Madhy aGujarat Vij Company Ltd · 2019. 12. 20. · Madhya Gujarat Vij Company Limited ( MGVCL ) is one of the di stribution companies engaged in distribution of electricity in the

BEFORE THE GUJARAT ELECTRICITY REGULATORY COMMISSION

GANDHINAGAR

CASE NO. 1841/2019

Filing of the Petition for True Up of FY 2018-19

&

Determination of Tariff for FY 2020-21

Under GERC (Multi Year Tariff) Regulations, 2016 along with other Guidelines and

Directions issued by the GERC from time to time AND under Part VII (Section 61 to Section 64) of the Electricity Act, 2003 read with the relevant Guidelines

Filed by:-

MadhyaGujarat Vij Company Ltd.

Corp. Office: Sardar Patel Vidyut Bhavan, Race Course, Vadodara – 390007.

Petition for True Up for FY 2018-19

and Tariff for FY 2020-21

Madhya Gujarat Vij Company Limited 2

BEFORE THE GUJARAT ELECTRICITY REGULATORY COMMISSION

GANDHINAGAR

Filing No:

Case No:

IN THE MATTER OF Filing of the Petition for True Up of FY 2018-19,and

Determination of Tariff for FY 2020-21under GERC (Multi Year

Tariff) Regulations, 2016 along with other Guidelines and

Directions` issued by the GERC from time to time AND under

Part VII (Section 61 to Section 64) of the Electricity Act, 2003

read with the relevant Guidelines

AND

IN THE MATTER OF Madhya Gujarat Vij Company Limited, Sardar Patel Vidyut Bhavan,

Race Course,

Vadodara – 390007

PETITIONER

Gujarat Urja Vikas Nigam Limited

Sardar Patel Vidyut Bhavan,

Race Course,

Vadodara - 390 007

CO-PETITIONER

THE PETITIONER ABOVE NAMED RESPECTFULLY SUBMITS




TABLE OF CONTENTS

SECTION 1. INTRODUCTION ........................................................................................ 8

1.1. PREAMBLE ................................................................................................... 8

1.2. INTRODUCTION .............................................................................................. 8

1.3. MULTI YEAR TARIFF REGULATIONS, 2016 .............................................................. 9

1.4. SUBMISSION BY MGVCL TO THE HON’BLE COMMISSION ............................................ 9

SECTION 2. EXECUTIVE SUMMARY ............................................................................. 10

2.1. PREAMBLE ................................................................................................. 10

2.2. TRUE UP OF FY 2018-19 ............................................................................... 10

2.3. REVENUE GAP FOR FY 2020-21 ....................................................................... 12

2.4. PROPOSED CHANGES IN THE TARIFF STRUCTURE FOR FY 2020-21 ................................ 14

SECTION 3. TRUE UP FOR FY 2018-19 ......................................................................... 15

3.1. PREAMBLE ................................................................................................. 15

3.2. PRINCIPLES FOR TRUE UP FOR FY 2018-19 .......................................................... 15

3.3. CATEGORY WISE SALES ................................................................................... 15

3.4. DISTRIBUTION LOSSES .................................................................................... 16

3.5. ENERGY REQUIREMENT AND ENERGY BALANCE ...................................................... 16

3.6. POWER PURCHASE COST ................................................................................ 17

3.7. CAPITAL EXPENDITURE ................................................................................... 19

3.8. FUNDING OF CAPITALISATION ........................................................................... 21

3.9. FIXED COST FOR FY 2018-19 .......................................................................... 22

3.10. OPERATION & MAINTENANCE EXPENSES.............................................................. 22

3.11. DEPRECIATION ............................................................................................ 26

3.12. INTEREST & FINANCIAL CHARGES ....................................................................... 26

3.13. INTEREST ON WORKING CAPITAL ....................................................................... 28

3.14. PROVISION FOR BAD DEBTS ............................................................................. 28

3.15. RETURN ON EQUITY ....................................................................................... 29

3.16. TAXES....................................................................................................... 30

3.17. NON-TARIFF INCOME FOR FY 2018-19 .............................................................. 30

3.18. AGGREGATE REVENUE REQUIREMENT FOR FY 2018-19 ........................................... 31

3.19. SHARING OF GAINS & LOSSES ........................................................................... 31

3.20. SHARING OF GAIN/ (LOSS) FOR FY 2018-19 ........................................................ 33

3.21. REVENUE FOR FY 2018-19 ............................................................................. 33

3.22. REVENUE GAP/SURPLUS FOR FY 2018-19 ........................................................... 34

SECTION 4. DETERMINATION OF REVENUE GAP/ (SURPLUS) FOR FY 2020-21 ................ 36

4.1. PREAMBLE ................................................................................................. 36

4.2. REVENUE GAP/ (SURPLUS) FOR FY 2020-21 WITH EXISTING TARIFF ............................. 36

4.3. REVENUE FROM FPPPA CHARGES ..................................................................... 36

4.4. REVENUE PROJECTION FOR OTHER CONSUMER RELATED INCOME ................................ 37

4.5. AGRICULTURE SUBSIDY ................................................................................... 38

4.6. TOTAL REVENUE FOR FY 2020-21 .................................................................... 38

4.7. ESTIMATED REVENUE GAP/ (SURPLUS) FOR FY 2020-21.......................................... 38

4.8. PROPOSED CHANGES IN THE TARIFF STRUCTURE FOR FY 2019-20 .............................. 39

SECTION 5. COMPLIANCE OF DIRECTIVES ................................................................... 40

5.1. PREAMBLE ................................................................................................. 40




5.2. COMPLIANCE OF DIRECTIVES .................................................................... 40

SECTION 6. PRAYER .................................................................................................. 44

SECTION 7. ANNEXURE 1: TARIFF SCHEDULE FOR FY 2019-20....................................... 47

SECTION 8. ANNEXURE 2: TARIFF FILING FORMATS ..................................................... 67




LIST OF TABLES

TABLE 1 : TRUE UP FOR FY 2018-19 ....................................................................................... 10

TABLE 2 : SUMMARY OF CONTROLLABLE AND UNCONTROLLABLE FACTORS FOR FY 2018-19 ..................... 11

TABLE 3 : REVENUE GAP FOR FY 2018-19 ................................................................................. 12

TABLE 4 : FPPPA COMPUTATION FOR FY 2020-21 ..................................................................... 12

TABLE 5: TOTAL PROJECTED REVENUE FOR FY 2020-21 AT EXISTING TARIFF ........................................ 13

TABLE 6: ESTIMATED REVENUE GAP/ (SURPLUS) FOR FY 2020-21 AT EXISTING TARIFF ........................... 14

TABLE 7 : CATEGORY-WISE SALES ............................................................................................ 16

TABLE 8 : DISTRIBUTION LOSSES .............................................................................................. 16

TABLE 9 : ENERGY REQUIREMENT AND ENERGY BALANCE ............................................................... 17

TABLE 10: NET POWER PURCHASE COST ................................................................................... 18

TABLE 11 : GAIN/ (LOSS) ON ACCOUNT OF DISTRIBUTION LOSSES FOR FY 2018-19 ............................... 19

TABLE 12 : GAINS / (LOSS) - POWER PURCHASE EXPENSES ............................................................. 19

TABLE 13 : CAPITAL EXPENDITURE ........................................................................................... 20

TABLE 14 : FUNDING OF CAPITALISATION ................................................................................... 21

TABLE 15 : OPERATION & MAINTENANCE EXPENSES ..................................................................... 23

TABLE 16 : EMPLOYEE COST FOR FY 2018-19 ............................................................................ 24

TABLE 17 : REPAIR & MAINTENANCE COST FOR FY 2018-19 .......................................................... 24

TABLE 18 : ADMINISTRATION & GENERAL EXPENSES FOR FY 2018-19 ............................................... 24

TABLE 19 : OTHER DEBITS FOR FY 2018-19 ............................................................................... 25

TABLE 20: EXTRAORDINARY ITEMS .......................................................................................... 25

TABLE 21: NET PRIOR PERIOD EXPENSE/(INCOME) ........................................................................ 25

TABLE 22: TOTAL O&M EXPENSES .......................................................................................... 25

TABLE 23 : FIXED ASSET AND DEPRECIATION FOR FY 2018-19 ........................................................ 26

TABLE 24 : TREATMENT OF DEPRECIATION ................................................................................. 26

