SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION

Statement of Objections
against
Filing of True-up petition for Distribution Business for
FY 2006-07 to FY 2020-21 under Multi-Year Tariff principles
in accordance with the “Andhra Pradesh Electricity
Regulatory Commission (Terms and Conditions for
Determination of Tariff for Wheeling and Retail Sale of
Electricity) Regulation, 2005”
by the
Southern Power Distribution Company of Telangana Ltd
(TSSPDCL)
&
Northern Power Distribution Company of Telangana Ltd
(TSNPDCL)

as Distribution Licensees

September, 2022

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

TABLE OF CONTENTS

STATEMENT OF OBJECTIONS ......................................................................................... 3

1 INADEQUATE DATA /DETAILS /DOCUMENTARY EVIDENCES
PROVIDED .................................................................................................................... 4
2 INSTANT TRUE-UP EXERCISE IS NOT IN ACCORDANCE TO THE
HON’BLE TRIBUNAL’S JUDGEMENT DATED 11.11.2011 IN OP NO. 1 OF
2011 .................................................................................................................................. 6
3 NON-COMPLIANCE TO TSERC’S TARIFF REGULATIONS, 2005 AND ITS
SUBEQUENT AMENDMENTS ................................................................................... 7
4 NON-COMPLIANCE TO THE HON’BLE TSERC’S GUIDELINES FOR
INVESTMENT APPROVAL (FEBRUARY 2006) ..................................................... 9
5 NON-COMPLIANCE TO THE HON’BLE TSERC’S DIRECTIVES AS PER
TSERC ORDER DATED 29.04.2020 ......................................................................... 12
6 UDAY MOU SIGNED BETWEEN MINISTRY OF POWER, GOVT. OF
TELANGANA AND TS DISCOMS ........................................................................... 14
7 O&M EXPENSES ........................................................................................................ 19
8 DEPRECIATION......................................................................................................... 27
9 RETURN ON CAPITAL EMPLOYED ..................................................................... 28
10 NON-TARIFF INCOME ............................................................................................. 41
11 OTHER EXPENDITURE ........................................................................................... 43
12 ALLOWABLE TRUE-UP AS PER OBJECTOR’S ASSESSMENT...................... 44
13 PRAYERS ..................................................................................................................... 55

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Objections on True up Petition for FY 2006-2021 (Distribution Business)

THE STATEMENT OF OBJECTIONS BY THE OBJECTOR

STATEMENT OF OBJECTIONS

The Distribution licensees namely Southern Power Distribution Company of Telangana Limited
and Northern Power Distribution Company of Telangana Limited (hereinafter referred to as the
‘discoms’ or ‘TS Discoms’ or ‘Petitioners’ or ‘distribution companies’ or ‘Licensees’) have filed
the Petitions for True up of the Distribution Business for FY2006-07 to FY2020-21 as per Andhra
Pradesh Electricity Regulatory Commission (Terms and Conditions for Determination of Tariff
for Wheeling and Retail Sale of Electricity) Regulation, 2005.

The Statement of Objections is herein being filed on behalf of the SOUTH INDIAN CEMENT
MANUFACTURERS' ASSOCIATION (SICMA)’, an Association registered under the
Telangana Societies Registration Act 2001 at Hyderabad, its members being major Cement
Manufacturers across South India (hereinafter called the ‘Objector’). The main function of
SICMA is to promote and protect the interests of its members in relation to the commerce &
industries of India and in particular, the commerce & industries connected with cement. The
members of the association are availing power supply from the licensees across the State of
Andhra Pradesh, predominantly at 132/220 KV voltage and few of them avail supply at 33 KV
voltage. They are also procuring power through Open Access.

SICMA has been working pro-actively to facilitate issues related to open access for its consumers
and in facilitating a competitive power market in the country. Industrial consumers account for
about 25~39% of the total energy sales of the Telangana Distribution Utilities. They contribute
about 36~41% to the total revenue from tariffs. The special characteristics of the Industrial
consumers that benefit the Utilities are:

• They are the subsidising category of consumers for the utilities. Hence they are the
revenue earners ensuring better returns for the utilities.

• The Load curve and consumption pattern enable better capacity utilisation and low Cost
of Service for the Utilities in comparison to LT consumer categories.

The Objector strongly objects to the Filing of the True-up Petition for the Distribution Business
for the FY2006 to FY2021 (herein after referred to as the ‘Tariff Petition’ or ‘Petition’ or ‘Subject
Petition’) and prays that the True-up Application may be rejected in limine, in the interest of
justice and equity. The brief facts, propositions, analysis, grounds for the above prayer of the
Objector are narrated herein below:

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Objections on True up Petition for FY 2006-2021 (Distribution Business)

1 INADEQUATE DATA /DETAILS /DOCUMENTARY EVIDENCES

PROVIDED

1.1. It is to be noted that the TS Discoms have filed the True-up Petitions for their Distribution
Business for FY 2006-07 to FY 2020-21. The said submissions of both the Discoms are
inadequate in the terms of details/data/justification/documentary evidence provided for the
true-up claims made by TSSPDCL and TSNPDCL The Objector has already addressed the
same issue before Hon’ble TSERC via its Letter dated 29th August, 2022. However, the
Objector has neither received any replies nor the requested information from the TS
Discoms. A copy of the same letter is attached herewith as Appendix-A.

1.2. To reiterate what is mentioned in the letter, the Objector is pointing out the detailed data
and documentary evidence supporting such data which are not furnished by the Petitioners
in the instant Petitions:
• Formula-linked workable excel model for True-up Petitions filed by TSNPDCL and
TSSPDCL for FY 2006-07 to FY 2020-21;
• Mapping of each Financial Certificate with the associated work and cost (along with
soft copies of work and cost details) for each year from FY 2006-07 to FY 2020-21
for both TSNPDCL and TSSPDCL;
• Complete set of Audited Reports/Accounts for TSNPDCL and TSSPDCL from FY
2006-07 to FY 2020-21;
• Formula-linked workable excel model of Fixed Asset Register for every year from
FY 2006-07 to FY 2020-21;
• Reconciliation Statements for each year from FY 2006-07 to FY 2020-21 of the
True-up Amounts for each ARR element claimed by TSNPDCL and TSSPDCL
with the Audited Reports/Accounts for TSNPDCL and TSSPDCL from FY 2006-
07 to FY 2020-21; This should also include the break-up between Retail Supply
Business and Distribution Business for each cost and revenue element;
• All Actuarial Valuation Reports for TSNPDCL and TSSPDCL from FY 2006-07
to FY 2020-21;
• Detailed Report on Wage Revision Impact for TSNPDCL and TSSPDCL from FY
2006-07 to FY 2020-21;
• Detailed explanation with supporting documents for increase in Repair and
Maintenance Expenses for TSNPDCL and TSSPDCL from FY 2006-07 to FY
2020-21;
• Detailed explanation with supporting documents for increase in Administrative and
General Expenses for TSNPDCL and TSSPDCL from FY 2006-07 to FY 2020-21;
• All Tax Evaluation Reports and Tax Assessment Orders for TSNPDCL and
TSSPDCL from FY 2006-07 to FY 2020-21;

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• All Orders of the Hon’ble TSERC in O.P. No.s 39, 40, 41, 42, 43, 44, 45 and 46 of
2021 along with I.A. No.s 12, 13, 14, 15, 16, 17, 18 and 19 of 2021 and O.P. No.
20 of 2022 and O.P. No. 22 of 2022;
• Pending Petitions/Appeals of the TSSPDCL and/or TSNPDCL (as
Appellant/Respondent/Both) in TSERC/High Court/Supreme Court/Any other
court that are related to the Electricity Distribution Business of TSSPDCL and/or
TSNPDCL;
1.3. In the absence of above details and particulars, the prudence check of the claims made by
the Petitioners cannot be conducted and gainful detailed objections/comments cannot be
framed by the Objector. The Hon’ble Commission is requested to direct the Petitioners to
furnish the above data along with comprehensive workable excel model for the same.

1.4. In the absence of complete information, the Objector has analysed the True up Petitions on
a best effort basis using the limited information available in public domain and preliminary
observations/comments/objections are discussed in detail in subsequent sections of the
report.

1.5. It is prayed that the Hon’ble Commission may permit the Objector to participate and make
additional submission and produce additional details and documentations before and during
the course of the Public Hearing, in the interest of justice and equity.

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2 INSTANT TRUE-UP EXERCISE IS NOT IN ACCORDANCE TO THE

HON’BLE TRIBUNAL’S JUDGEMENT DATED 11.11.2011 IN OP NO.
1 OF 2011

2.1. The Hon’ble Tribunal vide its Judgement dated 11.11.2011 in OP No. 1 of 2011 had issued
the following directives to the State Commissions:
“(i) Every State Commission has to ensure that Annual Performance Review, true-
up of past expenses and Annual Revenue Requirement and tariff determination is
conducted year to year basis as per the time schedule specified in the Regulations.
(ii) It should be the endeavour of every State Commission to ensure that the tariff
for the financial year is decided before 1st April of the tariff year. For example, the
ARR & tariff for the financial year 2011-12 should be decided before 1st April,
2011. The State Commission could consider making the tariff applicable only till
the end of the financial year so that the licensees remain vigilant to follow the time
schedule for filing of the application for determination of ARR/tariff.
(iii) In the event of delay in filing of the ARR, truing-up and Annual Performance
Review, one month beyond the scheduled date of submission of the petition, the
State Commission must initiate suo-moto proceedings for tariff determination in
accordance with Section 64 of the Act read with clause 8.1 (7) of the Tariff Policy.
…
(v) Truing up should be carried out regularly and preferably every year. For
example, truing up for the financial year 2009-10 should be carried out along with
the ARR and tariff determination for the financial year 2011-12.
…
66. We direct all the State Commissions to follow these directions scrupulously,
and send the periodical reports by 1st June of the relevant financial year about the
compliance of these directions to the Secretary, Forum of Regulators, who in turn
will send the status report to this Tribunal and also place it on its website.”
(Emphasis supplied)

2.2. It is prayed that the Hon’ble Commission may take cognizance of the aforementioned
directives of the Hon’ble Tribunal made vide its Judgement dated 11.11.2011 in OP No. 1
of 2011.

