- (1.) The Tata Power Company Ltd. (TPC) has submitted a Petition on 26 November, 2013 under Regulations 99 and 100 of the MERC (Multi Year Tariff (MYT)) Regulations, 2011 seeking amendment of the Regulations to provide for Return on Equity (RoE) on capitalization carried out during the year in case of Generation Business. TPC's prayers are as follows:
(2.) "1. To allow RoE at stipulated rates on 50% of the equity portion of the capitalization carried out in a financial year; 2. Condone any inadvertent omissions / errors / shortcomings and permit Tata Power to add / change / modify / alter this filing and make further submissions as may be required at a future date. 3. Any other relief that Hon'ble Commission may deem fit."
(3.) The Petition states that: 3.1 The Commission's MYT Regulations specify the terms and conditions for Tariff determination for the second control period. One of the components of Tariff is RoE on the equity portion of the asset capitalized by the generating company or Licensee. Regulation 32 provides that: " 32.1 Generation 32.1.1 Return on equity capital shall be computed on the equity capital determined in accordance with Regulation 30 at the rate of 15.5 per cent per annum in Indian Rupee terms: Provided that, in case of projects commissioned on or after 1st April, 2011, an additional return of 0.5% shall be allowed if such projects are completed within the timeline specified in Annexure -III: Provided further that the additional return of 0.5% shall not be admissible if the project is not completed within the timeline specified above for reasons whatsoever. 32.2 Transmission Licensee and Distribution Licensee 32.2.1 Return on equity capital for the Transmission Licensee and Wires Business of Distribution Licensee shall be computed on the equity capital determined in accordance with Regulation 30 at the rate of 15.5 % per cent per annum, and for the Retail Supply of Electricity of Distribution Licensee, Return on equity capital shall be allowed a return at the rate of 17.5 % per cent per annum, in Indian Rupee terms, on the amount of equity capital determined in accordance with Regulation 30. 32.2.2 The return on equity capital shall be computed in the following manner: (a) Return at the allowable rate as per this Regulation above, applied on the amount of equity capital at the commencement of the financial year; plus (b) Return at the allowable rate as per this Regulation above, applied on 50 per cent of the equity capital portion of the allowable capital cost, for the investments put to use in transmission business or distribution business, calculated in accordance with Regulation 27, Regulation 28 and Regulation 29 above, for such financial year. " 3.2 Thus, RoE is allowed for Transmission and Distribution Business at the specified rates on 50% of equity capital portion capitalized during the year, but is not available to Generation Business. There is no reason for such differential treatment to the disadvantage of the latter. 3.3 The Central Electricity Regulatory Commission (CERC) Regulations, 2009 have no explicit provision for RoE on the equity portion capitalized during the year. However, in its Order dated 7 August, 2013, CERC has allowed RoE on the equity portion capitalised during the year. The Gujarat Electricity Regulatory Commission (GERC) (Tariff ) Regulations, 2011 provide for RoE on 50% of the equity portion capitalised during the year for Generation, Transmission and Distribution Business. While the Jharkhand State Electricity Regulatory Commission (JSERC) (Tariff) Regulations, 2010 do not explicitly provide for RoE on the equity portion capitalised during the year, this has been approved JSERC in its Order dated 30 May, 2012. The National Tariff Policy also states that the rate of return should be such that it allows a reasonable surplus for the growth of the sector. However, under the MERC Regulations, the Generation Business is denied any return on the investment capitalised during the year. 3.4 The Supreme Court judgements in the matters of Madeva Upendra Sinai and Ors. V/s. Union of India and Damodar Mangaliji and Co. and Ors. Vs. Union of India underline the importance of clauses relating to 'removal of difficulties' so as to avoid time -consuming amendment procedures and the need to approach the Legislature for every small amendment. Moreover, the Appellate Tribunal, in Appeal No. 36 of 2008, has held that there is no bar on the Commission to amend the Regulations, if considered necessary. ;