TABLE 25 : INTEREST & FINANCE CHARGES ................................................................................. 27

TABLE 26 : TREATMENT OF INTEREST & FINANCE CHARGES ............................................................. 27

TABLE 27 : INTEREST ON WORKING CAPITAL ............................................................................... 28

TABLE 28: BAD & DOUBTFUL DEBTS WRITTEN OFF ...................................................................... 28

TABLE 29 : TREATMENT OF BAD & DOUBTFUL DEBTS ..................................................................... 29

TABLE 30 : RETURN ON EQUITY .............................................................................................. 29

TABLE 31 : TREATMENT OF RETURN ON EQUITY ........................................................................... 29

TABLE 32 : INCOME TAX ....................................................................................................... 30

TABLE 33 : TREATMENT OF INCOME TAX ................................................................................... 30

TABLE 34 : TREATMENT OF NON-TARIFF INCOME ......................................................................... 31

TABLE 35 : AGGREGATE REVENUE REQUIREMENT FOR FY 2018-19 ................................................... 31

TABLE 36 : NET GAIN/ (LOSS) FOR FY 2018-19 .......................................................................... 33

TABLE 37 : REVENUE FOR FY 2018-19 ..................................................................................... 34

TABLE 38 : REVENUE GAP/ (SURPLUS) FOR FY 2018-19 ............................................................... 35

TABLE 39: REVENUE AT EXISTING TARIFF FOR FY 2020-21 ............................................................. 36

TABLE 40: WEIGHTED AVERAGE POWER PURCHASE COST FOR FY 2020-21 ........................................ 37

TABLE 41: COMPUTATION OF REVISED FPPPA CHARGES (RS. /KWH) ................................................. 37

TABLE 42: REVENUE FROM FPPPA CHARGES FOR THE FY 2020-21 ................................................. 37

TABLE 43: OTHER CONSUMER RELATED INCOME FOR FY 2020-21 .................................................... 38

TABLE 44: AGRICULTURE SUBSIDY FOR FY 2020-21 ..................................................................... 38




TABLE 45: TOTAL REVENUE FOR FY 2020-21 ............................................................................. 38

TABLE 46: ESTIMATED REVENUE GAP FOR FY 2020-21 AT EXISTING TARIFF ........................................ 39




ABBREVIATIONS

1. ARR Aggregate Revenue Requirement

2. DGVCL Dakshin Gujarat Vij Company Limited

3. FPPPA Fuel and Power Purchase Price Adjustment

4. FY Financial Year

5. GEB Erstwhile Gujarat Electricity Board

6. GERC Gujarat Electricity Regulatory Commission

7. GERC MYT Regulations, 2016

GERC (Multi Year Tariff) Regulations, 2016

8. GETCO Gujarat Energy Transmission Corporation Limited

9. GoG Government of Gujarat

10. GoI Government of India

11. GSECL Gujarat State Electricity Corporation Limited

12. GUVNL Gujarat Urja Vikas Nigam Limited

13. kV Kilo Volt

14. kVA Kilo Volt Ampere

15. kVAh Kilo Volt Ampere Hour

16. kWh Kilo Watt Hour

17. MCLR Marginal Cost of Funds based Lending Rate

18. MGVCL Madhya Gujarat Vij Company Limited

19. MTR Mid-Term Review

20. MU Million Units (Million kWh)

21. MVA Mega Volt Ampere

22. MW Mega Watt

23. MYT Multi Year Tariff

24. MYT Control Period FY 2016-17, FY 2017-18, FY 2018-19, FY 2019-20 & FY 2020-21

25. O&M Operation & Maintenance

26. PGVCL Paschim Gujarat Vij Company Limited

27. UGVCL Uttar Gujarat Vij Company Limited




SECTION 1. INTRODUCTION

1.1. PREAMBLE

1.1.1. This section presents the background and reasons for filing this Petition.

1.2. INTRODUCTION

1.2.1 The Government of Gujarat (hereinafter referred to as “GoG”) notified the Gujarat

Electricity Industry (Reorganization and Regulation) Act 2003 (herein after called as

“Act”) in May 2003 for the reorganization of the entire power sector in the State of

Gujarat.

1.2.2 Pursuant to the above, Government of Gujarat in their letter vide GO / 19th August

2003 had directed GEB to form four Distribution Companies (Discoms) based on

geographical location of the circles. Accordingly, the four distribution companies had

been incorporated with the Registrar of Companies (RoC) on September 15th, 2003.

Madhya Gujarat Vij Company Limited (MGVCL) is one of the distribution companies

engaged in distribution of electricity in the middlezone area of Gujarat.

1.2.3 The Madhya Gujarat Vij Co. Ltd obtained its Certificate of Commencement of Business

on the 15th October, 2003. However, the company did not commence its commercial

operations during the financial year ending 31st March, 2005. The Company has

started its commercial function w.e.f. 1st April 2005.

1.2.4 The Gujarat Electricity Regulatory Commission (hereinafter referred to as “GERC” or

“the Hon’ble Commission”), an independent statutory body constituted under the

provisions of the Electricity Regulatory Commissions (ERC) Act, 1998 and is currently

under purview of the Electricity Act, 2003. GERC is vested with the authority of

regulating the power sector in the State inter alia including determination of Tariff for

electricity consumers.

1.2.5 Hon’ble Commission notified the Gujarat Electricity Regulatory Commission (Multi-

Year Tariff) Regulations, 2016 (“GERC MYT Regulations, 2016”) on 29th March 2016

and shall be applicable for determination of tariff in all cases covered under the

regulations from 1st April, 2016 onwards.

1.2.6 The Hon’ble Commission issued Order in Case No. 1624 of 2016 dated 31st March,

2017 for Truing up of FY 2015-16, approval of final ARR for FY 2016-17 and approval

of Multi-Year ARR for FY 2016-17 to FY 2020-21 and determination of Tariff for FY

2017-18. Subsequently, the Hon’bleCommission issued Order in Case No. 1701 of

2017 dated 31st March, 2018 for Truing up of FY 2016-17 and determination of Tariff

for FY 2018-19.

1.2.7 The Hon’ble Commission issued Order in Case No. 1761 of 2018 dated 24 April 2019

for Truing up of FY 2017-18, Mid-Term Review of ARR of FY 2019-20 & FY 2020-21 and

determination of Tariff for FY 2019-20.




1.3. MULTI YEAR TARIFF REGULATIONS, 2016

1.3.1 Under section 62 of the Electricity Act, 2003 and under the MYT Regulation, 2016

along with other guidelines and directions issued by the GERC from time to time,

MGVCL is required to file a Petition for Truing-Up for FY 2018-19and Determination of

Tariff for FY 2020-21 with the Hon’ble Commission. The relevant extracts of the MYT

Regulations, 2016 are given in the following paragraphs.

Section - 3.1 of MYT Regulations, 2016:

“3.1 The Commission shall determine tariff within the Multi-Year Tariff

framework, for all matters for which the Commission has jurisdiction

under the Act, including in the following cases:

1. Supply of electricity by a Generating Company to a Distribution Licensee;

………………………

2. Intra-State transmission of electricity;

3. SLDC Fees and Charges;

4. Intra-State Wheeling of electricity;

5. Retail sale of electricity.” (Emphasis Added)

Section 17 of the GERC MYT Regulations, 2016:

“17.2 The filing for the Control Period under these Regulations shall be as under:

b) From the second year of the Control Period and onwards, the Petition shall

comprise of:

i. Truing Up for FY 2016-17 and onwards to be carried out under Gujarat

Electricity Regulatory Commission (Multi-Year Tariff) Regulations, 2016;

ii. Revenue from the sale of power at existing tariffs and charges for the ensuing

year;

iii. Revenue gap or revenue surplus for the ensuing year calculated based on

Aggregate Revenue Requirement approved in the MYT Order and truing up

for the previous year;

iv. Application for determination of tariff for the ensuing year.”

1.4. SUBMISSION BY MGVCL TO THE HON’BLE COMMISSION

1.4.1 Under section 62 of the Electricity Act, 2003 and GERC MYT Regulations, 2016,

MGVCLhereby submits the Petition for True-up of FY 2018-19, and determination of

Tariff for FY 2020-21to the Hon’ble Commission for approval.




SECTION 2. EXECUTIVE SUMMARY

2.1. PREAMBLE

2.1.1. This section highlights the summary of the Petition for True Up for FY 2018-19 and

Revenue gap/surplus for FY 2020-21.