2.3. A copy of the Hon’ble Tribunal’s Judgement dated 11.11.2011 in OP No. 1 of 2011 is
attached herewith as Appendix-B.

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3 NON-COMPLIANCE TO TSERC’S TARIFF REGULATIONS, 2005

AND ITS SUBEQUENT AMENDMENTS

3.1. The Tariff Regulations, 2005 and its subsequent Amendments stipulate the following:

“9 Resource Plan
9.1 The Distribution Licensee shall file for Commission’s approval a Resource Plan
on 1st April of the year preceding the first year of Control Period. The Resource Plan
shall inter alia, contain the Sales Forecast, Load Forecast, Power Procurement Plan
and a Distribution Plan (Capital Investment Plan) consistent with the requirements
of the Commission's Guidelines on Load Forecast and Resource Plan (Distribution
Plan and Power Procurement Plan) as amended from time to time.
Provided the Resource Plan for the first Control Period may be filed along with the
Multi-year filings for ARR of the first Control Period.
9.2 The Commission shall approve the Resource Plan as per the Guidelines on Load
Forecast, Resource Plan (Distribution Plan and Power Procurement Plan) and the
Distribution Licensee shall adopt them in the Multi-Year and Annual filings for the
Control Period.
…
16 INVESTMENT PLAN
16.1 The Commission shall adopt the Capital Investment Plan approved as part of
the Resource Plan in terms of clause 9 of this Regulation for the purpose of
determining the Regulated Rate Base (RRB) at the commencement of the Control
Period:
Provided that for the first Control Period, the Distribution Licensee shall file its
Capital Investment Plan for the Control Period as part of its Multi-Year Filings for
Commission's approval.
16.2 The Distribution Licensee shall seek approval for individual schemes in the
Capital Investment Plan at least 90 days before undertaking the investment in
accordance with the Guidelines on Investment Approval. The individual schemes/
projects submitted by the Distribution Licensee for Commission's approval must
provide complete details including those relating to the cost and capitalisation for
each year of the Control Period.
16.3 The Commission may provide corrections in the ARR of the Distribution
Licensee for subsequent years of the Control Period to the extent of deviation from
the investments approved as part of the Capital Investment Plan. The Distribution
Licensee shall justify the deviations beyond 1.0 percent for each individual
scheme/project and any other material deviations from the Capital Investment Plan
including introduction of; or substitution of existing schemes/ projects by, new
scheme/project (s).”
(Emphasis supplied)

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3.2. Thus, as per the above Regulations, it is evident that the Hon’ble Commission may provide
corrections in the ARR of the Distribution Licensee for subsequent years of the Control
Period to the extent of deviation from the investments approved as part of the Capital
Investment Plan such that the TS Discoms shall have to:
• Seek approval for individual schemes in the Capital Investment Plan at least 90 days
before undertaking the investment in accordance with the Guidelines on Investment
Approval
• The individual schemes/ projects submitted by the Distribution Licensee for
Commission's approval must provide complete details including those relating to the cost
and capitalisation for each year of the Control Period
• Justify the deviations beyond 1.0 percent for each individual scheme/project and any
other material deviations from the Capital Investment Plan including introduction of; or
substitution of existing schemes/ projects by, new scheme/project (s)

3.3. From the instant Petitions, it is apparent that the Petitioners have not complied with the
above stipulations as per the Tariff Regulations of the Hon’ble Commission.

3.4. It prayed that the Hon’ble Commission may direct the Petitioners to submit a point-by-
point compliance report of the above along with all of the necessary supporting documents
and evidences and the same may be made available on the public domain so that the
Objector may submit its objections/comments on the same.

3.5. If the Petitioners fail to prove absolute compliance to the Hon’ble Commission’s Tariff
Regulations, it prayed that the Hon’ble Commission may reject the instant Petitions in
limine.

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4 NON-COMPLIANCE TO THE HON’BLE TSERC’S GUIDELINES

FOR INVESTMENT APPROVAL (FEBRUARY 2006)

4.1. The TSERC’s Guidelines for Investment Approval (February 2006) stipulates the
following:
“1.1 As per the provisions of paragraph 10 of the Transmission and Bulk Supply
Licence (Licence No. 1/2000) and paragraph 9 of the Distribution & Retail Supply
License (Licence No. 12/2000), the Licensee shall promptly notify the Commission of
any Schemes pertaining to the Transmission or Distribution System which the
Licensee from time to time proposes to implement.
As per the Licence conditions, the Licensees are required to obtain prior approval
of the Commission for any investment above Rs. 500 lakhs (major investment). The
Licensee needs to demonstrate to the satisfaction of the Commission that:
(a) there is a clear need for the major investment and it forms part of the Licensee’s
Resource Plan. In case the major investment proposed in any year of the control
period is not covered under the approved Resource Plan, the Licensee has to
establish the need, justification and urgency to take up the scheme in the time-
frame proposed and
(b) the Licensee has examined the economic, technical, system and environmental
aspects of all viable alternatives to the proposal.
…
Periodic Reporting
1.8 The Licensee shall submit to the Commission periodic progress reports duly
correlated to the commissioning schedules. This monitoring shall take place at the
end of every half-year. The Licensee shall submit to the Commission a progress
report within 15 days of end of each such monitoring period. This progress report
should provide details of the progress made in each of the approved Schemes.
1.9 The Licensee shall indicate the expenditure incurred till the reporting period vis-
à-vis the provisions approved by the Commission while approving the investment
Scheme.
1.10 The Licensee shall submit the details of the Scheme completed indicating the
original cost, interest during construction, expenses capitalised and original
schedule of completion, as approved by the Commission for such scheme along with
the actual cost, interest during construction, expenses capitalised, etc. and, date of
completion.
1.11 On completion of a scheme or a usable module of the scheme, a Physical
Completion Certificate (PCC) to the effect that the work in question has been fully
executed, physically, and the assets created are put to use, is required to be issued
by the engineer concerned not below the rank of Superintendent Engineer. The
PCC shall be accompanied with a Financial Completion Certificate (FCC) to the
effect that the assets created have been duly entered in the Fixed Assets Register

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by transfer from the CWIP register to OCFA. The FCC shall have to be issued by
an officer not below the rank of Senior Accounts Officer. The Licensee shall
submit these certificates to the Commission within 60 days of completion of
work/module/scheme, at the latest.
1.12 The Commission or its authorized representative shall have the right to verify
the correctness of the PCC and FCC.
1.13 The Licensee shall also undertake a post-completion review of the Scheme to
assess whether the objective of the investment is met or not and whether or not the
desired benefits are accruing from the Scheme and submit a report to the
Commission after twelve months of its completion.
1.14 The waiver granted for implementing Schemes below Rs. 500 lakhs relaxes
only the requirement of obtaining prior Commission approval for the investment.
The Commission still retains the authority to assess the efficiency and economy
with which the Licensee makes any investment and to verify that these investments
are consistent with the spirit of the Licence and the Act, and for this purpose may
require the Licensee to furnish details of any such scheme, from time to time.
1.15 If it comes to the Commission’s notice that the quality of supply to consumers
in a particular area is below the standards set out by the Commission due to lack of
investments in the Transmission System or Distribution System in that area, the
Commission may suo motou direct the Licensee to make investment in Schemes that
would result in improvement of the quality of supply. Provided however that while
issuing such a direction, the Commission would take into consideration the
Licensee’s resource position.”
(Emphasis supplied)

4.2. As can be observed from the above the Guidelines for Investment Approval mandate the
TS Discoms to:
• Obtain prior approval of the Commission for any investment above Rs. 500 lakhs (major
investment) providing due justifications. (Such that the waiver granted for implementing
Schemes below Rs. 500 lakhs relaxes only the requirement of obtaining prior Hon’ble
Commission approval for the investment. The Hon’ble Commission still retains the
authority to assess the efficiency and economy with which the Licensee makes any
investment and to verify that these investments are consistent with the spirit of the
Licence and the Act, and for this purpose may require the Licensee to furnish details of
any such scheme, from time to time.)
• Submit the PCC and FCC certificates (On completion of a scheme or a usable module of
the scheme) to the effect that the assets created have been duly entered in the Fixed Assets
Register by transfer from the CWIP register to OCFA to the Hon’ble Commission within
60 days of completion of work/module/scheme, at the latest. (Such that the Hon’ble
Commission or its authorized representative shall have the right to verify the correctness
of the PCC and FCC.)

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• Undertake a post-completion review of the Scheme to assess whether the objective of the
investment is met or not and whether or not the desired benefits are accruing from the
Scheme and submit a report to the Commission after twelve months of its completion.

4.3. It is observed that the Petitioners have flouted the 60 days limit for submission of PCC
and FCC certificates. Moreover, in the instant Petition, Petitioners have not provided the
mapping of each PCC and FCC with the associated work and cost (along with soft copies
of work and cost details) for each year from FY 2006-07 to FY 2020-21 for both TSNPDCL
and TSSPDCL. Nor have the Petitioners submitted their Fixed Asset Registers for every
year from FY 2006-07 to FY 2020-21.

4.4. It is prayed that the Hon’ble Commission may take cognizance of the above provisions of
the Guidelines for Investment Approval and direct the Petitioners to submit the necessary
reports/documents and evidences and the same may be made available on the public
domain so that the Objector may submit its objections/comments on the same.

4.5. Furthermore, it is prayed that the Hon’ble Commission may take due action providing due
reasoning in accordance to the following provisions of the Guidelines for Investment
Approval:
“1.16 Based on the information provided by the Licensee as per the process as
specified in the preceding paragraphs, the Commission may, if it comes to the
conclusion that the Licensee had not followed the provisions of the guidelines or
has been guilty of negligence or wilful default in implementing a Scheme which
are not consistent with the objectives sought to be achieved by such investments,
disallow recovery of such cost in the Tariff Order or pass such other orders, as the
Commission may consider appropriate.
1.17 If the assessment suggests that the company has overestimated the amount
needed for investments, the Commission reserves the right to reduce the project
cost of the scheme and take any other action it deems appropriate.
…
1.19 Without prejudice to the above the Commission may at any time direct the
Licensee to comply with such further or other conditions as the Commission may
consider appropriate for undertaking investments consistent with the objects of the
Andhra Pradesh Electricity Reform Act, 1998 (Act No. 30 of 1998), the Electricity
Act, 2003, the Regulations framed thereunder and the terms and conditions
contained in the Licences issued by the Commission.
1.20 Any violation of these conditions shall be a breach of the obligations assumed
by the Licensee under Transmission & Bulk Supply Licence and/or the
Distribution and Retail Supply Licence and may be subjected to the same
proceedings as if the terms of the licence conditions have been violated or not
complied with by the Licensee.”

