneration from sources other than renewable sources, excluded from applicability of RPOs to arrive RPO targets should be merged. the same shall not be excluded from applicability of RPOs to at base consumption for of RPO requirement arrive at base consumption for of RPO requirement and and compliance. 7 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion compliance. Provided further that the electricity Provided further that the electricity generated and generated and consumed from the waste consumed from the waste heat in gas based power plant, heat in gas based power plant, shall not be shall not be deducted to arrive at base consumption. deducted to arrive at base consumption. 6.4 (iii) It is desirable that purchase of energy from renewable Clarity regarding REC mechanism is In spite of best efforts of the obligated entity, if sources of energy takes place more or less in the same required it is not possible for it to meet its RPO due to proportion in different States. To achieve this objective in any reason beyond its control, then REC shall be the current scenario of large availability of such resources allowed to that extent or such quantum shall be only in certain parts of the country, an appropriate allowed to be deferred. Also the obligated mechanism such as Renewable Energy Certificate (REC) entity shall not be charged with penalty for non- would need to be promoted. Through such a mechanism, fulfilment of RPO. the renewable energy based generation companies can sell the electricity to local distribution licensee at the rates for conventional power and can recover the balance cost by selling certificates to other distribution companies and obligated entities enabling the latter to meet their renewable power purchase obligations. The REC mechanism should also have a solar specific REC. 6.4 (iv) Appropriate Commission may also provide for a suitable regulatory framework for encouraging such other emerging renewable energy technologies by prescribing separate technology based REC multiplier (i.e. granting higher or lower number of RECs to such emerging technologies for the same level of generation). Similarly, considering the change in prices of renewable energy technologies with passage of time, the Appropriate Commission may prescribe vintage based REC multiplier (i.e. granting higher or lower number of 8 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion RECs for the same level of generation based on year of commissioning of plant). 8.0 DISTRIBUTION 1. 24x7 power supply is a welcome step. Supply of reliable and quality power of specified standards in 2. Short term arrangement provides a effective tool for peak management as peak an efficient manner and at reasonable rates is one of the load cannot be accurately projected. Hence main objectives of the National Electricity Policy. The State ~ 15-20% power shall be allowed to be Commission should determine and notify the standards of procured through short term arrangement. performance of licensees with respect to quality, continuity 3. Excess Long Term PPAs will lead Discoms to and reliability of service for all consumers. It is desirable that incur higher capacity charges and the Forum of Regulators determines the basic framework on consumers will be burdened with high cost power. service standards. A suitable transition framework could be provided for the licensees to reach the desired levels of service as quickly as possible. The basic framework on service standards shall include the following: i. Continuity and reliability of supply – the consumer is entitled to have reliable supply of electricity on a 24x7 basis provided he is not in default, and has not been charged with any offence under the Electricity Act warranting disconnection. ii. The quality of supply shall be as per standards prescribed by the Central Electricity Authority iii. Application for connection/ disconnection/enhancement or reduction of connected load must be responded to and disposed off within a reasonable time frame iv. Complaints of disruption in supply must be responded within the stipulated time frame barring major 9 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion breakdown or force majeure Penalties may be imposed on licensees in accordance with section 57 of the Act for failure to meet the standards. Within the above framework the State Commission shall notify the standards of performance of licensee with respect to quality, continuity and reliability of service for all consumers. This notification shall issue within 60 days of the issue of the Tariff Policy. ….. The State Regulatory Commission will devise a specific trajectory so that It shall be mandatory for the Distribution Company to show to the respective Commission that they have tied up long term/ medium term PPAs to meet the annual average power requirement in their area of supply, failing which their license shall be liable to be suspended. 24 hours supply of adequate and uninterrupted power may be ensured to all categories of consumers by March, 2019 or earlier 2021-22 or earlier depending upon the situation prevailing in the State. In case of power cuts other than in force majeure conditions or technical faults an appropriate penalty, as determined by the SERC shall be levied on the Distribution Company and credited to the account of the respective consumers. The quantum of penalty shall be laid down by the respective SERC through Regulations. 