MSPGCL’S ARR and Tariff Petition for FY 2006-07

EXECUTIVE SUMMARY

The Maharashtra State Power Generation Company Limited (MSPGCL or Maha

GENCO) is submitting this Annual Revenue Requirement (ARR) and Tariff Petition
as per the MERC (Terms and Conditions of Tariff) Regulations, 2005 for FY 2006-07,
based on the actual expenditure and revenue of FY 2004-05 and actuals till
August/September 2005 and projections from September/October onwards for FY
2005-06, and projections for FY 2006-07, on the basis of the provisional Transfer
Scheme.

Station-wise Estimated Generation and PLF during FY 2005-06 and FY 2006-07

Generation Station FY 2005-06 (Estimated) FY 2006-07 (Estimated)
Generation PLF (%) Generation PLF (%)
(MU) (MU)
Thermal - Coal
Khaperkheda 5804 79% 6141 83%
Paras 410 81% 410 81%
Bhusawal 3335 80% 3352 80%
Nasik 5924 74% 6167 77%
Parli 5020 83% 5160 85%
Koradi 6532 69% 6825 72%
Chandrapur 14150 69% 14665 72%
sub-total (Thermal - coal) 41176 73% 42720 76%
Uran Gas 3591 48% 3800 51%
Hydel 5510 3964
Total Maha Genco 50277 50484

MSPGCL has projected the generation during FY 2005-06, on the basis of the actual
generation for the period April to August 2005, and projected generation for the
balance period during the year. For FY 2006-07, the generation has been projected
based on the actual generation during the past three years, and considering the
planned and forced outages. The PLF of thermal generation plants is projected to
increase to 76%, from the level of 73% in FY 2005-06, with three plants having PLF
above the benchmark PLF of 80%. The PLF of Koradi and Chandrapur is on the
lower side due to planned and forced outages, as discussed in detail in Section 2 of
the Petition. The hydel generation in FY 2005-06 has been very good, on account of
the heavy rainfall during the year. Hydel generation for FY 2006-07 has been
projected equivalent to the actual generation in FY 2004-05, which is also consistent
with the average generation during the past five years.
MSPGCL’S ARR and Tariff Petition for FY 2006-07

Net Generation
After deducting the auxiliary consumption from the gross generation, the station-
wise actual net generation during FY 2004-05 and estimated net generation during
FY 2005-06 and FY 2006-07 is given in the following Table:

Table : Station-wise Net Generation (MU)

Station FY 2004-05 FY 2005-06 FY 2006-07
Actual Estimated Projected
Thermal – coal
Khaperkheda 5730 5282 5588
Paras 352 369 369
Bhusawal 2972 3008 3025
Nasik 5170 5391 5612
Parli 4455 4559 4696
Koradi 5804 5860 6123
Chandrapur 14695 13018 13506
Paras Expansion 436
Parli Expansion 987
sub-total (Thermal) 39177 37487 40343
Uran Gas 4021 3508 3713
Hydel 3933 5464 3931
Ghatghar Net Generation 458
Ghatghar Energy Required for Pumping (645)
Total Maha Genco 47131 46459 47798

Station Heat Rate

The actual station-wise heat rate achieved in FY 2004-05, and the heat rates
considered for FY 2005-06 and FY 2006-07, is summarized in the Table below:

Table: Station-wise Heat Rate (kcal/kWh)

Station FY 2004-05 FY 2005-06 FY 2006-07
Actual Estimated Estimated
Khaperkheda 2642 2671 2660
Paras 3289 3200 3171
Bhusawal 2648 2686 2673
Nasik 2586 2610 2597
Parli 2647 2647 2634
Koradi 2955 2992 2977
Chandrapur 2600 2611 2600
sub-total (Thermal - coal) 2673 2696 2684
Uran Gas 1993 2020 2010
MSPGCL’S ARR and Tariff Petition for FY 2006-07

Coal Transit and Stacking Loss

Station FY 2004-05 FY 2005-06 FY 2006-07
Actual Estimated Estimated
Khaperkheda 1.55% 1.50% 1.50%
Paras 3.36% 2.11% 2.11%
Bhusawal 0.38% 1.77% 2.00%
Nasik 0.88% 1.00% 1.00%
Parli 2.13% 3.91% 3.24%
Koradi 1.23% 0.80% 0.80%
Chandrapur 1.06% 1.00% 1.00%

MSPGCL submits that pilferage during transit continues to be the single biggest
menace to the improvement of transit losses and accounts for a lion's share of the
transit losses. MSPGCL requests the Hon’ble Commission to approve the estimated
transit losses for FY 2005-06 and FY 2006-07 as proposed in the Petition.