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(Emphasis supplied)
4.6. A copy of the TSERC’s Guidelines for Investment Approval (February 2006) is attached
herewith as Appendix-C.

5 NON-COMPLIANCE TO THE HON’BLE TSERC’S DIRECTIVES AS

PER TSERC ORDER DATED 29.04.2020

5.1. As per the Distribution order dated 29.04.2020 of TS Discoms pertaining to 4th Control
Period (FY2019-20 to FY 2023-24) issued by the Hon’ble TSERC, the Hon’ble
Commission had directed the TS Discoms as follows:

“1. Neutral Wire-HVDC areas

The Commission directs the DISCOMs to run neutral wire from 33/11 kV SS to all
single-phase transformers both existing and new installations without resorting to
use of earth as return conductor. Further, the DISCOMs are directed to strictly
implement earthing practices as per 61(1)(a), 67(1A) and 92 of IE Rules, 1956 and
provide three earth pits as per the prescribed construction standards. The DISCOMs
shall submit half yearly reports by 31st October and 30th April for the periods
ending 30th September and 31st March respectively.

2. True-up for 1st, 2nd and 3rd Control Periods

The Commission directs the DISCOMs to submit their true-up claims along
complete details sought regarding the capitalization claimed for each year of the
1st, 2nd and 3rd Control Periods in the Petitions to be filed for Annual Performance
Review for FY 2019-20. The DISCOMs are also directed to submit the requisite
supporting documents such as Physical Completion Certificates (PCCs), Financial
Completion Certificates (FCCs) etc. as mandated in the investment approval
guidelines.
The Commission directs the DISCOMs to make a detailed submission regarding
the differential treatment of GoTS under the UDAY scheme and likely
consequences of the same in in the Petitions to be filed for Annual Performance
Review for FY 2019-20. The Commission directs the DISCOMs to submit the
details of long-term loans viz., loans availed for capital expenditure, taken over by
GoTS under UDAY scheme in the Petitions to be filed for Annual Performance
Review for FY 2019-20.

3. Computation of depreciation in accordance with CERC (Terms and Conditions

of Tariff) Regulations, 2019
The Commission directs the DISCOMs to submit the computations of depreciation
for each year of 4th Control Period in accordance with the provisions of the CERC

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Tariff Regulations, 2019 in Annual Performance Review for each year of 4th Control
Period.

4. Capital Investments
The DISCOMs shall seek approval for individual schemes at least 90 days
undertaking the investment in accordance with the Guidelines for Investment
Approval. The individual schemes/ projects submitted by the DISCOMs for
Commission’s approval must provide complete details including those relating to
the cost and capitalisation for each year of 4th Control Period.
Considering the importance of capitalisation of works, the Commission lays down
the following requirements to be fulfilled before accepting inclusion of the value of
capitalised work in the Original Cost of Fixed Assets (OCFA):
a. On completion of a capital work, a physical completion certificate (PCC) to the
effect that the work has been fully executed, physically, and the assets created are
put in use, to be issued by the concerned engineer not below the rank of
Superintendent Engineer.

b. The PCC shall be accompanied or followed by a financial completion certificate

(FCC) to the effect that the assets created have been duly entered in the fixed assets
register by transfer from the Capital Works in Progress (CWIP) register to OCFA.
The FCC shall have to be issued by the concerned finance officer not below the
rank of Senior Accounts Officer.

c. The above mentioned certificates have to be submitted to the Commission within

60 days of completion of work, at the latest. The Commission may also inspect or
arrange to inspect, at random, a few of the capitalised works included in the OCFA
to confirm that the assets created are actually being used and are useful for the
business.”

5.2. It is apparent from the instant Petitions of the TS Discoms that the TS Discoms have not
complied with the directives of the Hon’ble Commission’s Distribution order dated
29.04.2020.

5.3. It prayed that the Hon’ble Commission may direct the Petitioners to submit a point-by-
point compliance report of the aforementioned directives along with all of the necessary
supporting documents and evidences and the same may be made available on the public
domain so that the Objector may submit its objections/comments on the same.

5.4. If the Petitioners fail to prove absolute compliance to the Hon’ble Commission’s directives
in the aforementioned Distribution order dated 29.04.2020, it prayed that the Hon’ble
Commission may reject the instant Petitions in limine.

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6 UDAY MOU SIGNED BETWEEN MINISTRY OF POWER, GOVT. OF

TELANGANA AND TS DISCOMS

6.1. In the instant Petitions, the Discoms have submitted as follows:

TSSPDCL:
“Subsequently in 2017,Telangana Discoms entered in to UDAY scheme and as per
the agreement, total outstanding debt balance of TSSPDCL of Rs.5550.21 crores
(75% of total outstanding) as on 21.02.2017 has been taken over by Government of
Telangana. The GoTS has released Rs. 4593.84 crores in FY 2016-17 and Rs. 282.93
Crores in 2017-18 in the form of Equity. The outstanding loans of the Discoms
which includes long -term and short-term borrowings has been taken over by the
GoTS in the form of Equity infusion in the DISCOMs. Therefore as per the
Regulation mandate, though DISCOM has savings through interest & principle
repayment portion of loans but since the same has been taken as equity infusion by
GoTS but not as a capital grant it attracts Return on Equity @ 14% p.a as per
Regulation 4 of 2005.
…
Therefore, no benefit has been accrued to the DISCOM due to UDAY as the equity
infusion by the GoTS attracts return on equity of 14% which is higher than the
cost of debt that would have incurred in the absence of UDAY scheme.
Further, it is noteworthy to mention that the loans taken under UDAY also
comprises FRP & other loans taken to meet the working capital requirements and
these costs of finance are not allowed as a pass through under Distribution or
Retail Supply Business.
The GoTS has taken over Rs. 5550 crores of loans of TSSPDCL under UDAY
agreement. The Breakup of capital expenditure loans and Working capital loans
taken over by GoTS under UDAY is tabulated below:

Total Loans taken over under UDAY Scheme 5,500.00 Crs.

CAPEX Loans 1,851.40 Crs.
Working Capital Loans 3,698.60 Crs.

The Honble Commission has not considered any interest of working capital loans for
power purchase in the Retail Supply ARR. Only loans to meet capital expenditure
have been considered in the Distribution Business ARR.
But, the Honble Commission has computed the savings as INR 743.88 Crores for
TSSPDCL for each year of FY 2017-18 and FY 2018-19 in respective Retail Supply
Tariff Orders which includes savings towards capital expenditure loans and working
capital loans for each year. These savings were already considered as pass through
in the Retail Tariffs for FY 2017-18 and FY 2018-19. Therefore, the DISCOM prays
before the Honble Commission to

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• Consider the loans taken under UDAY by GoTS as equity infusion

• Consider no savings on loans under UDAY scheme for the DISCOM and
the computed savings of Rs. 1487.76 crores (for two years) which was
already passed through the tariffs in retail supply Tariff Order FY 2017-18
and FY 2018-19, may be added back to the True-ups of third control period
i.e. FY 2014-15 to FY 2018-19
Hence, the DISCOM prays the Hon'ble Commission to allow the True-ups for the 3rd
control period entirely as per the Regulation.
Particulars Rs. in crores
Third Control Period Gap 1300.69
Add. Savings already considered in the 1487.76
Retail Supply Tariff Order FY 2017-18
& FY 2018-19
Total True-up Gap 2788.45

Further, in compliance to the Directive No. 3 of the Distribution Business Tariff

Order for 4th Control Period (FY 2019-2024), the details of the loans taken over
under UDAY scheme is enclosed as Annexure -II.”

TSNPDCL:
“Subsequently in 2017, Telangana Discoms entered in to UDAY scheme and as per
the agreement, total outstanding debt balance of TSNPDCL of Rs.3373 crores (75%
of total outstanding) as on 30.09.2015 has been taken over by Government of
Telangana. The GoTS has released Rs. 2,396 crores in 2016- 17 and Rs.450 crores
in 2017.18 in the form of Equity. The outstanding loans of the Discoms which
includes long--term and short-term borrowings has been taken over by the GoTS
in the form of Equity infusion in the DISCOMS. Therefore, as per the Regulation
mandate, though DISCOM has savings through interest & principle repayment
portion of loans but since the same has been taken as equity infusion by GoTS but
not as a capital grant it attracts Return on Equity @ 14% p.a as per Regulation 4 of
2005.
…
Therefore, no benefit has been accrued to the DISCOM due to UDAY as the equity
infusion by the GoTS attracts return on equity of 14% which is higher than the
cost of debt that would have incurred in the absence of UDAY scheme. Further, it
is noteworthy to mention that the loans taken under UDAY also comprises FR
loans taken to meet the power purchase payments and these costs of finance are
not allowed as a pass through under Distribution or Retail Supply Business.
The GoTS has taken over Rs. 3,373 crores of loans of TSNPDCL under UDAY
agreement. The Breakup of capital expenditure loans and Working capital loans
taken over by GoTS under UDAY is tabulated below.

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Total Loans taken over under UDAY Scheme 3,373 Crs.

CAPEX Loans 940 Crs.
Working Capital Loans 2,433 Crs.
The Hon'ble Commission has not considered any interest Pass-through of working
capital loans for power purchase in the Retail Supply ARR. Only loans to meet capital
expenditure have been considered in the Distribution Business ARR.
But, the Hon'ble Commission has computed the savings as INR 372.54 Crores for
TSNPDCL for each year of FY 2017-18 and FY 2018-19 in respective Retail Supply
Tariff Orders which includes savings towards capital expenditure loans and working
capital loans for each year. These savings were already considered as pass through
in the Retail Tariffs for FY 2017-18 and FY 201819. Therefore, the DISCOM prays
before the Hon'ble Commission to
• Consider the loans taken under UDAY by GoTS as equity infusion.
• Consider no savings on loans under UDAY scheme for the DISCOM and
the computed savings of Rs.745.08 crores (for two years) which was already
passed through the tariffs in retail supply Tariff Order FY 2017-18 and FY
2018-19, may be added back to the True-ups of third control period ie FY
2014-15 to FY 2018-19.
Hence, the DISCOM prays the Hon'ble Commission to allow the True-ups for the 3rd
control period entirely as per the Regulation.