8.1 2) The State Commissions should introduce mechanisms for The State Commissions should introduce This provision is the basis for sharing of gains or sharing of excess profits and losses with the consumers as mechanisms for sharing of excess profits losses during control period which encourages 10 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion part of the overall MYT framework. In the first control period and losses with the consumers as part of Discoms for efficient operations. Hence this the incentives for the utilities may be asymmetric with the the overall MYT framework. In the first provision needs to be retained percentage of the excess profits being retained by the utility control period the incentives for the set at higher levels than the percentage of losses to be utilities may be asymmetric with the borne by the utility. This is necessary to accelerate percentage of the excess profits being performance improvement and reduction in losses and will retained by the utility set at higher levels be in the long term interest of consumers by way of lower than the percentage of losses to be borne tariffs. by the utility. This is necessary to accelerate performance improvement and reduction in losses and will be in the long term interest of consumers by way of lower tariffs. 8.1 4) The tariff shall be a two part tariff with the capital costs 1. It is a welcome step. being reflected in the fixed charges linked to capacity and 2. At present, around 55% of total cost of the energy charges reflecting the average purchase price of MSEDCL is fixed in nature; however, the recovery through fixed charges is much power with administrative margins. Licensees may have the lower at around 16% of total revenue. flexibility of charging lower tariffs than approved by the Higher quantum of revenue recovery State Commission if competitive conditions require so through variable charges instead of fixed without having a claim on additional revenue requirement charges results into steep fluctuations in on this account in accordance with Section 62 of the Act. revenue with varying consumption. This affects Discoms ability to meet its fixed coat obligations. 8.2 All power purchase costs to provide 24 hour supply need to 1. MSEDCL welcomes the proposed provision. 8.2.1 (1) be considered legitimate unless it is established that the 2. SERC should consider trajectory proposed in merit order principle has been violated or power has been UDAY scheme for determination of tariff. purchased at unreasonable rates. Further, there is need to reduce the Aggregate Technical & Commercial (AT&C) losses. The reduction of Aggregate Technical & Commercial (AT&C) losses needs to be brought about but not bydenying 11 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion revenues required for power purchase for 24 hours supply and necessary and reasonable O&M and investment for system up- gradation. Consumers, particularly those who are ready to pay a tariff which reflects efficient costs have the right to get uninterrupted 24 hours supply of quality power. Actual level of retail sales should be grossed up by normative level of AT&C losses as indicated in MYT trajectory for allowing power purchase cost subject to justifiable power purchase mix variation (for example, more energy may be purchased from thermal generation in the event of poor rainfall) and fuel surcharge adjustment as per regulations of the SERC. 8.2.1 (3) Section 65 of the Act provides that no direction of the State Section 65 of the Act provides that no 1. Policy advocates for Payment of subsidies Government regarding grant of subsidy to consumers in the direction of the State Government regarding through DBT with an ultimate goal to bring tariff determined by the State Commission shall be operative grant of subsidy to consumers in the tariff down cross subsidy; if the payment on account of subsidy as decided by the State determined by the State Commission shall 2. However there is no discussion on Commission is not made to the utilities and the tariff fixed be operative if the payment on account of protection of Licensee’s revenue from by the State Commission shall be applicable from the date of subsidy as decided by the State Commission subsidized category; issue of orders by the Commission in this regard. The State is not made to the utilities and the tariff 3. There are inherent difficulties in Commissions should ensure compliance of this provision of fixed by the State Commission shall be recovering the payments from farmers. It law to ensure financial viability of the utilities. To ensure applicable from the date of issue of orders is also difficult to disconnect the supply of implementation of the provision of the law, the State by the Commission in this regard. The State farmers in case of draught like situations. Commission should determine the tariff initially, without Commissions should ensure compliance of It is observed that collection efficiency considering the subsidy commitment by the State this provision of law to ensure financial from the agriculture consumers is only Government and subsidized tariff shall be arrived at viability of the utilities. To ensure around 15-16%. thereafter considering the subsidy by the State Government implementation of the provision of the law, 4. It is strongly advised to assess the for the respective categories of consumers. the State Commission should determine the practicability of DBT on pilot basis. Only The Appropriate Commission shall determine the tariff tariff initially, without considering the 12 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion without taking into account any subsidy components. Any subsidy commitment by the State after conducting the pilot study and subsidy to be given to any category of consumers shall be Government and subsidized tariff shall be considering the stakeholders responses, given by way of Direct Benefit Transfer directly into their arrived at thereafter considering the subsidy further decision on DBT shall be taken. accounts. by the State Government for the respective categories of consumers. 