2.2. TRUE UP OF FY 2018-19

2.2.1 MGVCL has worked out its actual Aggregate Revenue Requirement (ARR) for FY 2018-

19based on the audited accounts and the principles adopted by the Hon’ble

Commission in its previous Orders.

2.2.2 The actual expenses have been compared against those approved for FY 2018-19in

the Multi-Year Tariff (‘MYT’)Order dated 31stMarch, 2017. The detailed comparison

of various cost components with the values approved by the Hon’ble Commission has

been presented in the next Chapter on True up of FY 2018-19. A summary of the

actual ARR for Truing-up of FY 2018-19 compared with the approved ARR for FY 2018-

19is presented in the table given below:

TABLE 1 : TRUE UPFOR FY 2018-19

Sr. No. ParticularsFY 2018-19

(Approved)

FY 2018-19

(Actual)Deviation

1 Cost of Power Purchase 5,328.11 5,350.66 (22.55)

2 Operation & Maintenance Expenses 427.81 544.06 (116.25)

2.1 Employee Cost 396.26 481.30 (85.04)

2.2 Repair & Maintenance 59.83 41.69 18.14

2.3 Administration & General Charges 74.23 79.28 (5.04)

2.4 Other Debits - -

2.5 Extraordinary Items - -

2.6 Net Prior Period Expenses / (Income) - -

2.7 Other Expenses Capitalised (102.51) (58.20) (44.31)

3 Depreciation 304.84 253.49 51.35

4 Interest & Finance Charges 114.17 54.17 60.00

5 Interest on Working Capital - -

6 Provision for Bad Debts - 6.07 (6.07)

7 Sub-Total [1 to 6] 6,174.93 6,208.45 (33.52)

8 Return on Equity 168.36 139.62 28.74

9 Provision for Tax / Tax Paid 17.59 4.44 13.15

10 Total Expenditure (7 to 9) 6,360.89 6,352.51 8.37

11 Less: Non-Tariff Income 137.11 142.42 (5.31)

12 Aggregate Revenue Requirement (10 - 11) 6,223.77 6,210.10 13.67

Rs in Crore




2.2.3 In line with the provisions of the GERC MYT Regulations, 2016MGVCL has computed

the gains and losses on account of controllable and uncontrollable parameters and

hasproposed the sharing of gain/(losses)accordingly.

2.2.4 The cost components have been segregated into controllable and uncontrollable

factors as per the methodology outlined in Regulation22 of the GERC MYT

Regulations, 2016. Summary of the difference allocation to controllable &

Uncontrollable factors is outlined as per the table below:

TABLE 2 : SUMMARY OF CONTROLLABLE AND UNCONTROLLABLE FACTORS FOR FY 2018-19

2.2.5 As per the mechanism specified in the MYT Regulation 2016, MGVCL proposes to pass

on a sum of 1/3rd of total gain/(loss) on account of controllable factors i.e. Rs.

82.09/3 = 27.36 Crore and total gain/(loss) on account of uncontrollable factor i.e. Rs.

(68.41) Crore to the consumers.

2.2.6 Further, the Hon’ble Commission in its MYT Order had approved the net Aggregate

Revenue Requirement for FY 2018-19 as Rs. 6223.77 Crore. MGVCL has worked out

revised Aggregate Revenue Requirement for FY 2018-19, considering the above

computed gains/(losses) on account of controllable and uncontrollable factors.

2.2.7 Further, the revenue gap/(surplus) approved by the Hon’ble Commission on True up

of FY 2016-17of Rs. (105.36) Crore is also considered. Accordingly, Adjusting these to

the net Aggregate Revenue Requirement, MGVCL has arrived at the Revised

Aggregate Revenue Requirement for FY 2018-19at Rs. 6,159.46Crore.

2.2.8 This revised Aggregate Revenue Requirement is compared against the actual income

under various heads including Revenue from Existing Tariff of Rs. 5,952.00 Crore,

other consumer related income of Rs. 83.62 Crore, agriculture subsidyof Rs.

73.87Crore and GUVNL profit allocation of Rs. 4.56 Crore, summing up to a Total

Revenue of Rs. 6114.05 Crore. Accordingly, total revenue gap/(surplus) of MGVCL for


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due

to Controllable

Factors

Gain/(Loss) due to

Uncontrollable

Factors

1 Cost of Power Purchase 5,328.11 5,350.66 95.58 (118.13)

2 Operation & Maintenance Expenses 427.81 544.06 (7.43) (108.82)

2.1 Employee Cost 396.26 481.30 (20.52) (64.51)

2.2 Repair & Maintenance 59.83 41.69 18.14 -

2.3 Administration & General Charges 74.23 79.28 (5.04) -

2.4 Other Debits - - - -

2.5 Extraordinary Items - - - -

2.6 Net Prior Period Expenses / (Income) - - - -

2.7 Other Expenses Capitalised (102.51) (58.20) - (44.31)

3 Depreciation 304.84 253.49 - 51.35

4 Interest & Finance Charges 114.17 54.17 - 60.00

5 Interest on Working Capital - - - -

6 Provision for Bad Debts - 6.07 (6.07) -

7 Return on Equity 168.36 139.62 - 28.74

8 Provision for Tax / Tax Paid 17.59 4.44 - 13.15

9 ARR (1 to 8) 6,360.89 6,352.51 82.09 (73.72)

10 Non - Tariff Income 137.11 142.42 - (5.31)

11 Total ARR (9-10) 6,223.77 6,210.10 82.09 (68.41)

Rs in Crore




FY 2018-19after treatment of gain/(loss) due to controllable / uncontrollable factors is

computed at Rs. 45.41 Crore as shown in the table below:

TABLE 3 : REVENUE GAP FOR FY 2018-19

2.3. REVENUE GAP FOR FY 2020-21

2.3.1. The sales projections for FY 2020-21 as per MTR Order in Case No. 1761/2018 dated 24

April, 2019 are11,076MU.

2.3.2. Based on projected sales & existing retail tariff, revenue from sale of power works out

to Rs. 4,919.83Crore for FY 2020-21.

2.3.3. In the True up Order for FY 2017-18 and Mid-Term Review of ARR for FY 2019-20 & FY

2020-21 dated 24th April 2019, the Hon’ble Commission has considered the base

power purchase cost at Rs. 4.32/unit and base FPPPA at Rs. 1.61/unit. As per approved

FPPPA formula, any changein power purchase cost during the year vis-a-vis base

power purchase cost of Rs. 4.32/unit is to be passedthrough corresponding change in

FPPPA charges with respect to base FPPPA of Rs. 1.61/unit on quarterly basis. As per

projected ARR for FY 2020-21, the weighted average power purchase cost is worked

out to be Rs. 4.30/unit vis-à-vis base power purchase cost of Rs. 4.32/unit. Thus, the

change inpower purchase cost of Rs. (0.02)/unit (i.e. Rs. 4.30 - 4.32)for FY 2020-21will

require corresponding change in base FPPPA of Rs. 1.61/unit. Therefore, estimated

revenue from FPPPA is considered at Rs. 1.59/unit for FY 2020-21 as shown below.

TABLE 4 : FPPPA COMPUTATION FOR FY 2020-21

Rs in Crore


(Actual)

1Aggregate Revenue Requirement originally approved

for FY 2018-196,223.77

2 Add: Gap/(Surplus) of FY 2016-17 (105.36)

3Gain / (Loss) on account of Uncontrollable factor to

be passed on to Consumer (68.41)

4Gain / (Loss) on account of Controllable factor to be

passed on to Consumer (1/3rd of Total Gain / Loss)27.36

5Revised ARR for FY 2018-19

(1 + 2 - 3 - 4)6,159.46

6 Revenue from Sale of Power 5,952.00

7 Other Income (Consumer related) 83.62

8Total Revenue excluding Subsidy

(6 + 7)6,035.62

9 Agriculture Subsidy 73.87

10 GUVNL Profit / (Loss) Allocation 4.56

11Total Revenue including Subsidy

(8 + 9 + 10)6,114.05

12Revised Gap after treating gains/(losses) due to

Controllable/ Uncontrollable factors (5 - 11) 45.41




2.3.4. In the above submitted computation, the income under the head “other consumer

related income” has been considered the same as of FY 2018-19. Theagriculture

subsidy for FY 2020-21 has been considered on pro rata basis of MGVCL’s agricultural

sale vis-à-vis total projected agricultural sales of all 4 state discoms in FY 2020-21.