Particulars Rs. in crores

Third Control Period Gap 82.82
Add. Savings already considered in the 745.08
Retail Supply Tariff Order FY 2017-18
& FY 2018-19
Total True-up Gap 827.90
Further, in compliance to the Directive No. 3 of the Distribution Business Tariff
Order for 4th Control Period (FY 2019-2024), the details of the loans taken over
under UDAY scheme is enclosed as Annexure – XI.”
(Emphasis supplied)

6.2. As per the UDAY MoU signed between Ministry of Power, Govt. of Telangana and the TS
Discoms, the Govt. of Telangana had committed to take the following measures:
“a) Taking over 75% of the debt of the Telangana DISCOMs as on 30th September,
2015 by 31-03-2017.
b) The Borrowings made by the state to takeover DISCOMs debt during 2016-17
shall be utilized by Government of Telangana solely for the purpose of discharging
the DISCOMs debt and transfer to DISCOMs as a mix of grant, loan or equity as
described in the following table:

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Objections on True up Petition for FY 2006-2021 (Distribution Business)

(Rs. in Crores)
Year Total Debt Transfer to Transfer to Transfer to Outstanding
taken over the the the State Loan
DISCOMs DISCOMs DISCOMs of the
in the form in the form in the form DISCOMs
of Grants of Loan of Equity
Year - 1 75% of the 50% of Rs 25% of Rs 25% of Rs Rs. 2230 Crs
(By 31-03- total debt 8,923 cr Rs 8923 crs -Rs 8923 crs - Rs
2017) i.e. Rs. 8923 4,462 crs to 2230 crs 2,231 crs
Crs. be taken will be
over in issued in
2016-17 2016-17
*Discoms to pay the interest on loans till takeover by Go l S. The loan to be taken over by
GoTS in the year 2017-18.
…
e) The Government of Telangana shall issue non-SLR bonds to raise funds for
providing grant to the DISCOMs.
g) The takeover of the debt shall be in the order of debt already due, followed by
debt with highest cost:
Year 2016-17 2017-18 2018-19 2019-20 2020-21
Previous 0% of 5% of 10% of the 25% of the 50% of the
year's the loss the loss loss of 2017- loss of previous
DISCOMs of 2015- of 2016- 18 2018-19 year loss
loss to be 16 17
taken over
by State

h) Government of Telangana shall provide Operational Funding Requirement

(OFR) support to the DISCOMs, till the DISCOMs achieves turnaround.
…
j) Government of Telangana shall guarantee repayment of principal and interest
payment for the balance debt remaining with DISCOMs / bonds issued by
DISCOMs.
k) Henceforth, Banks / FIs shall not advance short term debt to DISCOMs for
financing losses. Therefore, Government of Telangana shall guarantee the bonds
issued by DISCOMs or issue bonds itself to meet current losses after 1st October
2015, if any, within the limit of loss trajectory finalised by MoP.”

6.3. As can be observed, as per the Terms of the UDAY MoU, the Govt. of Telangana had
committed to:

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Objections on True up Petition for FY 2006-2021 (Distribution Business)

• Takeover 75% of the debt of the Telangana DISCOMs as on 30th September, 2015 by 31-
03-2017
• The Borrowings made by the state to takeover DISCOMs debt during 2016-17 would be
transferred to the Discoms as a mix of grant, loan or equity.
• To issue non-SLR bonds to raise funds for providing grant to the DISCOMs.
• Provide Operational Funding Requirement (OFR) support to the DISCOMs, till the
DISCOMs achieves turnaround.
• Guarantee repayment of principal and interest payment for the balance debt remaining
with DISCOMs / bonds issued by DISCOMs.
• Guarantee the bonds issued by DISCOMs or issue bonds itself to meet current losses after
1st October 2015, if any, within the limit of loss trajectory finalised by MoP.

6.4. As per the UDAY MoU signed between Ministry of Power, Govt. of Telangana and the TS
Discoms, the TS Discoms had committed to take the following measures:
“a) For the 25% of the debt remaining with DISCOM as on 30th September, 2015
DISCOM to fully/ partially issue state government guaranteed bonds or get them
converted by Banks/FIs into loans or bonds with interest not more than the Banks
base rate plus 0.1 %.
DISCOMs to ensure timely payment of lender's dues towards principal/interest for
the balance debt remaining with them.
b) The DISCOMs shall pay interest to the Government of Telangana on the
outstanding Government Guaranteed bonds for the Go TS loan in a financial year
at the rate at which Telangana Government issued non-SLR Bonds.”
(Emphasis supplied)

6.5. It is prayed that the Hon’ble Commission may ensure that the borrowings made by the state
to takeover DISCOMs debt during 2016-17 would be transferred to the Discoms as a mix
of grant, loan or equity are strictly in accordance with the Terms of the UDAY MoU and
that the other commitments of Govt. of Telangana and the TS Discoms are being strictly
complied with.

6.6. Wherever there is non-compliance of the Terms of the UDAY MoU, it is prayed that the
Hon’ble TSERC may take note of the same in its Order and disallow any claims made by
the Petitioners which are in violation of the Terms of the UDAY MoU in the instant
Petition.

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Objections on True up Petition for FY 2006-2021 (Distribution Business)

7 O&M EXPENSES

7.1. The TSSPDCL and TSNPDCL Discoms have claimed a true up of Rs. 2,555.61 Crores &
Rs. 1,403.56 Crores respectively towards the variation in the O&M Expenses for the Period
from FY 2006-07 to FY 2020-21. The TSSPDCL and TSNPDCL have stated the actual
O&M expenses to the tune of Rs. 20,299.95 Crores & Rs. 12,037.99 Crores respectively
against the approved value of Rs. 17,744.34 & 10,634.43. The Objections in respect of the
variation in O&M expenses claimed by the Licensee are provided below:

A. Truing up of O&M expenses is not allowable as it is a Controllable Expense

7.2. As per clause 10.4 of the Tariff Regulations, the O&M expenses are ‘Controllable’
expenses and the Hon’ble Commission in its latest Tariff Order dated 29.04.2020 and past
orders had allowed the same on normative basis. In view of the provisions of the APERC
Tariff Regulations, 2005, the variation in respect of ‘Controllable’ expenses are not
allowable. The Relevant clauses (10.5 to 10.8) of the APERC Tariff Regulations is
interpreted below:

“10.5 Pass-through of gains and losses on variations in "uncontrollable" items of

ARR: - The Distribution Licensee shall be eligible to claim variations in
"uncontrollable" items in the ARR for the year succeeding the relevant year of the
Control Period depending on the availability of data as per actuals with respect to
effect of uncontrollable items Provided that the Commission shall allow the
financing cost on account of the time gap between the time when the true-up
becomes due and when it is actually allowed and the corrections shall not be
normally revisited

10.6 Sharing of gains and losses on variations in "controllable" items of ARR; -

The Distribution Licensee in its annual filings during the Control Period shall
present gains and losses for each controllable item of the Aggregate Revenue
Requirement. A statement of gain and loss against each controllable item will be
presented after adjusting for any variations on account of uncontrollable factors

10.7 For the purpose of sharing gains and losses with the consumers, only
aggregate gains or losses for the Control Period as a whole will be considered. The
Commission will review the gains and losses for each item of the ARR and make
appropriate adjustments wherever required
Provided that for the first Control Period, insofar as the gains and losses from the
Retail Supply Business of the Distribution Licensee are concerned, these will be
shared with the consumers on yearly basis.

I0.8 Notwithstanding anything contained in this Regulation, the gains or losses in

the controllable items of ARR on account of factors that are beyond the control of
the Distribution Licensee -force majeure -- shall be passed on as an additional
charge or rebate in ARR over such period as may be specified in the Order of the
Commission.”

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Objections on True up Petition for FY 2006-2021 (Distribution Business)

(Emphasis Supplied)

7.3. Above stated clauses 10.5-10.8 of the defined regulation clearly depicts a picture that only
force majeure items are allowed for pass through over and above the normative values,
subjected to Commission prudence check.

7.4. Contrary to this, the Petitioners have claimed the entire variation in O&M expenses without
appreciating that Reg.10.8 provides that only the gains and losses on account of factors
which are beyond the control of the Petitioner – force majeure – are to be allowed.

7.5. Basically, the Operation and Maintenance Expenses consist of three elements:
A. Employee Cost Expenses
B. Repair and Maintenance Expenses
C. Administrative and General Expenses

7.6. As Discoms are regulated entities, the Hon’ble Commission has set out the allowable norms
for these three components in the relevant tariff orders which are to be strictly adhered.
However, both the Discoms have deviated from the approved norms. The major reasons
stated in instant Petitions against the deviation are as below:
➢ Wage Revision
➢ Regularization of outsourcing employees
➢ Actuarial Valuation Report
➢ Leave Encashment
➢ DA hike and new recruitment
➢ Increase in Repairs and Maintenance cost
➢ Increase in travelling and vehicle hire expenses

7.7. It is reiterated that the Hon’ble Commission may direct the Petitioners to submit the
following details, without which prudence check exercise of Wage Revision, Actuarial
Valuation Report, Leave Encashment, Increase in Repairs and Maintenance cost, Increase
in travelling and vehicle hire expenses, would be hampered:
• All Actuarial Valuation Reports for TSNPDCL and TSSPDCL from FY 2006-07
to FY 2020-21;
• Detailed Report on Wage Revision Impact for TSNPDCL and TSSPDCL from FY
2006-07 to FY 2020-21;
• Detailed explanation with supporting documents for increase in Repair and
Maintenance Expenses for TSNPDCL and TSSPDCL from FY 2006-07 to FY
2020-21;
• Detailed explanation with supporting documents for increase in Administrative and
General Expenses for TSNPDCL and TSSPDCL from FY 2006-07 to FY 2020-21;
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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

B. Enabling Provision for O&M expenses computation as per APERC Regulation 2005:
7.8. Clause 14 of the APERC Tariff Regulations, 2005 stipulate the following pertaining to
Operation and Maintenance Expenses:

“14 OPERATION AND MAINTENANCE COSTS

14.I. Operation and Maintenance (O&M) costs shall comprise the following:
a. Salaries, wages and other employee costs;
b. Administrative and General costs;
c. Repairs and maintenance, and
d. Other miscellaneous expenses, like legal charges, audit fees, lease charges, rent,
rates and taxes etc.

