Before the

MAHARASHTRA ELECTRICITY REGULATORY COMMISSION

World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai – 400 005
Tel.No. 22163964/ 65/ 69 Fax 22163976
Email: mercindia@mercindia.org.in
Website: www.mercindia.org.in

In the matter of
Confederation of Indian Industry (CII) Application in the matter of MSEDCL’s
Proposal for Additional Recovery of Cost as a Reliability Charge for mitigating load
shedding in Pune City

Case No. 101 of 2007

Dr. Pramod Deo, Chairman

Shri. A. Velayutham, Member
Shri. S. B. Kulkarni, Member

Dated: March 31, 2008

The Commission issued its Order in Case No. 51 and 90 of 2007 on March 13,
2008, in the matter of MSEDCL’s Petition for recovery of additional cost as a reliability
charge for mitigating load shedding in Pune city. The above-said Order stated,

“33. Having heard the parties and after considering the material placed on
record, the Commission is of the view as under:

(i) …MSEDCL’s practice of allocating additional grid power to make up

the shortfall in CPP power generation in Pune Urban Circles is not in
line with the load shedding protocol determined by the Commission, as
it cannot discriminate between different regions, by allocating the
available grid power to selected regions, at the cost of increasing the
load shedding for other regions. MSEDCL’s proposal for Pune Model in
Case No. 1 of 2006 had clearly indicated that grid support through
power procured from Kawas or other sources would be given only as a
stand-by in case of emergency situation, and not a regular occurrence
as being undertaken by MSEDCL presently. MSEDCL’s practice of
allocating additional grid power to make up the shortfall in CPP power

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generation in Pune Urban Circles should be stopped with immediate
effect by MSEDCL, or at the end of the present billing cycle, to avoid
billing complications, since Reliability Charges will be payable for the
additional supply already given during the current billing month ... In
view of the above reasons, the proposal to levy additional reliability
charge is hereby rejected.
…
(iii) The Commission is of the view that if distribution licensees
suitably appoint distributed generation based franchisees for electricity
distribution; this could result in better service to consumers who are
prepared to pay cost reflective tariffs. …

(iv) The process of appointing a Franchisee through a competitive

bidding process will take time. Moreover, after appointment of the
Franchisee, further time will be required for setting up generation
facilities near the load centre. The generation capacity should be set up
to provide peaking support so that the Scheme offers MW support to
MSEDCL during peak hours, in addition to MU support. However, in
the meanwhile, the consumers in selected areas, who are willing to pay
additional Reliability Charges for reduction/elimination of load
shedding, as under the CII-Pune Model, should not be deprived of this
facility. To overcome the problem of additional time required for
appointing the franchisee after following due process, till such time as
the Franchisee is identified and appointed, as suggested during the
Public Hearing, MSEDCL may consider appointing any entity as an
interim measure, which shall act as the Franchisee. MSEDCL may
consider contracting these functions with entities such as MIDC or
others, or any other agency, with the objective of facilitating the power
purchase activity for identified regions that are desirous of reducing
their load shedding.
…
35. The Partial Open Access Model proposed by CII-Pune appears to
be one of the short-term solutions to mitigate load shedding, till such
time as the generation capacity is set up in / near the local area. The
Open Access consumers would have to be compensated for the increase
in power procurement cost, in a manner similar to that considered
under the CII-Pune Model enunciated under the Commission’s Order

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 dated May 16, 2006 in Case No. 1 of 2006, with the only difference
being the shift from using power generated by captive power plants to
procurement of power from other sources. The modalities of identifying
sources of power and co-ordination of the transaction between the
source of power and the individual HT consumers would have to be
worked out in detail with proper technical feasibility and commercial
checks and balances.”

2. In this context, Confederation of Indian Industry (CII) - Western Region,

submitted an Application dated March 24, 2008, requesting for maintenance of status-
quo in Pune city till such time an alternate model of either partial open access or
appointment of franchisee is established. Considering the urgency of the matter, the
Commission scheduled a hearing in the presence of authorised Consumer Representatives
on March 31, 2008, in the Commission’s office, and directed the Appellant to serve a
copy of their Application to MSEDCL and the four authorised Consumer
Representatives.

3. In its reply, MSEDCL raised certain queries regarding the Application filed by CII
and stated that unless these issues were clarified by CII, MSEDCL would have no
alternative but to implement load shedding for the remaining power deficit in Pune Urban
circles from April 1, 2008. MSEDCL also submitted a computation, wherein the assessed
reliability charge for Pune consumers, after considering power procurement from Tata
Power Trading Company Limited, has been indicated as Rs. 1.53 per kWh for the entire
consumption.

4. During the hearing, Shri. Pradeep Bhargava representing CII, submitted that they
were seeking relief on behalf of consumers in Pune city, within the framework of the law,
without affecting other communities, and by paying for the incremental cost incurred to
mitigate load shedding. CII made the following submissions in the context of the
Application submitted by CII:

a. The Tata Power Company Limited (TPC) has submitted an offer to MSEDCL to
act as an Interim Franchisee under the DGBDF concept.
b. MSEDCL has confirmed that it needs additional power of 120 MW for 12 hours
every day during the period from April to June 2008, and that MSEDCL would
not be able to appoint the Franchisee without following due procedure.