2.3.5. Based on the above projections, the total revenue of the company comprising of

revenue from sale of power at existing tariff, FPPPA charges, other consumer related

income and agriculture subsidy has been arrived at Rs. 6,844.29 for FY 2020-21as

shown in table below:

TABLE 5: TOTAL PROJECTED REVENUE FOR FY 2020-21AT EXISTING TARIFF

2.3.6. The revenue gap/(surplus) of Rs. 45.41 Crore after true up exercise of FY 2018-

19isalso considered for estimating revenue gap/(surplus) for FY 2020-21.

2.3.7. Based on the above, the estimated revenue gap/ (surplus) for FY 2020-21at existing

tariff is as outlined in the table below:

(Rs. Crore)

Particulars FY 2019-20 FY 2020-21

Fixed Cost 11,900 12,173

Variable Cost 24,572 26,105

GETCO Cost 4,115 4,502

GUVNL Cost 399 423

PGCIL Charge 2,077 2,181

SLDC Charge 29 33

Total Power Purchase Cost (Rs. Crore) 43,092 45,417

Total Energy Requirement (MU) 99,680 1,05,652

Power Purchase Cost (Rs./kWh) 4.32 4.30

Power Purchase Cost (Rs./kWh) 4.32 4.30

Change in Power Purchase Cost (Rs./kWh) (0.02)

Incremental FPPPA charges (Grossed up by T&D

Losses (0.02)

Base FPPPA Charges (Rs./kWh) 1.61

Revised Base FPPPA Charges (Rs./kWh) 1.59

Rs Crore

Particulars FY 2020-21 (Projected)

Revenue with Existing Tariff 4,919.83

FPPPA Charges 1,761.06

Other Income (Consumer related) 83.62

Agriculture Subsidy 79.78

Total Revenue including subsidy 6,844.29




TABLE 6:ESTIMATED REVENUE GAP/ (SURPLUS) FOR FY 2020-21 AT EXISTING TARIFF

2.3.8. The Hon’ble Commission is requested to approve the above mentioned surplus.

2.4. PROPOSED CHANGES IN THE TARIFF STRUCTURE FOR FY 2020-21

2.4.1. The consolidated resultant revenue gap for all four distribution companies is more

than Rs. 880Crore. It is envisaged that part of estimated revenue gap will be mitigated

through efficiency measures. The unmitigated revenue gap, ifany, will be considered at

the time of final true-up of FY 2020-21. Therefore, no increase in tariff rates is

proposed in FY 2020-21.

Rs Crore

Sr. No. Particulars FY 2020-21

(Projected)

1 Aggregate Revenue Requirement 6,780.45

2 Revenue Gap from True up of FY 2018-19 45.41

3 Total Aggregate Revenue Requirement 6,825.86

4 Revenue with Existing Tariff 4,919.83

5 FPPPA Charges 1,761.06

6 Other Income (Consumer related) 83.62

7 Agriculture Subsidy 79.78

8 Total Revenue including subsidy (4 to 7) 6,844.29

9 Gap / (Surplus) (3 - 8) (18.43)




SECTION 3. TRUE UP FOR FY 2018-19

3.1. PREAMBLE

3.1.1. This section outlines the performance of MGVCL for FY 2018-19. In line with the

provisions of the MYT Regulations, 2016,MGVCL hereby submits the True-Up Petition

comparing the actual performance of MGVCL during FY 2018-19with the forecast

approved by the Hon’ble Commission vide MYT Order dated 31st March, 2017.

3.2. PRINCIPLES FOR TRUE UP FOR FY 2018-19

3.2.1. As per MYT Tariff Regulations, 2016, the Hon’ble Commission is required to undertake

the True-Up of the licensees for FY 2018-19based on the comparison of the actual

performance of the past year with the approved estimates for such year. Section 21.1

of the MYT Regulations, 2016 is read as below:

“the Generating Company or Transmission Licensee or SLDC or Distribution Licensee

shall be subject to truing up of expenses and revenue during the Control Period in

accordance with these Regulations.”

3.2.2. In line with the provisions of MYT Regulations,2016,MGVCL has filed this Petition for

True-Up ofthe year FY 2018-19. Information provided in the True-Up for FY 2018-19is

based on audited actual performance and considering principles adopted by the

Hon’ble Commission in its previous Orders. The actual performance has been

compared with the approved numbers as per the MYT Order dated 31st March, 2017.

3.2.3. Accordingly, actual data for revised Aggregate Revenue Requirement, revenue and

gap for FY 2018-19are given in the following paragraphs of this chapter.

3.2.4. For the purpose of True-Up all the expense heads have been categorized into

controllable and uncontrollable factors. A head-wise comparison has been made

between the values approved by the Hon’ble Commission and the actual values for

various expenditures ofFY 2018-19.

3.3. CATEGORY WISE SALES

3.3.1. The actual category wise sales for FY 2018-19 was10,004 MU as against the approved

sales of 9,900 MU. The table below highlights the comparison of actual category wise

sales of MGVCL against that approved by the Hon’ble Commission vide its Tariff

Order.




TABLE 7 : CATEGORY-WISE SALES

3.4. DISTRIBUTION LOSSES

3.4.1. In FY 2018-19, the actual distribution loss was9.98% as against the MYT approved

level of11.65%. The table below highlights the comparison of actual distribution loss

of MGVCL against distribution lossapproved by the Hon’ble Commission vide its Tariff

Order.

TABLE 8 : DISTRIBUTION LOSSES

3.4.2. As per theMYT Regulations, 2016distribution loss is acontrollable

factor.Accordingly,any gain or loss on account of distribution losseswould be shared

with the consumers as per Regulations 24 of MYT Regulations, 2016.

3.4.3. MGVCL submits that it has achieved a significant reduction in distribution loss

inrecent years. The Hon’ble Commission has approved the distribution loss levels for

MGVCL at 11.65% for FY 2018-19and the actual loss achieved was 9.98% for FY 2018-

19. MGVCL shall continue its efforts to lower distribution losses further.

3.4.4. Since MGVCL has losses lower than those approved by the Hon’ble Commission, its

effect relating to power purchase and the gains and losses has been captured in the

section below.

3.5. ENERGY REQUIREMENT AND ENERGY BALANCE

3.5.1. The gross energy requirement of MGVCL is given in the table below:

FY 2018-19

(Approved)

FY 2018-19

(Actual)

FY 2018-19

(Approved)

FY 2018-19

(Actual)

A LT Consumers

1 RGP 2,831 2,609 1,646.12 1,400.06

2 GLP 71 63 40.279 37.28

3 Non-RGP & LTMD 1,571 1,543 1072.229 1,097.65

4 Public Water Works 288 302 146.062 156.96

5 Agriculture - Metered 1,070 857 260.66

6 Agriculture - Unmetered 472 475 136.948

7 Public Lighting 65 61 35.975 35.32

LT Total (A) 6,366 5,910 3,337.96 3,142.77

B HT Consumers

8 Industrial HT 3,534 4,094 2,686.14 2,809.23

9 Railway Traction - - -

HT Total (A) 3,534 4,094 2,686.14 2,809.23

Grand Total (A + B) 9,900 10,004 6,024.10 5,952.00

Sr. No. Particulars

Sales(MUs) Revenue (Rs. Crores)

415.50

1 Distribution Losses 11.65% 9.98%


(Approved)

FY 2018-19

(Actual)




TABLE 9 : ENERGY REQUIREMENT AND ENERGY BALANCE

3.5.2. The gross energy requirement for sale to the consumers in FY 2018-19 is 11,794 MUs

as compared to 11,867 MUs as approved by the Hon’ble Commission.

3.6. POWER PURCHASE COST

3.6.1. The company has been currently allocated share of generation capacities as per the

scheme worked out by GUVNL. In order to minimize power purchase cost, GUVNL

adopts the Merit Order Despatch principles for despatching power from the

generating stations based on the demand and accordingly power gets allocated to

MGVCL.

3.6.2. The actual power purchase from GUVNL is different from allocation, because the

demand from MGVCL is not constant and it varies from time to time.