14.2. The Distribution Licensee in its filings for the Control Period shall submit
consolidated O&M expenses for the Base Year of the Control Period, and two years
preceding the Base Year. The O &M expenses for the Base Year shall be determined
based on latest audited accounts, best estimates of Distribution Licensee of actual
O&M expenses for relevant years and other factors considered relevant. The O&M
expenses the Base Year, if required, will be used for projecting the expenses for each
year of Control Period.

14.3 The composite O&M expenses permissible towards revenue requirement for
each year the Control Period shall be determined, by using pre-determined norms or
formulae this purpose. These norms or formulae shall be determined by the
Commission based on Distribution Licensee's submissions in this regard, previous
years' actual expenses and any other factors considered relevant by the
Commission.”
(Emphasis supplied)

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Objections on True up Petition for FY 2006-2021 (Distribution Business)

C. O&M norms defined in the MYT order dt. 27.03.2015 & 29.04.2020
7.9. Notwithstanding the previous points, it is submitted that the Hon’ble Commission vide its
Order dt. 27.03.2015 has defined the O&M norms for FY 2015-16 to FY 2018-19 as
follows:

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

7.10. In the same manner, the Hon’ble Commission has also approved the O&M norms for FY
2019-20 and FY 2020-21 as follows vide its Order dt. 29.04.2020:

*The R&M expenses for each year of 4th Control Period have been arrived at by multiplying the
K factor with the opening GFA for the respective year

7.11. The Objector has computed the allowable True-up for the TSSPDCL and TSNPDCL in
accordance to the above norms defined by the Hon’ble Commission and the actual
Substations, Line Length, DTR, Consumer and GFA data as available in the Audited
Accounts of the Petitioners:

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Information provided in Audited Accounts for TSSPDCL

TSSPDCL FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
No. of Substations 1,344 1,407 1,488 1,593 1,644 1,675
Line Length in KM 2,55,613 2,62,889 2,78,106 2,89,253 2,98,932 3,55,613
No. of DTRs 3,18,765 3,44,763 3,98,586 4,11,372 44,35,453 4,57,384
No of Consumers 68,97,922 73,21,151 76,24,732 82,53,998 87,52,121 91,07,326
(All Figures in Crores)

TSSPDCL FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
GFA* 7,806 9,716 11,265 12,524 14,192 16,417

Information provided in Audited Accounts for TSNPDCL

TSNPDCL FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
No. of Substations 1110 1195 1283 1368 1405 1439
Line Length in KM 2,16,224 2,13,606 2,18,194 2,62,158 2,67,844 2,72,083
No. of DTRs 2,42,539 2,55,087 2,66,213 2,82,666 2,95,018 3,05,031
No of Consumers 51,78,054 52,74,360 54,29,988 57,05,258 59,81,954 61,77,230
(All Figures in Crores)

TSNPDCL FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
GFA* 4,275 4,807 5,421 6,043 7,030 7,888

Allowable O&M expenses for TSSPDCL as per Objector Assessment:

(All Figures in Crores)

TSSPDCL FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Employee Cost 786.67 897.48 1,031.69 730.86 791.61 863.71
A&G Expenses 220.04 256.00 293.25 50.87 56.76 78.80
R&M 166 150 187 216 126 143
O&M Expenses 1,172.85 1,303.36 1,511.48 998.02 974.87 1,085.85

Allowable O&M expenses for TSNPDCL as per Objector Assessment:

(All Figures in Crores)

TSSPDCL FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Employee Cost 517.20 589.30 677.03 546.98 588.10 629.47
A&G Expenses 134.36 153.21 175.98 29.16 31.32 33.49
R&M 68 74 83 93 72 84
O&M Expenses 719.41 816.04 935.69 669.38 691.34 746.62
* Note: GFA figures (Netted off CWIP) has been considered as per consistent methodology adopted by Hon’ble TSERC

7.12. The detailed computation of allowable O&M expenses for FY16 - 21 is attached herewith
as Appendix-D

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Summary of Disallowances in O&M Expenses as per Objector’s Assessment - TSSPDCL:

(All Figures in Crores)

Over the control period 2006-09

Deviation
As per Disallowance in
allowable as
TSSPDCL Approved Claimed Objector Deviation deviation
per Objector
(O&M Cost) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) F =D-E
(E=C-A)
Operation and
1,168.01 1,554.58 1,168.01 386.57 0.00 386.57
Maintenance Cost

(All Figures in Crores)

Over the control period 2009-14

Deviation
As per allowable as Disallowance in
TSSPDCL Approved Claimed Objector Deviation per deviation
(O&M Cost) (A) (B) Assessment (D=B-A) Objector claimed
(C) Assessment (F =D-E)
(E=C-A)
Operation and
3,969.21 4,886.00 3,969.21 916.79 0.00 916.79
Maintenance Cost

(All Figures in Crores)

Over the control period 2014-19

Deviation
As per Disallowance in
allowable as
TSSPDCL Approved Claimed Objector Deviation deviation
per Objector
(O&M Cost) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) (F =D-E)
(E=C-A)
Operation and
7,154.92 8753.00 6002.54 1598.08 -1152.38 2750.46
Maintenance Cost

(All Figures in Crores)

Over the control period 2019-21

Deviation
As per Disallowance in
allowable as
TSSPDCL Approved Claimed Objector Deviation deviation
per Objector
(O&M Cost) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) (F =D-E)
(E=C-A)
Operation and
5,451.85 5,105.37 2100.03 -346.48 -3351.82 3005.34
Maintenance Cost

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Summary of Disallowances in O&M Expenses as per Objector’s Assessment - TSNPDCL:

(All Figures in Crores)

Over the control period 2006-09

Deviation
As per Disallowance in
allowable as
TSNPDCL Approved Claimed Objector Deviation deviation
per Objector
(O&M Cost) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) F =D-E
(E=C-A)
Operation and
608.42 753.00 608.42 144.58 0.00 -463.84
Maintenance Cost

(All Figures in Crores)

Over the control period 2009-14

Deviation
As per Disallowance in
allowable as
TSNPDCL Approved Claimed Objector Deviation deviation
per Objector
(O&M Cost) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) F =D-E
(E=C-A)
Operation and
1,629.22 2,426.00 1629.22 796.78 0.00 -832.44
Maintenance Cost

(All Figures in Crores)

Over the control period 2014-19

Deviation
As per Disallowance in
allowable as
TSNPDCL Approved Claimed Objector Deviation deviation
per Objector
(O&M Cost) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) F =D-E
(E=C-A)
Operation and
4,471.00 5275.00 3505.46 804.00 -965.54 -3667.00
Maintenance Cost

(All Figures in Crores)

Over the control period 2019-21

Deviation
As per Disallowance in
allowable as
TSNPDCL Approved Claimed Objector Deviation deviation
per Objector
(O&M Cost) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) F =D-E
(E=C-A)
Operation and
3,925.79 3,583.99 1356.20 -341.80 -2569.59 -4267.59
Maintenance Cost

7.13. It is prayed that the Hon’ble Commission may limit the O&M expenses to the approved
value for the period 2006-2015 and may allow the O&M expenses (based on norms
approved by the Hon’ble TSERC) as per Objector’s Assessment for the period 2016-21.

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

8 DEPRECIATION

8.1. It has been observed that the Distribution Licensees have computed depreciation in the
instant Petition using the depreciation rates notified by Ministry of Power (MoP), GOI and
incorporated the same into the RRB and expenditure calculations.

8.2. As per the enabling provision listed in APERC Tariff Regulations, 2005, depreciation
ought to be computed as per the defined CERC rates. This is affirmed by the Hon’ble
Commission in Clause 15 of its Tariff Regulations:
“15.1 For each year of the Control Period, depreciation shall be calculated on the
amount of Original Cost of the Fixed Assets included in the RRB at the beginning of
each year of the Control Period:
Provided that depreciation on assets funded by consumer /user contributions or
through any capital subsidy/ grant etc. shall not be allowed in the revenue requirement
of the Transmission Licensee.
15.2 Depreciation allowance for each year of the Control Period shall be determined,
generally based on the methodology, rates and other terms as decided by CERC from
time to time.
15.3 Depreciation shall be charged from the 1st April of the following year from the
date the asset is put to use.”
(Emphasis supplied)

8.3. Additionally, the Hon’ble Commission’s views in this regard as per Distribution Order
dated 29.04.2020 are reproduced below:
“3.8 DEPRECIATION
Commission’s Views
3.8.3 Regulation No.4 of 2005 stipulates that the depreciation shall be calculated on
the amount of Original Cost of Fixed Assets included in the Regulated Rate Base at the
beginning of each year of the Control Period, generally based on the methodology,
rates and other terms as decided by CERC from time to time. The Commission has
approved the depreciation for 4th Control Period considering the rates of depreciation
as specified by CERC in its Tariff Regulations, 2019 as detailed in Chapter.”
(Emphasis supplied)

8.4. Thus, it is evident from the Tariff Regulations and the above-mentioned Hon’ble
Commission’s view that Depreciation is to be computed as per the rates specified by CERC
from time to time.

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

8.5. Therefore, it is prayed that the Hon’ble Commission may direct the petitioner to revise its
Depreciation claims in accordance to the Regulation 15 of the APERC Tariff Regulations
2005, and subsequently allow Depreciation after due prudence check.
9 RETURN ON CAPITAL EMPLOYED

9.1. The TSSPDCL and TSNPDCL discoms have claimed a true up of Rs. 185.99 Crores and
Rs.525.01 Crores respectively towards the variation in the Return on Capital Employed
(RoCE) for the Period FY 2007 to FY 2021. The TSSPDCL and TSNPDCL has stated that
the actual RoCE is to the tune of Rs. 5,080.21 Crores and Rs. 2,524.27 Crores respectively.
The Objections in respect of the variation in RoCE claimed by the Licensee are provided
below:

A. Enabling provision for RoCE computation in the APERC Tariff Regulations, 2005

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

B. RoCE Computation Methodology adopted as per the MYT Order dated 27.03.2015:

9.2. The relevant extract of the MYT Order is reproduced below:

“31. Calculation of Return on capital employed (ROCE)

As per Regulation 4 of 2005, the Return on Capital Employed is a permitted as an element of

ARR. The amount claimed in this manner is expected to meet the cost of debt and cost of equity
to finance the assets used in the distribution business. The Return On Capital Employed is
generally worked out under regulated framework as follows:

The value of capital/net assets used in the distribution business defines the Regulated rate base
Weighted Average Cost of Capital (WACC) in percentage is worked out based on a) debt –
equity ratio (capital structure) b) cost of debt and c) return on equity, and

WACC, in percent, is applied on RRB to arrive at ROCE for each year of control period.