Fuel Price and Calorific Value

The actual price of coal and secondary fuel received during April to August 2005 has
been considered as the price of coal and secondary fuel for FY 2005-06. The price of
coal for FY 2006-07 has been projected by assuming a 4% increase over the price of
coal received during April-August 2005. The prices of secondary fuel for FY 2006-07
have been projected by assuming a 6% increase over the price of secondary fuel
received during April-August 2005. For Uran gas-based station, the actual price of
gas received during April to August 2005 has been considered as the price of gas for
the year 2005-06. The price of gas for FY 2006-07 has been projected by assuming a
4% increase over the price of gas received during April-August 2005.

The Calorific Value of all the fuels has been considered based on actual calorific
value of the respective fuels received during April to August 2005.

The energy charge (variable cost per unit) has been estimated considering the
assumptions of fuel price and calorific value as discussed above. The rate of energy
charge (variable cost per unit) will be adjusted on month to month basis for any
variation in actual fuel price or calorific value as compared to the fuel price and
calorific value considered for projection in accordance with Regulation 35.1(b) of
MERC (Terms and Conditions of Tariff) Regulations, 2005 .
MSPGCL’S ARR and Tariff Petition for FY 2006-07

Total Fuel Costs

FY 2003-04 FY 2004-05 FY 2005-06 FY 2006-07
Generation Station Actual Actual Act+Est Projected
Thermal - coal
Khaperkheda 509 614 633 771
Paras 46 51 54 56
Bhusawal 344 427 424 441
Nasik 709 826 910 977
Parli 504 569 714 731
Koradi 677 670 708 754
Chandrapur 1102 1405 1267 1357
Paras Expansion 61
Parli Expansion 125
sub-total (thermal - coal) 3891 4563 4711 5273
Uran Gas 265 272 278 308
Total Fuel Cost 4156 4835 4989 5581

Variable Cost per unit:

The variable cost per unit (ex-bus) has been projected, considering the total fuel costs
and net generation.

Table : Station wise Variable Cost (Rs/kWh)

FY 2003-04 FY 2004-05 FY 2005-06 FY 2006-07
Actual Actual Act+Est Projected
Khaperkheda 0.93 1.07 1.20 1.38
Paras 1.23 1.46 1.47 1.51
Bhusawal 1.15 1.44 1.41 1.46
Nasik 1.38 1.60 1.69 1.74
Parli 1.29 1.28 1.57 1.56
Koradi 1.20 1.15 1.21 1.23
Chandrapur 0.74 0.96 0.97 1.00
Paras Expansion 0.00 0.00 0.00 1.40
Parli Expansion 0.00 0.00 0.00 1.27
Uran Gas 0.68 0.68 0.79 0.83

MSPGCL’s FIXED COST OF GENERATION

MSPGCL has provided separate data on un-audited expenses for the period from
April 1, 2005 to June 5, 2005, and for the period from June 6, 2005 to September 30,
2005, as prior to June 5, 2005, the erstwhile MSEB was the existing Utility, and the
expenses of Maha GENCO have been apportioned from the total expenses of MSEB.
The expenditure for FY 2005-06 has been estimated on the past trends in the overall
expenditure. Projections for FY 2006-07 have been made on the basis of past trends
and expenditure allocated to Maha GENCO.
MSPGCL’S ARR and Tariff Petition for FY 2006-07