8.2.1 (5) Pass through of past losses or profits should be allowed to Pass through of past losses or profits should The controllable factor needs to be considered the extent caused by uncontrollable factors. During the be allowed to the extent caused by for sharing of losses and gains irrespective of transition period controllable factors should be to the uncontrollable factors. The controllable period. account of utilities and consumers in proportions factors should be to the account of utilities determined under the MYT framework. and consumers in proportions determined under the MYT framework. 8.3 In accordance with Section 43 and 45 of the Electricity Act, In accordance with Section 43 and 45 of the 1. Section 65 of the Electricity Act, 2003 1. 2003 all consumers shall be metered and shall be required Electricity Act, 2003 all consumers shall be stipulates provisions related to grant of to pay electricity charges for the electricity consumed in metered and shall be required to pay subsidy. accordance with the tariff fixed by the Appropriate electricity charges for the electricity 2. MSEDCL is serving around 41 Lakhs Commission. Where government propose to give subsidy to consumed in accordance with the tariff fixed agriculture consumers. There are inherent any category of consumers, this may be done by Direct by the Appropriate Commission. Where difficulties in recovering arrears from Benefit Transfer. government propose to give subsidy to any Agricultural consumers as well as category of consumers, this may be done as disconnecting such consumers. In the per stipulations made in Section 65 of the absence of any remedial provisions, Electricity Act, 2003. Licensees will end-up losing revenue. 3. As already indicated in comment on Clause 8.2.1 (3) above, decision on DBT needs to be taken only after pilot study is done. 8.3 In a time frame of three years Electricity Supply shall shift The appropriate Commission shall define 1. It has been observed that theft of 2. from a post-paid basis to pre-paid basis with the meters milestones for shifting consumers from a electricity by hooking supply wires beyond 13 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion being designed to automatically cut off supply when the post-paid to pre-paid regime, with the meters is rampant and prepaid metering is amount credited is exhausted. Accordingly the meters will meters being designed to automatically cut not a solution for this type of theft. be Smart Meter in a pre-paid mode for bigger consumers off supply when the amount credited is 2. Considering the huge quantum of and simple prepaid meter for smaller consumers. The exhausted. Accordingly the meters will be electricity consumers, prepaid metering trajectory for this shall be laid down by the Appropriate Smart Meter in a pre-paid mode for bigger will only add to huge capex thereby Commission with priority given to areas with high losses. The consumers and simple prepaid meter for increasing tariff further without any shift to the pre-paid system will do away with all the smaller consumers. Priority should be given benefits. Further, it is necessary to problems associated with meter reading, billing, collection to areas with high losses. The shift to the consider limitations in manufacturing & and disconnection in case of non-payment. pre-paid system will do away with all the installation capacity in the country. problems associated with meter reading, 3. The Electricity Act requires notice to be billing, collection and disconnection in case given to consumer before disconnection. of non-payment. The Act will have to be amended if prepaid meters are to be installed. 8.3 Third proviso to the sub-section (2) of the Section 42 of the No Comment 1. MSEDCL welcomes the provisions made in 3. Electricity Act 2003 inter-alia provides that cross subsidies the proposed amendment. However, if the shall be progressively reduced in the manner as may be tariffs are brought within ±20% of average specified by the State Commission. Towards this end, the cost of supply then it will lead to increase in Appropriate Commission would ensure that cross-subsidies tariff of subsidised category. Presently, tariff are reduced and the tariff for all consumer categories are of farmers have been cross-subsidised and brought within ±20% of the average cost of supply effective also supported by government subsidy. from 1st April 2019 or earlier. Despite of subsidy benefit, recovery from Provided that the consumers belonging to poorer sections of farmers is very low. the society who consume below 60 kWh per month may 2. If the tariffs of farmers are increased, poor receive a special support through cross subsidy. Effective recovery and inherent difficulties in tariffs for such designated group of consumers will be at disconnecting their supply will further badly least 50% of the average cost of supply after taking into affect DISCOM’s financial and its ability to account the subsidy given by the State Government through serve its consumers. DBT mechanism in accordance with para 8.3A (11) of this 14 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion Policy. 