31.4. Return on Capital Employed (ROCE): As per Regulation, return on Capital Employed is
calculated by multiplying the regulated base rate with weighted average cost of capital. The
amount claimed through return on Capital employed is to meet the cost of debt and the cost of
equity.”

(Emphasis supplied)

9.3. In line with the Clause 15 of the APERC Tariff Regulations and the RoCE Computation
Methodology adopted as per the MYT Order dated 27.03.2015, the Objector has computed
the RoCE allowable to TSSPDCL and TSNPDCL based on the Audited Accounts for the
respective control Period as follows:

Consumer Contributions -TSSPDCL

Particular FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15
Opening 607.31 738.12 958.58 1,185.52 1,446.64 1,652.84 2,001.53 2,387.66 2,772.96
Addition 130.82 220.46 226.93 261.12 206.20 348.68 386.13 385.30 (139.11)
Closing 738.12 958.58 1,185.52 1,446.64 1,652.84 2,001.53 2,387.66 2,772.96 2,633.84
Consumer Contributions -TSSPDCL
Particular FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Opening 2,633.84 3,076.25 3,508.11 3,926.13 4,538.70 5,257.91
Addition 442.40 431.86 418.02 612.57 719.21 582.83
Closing 3,076.25 3,508.11 3,926.13 4,538.70 5,257.91 5,840.74

29
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Consumer Contributions -TSNPDCL

Particular FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14 FY 15
Opening 237.20 244.56 287.86 289.89 354.37 406.08 462.35 540.92 617.24
Addition 7.36 43.30 2.03 64.48 51.71 56.28 78.56 76.32 65.73
Closing 244.56 287.86 289.89 354.37 406.08 462.35 540.92 617.24 682.97
Consumer Contributions - TSNPDCL
Particular FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Opening 682.97 673.25 755.62 875.09 946.29 1,019.03
Addition (9.72) 82.37 119.47 71.19 72.74 137.58
Closing 673.25 755.62 875.09 946.29 1,019.03 1,156.61

Depreciation -TSSPDCL
Particular FY 07 FY 08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Opening Acc
1,341.17 1,543.66 1,777.36 2,038.61 2,333.91 2,660.23 3,051.34 3,504.94 4,012.54
Dep
Dep Addition 202.49 233.70 260.93 295.30 325.93 390.35 452.79 507.53 476.06
Adj/Deduction - - 0.33 - 0.40 0.75 0.81 0.06 (912.18)
Closing Dep 1,543.66 1,777.36 2,038.61 2,333.91 2,660.23 3,051.34 3,504.94 4,012.54 3,576.41
Depreciation -TSSPDCL
Particular FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Opening Acc Dep 3,576.41 4,122.04 4,801.83 5,622.67 6,485.60 7,492.46
Dep Addition 544.52 673.28 832.33 855.81 996.99 1,066.58
Adj/Deduction 1.10 6.52 -11.49 7.12 9.88 1.97
Closing Dep 4,122.04 4,801.83 5,622.67 6,485.60 7,492.46 8,561.01
Depreciation -TSNPDCL
Particular FY 07 FY 08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Opening Acc Dep 689.26 798.42 918.19 1,053.95 1,222.08 1,393.67 1,585.80 1,791.79 2,017.44
Dep Addition 109.44 120.29 136.50 168.30 178.04 195.84 213.67 232.08 246.54
Adj/Deduction 0.28 0.53 0.74 0.16 6.44 3.72 7.68 6.43 20.57
Closing Dep 798.42 918.19 1,053.95 1,222.08 1,393.67 1,585.80 1,791.79 2,017.44 2,243.41
Depreciation -TSNPDCL
Particular FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Opening Acc Dep 2,243.41 2,608.71 2,836.21 3,168.46 3,546.82 3,981.81
Dep Addition 367.61 299.06 335.45 379.91 444.87 322.62
Adj/Deduction 2.31 71.57 3.19 1.56 9.87 25.38
Closing Dep 2,608.71 2,836.21 3,168.46 3,546.82 3,981.81 4,279.05

30
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

GFA -TSSPDCL
Particular FY 07 FY 08 FY09 FY10 FY11 FY12 FY13 FY14
Opening GFA* 3,020.14 3,170.98 3,801.82 4,427.99 5,118.20 6,479.19 7,463.92 8,472.17
Addition 159.52 630.95 626.55 690.21 659.07 1,872.46 1,913.28 2,133.02
Decapitalisation 8.68 0.11 0.38 - - 887.73 905.04 1,036.22
Closing 3,170.98 3,801.82 4,427.99 5,118.20 5,777.27 7,463.92 8,472.17 9,568.97
GFA-TSSPDCL
Particular FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Opening GFA* 3,020.14 3,170.98 3,801.82 4,427.99 5,118.20 6,479.19 7,463.92
Addition 159.52 630.95 626.55 690.21 659.07 1,872.46 1,913.28
Decapitalisation 8.68 0.11 0.38 - - 887.73 905.04
Closing 3,170.98 3,801.82 4,427.99 5,118.20 5,777.27 7,463.92 8,472.17

GFA -TSNPDCL
Particular FY 07 FY 08 FY09 FY10 FY11 FY12 FY13 FY14 FY15
Opening GFA* 1,623.87 1,756.90 1,916.01 2,353.62 2,721.42 2,945.77 3,291.19 3,664.58 3,944.51
Addition 133.57 159.17 440.10 371.78 234.82 353.73 388.65 293.37 370.13
Decapitalisation 0.54 0.06 2.50 3.98 10.47 8.30 15.25 13.45 39.66
Closing 1,756.90 1,916.01 2,353.62 2,721.42 2,945.77 3,291.19 3,664.58 3,944.51 4,274.98
GFA -TSNPDCL
Particular FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Opening GFA* 4,274.98 4,807.37 5,421.15 6,043.00 7,030.48 7,887.89
Addition 536.21 735.62 626.05 989.40 871.60 748.85
Decapitalisation 3.81 121.84 4.21 1.92 14.19 30.00
Closing 4807.37 5,421.15 6,043.00 7,030.48 7,887.89 8,606.75

31
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

RRB - Base Year (TSSPDCL)

Particulars (Rs. Crores) FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14
Opening Balance of OCFA 3,020.14 3,170.98 3,801.82 4,427.99 5,118.20 5,777.27 6,762.00 7,770.25

Opening Balance of Working Capital - - - - - - - -

Opening Balance of Accumulated Depreciation 1,341.17 1,543.66 1,777.36 2,038.61 2,491.40 2,817.73 3,208.84 3,662.43
Opening balance of Accumulated Consumer Contribution 607.31 738.12 958.58 1,185.52 1,446.64 1,652.84 2,001.53 2,387.66
Regulated Rate Base (RRB) (Opening) 1,071.66 889.20 1,065.88 1,203.86 1,180.16 1,306.70 1,551.64 1,720.15
Capitalisation allowed during the Year 150.84 630.84 626.17 690.21 659.07 984.73 1008.25 1096.80
Depreciation 202.49 233.70 261.25 452.79 326.33 391.11 453.60 507.60
Consumer Contribution 130.82 220.46 226.93 261.12 206.20 348.68 386.13 385.30
O&M Expenses as per Objector's Assessment 371.27 389.84 406.90 644.72 716.33 785.00 869.17 954.34
Change in Working Capital (O&M/12) 30.94 32.49 33.91 53.73 59.69 65.42 72.43 79.53
RRB (Closing) 858.26 1,033.39 1,169.95 1,126.43 1,247.00 1,486.22 1,647.72 1,844.53
Change in RRB (Δ RB) (60.30) 120.83 102.90 41.88 122.96 187.89 156.69 181.48
Regulated Rate Base (RRB) 1,011.37 1,010.02 1,168.78 1,245.74 1,303.12 1,494.58 1,708.33 1,901.63

32
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

RRB - Base Year (TSSPDCL)

Particulars (Rs. Crores) FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Opening Balance of OCFA 8,867.05 8,030.03 9,624.13 11,250.68 12,870.63 15,039.96 16,661.90

Opening Balance of Working Capital - - - - - - -

Opening Balance of Accumulated Depreciation 4,170.03 3,733.91 4,279.53 4,959.33 5,780.17 6,643.10 7,649.96
Opening balance of Accumulated Consumer Contribution 2,772.96 2,633.84 3,076.25 3,508.11 3,926.13 4,538.70 5,257.91
Regulated Rate Base (RRB) (Opening) 1,924.05 1,662.28 2,268.35 2,783.24 3,164.33 3,858.16 3,754.03
Capitalisation allowed during the Year -837.01 1594.10 1626.55 1619.95 2169.33 1621.94 1205.81
Depreciation (436.13) 545.62 679.80 820.84 862.93 1,006.86 1,068.55
Consumer Contribution (139.11) 442.41 431.86 418.03 612.57 719.21 582.83
O&M Expenses as per Objector's Assessment 1,056.47 1,156.59 1,340.03 1,541.22 908.23 991.71 1,108.32
Change in Working Capital (O&M/12) 88.04 96.38 111.67 128.43 75.69 82.64 92.36
RRB (Closing) 1,574.24 2,171.96 2,671.57 3,035.89 3,782.48 3,671.39 3,216.11
Change in RRB (Δ RB) (42.85) 399.42 369.12 318.98 422.60 30.58 (130.42)
Regulated Rate Base (RRB) 1,881.21 2,061.70 2,637.46 3,102.22 3,586.93 3,888.74 3,623.61

33
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

RRB - Base Year (TSNPDCL)

Particulars (Rs. Crores) FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14
Opening Balance of OCFA 1,623.87 1,756.90 1,916.01 2,353.62 2,721.42 2,945.77 3,291.19 3,664.58