a) The employee expenses have been projected after considering the impact of the
wage revision, normal increase in DA expenses, and a nominal increase of 4% in
basic salary and other allowances.
b) A&G expenses have been projected to increase at a nominal rate of 5%
c) R&M expenses for FY 2005-06 and FY 2006-07 have been projected at 5.1% and
7% of the opening GFA respectively.
d) Depreciation has been projected on the opening GFA at an average rate of 4.7%,
which is lower than the depreciation rate of 6.3% approved by the Hon’ble
Commission for the erstwhile MSEB.
e) Interest on long-term loans has been projected on the outstanding loans allocated
to MSPGCL as per the provisional Transfer Scheme, after considering the
additional loans, and repayment schedule. The outstanding loans in FY 2004-05,
include certain Government of Maharashtra (GoM) loans, CPSU dues and Private
Placement Bonds, which have been serviced by the erstwhile MSEB. However, as
per the provisional Transfer Scheme, these GoM loans, CPSU dues and Private
Placement Bonds, have not been allocated to the Successor Companies including
MSPGCL, and have been retained with the residual MSEB Holding Company.
Accordingly, the interest expenditure against these loans has not been considered
under MSPGCL, while projecting the interest expenditure for FY 2005-06 and FY
2006-07.
f) It should be noted that the existing Transfer Scheme is provisional and is
expected to be finalised before June 6, 2006. If, under any circumstances, the
liability of servicing these GoM loans, CPSU dues and Private Placement Bonds,
are allocated to the MSPGCL under the provisions of the Final Transfer Scheme,
then the MSPGCL reserves the right to approach the Hon’ble Commission for
recovering the cost of the same through appropriate tariff measures, at that point
in time.
g) The average interest has been reduced from around 13.4% in FY 2001-02, to
around 11.7% in FY 2004-05, and is expected to reduce further to around 8.7% in
FY 2005-06 and FY 2006-07.
h) MSPGCL has prepared its capital expenditure rolling plan for the financial years
2005-06 onwards. The generation augmentation projects already under
implementation are:
Parli TPS Project Unit 1 (1 X 250 MW)
Paras Expansion Unit 1 (1 X 250 MW)
i) The capital expenditure has been assumed to be undertaken at a normative
debt:equity ratio of 80:20, which is lower than the normative debt:equity ratio of
70:30 allowed in the MERC (Terms and Conditions of Tariff) Regulations, 2005,
MSPGCL’S ARR and Tariff Petition for FY 2006-07

notified in August 2005. The lower equity funding will help in reducing the fixed
costs and hence the generation tariff.
j) MSPGCL has considered lease rent payable to the GoM at Rs. 386.5 crore and Rs.
373.2 crore in FY 2005-06 and FY 2006-07, respectively, on the basis of the
Consultant’s Report, and the ‘in-principle’ agreement between the GoM and
Maha GENCO to increase the lease rent payable, in accordance with the scientific
basis for computing the same.
k) The income tax liability of MSPGCL in FY 2005-06 and FY 2006-07 has been
projected by applying the current effective income tax rate of 33.66% (30% tax,
10% surcharge, and 2% cess thereon) on the projected RoE.
l) For FY 2004-05, MSPGCL has projected return on the basis of 4.5% of its Net
Fixed Assets. For the period April 1, 2005 to June 5, 2005, MSPGCL has projected
return at 4.5% on Net Fixed Assets (proportionately for 66 days). For the balance
299 days of the year, i.e., June 6, 2005 to March 31, 2006, MSPGCL has projected
proportionate return on equity (RoE) at the rate of 14% on the opening equity at
the beginning of the year, in accordance with the MERC (Terms and Conditions
of Tariff) Regulations, 2005. For FY 2006-07, MSPGCL has projected
proportionate return on equity (RoE) at the rate of 14% on the opening equity at
the beginning of the year.

MSPGCL’s AGGREGATE REVENUE REQUIREMENT

The Aggregate Revenue Requirement of MSPGCL is the summation of the variable

cost of fuel and the fixed cost of generation, as discussed in detail in Sections 3 and 4,
and as summarised in the Table below:
 MSPGCL’S ARR and Tariff Petition for FY 2006-07

Table: Aggregate Revenue Requirement of MSPGCL (Rs Crore)

Previous Year Current Year Ensuing Year

(FY 2004-05) (FY 2005-06) (FY 2006-07)
S.no. Particulars
(Unaudited) April - March (Forecast)