3.6.3. The total power purchase cost of MGVCL for FY 2018-19consists of the basic power

purchase cost, transmission charges payable to GETCO and PGCIL, SLDC

charges.Further, MGVCL has earned income on account of sale of power to GUVNL

and from UI charges. The net power purchase cost has been computed by deducting

the aforesaid income from total power purchase cost. Based on above computation,

comparison of approved and actual cost of power purchase is as shown in table

below:

S.No. Particulars UnitFY 2018-19

(Approved)

FY 2018-19

(Actual)

1 Energy Sales MUs 9900 10,004.36

MUs 1305 1,109.00

% 11.65% 9.98%

3 Energy Requirement MUs 11205 11,113.36

4 Local Power Purchase by Discom MUs 0 37.19

5 Power Purchase at TD periphery from GUVNL MUs 11,205 11,076.17

MUs 449 455.00

% 3.85% 3.9492%

7Total Energy to be input to Transmission

SystemMUs

1165411,531.17

8 Pooled Losses in PGCIL System MUs 213 225.142

9 Total Energy Requirement MUs 11867 11,793.50

Distribution Losses

Transmission Losses

2

6




TABLE 10: NET POWER PURCHASE COST

3.6.4. The variation in the approved and the actual power purchase expenses is on account

of various reasons including change in approved cost of power, change in quantum of

power purchased, and consequent changes in the transmission charges payable.

3.6.5. The quantum of power purchase depends upon the sales during the year as well as

the losses in the system. The actual sales are higher than that of the approved sales

by the Hon’ble Commission.However, the actual distribution loss ofMGVCL

distribution network has been lower than the approved level. Therefore, the quantum

of power purchased is lower than the approved quantum of power required.

3.6.6. As per the Regulation 22 of MYT regulations, 2016 the Hon’ble Commission has

categorised the variation in the price of fuel and/or price of power purchase

according to the FPPPA formula approved by the Hon’ble Commission as an

uncontrollable factor. Further, the Hon’ble Commission has also identified the

variation in the number or mix of consumers or quantity of electricity sold to

consumers as an uncontrollable factor. Thus, the variation in the above factors affects

the power purchase expenses and results into either a loss or gain. Accordingly, any

gain or loss on this account is to be entirely passed on to the consumers as per the

methodology approved by the Hon’ble Commission.

3.6.7. In addition to the above, there is an incidence of lower power purchase cost on

account of the lower distribution loss as compared to the loss approved by the

Hon’ble Commission. Accordingly, MGVCL has worked out gain onpower purchase on

account of lower distribution losses as shownin table below:

Rs. Crore


(Approved)

FY 2018-19

(Actual)

A Cost

1 Power Purchased from GUVNL 5,340.20

2 Power purchase from Windfarm [Local purchase] 9.18

3 Power Purchased from Solar [Local purchase] 8.26

4 Unscheduled Interchange Charges/DSM Charges -

5 SLDC Charges0.52

5,358.16

B Income

1 Sale of Power to GUVNL -

2 Unscheduled Interchange 7.50

Net Power Purchase Cost 5,328.11 5,350.66




TABLE 11 : GAIN/ (LOSS) ON ACCOUNT OF DISTRIBUTION LOSSES FOR FY 2018-19

3.6.8. As can be seen from the above table, the total gain on account of lower distribution

losses as compared to the approved distribution losses is Rs. 98.49Crore. This gain is

considered on account of controllable factors and the appropriate treatment is given

below:

TABLE 12 : GAINS / (LOSS) - POWER PURCHASE EXPENSES

3.6.9. From the above table, the power purchase gain/(loss) due to controllable &

uncontrollable factors are Rs. 95.58Crore and Rs. (118.13)Crore respectively which

would have to be passed on to the consumers as per the methodology approved by

the Hon’ble Commission.

3.7. CAPITAL EXPENDITURE

3.7.1. Capital expenditure incurred by MGVCL in FY 2018-19 was Rs. 417.51Crore. The actual

capital expenditure by MGVCL during the FY 2018-19 is lower than that approved by

the Hon’ble Commission. The scheme-wise actual capital expenditure incurred in FY

2018-19 against approved by the Hon’ble Commission is as shown below:

S.No. Particulars Unit

FY 2018-19

(with Approved

Distribution

Losses)

FY 2018-19

(with Actual

Distribution

Losses)

1 Energy Sales MUs 10,004.36 10,004.36

2 Distribution Losses MUs 1,319.19 1,108.52

% 11.65% 9.98%

3 Energy Requirement MUs 11,323.56 11,112.88

4 Saving due to Distribution Losses MUs 210.68

5 Average Power Purchase Cost Rs./Unit 4.54

6 Gain/(Loss) due to Dist. Losses 95.58

Rs in Crore


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due

to Controllable

Factor

Gain/(Loss) due to

Uncontrollable

Factor

1 Total Power Purchase Cost 5,328.11 5,350.66 95.58 (118.13)




TABLE 13 : CAPITAL EXPENDITURE

3.7.2. Scheme wise deviation in capital expenditure is explained as under:

Normal Development Scheme:Expensesunder Normal Development Scheme,

generally incurred to meet the Supply Obligation of utility. Based on number of

application received, MGVCL had incurred Rs. 20.00Crore against approved Rs.

26.31 Crore.

Distribution Infrastructure Shifting Scheme: It is essential to get the proposal

from Nagar Palika,Municipal Corporation, etc.for shifting for implementation

under this scheme as per the stipulations of the scheme.Based on number of

proposalreceived from urban local bodies like Nagarpalika,Municipal

Corporation, Gram Panchayat, etc. during FY 2018-19,work was undertaken

under this scheme and capital expenditure wasincurred accordingly.

Electrification of Hutments:Household connections were issued to 17437

hutments under this scheme during FY 2018-19. Capital expenditure ofRs. 9.60

Crore was incurred for the same during FY 2018-19.

FY 2018-19 FY 2018-19

Approved Actual

A Distribution Schemes

Normal Development Scheme 26.31 20.00 6.31

Distribution Infra & Shifting Schemes(DISS) 26.31 16.01 10.30

Electrification of hutments 10.13 9.60 0.53

Kutir Jyoti Scheme 2.96 3.00 (0.04)

Others Harijan Basti – Petapara 0.92 0.30 0.62

Total 66.63 48.91 17.72

B Rural Electrification Schemes - Plan

TASP(Wells & Petapara) 146.78 38.09 108.69

Special Component plan 4.80 1.07 3.73

RE Wells(OA +SPA) 188.79 80.68 108.11

Dark Zone 72.82 13.68 59.14

Total 413.19 133.52 279.67

C Non Plan Schemes

Integrated Power Development Scheme (IPDS) 119.10 147.31 (28.21)

Din Dayal Upadhyay Gramin Jyoti Yojana (DDUGJY) 52.72 76.08 (23.36)

R-APDRP(Scada)-A 0.00 0.00 -

R-APDRP(Scada)-B 2.00 0.00 2.00

PSDF 0.00 0.00 -

RAPDRP (Part B) 5.00 0.00 5.00

Total 178.82 223.39 (44.57)

D Other Schemes

Sagar Khedu 1.50 1.51 (0.01)

Energy Conservation(HVDS) 5.00 5.38 (0.38)

Vehicle 0.99 0.19 0.80

Sardar Krushi Jyoti Yojna 0.00 3.79 (3.79)

Misc Civil + Electrical Works + Furniture 4.00 0.70 3.30

SKY 0.00 0.12 (0.12)

Total 11.49 11.69 (0.20)

F Capital Expenditure Total 670.13 417.51 252.62

DeviationParticulars




Kutir Jyoti Scheme [HH]:MGVCL has incurred Rs. 3.00 Crore of capital

expenditure during FY 2018-19 for 8396 nos. of household connections.

Harijan Basti [SCSP]:MGVCL hasincurred Rs. 0.30 Crore for providing 674

household connections during FY 2018-19.

TASP Wells:Allocation of agriculture connection is a continuous process.Itis

governed by Government of Gujarat by way of fund monitoring and availability of

Energy & Infrastructure. MGVCLhas providedagriculture category connections

under various schemes. Due to widespread electrification of agricultural wells

and household connections, length of line per connection has been decreasing.

As a result, average capital expenditure per connection has beendecreasing.

Under TASP scheme, MGVCL has achieved 3,395 nos. of agriculture wells against

target of 3,300 wells and incurred expenditure of Rs. 38.09 Crore in FY 2018-19.

Special Component Plan:Under this scheme, 93 nos. of agricultural wells were

completed against the approved target of 150 nos. The total expenditure of Rs.