Opening Balance of Working Capital - - - - - - - -

Opening Balance of Accumulated Depreciation 689.26 798.42 919.24 1,056.48 1,270.32 1,454.80 1,654.36 1,875.71
Opening balance of Accumulated Consumer
237.20 244.56 287.86 289.89 354.37 406.08 462.35 540.92
Contribution
Regulated Rate Base (RRB) (Opening) 697.41 713.92 708.92 1,007.24 1,096.73 1,084.89 1,174.47 1,247.95
Capitalisation allowed during the Year 133.03 159.12 437.61 367.80 224.35 345.42 373.39 279.92
Depreciation 109.71 120.82 137.25 213.83 184.48 199.56 221.35 238.52
Consumer Contribution 7.36 43.30 2.03 64.48 51.71 56.28 78.56 76.32
O&M Expenses as per Objector's Assessment 196.71 200.93 210.78 251.43 284.63 317.23 368.02 407.91
Change in Working Capital (O&M/12) 16.39 16.74 17.57 20.95 23.72 26.44 30.67 33.99
RRB (Closing) 696.97 692.18 989.68 1,075.78 1,061.17 1,148.04 1,217.29 1,179.05
Change in RRB (Δ RB) 24.37 14.24 166.73 65.69 17.80 71.23 67.41 16.53
Regulated Rate Base (RRB) 721.78 728.17 875.65 1,072.94 1,114.53 1,156.12 1,241.88 1,264.49

34
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

RRB - Base Year (TSNPDCL)

Particulars (Rs. Crores) FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Opening Balance of OCFA 3,944.51 4,274.98 4,807.37 5,421.15 6,043.00 7,030.48 7,887.89

Opening Balance of Working Capital - - - - - - -

Opening Balance of Accumulated Depreciation 2,114.23 2,381.33 2,751.24 3,121.87 3,460.51 3,841.98 4,296.71
Opening balance of Accumulated Consumer Contribution 617.24 682.97 673.25 755.62 875.09 946.29 1,019.03
Regulated Rate Base (RRB) (Opening) 1,213.04 1,210.68 1,382.88 1,543.66 1,707.40 2,242.22 2,572.15
Capitalisation allowed during the Year 330.47 532.39 613.78 621.85 987.48 857.41 718.85
Depreciation 267.10 369.91 370.63 338.64 381.47 454.73 348.00
Consumer Contribution 65.73 (9.72) 82.37 119.47 71.19 72.74 137.58
O&M Expenses as per Objector's Assessment 628.00 673.66 743.61 879.19 580.99 644.69 711.51
Change in Working Capital (O&M/12) 52.33 56.14 61.97 73.27 48.42 53.72 59.29
RRB (Closing) 1,158.34 1,326.74 1,481.69 1,634.14 2,193.80 2,518.43 2,746.13
Change in RRB (Δ RB) 51.15 142.24 142.36 155.14 315.82 218.69 175.93
Regulated Rate Base (RRB) 1,264.19 1,352.92 1,525.24 1,698.80 2,023.23 2,460.91 2,748.08
ROCE - TSSPDCL
Particulars (Rs. Crores) FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14
Regulated Rate Base (RRB) 1,011.37 1,010.02 1,168.78 1,245.74 1,303.12 1,494.58 1,708.33 1,901.63
Working Capital Loan 30.94 32.49 33.91 53.73 59.69 65.42 72.43 79.53
Net Regulated Rate Base (RRB) 980.43 977.54 1,134.87 1,192.01 1,243.43 1,429.17 1,635.90 1,822.10
Equity (25%) 245.11 244.38 283.72 298.00 310.86 357.29 408.97 455.53
Debt (75%) 735.32 733.15 851.15 894.01 932.57 1,071.88 1,226.92 1,366.58
Rate of return on Equity 14.00% 14.00% 14.00% 14.00% 14.00% 14.00% 14.00% 14.00%
Rate of Return on Debt 9.00% 9.00% 9.00% 10.00% 10.00% 10.00% 10.00% 12.00%
Weighted Average Cost of Capital (WACC) 10.21% 10.21% 10.21% 10.96% 10.95% 10.96% 10.96% 12.48%
Return on Capital Employed (RoCE) 103.28 103.12 119.38 136.49 142.75 163.75 187.19 237.31

ROCE -TSSPDCL
Particulars (Rs. Crores) FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Regulated Rate Base (RRB) 1,881.21 2,061.70 2,637.46 3,102.22 3,586.93 3,888.74 3,623.61

35
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Working Capital Loan 88.04 96.38 111.67 128.43 75.69 82.64 92.36
Net Regulated Rate Base (RRB) 1,793.17 1,965.31 2,525.79 2,973.78 3,511.25 3,806.10 3,531.25
Equity (25%) 448.29 491.33 631.45 743.45 877.81 951.52 882.81
Debt (75%) 1,344.88 1,473.99 1,894.34 2,230.34 2,633.43 2,854.57 2,648.44
Rate of return on Equity 14.00% 14.00% 14.00% 14.00% 14.00% 14.00% 14.00%
Rate of Return on Debt 12.00% 12.00% 12.00% 12.00% 12.00% 9.85% 9.85%
Weighted Average Cost of Capital (WACC) 12.48% 12.48% 12.48% 12.48% 12.49% 10.87% 10.86%
Return on Capital Employed (RoCE) 234.71 257.23 329.12 387.14 447.99 422.53 393.56

ROCE - TSNPDCL
Particulars (Rs. Crores) FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14
Regulated Rate Base (RRB) 721.78 728.17 875.65 1,072.94 1,114.53 1,156.12 1,241.88 1,264.49
Working Capital Loan 16.39 16.74 17.57 20.95 23.72 26.44 30.67 33.99
Net Regulated Rate Base (RRB) 705.39 711.42 858.08 1,051.99 1,090.81 1,129.68 1,211.21 1,230.50
Equity (25%) 176.35 177.86 214.52 263.00 272.70 282.42 302.80 307.62
Debt (75%) 529.04 533.57 643.56 788.99 818.11 847.26 908.41 922.87
Rate of return on Equity 14.00% 14.00% 14.00% 14.00% 14.00% 14.00% 14.00% 14.00%
Rate of Return on Debt 9.00% 9.00% 9.00% 10.00% 10.00% 10.00% 10.00% 12.00%
Weighted Average Cost of Capital (WACC) 10.22% 10.22% 10.22% 10.98% 10.98% 10.98% 10.98% 12.49%
Return on Capital Employed (RoCE) 73.78 74.43 89.53 117.81 122.36 126.91 136.30 157.89

ROCE –TSNPDCL
Particulars (Rs. Crores) FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Regulated Rate Base (RRB) 1,264.19 1,352.92 1,525.24 1,698.80 2,023.23 2,460.91 2,748.08
Working Capital Loan 52.33 56.14 61.97 73.27 48.42 53.72 59.29
Net Regulated Rate Base (RRB) 1,211.86 1,296.78 1,463.27 1,625.53 1,974.81 2,407.19 2,688.79
Equity (25%) 302.96 324.19 365.82 406.38 493.70 601.80 672.20
Debt (75%) 908.89 972.58 1,097.45 1,219.15 1,481.11 1,805.39 2,016.59
Rate of return on Equity 14.00% 14.00% 14.00% 14.00% 14.00% 14.00% 14.00%
Rate of Return on Debt 12.00% 12.00% 12.00% 12.00% 12.00% 9.85% 9.85%
Weighted Average Cost of Capital (WACC) 12.48% 12.48% 12.48% 12.48% 12.49% 10.86% 10.87%
36
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Return on Capital Employed (RoCE) 157.76 168.83 190.35 211.98 252.66 267.37 298.58

True-up of ROCE Allowable as per Objector's Assessment for TSSPDCL

Particulars (Rs. Crores) FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14
RoCE Approved in MYT Order 132.55 146.21 159.88 184.66 209.08 227.60 243.92 257.10
RoCE as claimed by the Petitioner 113.00 119.00 146.00 173.00 201.00 255.00 293.00 348.00
RoCE as per Objector's Assessment 103.28 103.12 119.38 136.49 142.75 163.75 187.19 237.31
True-up Allowable as per Objector's
-29.27 -43.09 -40.50 -48.17 -66.33 -63.85 -56.73 -19.79
Assessment

37
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

True-up of ROCE Allowable as per Objector's Assessment for TSSPDCL

Particulars (Rs. Crores) FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 Total
RoCE Approved in MYT Order 278.00 376.00 490.00 610.00 730.00 573.77 647.43 5,266.20
RoCE as claimed by the Petitioner 234.00 333.00 559.00 565.00 542.00 583.22 615.99 5,080.21
RoCE as per Objector's Assessment 234.71 257.23 329.12 387.14 447.99 422.53 393.56 3,665.54
True-up Allowable as per Objector's
-43.29 -118.77 -160.88 -222.86 -282.01 -151.24 -253.87 (1,600.66)
Assessment

True-up of ROCE Allowable as per Objector's Assessment for TSNPDCL

Particulars (Rs. Crores) FY 07 FY 08 FY 09 FY 10 FY 11 FY 12 FY 13 FY 14
RoCE Approved in MYT Order 77.51 87.01 93.66 113.70 130.93 148.12 156.79 159.13
RoCE as claimed by the Petitioner 80.00 77.00 94.00 117.00 132.00 140.00 154.00 165.00
RoCE as per Objector's Assessment 73.78 74.43 89.53 117.81 122.36 126.91 136.30 157.89
True-up Allowable as per
-3.73 -12.58 -4.13 4.11 -8.57 -21.21 -20.49 -1.24
Objector's Assessment

True-up of ROCE Allowable as per Objector's Assessment for TSNPDCL

Particulars (Rs. Crores) FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 Total
RoCE Approved in MYT Order 188.52 224.68 267.65 328.59 404.02 297.62 371.35 3,049.28
RoCE as claimed by the Petitioner 151.00 160.00 247.00 213.00 259.00 267.08 268.19 2,524.27
RoCE as per Objector's Assessment 157.76 168.83 190.35 211.98 252.66 267.37 298.58 2,446.56
True-up Allowable as per Objector's
-30.76 -55.85 -77.30 -116.61 -151.36 -30.25 -72.77 (602.72)
Assessment

38
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Summary of Disallowances in ROCE as per Objector’s Assessment - TSSPDCL:

(All Figures in Crores)

Over the control period 2006-09

Deviation
As per Disallowance in
allowable as
TSSPDCL Approved Claimed Objector Deviation deviation
per Objector
(ROCE) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) F =D-E
(E=C-A)
Return on Capital
438.64 378.00 325.78 -60.64 -113 52
Employed