1Fuel Related Expenses 4804.00 4989.00 5581.00

2Operation & Maintenance Expenses 729.92 883.43 1121.25
2.1Employee Expenses 345.63 374.23 401.47
2.2Administration & General Expenses 24.00 24.60 25.83
2.3Repair & Maintenance Expenses 360.28 484.60 693.95
Depreciation, including advance against
3 439.92 447.66 468.16
depreciation
4 Interest on Long-term Loan Capital 251.52 116.17 111.94
Other Interest & Finance Charges, including
5 41.24 206.77 223.54
Working Capital interest
6 Lease Rentals 85.00 386.50 373.20
7 Income Tax 0.00 103.88 126.81
8 Fixed Cost of new Paras & Parli Stations 93.49
9 Total Revenue Expenditure 6351.59 7133.41 8099.40
10 Return on Equity Capital 122.12 332.04 376.74
11 Aggregate Revenue Requirement 6473.71 7465.46 8476.14

Thus, the Aggregate Revenue Requirement of MSPGCL is projected to increase from

Rs. 6473.7 crore in FY 2004-05, to Rs. 7465.46 crore in FY 2005-06 and Rs. 8476.14 crore
in FY 2006-07.

Station-wise Fixed and Variable Costs

The Station-wise fixed and variable cost per unit of net generation for FY 2005-06 and
FY 2006-07 are summarised in the Table below:

Table: Station-wise per unit Fixed and Variable Cost of Generation (Rs/kWh)
Sl. Generation Current Year (FY 2005-06) Ensuing Year (FY 2006-07) (Projected)
Station (Estimated)
Fixed Cost Variable Total Cost Fixed Cost Variable Total Cost
Cost Cost
1 Khaperkheda 0.64 1.20 1.84 0.69 1.38 2.07
2 Paras 0.74 1.47 2.21 0.90 1.51 2.41
3 Bhusawal 0.42 1.41 1.83 0.51 1.46 1.97
4 Nasik 0.42 1.69 2.11 0.48 1.74 2.22
5 Parli 0.39 1.57 1.96 0.45 1.56 2.01
6 Koradi 0.53 1.21 1.74 0.62 1.23 1.85
7 Chandrapur 0.47 0.97 1.44 0.51 1.00 1.51
8 Paras
Expansion 1.13 1.40 2.53
 MSPGCL’S ARR and Tariff Petition for FY 2006-07

Sl. Generation Current Year (FY 2005-06) Ensuing Year (FY 2006-07) (Projected)
Station (Estimated)
Fixed Cost Variable Total Cost Fixed Cost Variable Total Cost
Cost Cost
9 Parli
Expansion 1.00 1.27 2.27
10 Uran Gas 0.58 0.79 1.37 0.60 0.83 1.43
11 Hydel 0.83 0.83 1.15 1.15
12 TOTAL 0.53 1.08 1.61 0.60 1.17 1.77

As can be seen from the above Table, the cost of generation of MSPGCL’s generation
stations compares very favourably with the generation cost of other sources,
including generation stations owned and operated by NTPC in the Western Region.

GENERATION TARIFF

Station-wise Annual Fixed Charge and Energy Charges for thermal stations:
The estimated station-wise Annual Fixed Charge and Energy Charges for FY 2006-07
proposed to be charged to MSEDCL for sale of power is given in Table below:

Table : Station-wise Tariff for Thermal Generating Stations

Station Annual Fixed Charge Energy Charge
(Rs. Crore) (Rs/kWh)
Khaperkheda 385.25 1.38
Paras 32.42 1.51
Bhusawal 153.46 1.46
Nasik 268.64 1.74
Parli 211.21 1.56
Koradi 377.80 1.23
Chandrapur 694.23 1.00
Paras Expansion 18.79 1.40
Parli Expansion 74.70 1.27
Uran Gas 223.45 0.83

The tariff proposed for sale of power from hydro generating stations is summarised
in following Table:

Table : Tariff for Hydro Power Generating Stations

Capacity Charge Energy Charge
(Rs Crore) (Rs/kWh)
Hydro Power 59.83 1.00
Generating Station
MSPGCL’S ARR and Tariff Petition for FY 2006-07

PRAYERS

a) The delay in filing this ARR and Tariff Petition may please be condoned and the
Hon’ble Commission is requested to accept this Petition and process the Petition
expeditiously.
b) The Aggregate Revenue Requirement (ARR) of MSPGCL may please be
approved in accordance with the submissions and rationale given in this Petition.
c) The station-wise tariff proposed for thermal generating stations may please be
approved in accordance with the submissions and rationale given in this Petition.
d) The tariff proposed for hydro power generating stations may please be approved
in accordance with the submissions and rationale given in this Petition

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