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 c. TPC has offered around 40 MW of power from its DG set, with the balance
requirement being made up by procurement through TPC Trading Company
Limited (TPC-T)
d. TPC-T and Kalyani Power Development Corporation Limited (KPDCL) have
offered to arrange for the additional power requirement to mitigate the load
shedding in Pune city. TPC-T can get the power from April 1, 2008, while
KPDCL has indicated that the power would be available from April 15, 2008
e. MSEDCL’s computation of reliability charges at Rs. 1.53 per kWh needs to be
annualised as was done in the past, rather than being computed on a monthly
basis
f. MSEDCL may have surplus funds to the extent of around Rs. 30 crore from the
reliability charges levied till date, which needs to be confirmed by MSEDCL
g. As regards MSEDCL’s submission that the cost of additional power procured
during night time would have to be loaded on to the consumers in Pune city, TPC-
T has indicated that it would be in a position to divert the additional power during
night time, which would reduce the effective cost
h. The Commission should take a decision to either appoint an Interim Franchisee or
to permit direct import of power into Pune city.
i. The Pune model needs to be encouraged, rather than being closed down
j. If at all the Pune model is being stopped, then the levy of 42 paise should be
discontinued and the supply of surplus power from the CPPs would also be
discontinued, since the consumers were paying for zero load shedding, rather than
reduction in load shedding.

5. Shri. Dabhade, Executive Director, MSEDCL, submitted that in the meeting held
on March 25, 2008, CII and MCCIA had agreed to act as Interim Franchisees, as
MSEDCL would require time to appoint a proper Franchisee after following due
procedure. However, it now appears from CII’s submission that CII and MCCIA are no
longer willing to act as Interim Franchisees, and are proposing TPC as an Interim
Franchisee. Shri. Dabhade submitted that under these circumstances, MSEDCL would
take time to appoint even the Interim Franchisee, as it would have to follow due
procedure. He added that since the Commission had ruled earlier that grid power should
not be diverted to mitigate load shedding in Pune city, MSEDCL would have no option
but to initiate load shedding in Pune city from April 1, 2008.

6. Shri. Shantanu Dixit, representing Prayas, one of the authorised Consumer

Representatives, submitted that additional data would be required to verify the

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computations submitted by the Parties. Further, MSEDCL would take time to appoint a
limited Franchisee, and unless additional power flows into Pune city from April 1, 2008,
Pune city would have to be subjected to load shedding. Shri. Dixit suggested that in case
a time frame of one-month is given for appointing the Interim Franchisee, then during
this period, if TPC-T and KPDCL are willing to procure additional power of 120 MW for
12 hours daily, the expenditure on the same could be met through the surplus available
with MSEDCL and continued levy of 42 paise/kWh on an interim basis, till such time as
the reliability charges are determined by the Commission after following due regulatory
procedure. Both Shri. Dixit and CII submitted that the Commission had earlier directed
MSEDCL to submit the audited accounts for the twenty-one (21) month period from June
2006 to March 2008, to ascertain whether there was any over-recovery through levy of
reliability charges, which has not been complied with by MSEDCL.

7. The Mahratta Chamber of Commece, Industries and Agriculture (MCCIA)

submitted that it supported the proposal submitted by CII, and MCCIA in association
with CII was facilitating identification of sources willing to supply additional power, and
hence, there should be no load shedding in Pune city.

8. Having heard the parties and after considering the material placed on record, the
Commission is of the view as under:

a) The present hearing is not the forum to decide on the numbers presented by
Parties to the case
b) If the power is procured directly by MSEDCL, it would have to be added to the
overall pool and cannot be used to mitigate load shedding for any particular
region
c) MSEDCL would have to appoint an Interim Franchisee, to undertake the
necessary activities, till such time as the Franchisee is appointed. MSEDCL
would have to make a realistic assessment of the timeframe required to appoint a
Franchisee, so that the Interim Franchisee could be appointed to operate till such
time as the Franchisee is appointed.
d) It is entirely MSEDCL’s discretion to appoint a Franchisee/Interim Franchisee,
and the Commission cannot issue any directions to MSEDCL in this regard
e) MSEDCL and the interested stakeholders would have to sit together to resolve
the issues involved

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 f) If the power is procured on behalf of the Franchisee/Interim Franchisee, then the
additional power procured could be used to mitigate load shedding in the
identified areas
g) The Franchisee/Interim Franchisee would have to ensure additionality of power
procurement from April 1, 2008, as grid power cannot be diverted to mitigate
load shedding in selected areas.
h) The reliability charges to be paid by the consumers who are benefiting from
reduction in load shedding, and the willingness of the consumers to pay the
reliability charges, can only be determined after a comprehensive proposal with
facts and figures of actual availability of power, shortfall, its duration and
seasonality and all the costs involved, etc., are submitted and due regulatory
process including a Public Hearing, to be undertaken once MSEDCL submits a
proper Petition.
i) Till the completion of the regulatory process and the determination of the
reliability charges through the Commission’s Order, the Interim Franchisee
would have to bear the risk of consumers in Pune not being willing to bear the
reliability charges.
j) The cost of the additional power procurement would have to be spread over the
entire tenure of the arrangement for computation of the reliability charges, rather
than computing the same on a monthly basis.
k) MSEDCL should submit the audited accounts for the twenty-one (21) month
period from June 2006 to March 2008, detailing the costs incurred towards power
procurement and the reliability charges collected from consumers in Pune city,
within two weeks of issue of this Order.

With the above observations and directions, Case No. 101 of 2007 stands disposed of.

(S.B. Kulkarni) (A. Velayutham) (Dr. Pramod Deo)

Member Member Chairman, MERC

Secretary, MERC

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