1.07 Crore was incurred under this scheme during FY 2018-19.

Normal agriculturalwells SPA:Under SPA scheme, 5,987 nos. of agriculturalwells

are electrified against approved target of 6000 nos. and company has incurred

capital expenditure of Rs. 80.68 Crore.

Dark Zone:Under Dark Zone scheme, 1,070 agricultural wells are electrified vis-à-

vis target of 800 nos.for capital expenditure of Rs. 13.68 Crore during FY 2018-19.

IPDS& DDUGJY: MGVCL has completed physical progress in March, 2019,i.e.,

before target date which was planned to be completed in FY2019-20.Hence,

actual capital expenditure is more than the approved in MYT Order.

SCADA/DMS:MGVCL has completedphysical works as per sanctioned quantities

of SCADA PART-B project in March, 2018.Further, all expenses were booked

under SCADA PART-B in FY2017-18.Therefore, there is no expense in FY 2018-19

for this scheme.

3.8. FUNDING OF CAPITALISATION

3.8.1. Funding of actual capitalisation is done through various sources categorised under

four headings namely: consumer contribution, grants, equity and debt. The detailed

breakup of funding of capitalised asset during FY 2018-19 is mentioned in the table

below.

Table 14 : Funding of Capitalisation




3.9. FIXED COST FOR FY 2018-19

3.9.1. The fixed cost of MGVCL for FY 2018-19has been determined in accordance with the

MYT Regulations, 2016. As outlined under the regulations, the fixed cost for MGVCL

has been determined under the following major heads:

Operation and Maintenance Expenses

Depreciation

Interest and Finance Charges

Interest on Working Capital

Income Tax

Return on Equity

3.9.2. Net Annual Revenue Requirement of MGVCL has been computed after netting off

expenses capitalised and Non-Tariff Income.

3.9.3. For the purpose of True-Up, all the heads mentioned above have been categorized

into controllable or uncontrollable in line with provisions of MYT Regulations, 2016. A

head wise comparison of cost has been made between the values approved by the

Hon’ble Commission vide MYT Order dated 31st March, 2017 and the actual expenses

of MGVCL in FY 2017-18.

3.10. OPERATION & MAINTENANCE EXPENSES

3.10.1. Operations and Maintenance (O&M) Expenses of MGVCL consists of the following

elements:

Employee expenses

Repairs and Maintenance expenses

Administrative and General expenses

3.10.2. MGVCLhas also shown expenses on account of the following items of the ARR into

O&M expenses:

Other Debits

Extraordinary Items

Net Prior Period Expenses/(Income)

Other Expenses Capitalised

3.10.3. After the combination of all the above parameters for FY 2018-19, MGVCL’s actual

O&M expenseswere as shown in table below.

Rs in Crores


(Approved)

FY 2018-19

(Actual)Deviation

1 Capitalization 670.13 411.86 258.27

2 Less : Consumer Contribution 26.31 102.87 (76.56)

3 Grants 123.6 80.77 42.83

4 Balance CAPEX 520.22 228.22 292.00

5 Debt @ 70% 364.15 159.76 204.39

6 Equity @ 30% 156.07 68.47 87.60




TABLE 15 : OPERATION & MAINTENANCE EXPENSES

Employee Cost

3.10.4. Employee expenses comprise of salaries, dearness allowance, bonus, terminal benefits

in the form of pension & gratuity, leave encashment and staff welfare expenses.

3.10.5. The Hon’ble Commission in its previous Orders had not approved the provision made

for respective years towards impact of 7th Pay Commission considering that actual

payment is not made and had ruled that as and when the actual expenses are incurred,

the Commission would consider such claims, which would be accounted for during the

true up of annual account of the respective year as uncontrollable factor. Therefore, in

line with the approach adopted by the Hon’ble Commission, MGVCL has not

considered the provisions made towards 7th Pay.

3.10.6. Accordingly, the actual employee expensefor FY 2018-19wasRs. 481.30Crore which

excludes the provision made towards 7th Pay Commission of Rs. 35.59 Crore but

includes the actual amount of Rs. 64.51 Crorepaid during FY 2018-19 as arrears

towards 7th Pay Commission.

3.10.7. The Hon’ble Commission in the MTR Order dated 24th April, 2019 the

Hon’blecommission had ruled as follows:

“MGVCL has compared the actual employee cost of Rs. 478.30 Crore incurred during FY 2017-18 with Rs. 374.82 Crore approved in the MYT Order dated 31st March, 2017. The actual employee cost, as per the audited annual accounts for FY 2017-18, is Rs. 469.73 Crore before capitalization of Rs. 40.99 Crore. Further, the Petitioner has submitted that the aforesaid employee cost excludes Rs. 73.37 Crore towards Provision for 7th Pay Commission but includes Rs. 27.14 Crore towards the actual payout on account of wage revision. The Petitioner has added the Re-measurement of the Defined Benefit Plans of Rs. 54.80 Crore as appearing in the Statement of P&L for the year ended 31st March, 2018 being the component of employee cost to arrive at claimed figure of Rs. 478.30 Crore. Therefore, the Commission considers Rs. 478.30 Crore as employee expenses for the purpose of true up of FY 2017-18.”

3.10.8. Accordingly, MGVCL has worked out a gain/ (loss) of Rs. (20.52) Crore on account of

controllable employee cost and Rs. (64.51) Crore of actual payment towards 7th Pay

Commission towards the uncontrollable employee cost.

3.10.9. The summary of the comparison of the actual employee expenses for FY 2018-19vis-

à-vis the expenses approved by the Hon’ble Commission is given in the table below:

Rs in Crores


(Approved)

FY 2018-19

(Actual)Deviation

1 Employee Cost 396.26 481.30 (85.04)

2 Repair & Maintenance 59.83 41.69 18.14

3 Administration & General Charges 74.23 79.28 (5.04)

4 Other Debits - - -

5 Extraordinary Items - - -

6 Net Prior Period Expenses / (Income) - - -

7 Other Expenses Capitalised (102.51) (58.20) (44.31)





TABLE 16 : EMPLOYEE COST FOR FY 2018-19

Repair & Maintenance Cost

3.10.10. Repairs and Maintenance expenses are incurred towards the day to day upkeep of

the distribution network and form an integral part of the efforts towards reliable and

quality power supply as also in the reduction of losses in the distribution system.

3.10.11. Repair and Maintenance expenditure is dependent on various factors. The assets of

MGVCL are old and require regular maintenance to ensure uninterrupted operations.

MGVCL has been trying its best to ensure uninterrupted operations of the system

and accordingly has been undertaking necessary expenditure for R&M activities. The

MYT Regulations, 2016 provide for R&M expenditure as a controllable expenditure.

The actual R&M cost for FY 2018-19 is Rs.41.69Crore. Accordingly, based on

comparison of actual R&M expenditure of MGVCL with the values approved by the

Hon’ble Commission, there is a gain/(loss) of Rs. 18.14Crore as indicated in the table

below:

TABLE 17 : REPAIR & MAINTENANCE COST FOR FY 2018-19

Administration & General Expenses

3.10.1. Administration & General expenses mainly comprise of rents, telephone and other

communication expenses, professional charges, conveyance and travelling allowances,

etc.

3.10.2. The actual A&G expense for FY 2018-19 were Rs.79.28Crore. As per the provisions of

the MYT Regulations, 2016, A&G expenses are categorised as controllable expenses

and accordingly, the comparison of value approved by the Hon’ble Commission with

the actual A&G expenses of MGVCL shows a gain/(loss) of Rs. (5.04) Crore as shown

in the table below:

TABLE 18 : ADMINISTRATION & GENERAL EXPENSES FOR FY 2018-19

Other Debits

3.10.3. MGVCLhas not claimed any expense as other debit in tariff petition.

Rs in Crores


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due to

Controllable

Factor

Gain/(Loss) due to

Uncontrollable

Factor

1 Employee Cost 396.26 481.30 (20.52) (64.51)

Rs in Crores


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due

to Controllable

Factor

Gain/(Loss) due

to

Uncontrollable

Factor

1 Repair & Maintenance Cost 59.83 41.69 18.14 -

Rs in Crores


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due

to Controllable

Factor

Gain/(Loss) due

to

Uncontrollable

Factor

1 Administration & General Charges 74.23 79.28 (5.04) -




TABLE 19 : OTHER DEBITS FOR FY 2018-19

Extraordinary Items

3.10.4. No extraordinary items are claimed in ARR by MGVCL as shown in the table below:

TABLE 20: EXTRAORDINARY ITEMS

Net prior period expense/ (income)

3.10.5. As per Regulation 49 of GERC MYT Regulations, 2016; prior period income/expenses

shall be allowed by the Hon’bleCommission at the time of truing up based on

audited accounts, on a case to case basis, subject to prudence check.