8.3 In keeping with the principle that the tariff reflects the cost 4. of supply of electricity the Appropriate Commission shall, with effect from 1st April, 2019, determine the tariff in such manner that the slabs are brought within +/- 20% of the cost of supply. 8.3 In order to promote electric mobility and for enhancing In order to promote electric mobility and 1. As indicated in Clause 8.1 (4), the two part 8. energy security, SERCs may lay down appropriate tariff for enhancing energy security, SERCs may tariff shall be applicable to all categories framework for electricity supply from the Discom to the lay down appropriate tariff framework for without any exception. charging stations such that: electricity supply from the Discom to the (a) Tariff shall be less than or equal to the average cost charging stations such that: of supply determined based on AT&C loss level of - there shall be two part tariff 15% or actual, whichever is lower, and (b) there shall be single part tariff for this purpose in the initial 3 years 8.3 A Simplification of tariff categories and rationalization of retail 1. Though this is a welcome step by the tariff Ministry and it is good to have less number of tariff categories, it is pertinent to note that some categories have been created as Over the years, the tariff structure across the States has a consequence of litigation or sometimes become very complex and disparate and there is a need to there is necessity of separation of not only simplify and rationalize the tariff structure, but also categories; make it harmonious across all States. Towards this end, the following principles shall be adopted: 2. Further, various factors such as capacity to pay, type of usage, uniqueness of activity, social aspects, etc. also affect number of categories. 15 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion (8) For consumers who are having suitable meters, the time- of- No Comment This is a welcome step. the-day (ToD) and two part tariffs shall be introduced not later than 1stApril 2019. This scheme should automatically be extended to other consumers as and when they get meters suitable for ToD and two part tariff. (9) In order to reflect the actual share of fixed cost in the In order to reflect the actual share of fixed This is a welcome step. Draft National Policy revenue requirement of Distribution licensees, there is need cost in the revenue requirement of mandates the discom to provide 24 x 7, quality to enhance recovery through fixed charges. The fixed charge Distribution licensees, there is need to power to the consumers. Provision of penalty shall be so set that it leads to recovery of at least 50% of the enhance recovery through fixed charges. has been prescribed in case Discom fails to fixed costs in case of Domestic and Agriculture categories The fixed charge shall be so set that it leads provide 24x7 quality supply. Hence there is no and at least 75% recovery of fixed costs in case of other to recovery of 100% of the fixed costs over rationale for not providing for 100% recovery of categories progressively over next three years. The SERCs next three years. The SERCs and JERCs shall fixed costs through fixed charges. and JERCs shall lay down a roadmap to achieve the same. lay down a roadmap to achieve the same. Two part tariff structure is in place for MSEDCL, Provided that tariff for poorer sections of the society Provided that tariff for poorer sections of which consists of fixed cost/demand charges referred to in para 8.3 of this Policy shall be single part tariff. the society referred to in para 8.3 of this and energy charges. However, at present, the Policy shall be two part tariff. fixed costs constitute around 55% of the ARR of MSEDCL, whereas their revenue recovery through fixed Charges amounts to ~ 16% of total revenue. Hence, 100% fixed costs should be recovered from fixed charges. (10) In case State Government decides to subsidize a certain Needs to omitted 1. As already indicated in comment on Clause section of consumers, the relief shall be passed on to such 8.2.1 (3) above, decision on DBT needs to consumers solely through direct benefit transfer (DBT) be taken only after pilot study is done. mechanism. 8.5 … No Comment 1. This is a welcome initiative. 8.5.1 Provided that the surcharge shall not exceed 20% of the 2. Section 42 (2) of the Electricity Act stipulates 16 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion st 1 proviso tariff applicable to the category of the consumers seeking levy Cross Subsidy Surcharge to meet open access. current level of cross subsidy. 3. However it is pertinent to note that currently retail tariffs for all the categories are not within the range of ±20% of the average cost of supply. 4. Hence, unless tariff of all the category are brought within ±20% of the average cost of supply, till such time such capping of ±20% should not be implemented. 8.5 … … 1. When a DISCOM consumer opts for Open 8.5.1 Provided further that the open access customer shall be Provided further that the open access Access, the loss of cross-subsidy remains a loss to the DISCOM thereafter and cross nd 2 proviso liable to pay cross subsidy surcharge for a maximum period customer shall be liable to pay cross subsidy subsidy surcharge does not make good such of one year from the date of opting for open access. surcharge for a maximum period of one loss in one year. Hence, there is no rationale year from the date of opting for open for limiting the cross subsidy surcharge for access. just one year. 2. Moreover, section 42 (2) of the Electricity Act stipulates the levy of Cross Subsidy Surcharge and any such provision of restricting CSS to 1 year will be in contravention to the provisions of the Act. 3. Any such provision will result in Industrial/Commercial consumers slowly opting for Open Access and DISCOMs will not be able to survive if all its paying consumers go out of its net. It will also lead to passing of undue burden due to loss of 17 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion Cross subsidy on Common consumers increasing tariff. 