P.S.DATTA, J. - (1.) MAHARASHTRA State Electricity Distribution Co. Ltd. preferred this appeal against the order dated 17.8.2009 passed in petition no. 116 of 2008 by the Maharashtra State Electricity Regulatory Commission, the respondent No. 1 herein whereby the said Commission made order in respect of true up for the FY 2007 -08, annual performance review for 2008 -09 and determination of ARR and tariff for the FY 2009 -10.
(2.) CERTAIN facts require to be mentioned bereft of unnecessary verbiages. Maharashtra State Electricity Regulatory Commission (Terms and Conditions of Tariff) Regulations, 2005 came into force on 26.8.2005. It superseded the earlier Regulations 2004. Importantly, the Commission issued the Multi Year Tariff Order in respect of the appellant on Appeal No. 124 of 2010 Page 2 18.5.2007 that came into effect from 1.5.2007 and in this order tariff for FY 2007 -08 was determined. On 30.11.2007 the appellant submitted a petition for annual performance review of its business for FY 2007 -08 and for determination of tariff for FY 2008 -09 in respect of which the Commission passed an order on 20.6.2008. This tariff order for FY 2008 -09 was enforceable from 1.6.2008. On 20.7.2008 the appellant filed a review petition for review of the order dated 20.6.2008 passed in case No. 72 of 2007 and the Commission in such review petition by the order dated 10.12.2008 upheld some of the contentions raised in the review petition with clarification that the impact of such review would be taken into account when the Commission passes order for annual performance review for the year 2008 - 09 and determines tariff for the FY 2009 -10. On 8.12.2008 the appellant submitted its petition for true up for FY 2007 -08, APR for 2008 -09 and ARR and tariff for 2009 -10. On 17.8.2009 the Commission passed the impugned order upon such petition and when the appellant filed a review application for review of the order dated 17.8.2009 passed in case No. 116 of 2008 the Appeal No. 124 of 2010 Page 3 Commission rejected the review petition by the order dated 7.1.2010 which merged with the main order dated 17.8.2009.
(3.) WITH this prolegomena the appellant categorised its appeal into three broad categories namely, (i) Failure to carry out truing up for FY 2007 -08 (ii) Infringement of the Statutory Regulations by the Regulatory Commission (iii) Wrongful order of the Respondent No. 1, Commission on issues relating to: a) Erroneous treatment meted out to the distribution loss and reduction for FY 2009 -10. b) Non -consideration of the revenue from sale of power to the franchisee at Bhiwandi at Bulk Supply Tariff Rate(Approximately financial impact is Rs.385 crores) c) Erroneous disallowance of interest paid to Wind Developers. (Approximately financial impact is Rs. 12 crores) Under the first head the appellant's case is that the Commission erroneously considered an amount of Rs.214 crores to be surplus in the provisional true up for FY 2008 - The appellant filed a petition for annual performance review for the year 2008 -09 wherein it showed true up of expenses and revenue for the FY 2007 -08 based on audited accounts and provisional true up of the expenses of FY 2008 - 09 as was approved by the Commission in its order dated 20.6.2008 in case of 72 of 2007 and thirdly revised projection for the FY 2009 -10 based on the estimates for the FY 2008 - 09 and other factual considerations. The Commission by the MYT order dated 18.5.2007 determined the ARR for FY 2006 -07, 2007 -08 and 2008 -09 and estimated that the total revenue gap to be recovered through sale of electricity in FY 2008 -09 would be Rs. 1010 crore as against Rs.3318 crore estimated by the appellant in the APR/ARR petition. While estimating the revenue gap for the FY 2008 -09 the Commission considered Rs.214 crore as surplus after true up exercise for the FY 2006 -07. In the impugned order the Appeal No. 124 of 2010 Page 5 Commission accordingly carried out the exercise of provisional true up for the FY 2008 -09 and determined the provision net aggregate revenue requirement of the appellant from the retail tariff for the FY 2008 -09 as Rs.22,940 crore and further estimated the revenue gap for the year 2008 -09 at Rs.981 crore and thereby considered surplus of Rs.214 crore for the year 2006 -07. According to the appellant, the Commission did not consider its own order dated 10.12.2008 passed in case No . 42 of 2008 wherein the Commission admitted that an error due to double counting of ASC revenue for FY 2006 -07 occurred in its earlier order dated 20.6.2008 while determining the revenue gap for the FY 2008 -09. In the order dated 10.12.2008 the Commission categorically stated that due to double counting error the revenue gap for the year 2008 -09 as estimated in the order dated 10.12.2008 would have been higher by 427 crore which inter alia means that there could not be any surplus of Rs. 214 crores as estimated in the order dated 20.6.2008, and on the contrary there would be revenue gap of Rs.213 crores for the FY Appeal No. 124 of 2010 Page 6 2008 -09 . This error was pointed out in the review petition against the impugned order dated 17.8.2009 but the Commission unfortunately declined to review. According to the appellant, the Commission by the order dated 10.12.2008 permitted recovery of Rs.427 crores by way of additional charge and the same has been levied and recovered in FY 2008 -09, but the said recovery for the purpose of truing up pertains to the FY 2006 -07, and therefore, the revenue on account of additional charge of Rs.427 crores cannot be accounted for as the revenue income for the year 2008 - Under the 2nd item the appellant contends that the Commission introduced Regulatory Liability Charge in its tariff order dated 10.3.2004. The impugned order dated 17.8.2009 whereby tariff was determined for the FY 2009 -10 is based on MYT Framework in respect of which, as aforesaid, the Commission made a MYT order on 18.5.2007. Now, MERC Tariff Regulations, 2005 in its regulation 19 provides for a mechanism for sharing of gains and losses on Appeal No. 124 of 2010 Page 7 account of controllable factors. According to the appellant, the impugned order dated 17.8.2008 is contrary to that regulation which was framed under the section 181 of Electricity Act, 2003 and in view thereof the Commission disregarded the sharing of gains and losses as contemplated in that regulation. Clause (b) of the regulation 19.1 clearly provides that one third of the such gain shall be retained with the licensee as a special reserve to be absorbed in future losses, while the Commission directed that one third to be credited to the consumers in addition to one third to be passed on as rebate in tariffs over such period as may be specified by the Commission in its order. For better appreciation of this order we will reproduce regulation 19 at the appropriate place of this judgement. The appellant claimed a sum of Rs.284 crores equivalent to two -third of the amount (additional revenue) representing gain on account of over achievement of reduction and distribution loss during the FY 2007 -08 in accordance with regulation 19 for retention as a special reserve and utilization at its discretion. Appeal No. 124 of 2010 Page 8 The appellant while determining the revenue gap for the FY 2009 -10 apportioned this amount of Rs.284 crores. The Commission contrary to the Regulations, 2005 directed that one -third of the efficiency gains which was to be retained as a special reserve should be used to fund additional fund of RLC in a sum of Rs.176.20 crore. According to the Commission, RLC can neither be treated as loss nor future loss on account of controllable factors and the direction of the Commission on this score is wrong.;