3.10.6. However, MGVCL has not claimed any prior period expense/ (income) in this

TariffPetition.

TABLE 21: NET PRIOR PERIOD EXPENSE/(INCOME)

3.10.7. The comparison of actual O&M expenses by MGVCL during FY 2018-19with the value

approved by the Hon’ble Commission shows net gain/(loss) on account of

controllable factors of Rs. (7.43) Crore and gain/(loss) of Rs. (108.82) Crore on

account of uncontrollable factors to MGVCL.

TABLE 22: TOTAL O&M EXPENSES

Rs in Crore


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due

to Controllable

Factor

Gain/(Loss) due to

Uncontrollable

Factor

1 Other Debits - - - -

Rs in Crore


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due

to Controllable

Factor

Gain/(Loss) due to

Uncontrollable

Factor

1 Extra Ordinary Items - - - -

Rs in Crore


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due

to Controllable

Factor

Gain/(Loss) due to

Uncontrollable

Factor

1 Net prior Period Expenses/(Income) - - - -

Rs in Crores


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due

to Controllable

Factor

Gain/(Loss) due

to

Uncontrollable

Factor

1 Employee Expenses 396.26 481.30 (20.52) (64.51)

2 Repair & Maintenance Cost 59.83 41.69 18.14 -

3 Administration & General Charges 74.23 79.28 (5.04) -

4 Other Debits - - - -

5 Extraordinary Items - - - -

6 Net Prior Period Expenses / (Income) - - - -

7 Other Expenses Capitalised (102.51) (58.20) - (44.31)

8 Total O&M Expenses 427.81 544.06 (7.43) (108.82)




3.11. DEPRECIATION

3.11.1. In case of Depreciation, the regulation 39.2 of GERC MYT Regulations, 2016 provides

that-

“Depreciation shall be computed annually based on the straight line method at the

rates specified in the Annexure I to these Regulations:

Provided that the remaining depreciable value as on 31st March of the year closing

after a period of 12 years from date of commercial operation shall be spread over the

balance useful life of the assets:

Provided further that for a Generating Company or a Transmission Licensee or SLDC or

a Distribution Licensee formed as a result of a Transfer Scheme, the depreciation on

assets transferred under the Transfer Scheme shall be charged as per rates specified in

these Regulations for a period of 12 years from the date of Transfer Scheme, and

thereafter depreciation will be spread over the balance useful life of the assets”

3.11.2. The Hon’ble Commission in the MYT Order dated 31st March, 2017 has directed

MGVCL to book depreciation charges in accordance with the MYT Regulations.

3.11.3. Accordingly, MGVCL has calculated the Depreciation for FY 2018-19 in accordance

with the provisions of the MYT Regulations, 2016 and the directives of the Hon’ble

Commission.

3.11.4. The actual and approved depreciation for FY 2018-19is as shown below:

TABLE 23 : FIXED ASSET AND DEPRECIATION FOR FY 2018-19

3.11.5. The actual depreciation for FY 2018-19as against the value approved by the Hon’ble

Commission results into an uncontrollable gain/(loss) of Rs. 51.35Crore as indicated

below:

TABLE 24 : TREATMENT OF DEPRECIATION

3.12. INTEREST & FINANCIAL CHARGES

3.12.1. For assessing actual Interest charges on loans in FY 2018-19, MGVCL has considered

the opening balance of loans for FY 2018-19 same as the closing loan approved by the

Hon’ble Commission for FY 2017-18in the True up Order dated 24th April, 2019. The

Rs in Crores


(Approved)

FY 2018-19

(Actual)Deviation

1 Gross Block in Beginning of the year 5,377.90 5,016.71

2 Additions during the Year (Net) 670.13 412.89

3 Depreciation for the Year 304.84 253.49 51.35

4 Average Rate of Depreciation 5.34% 4.85%

Rs in Crores


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due

to Controllable

Factor

Gain/(Loss) due

to

Uncontrollable

Factor

1 Depreciation 304.84 253.49 - 51.35




loan addition in FY 2018-19 is computed at Rs.159.76Crore which consists of loans for

funding capitalisation.

3.12.2. In line with the approach adopted by the Hon’ble Commission and as prescribed in

MYT Regulations, 2016; repayment during the year has been considered equal to the

depreciation for the financial year.

3.12.3. Based on provisions of the MYT Regulations, 2016, the weighted average rate of

interest during the year for Truing up of FY 2018-19 is 6.13%vis-a-vis9.46% as

approved by the Hon’ble Commission.

3.12.4. MGVCL submits that it had been allocatedguarantees of Govt. of Gujarat, for which it

is required to pay the guarantee charges. These are the legacy loans which have come

from the erstwhile GEB. These charges are, thus, beyond control of MGVCL and hence

are required to be considered in the total financial cost. MGVCL had considered these

guarantee charges in True-up of FY 2017-18 as uncontrollable.The Hon’ble

Commission had approved these charges as submitted by MGVCL in True-up of FY

2017-18.The Hon’bleCommission has ruled as follows in the Order for True-up of FY

2017-18 while approving finance charges:

“As per the GERC (MYT) Regulations, 2016, the Commission is of the view that the parameters which impact interest and finance charges should be treated as uncontrollable.”

3.12.5. The total Interest & Financial charges for FY 2018-19are soughed by MGVCL as shown

in table below vis-à-vis that approvedby the Hon’ble Commission:

TABLE 25 : INTEREST & FINANCE CHARGES

3.12.6. As per Regulation 22.1 of MYT Tariff Regulations, 2016;variation in market interest

rates is uncontrollable factor. Further, the Hon’bleCommission in MTR Order dated 24

April, 2019 for True-up of FY 2017-18 has ruled that interest and finance charges are

to be treated as uncontrollable. Accordingly, MGVCL has worked outsharing of

gain/(loss) of interest and finance charges as shown in the table below:

TABLE 26 : TREATMENT OF INTEREST & FINANCE CHARGES

Rs in Crores


(Approved)

FY 2018-19

(Actual)Deviation

1 Opening Loans 476.31 136.97

2 Loan Additions during the Year 364.15 159.76

3 Repayment during the Year 304.84 253.49

4 Closing Loans 535.63 43.23

5 Average Loans 505.97 90.10

6 Interest on Loan 47.86 5.53 42.33

7 Interest in Security Deposit 65.05 47.97 17.08

8 Guarantee Charges 1.25 0.68 0.57

9 Total Interest & Financial Charges 114.17 54.17 59.99

10 Weighted Average Rate of Interest 9.46% 6.13%




3.13. INTEREST ON WORKING CAPITAL

3.13.1. The interest on working capital has been calculated based onthe provisions of theMYT

Regulations, 2016.

3.13.2. In line with the first amendment to the MYT Regulations, 2016 dated 2nd December,

2016, the rate of interest considered is the weighted average of the 1-year MCLR of

the State Bank of India during the year plus 250 basis points. This rate works out to

10.89%.

3.13.3. As per these regulations, one month of receivables,O&M expense for one monthand

maintenance spares equal to 1% of GFAare to be considered for calculation of interest

on working capital.Further, receivables are equal to one month of the annual

revenue. Amount held as security deposit from consumers under clause (a) and

clause (b) of sub-section (1) of Section 47 of the Electricity Act 2003 except the

security deposit held in the form of Bank Guarantees is deducted from it. As per this

approach, the working capital requiredbyFY 2018-19 by MGVCL is nilas shown in table

below:

TABLE 27 : INTEREST ON WORKING CAPITAL

3.14. PROVISION FOR BAD DEBTS

3.14.1. As per Regulation 94.9.1 of MYT Regulations, 2016; the Hon’bleCommission shall true

up the bad debts written off in the Aggregate Revenue Requirement, based on the

actual write off of bad debts during the year.