8.5.6 In case of outages of generator supplying to a consumer on Standby charges shall be applicable only for 1. MSEDCL welcome the move to charge two open access, standby arrangements should be provided by the open access customers who have not part tariff to Open Access consumers. the licensee on the payment of tariff for temporary retained Contracted Demand with the 2. It is pertinent to note that during outage of connection to that consumer category as specified by the distribution licensee. The Standby charges its captive power plant/OA supply, the Appropriate Commission. Standby charges shall be shall be in the form of two-part tariff levied consumer draws power from the discom applicable only for the open access customers who had have for the maximum demand imposed and the grid. The discom not only has to procure the not retained Contracted Demand with the distribution energy drawn respectively from the system power for such consumers at higher tariff licensee. of distribution licensee during a month in but also needs to keep the infrastructure Standby charges shall be applicable only for the open access which such a customer has to fall back on ready to serve the OA consumer. Hence customers who have not retained Contracted Demand with supply from the distribution licensee for such consumers shall be levied higher the distribution licensee. The Standby charges shall be in the some reason. Standby charges shall be tariffs. form of two-part tariff levied for the maximum demand designed to reflect the actual fixed cost and 3. Standby charges shall be determined by imposed and the energy drawn respectively from the system variable cost liability incurred by the SERCs along with regular tariff of distribution licensee during a month in which such a DISCOMs to supply back up power to Open determination exercise. Fixed cost customer has to fall back on supply from the distribution Access consumer. Standby charges shall be necessarily be equal to 125 % of fixed licensee for some reason.Standby charges shall be designed determined by SERCs along with regular charge applicable to relevant category of to reflect the actual fixed cost and variable cost liability tariff determination exercise. Fixed cost consumer and energy charges needs to be incurred by the DISCOMs to supply back up power to Open necessarily be equal to 125 % of fixed billed at temporary tariff. Access consumer. Standby charges shall be determined charge applicable to relevant category of 4. MSEDCL further submits that in case if any annually by SERCs to reflect the variation in costs over time consumer and energy charges needs to be OA consumer without any standby or Auto- indexation mechanism may be designed for billed at temporary tariff. arrangement draws power from grid due to periodic (quarterly/annual) revision of standby charges. its source failure, then discom should be at Provided that such standby charges shall not be more than liberty to disconnect his supply without 125 percent of the normal tariff (both fixed charge and giving any notice. energy charge separately) of that category. 18 Clause No. Provisions in proposed amendment MSEDCL Suggestion Rationale behind MSEDCL’s suggestion 8.5.7 In case Open Access customer retains Contracted Demand In case Open Access customer retains 1. Consumer needs to seek Open Access for partly or fully, no standby charges shall be levied. Only tariff Contracted Demand partly or fully, no its entire requirement; partial open access applicable and penalties for drawing power beyond standby charges shall be levied. Only tariff need not be allowed. Contracted Demand as determined by the Appropriate applicable and penalties for drawing power 2. Considering Open Access consumer, Commission shall be applicable. beyond Contracted Demand as determined Standby Charges on standby component by the Appropriate Commission shall be will be applicable as suggested in above applicable. clause 8.5.6. 8.5.8 In order to avoid frequent changeover of customers In order to avoid frequent changeover of 1. For short term open access consumers between supply from Open access and that from the customers between supply from Open sourcing power from collective market or incumbent distribution licensee, such customers must access and that from the incumbent power exchanges, there is high degree of schedule power on open access for at least eight distribution licensee, such customers must uncertainty in their power procurement consecutive hours from conventional sources and four schedule power for at least 24 hours from Power Exchange and DISCOMs. They consecutive hours from renewable sources. whenever they seek open access. tend to deviate from their schedule. 2. Considering the number of open access consumers and the fluctuation in their demand, managing replacement power for them is practically not feasible within such a small period of 4-8 hours. Hence it shall be mandatory for OA consumers to schedule their power for at least 24 hours. 19