3.14.2. As per audited accounts for FY 2018-19, bad and doubtful debts written off in FY

2018-19 are Rs. 18.59Crore. However, Rs. 12.52 Crore is written-off towards Amnesty

scheme. As ruled by the Hon’ble Commissionvide order dated 18 June, 2018, the

impact of bad debts written off under the amnesty scheme needs to be absorbed by

the Discoms. Therefore, only Rs. 6.07 Crore (i.e. Rs. 18.59 Crore - Rs. 12.52 Crore) bad

debts written off are considered for True-up of FY 2018-19:

TABLE 28: BAD & DOUBTFUL DEBTS WRITTEN OFF

Rs in Crores


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due to

Controllable

Factor

Gain/(Loss) due to

Uncontrollable

Factor

1 Interest & Finance Charges 114.17 54.17 - 60.00

Rs in Crores


(Approved)

FY 2018-19

(Actual)Deviation

1 O & M expenses 35.65 45.34

2 Maintenance Spares 53.78 50.17

3 Receivables 511.78 509.12

4 Amount held as security deposit from consumers 839.42 841.57

5 Total Working Capital (238.21) (236.94)

6 Rate of Interest on Working Capital 11.70% 10.89%

7 Interest on Working Capital - - -




3.14.3. The Hon’bleCommission has consideredthe gain/ (loss) due to provision for bad debts

as controllable in previous Orders. Accordingly, MGVCL has computed controllable

gain/(loss) of Rs. (6.07)Crore as shown in the table below:

TABLE 29 : TREATMENT OF BAD & DOUBTFUL DEBTS

3.15. RETURN ON EQUITY

3.15.1. As per the Regulation 37.1 of MYT Regulations, 2016, a return @ 14% on the equity

base is considered for truing-up. As per Regulation 37.1, this rate of return is applied

on equity at the commencement of each financial year and on 50% of equity capital

portion of the allowable capital cost during the financial year.

3.15.2. For assessing actual return on equity for FY 2018-19, MGVCL has considered the

opening balance of equity of FY 2018-19as the closing balance of equity of FY 2017-18

approved by the Hon’bleCommission in the True up Order dated 24 April, 2019.

Further, the equity additions during the year based on actual capitalisation as already

discussed in the above paragraphs have been considered. Accordingly, the return on

equity for FY 2018-19has been worked out as shown below:

TABLE 30 : RETURN ON EQUITY

3.15.3. As ruled by theHon’ble Commission in MTR Order dated 24 April, 2019; deviation in

RoE is due to uncontrollable factors as the return on equity is being allowed on a

normative basis and the quantum of equity addition in the year depends upon the

capital expenditure and the capitalization achieved during the year. The

Hon’bleCommission has considered these factors impacting RoE as uncontrollable.

Accordingly, MGVCL has claimed uncontrollable gain/(loss) on Return on Equity for FY

2018-19vis-à-vis the amount approved by the Hon’ble Commission as shown intable

below.

TABLE 31 : TREATMENT OF RETURN ON EQUITY

Rs in Crores


(Approved)

FY 2018-19

(Actual)Deviation

1 Provision for Bad and Doubtful Debts - 6.07 (6.07)

Rs in Crores


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due

to Controllable

Factor

Gain/(Loss) due

to

Uncontrollable

Factor

1 Provision for Bad Debts - 6.07 (6.07) -

Rs in Crores


(Approved)

FY 2018-19

(Actual)Deviation

1 Opening Equity Capital 1,124.57 963.04 161.53

2 Equity Additions during the Year 156.07 68.47 87.60

3 Closing Equity 1,280.63 1,031.50 249.13

-

4 Average Equity 1,202.60 997.27 205.33

5 Rate of Return on the Equity 14% 14% -

6 Return on Equity 168.36 139.62 28.74




3.16. TAXES

3.16.1. As per Regulation 41.2 of MYT Regulations, 2016; variation between Income Tax

actually paid and approved shall be reimbursed to/recovered from based on the

documentary evidence submitted at the time of truing up subject to prudence check.

3.16.2. As per audited annual account of FY 2018-19, the actual tax in FY 2018-19 was Rs.

4.44Crore as against Rs. 17.59Crore approved by the Hon’ble Commission as shown

below:

TABLE 32 : INCOME TAX

3.16.3. It is submitted that Income Tax being a statutory expense, any variation on this

account is uncontrollable. Accordingly, Regulation 22.1 has considered income taxes

as uncontrollable. Therefore,MGVCL requests the Hon’ble Commission to consider

the gain/ (loss)on income tax as an uncontrollable.

3.16.4. A comparison of actual taxes for FY 2018-19with the amount approved by the Hon’ble

Commission shows an uncontrollable gain/(loss) as indicated in the table below:

TABLE 33 : TREATMENT OF INCOME TAX

3.17. NON-TARIFF INCOME FOR FY 2018-19

3.17.1. The actual non-tariff income as peraudited accounts is Rs. 145.43 Crorewith

includesinterest on staff loans and advances (Rs. 3.02 Crore). MGVCL has excluded

interest income on staff loan from non-tariff income. Accordingly, nom-tariff income

claimed by MGVCL in FY 2018-19is Rs. 142.42Crore (i.e. Rs. 145.43 Crore – Rs. 3.02

Crore)vis-a-vis Rs. 137.11Crore as approved by the Hon’ble Commission.This has

resulted in an uncontrollable gain/(loss) of Rs. (5.31)Crore.

3.17.2. The Hon’bleCommission has been considering deviation in non-tariff income as

uncontrollable in Tariff Orders during this control period. Accordingly, MGVCL has

done sharing of gain considering non-tariff income as uncontrollable as shown in

table below.

Rs in Crores


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due

to Controllable

Factor

Gain/(Loss) due

to

Uncontrollable

Factor

1 Return on Equity 168.36 139.62 - 28.74

Rs in Crores

ParticularsFY 2018-19

(Approved)

FY 2018-19

(Actual)Deviation

Normative ROE 168.36 -

Income Tax (MAT) 17.59 4.44 13.15

Rs in Crores


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due

to Controllable

Factor

Gain/(Loss) due

to

Uncontrollable

Factor

1 Provision for Tax / Tax Paid 17.59 4.44 - 13.15




TABLE 34 : TREATMENT OF NON-TARIFF INCOME

3.18. AGGREGATE REVENUE REQUIREMENT FOR FY 2018-19

3.18.1. Based on above, the table below summarises the actual Aggregate Revenue

Requirement of MGVCL for FY 2018-19as against the value approved by the Hon’ble

Commission.

TABLE 35 : AGGREGATE REVENUE REQUIREMENT FOR FY 2018-19

3.19. SHARING OF GAINS & LOSSES

3.19.1. MYT Regulations, 2016 specifies the Mechanism for treatment of Gains and Losses on

account of Uncontrollable and Controllable expenses. The methodology approved by

the Hon’ble Commission for sharing of such gains/ losses is as follows.

Mechanism for sharing of gains or losses on account of Un-controllable factors

Rs in Crores


(Approved)

FY 2018-19

(Actual)

Gain/(Loss) due

to Controllable

Factor

Gain/(Loss) due

to

Uncontrollable

Factor

1 Total Non-Tariff Income 137.11 142.42 - (5.31)


(Approved)

FY 2018-19

(Actual)Deviation

1 Cost of Power Purchase 5,328.11 5,350.66 (22.55)


2.1 Employee Cost 396.26 481.30 (85.04)

2.2 Repair & Maintenance 59.83 41.69 18.14

2.3 Administration & General Charges 74.23 79.28 (5.04)

2.4 Other Debits - -

2.5 Extraordinary Items - -

2.6 Net Prior Period Expenses / (Income) - -

2.7 Other Expenses Capitalised (102.51) (58.20) (44.31)

3 Depreciation 304.84 253.49 51.35

4 Interest & Finance Charges 114.17 54.17 60.00

5 Interest on Working Capital - -

6 Provision for Bad Debts - 6.07 (6.07)

7 Sub-Total [1 to 6] 6,174.93 6,208.45 (33.52)

8 Return on Equity 168.36 139.62 28.74

9 Provision for Tax / Tax Paid 17.59 4.44 13.15

10 Total Expenditure (7 to 9) 6,360.89 6,352.51 8.37

11 Less: Non-Tariff Income 137.11 142.42 (5.31)

12 Aggregate Revenue Requirement (10 - 11) 6,223.77 6,210.10 13.67

Rs in Crores




“23.1 The approved aggregate gain or loss to the Generating Company or

Documents

Madhy aGujarat Vij Company Ltd · 2019. 12. 20. · Madhya Gujarat Vij Company Limited ( MGVCL ) is one of the di stribution companies engaged in distribution of electricity in the