(All Figures in Crores)

Over the control period 2009-14

Deviation
As per allowable as Disallowance in
TSSPDCL Approved Claimed Objector Deviation per deviation
(ROCE) (A) (B) Assessment (D=B-A) Objector claimed
(C) Assessment (F =D-E)
(E=C-A)
Return on Capital
1,122.36 1,270.00 867.49 147.64 -255 403
Employed

(All Figures in Crores)

Over the control period 2014-19

Deviation
As per Disallowance in
allowable as
TSSPDCL Approved Claimed Objector Deviation deviation
per Objector
(ROCE) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) (F =D-E)
(E=C-A)
Return on Capital
2,484.00 2,233.00 1,656.19 -251.00 -828 577
Employed

(All Figures in Crores)

Over the control period 2019-21

Deviation
As per Disallowance in
allowable as
TSSPDCL Approved Claimed Objector Deviation deviation
per Objector
(ROCE) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) (F =D-E)
(E=C-A)
Return on Capital
1,221.20 1,199.21 816.09 -21.99 -405 383
Employed

39
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Summary of Disallowances in ROCE Expenses as per Objector’s Assessment -

TSNPDCL:
(All Figures in Crores)

Over the control period 2006-09

Deviation
As per Disallowance in
allowable as
TSNPDCL Approved Claimed Objector Deviation deviation
per Objector
(ROCE) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) F =D-E
(E=C-A)
Return on Capital
258.18 251.00 237.74 -7.18 -20.44 13.26
Employed
(All Figures in Crores)

Over the control period 2009-14

Deviation
As per Disallowance in
allowable as
TSNPDCL Approved Claimed Objector Deviation deviation
per Objector
(ROCE) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) F =D-E
(E=C-A)
Return on Capital
708.67 708.00 661.27 -0.67 -47.40 46.73
Employed

(All Figures in Crores)

Over the control period 2014-19

Deviation
As per Disallowance in
allowable as
TSNPDCL Approved Claimed Objector Deviation deviation
per Objector
(ROCE) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) F =D-E
(E=C-A)
Return on Capital
1,413.46 1,030.00 981.59 -383.46 -431.87 48.41
Employed

(All Figures in Crores)

Over the control period 2019-21

Deviation
As per Disallowance in
allowable as
TSNPDCL Approved Claimed Objector Deviation deviation
per Objector
(ROCE) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) F =D-E
(E=C-A)
Return on Capital
668.97 535.27 565.96 -133.70 -103.01 -30.69
Employed

9.4. It is prayed that the Hon’ble Commission may allow the ROCE as per Objector’s
Assessment for the period 2016-21, subjected to prudence check.

40
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

10 NON-TARIFF INCOME

10.1. The TSSPDCL and TSNPDCL discoms have claimed the non-tariff income to the tune of
Rs. 2,649.18 Crores and Rs. 572.93 Crores against the approved amount of Rs. 2.714.97
Crores and Rs.993.56 Crores for the period of 2006-21 pertaining to distribution business

10.2. Non -Tariff income means the income relating to the licensed business other than from
tariffs for wheeling and retail sale, excluding any income from Other Business and income
on account of Fuel Surcharge Adjustment, Cross-subsidy Surcharge and Additional
Surcharge.

10.3. The Hon’ble Commission in its tariff regulations 2005 defines the Non-Tariff as a
controllable factor. The relevant snip from the tariff regulations is reproduced below:

10.4. It has been observed that the Non-Tariff in the Audited Accounts of the Licensees is booked
to the tune of Rs. 4,370.15 Crores and Rs. 1,280.96 Crores for TSSPDCL and TSNPDCL
respectively for the period of 2006-21.

10.5. A simple comparison between the claimed non-tariff income and non-tariff income booked
in Audited Accounts indicates that there is an understatement in non-tariff income claim
made by Licensees.

10.6. The Hon’ble Commission is requested to the allow the Non-tariff income as per audited
accounts as assessed by the Objector and may reduce the same from the claimed true up
/ARR claim.

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Summary of Disallowances as per Objector’s Assessment - TSSPDCL:

(All Figures in Crores)

Over the control period 2006-21

Deviation
As per Disallowance in
allowable as
TSSPDCL Approved Claimed Objector Deviation deviation
per Objector
(NTI) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) F =D-E
(E=C-A)
Non-Tariff
2,715 2,649 4,370 -66 1,655 -1723
Income

Summary of Disallowances as per Objector’s Assessment - TSSPDCL:

(All Figures in Crores)

Over the control period 2006-21

Deviation
As per Disallowance in
allowable as
TSSPDCL Approved Claimed Objector Deviation deviation
per Objector
(NTI) (A) (B) Assessment (D=B-A) claimed
Assessment
(C) F =D-E
(E=C-A)
Non-Tariff
994 573 1,281 -420.44 287 -707.84
Income

42
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

11 OTHER EXPENDITURE

11.1. TSSPDCL and TSNPDCL have claimed Other Expenditure to the tune of Rs. 124.66
Crores and Rs. 28.82 Crores respectively against approved value of Rs. 7.13 Crores and
30.56 Crores respectively for the period from FY 2006-07 to 2020-21. From the details
submitted by TSSPDCL against other expenditure claim.

11.2. It has been observed that in the case of TSSPDCL. the Increase in Other Expenditure is
mainly due to Compensation provided for Injuries, Death and Damages. While there is no
rationale/backing provided in the instant Petition for TSNPDCL’s other expenditure claim.
The Objector’s Assessment against such claims is as follows:

Total for FY 2006-21

S No. Details Objector’s Assessment
Claimed Approved Variation
A TSSPDCL
1 Price Variances 5.43 -
Compensation:
• Compensation on account of R&R ought to be
capitalized and cannot be claimed in the
Compensation for
Distribution Business as it is violated of the
2 Injuries, Death 80.48
Tariff Regulations.
and Damages
• Compensation provided on account of
accidents cannot be allowed as part of true up
claim as the same is penal in nature.
It is a well settled principle that a cost can be loaded
on to the consumers only if they have reaped the
Loss on sale of
3 5.70 benefits from that expenditure and thus expenses
scrap
towards Materials /Scrap/ Assets Loss etc. ought to
be disallowed.
The provision for obsolete inventory is based on the
book value of the unsold inventory. It is the duty of
Provision for Discom to manage the inventory in such a way that
4 27.67
Obsolete stock it balances the supply demand scenario. Such
inability of the Discom ought not to be passed on to
the consumer.
The claim has been made without providing any
5 Others Expenses 5.38 supporting data and details. Hence such ought not
be passed to end consumer.
Total 124.66 7.13 117.53 -

B TSNPDCL
The claim has been made without providing any
Total 30.56 28.82 (1.74) supporting data and details. Hence such ought not
be passed to end consumer.

11.3. In light of the same, the Objector requests that the Hon’ble Commission may outright
disallow the true-up claim of TSSPDCL and TSNPDCL towards Other Expenditure and
further direct the TSNPDCL to submit the details of its Other Expenditure Claim.

43
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

12 ALLOWABLE TRUE-UP AS PER OBJECTOR’S ASSESSMENT

12.1. Notwithstanding the prayers at sections no. 2 to 5 of these Objections, the Allowable True-up of the Distribution Business of the TS DISCOMS
as per Objector’s Assessment is as follows:

SUMMARY OF ALLOWABLE TRUE-UP AS PER OBJECTOR’S ASSESSMENT- TSSPDCL:

(All figures in Rs. Crores)
TSSPDCL FY 2006-07 FY 2007-08 FY 2008-09 Total (1st Control period)
Objector's Objector's Objector's Objector's
Particulars Approved Approved Approved Approved
Assessment Assessment Assessment Assessment
O&M 371.27 371.27 389.84 389.84 406.90 406.90 1,168.01 325.78
RoCE 132.55 103.28 146.21 103.12 159.88 119.38 438.64 438.00
Depreciation 130.90 139.00 152.47 146.00 171.85 153.00 455.22 3.00
Income Tax - 1.00 - 1.00 - 1.00 - -
Special Appropriation for
5.00 - 5.00 - 5.00 - 15.00 -
Safety Measures
Other Expenditure 4.47 - - - - - 4.47 1,934.79
Gross ARR 644.19 614.55 693.52 639.96 743.63 680.28 2,081.34 -
Less: - - - - - - - 531.11
Non-Tariff Income - 198.01 - 289.45 - 43.66 - 14.82
Revenue from Wheeling
6.27 11.87 6.35 2.94 6.32 0.01 18.94 1,388.85
Charges/Open Access
Net ARR 637.92 404.68 687.17 347.57 737.31 636.61 2,062.40 325.78
Gap/(Surplus) (233.24) (339.60) (100.70) (673.55)

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Total
TSSPDCL FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14
(2nd Control Period)
Objector's Objector's Objector's Objector's Objector's Objector's
Particulars Approved Approved Approved Approved Approved Approved
Assessment Assessment Assessment Assessment Assessment Assessment
O&M 644.72 644.72 716.33 716.33 785.00 785.00 869.17 869.17 954.34 954.34 3,969.56 3,969.56
RoCE 184.66 136.49 209.08 142.75 227.60 163.75 243.92 187.19 257.10 237.31 1,122.36 867.49
Depreciation 224.82 167.00 301.67 182.00 380.94 220.00 443.94 255.00 514.17 284.00 1,865.54 1,108.00
Income Tax 1.50 3.00 1.50 2.00 1.50 1.00 1.50 - 1.50 - 7.50 6.00
Special Appropriation
5.00 - 5.00 - 5.00 - 5.00 - 5.00 - 25.00 -
for Safety Measures
Other Expenditure - - - - - - - - - - - -
Gross ARR 1,060.70 951.21 1,233.58 1,043.08 1,400.04 1,169.75 1,563.53 1,311.36 1,732.11 1,475.65 6,989.96 5,951.05
Less: - - - - - - - - - - - -
Non-Tariff Income 32.10 386.33 32.17 426.98 32.25 99.25 32.32 118.10 32.42 72.31 161.26 1,102.97
Revenue from
Wheeling 6.32 0.10 - - - - - 0.20 - - 6.32 0.30
Charges/Open Access
Net ARR 1,022.28 564.79 1,201.41 616.10 1,367.79 1,070.50 1,531.21 1,193.06 1,699.69 1,403.34 6,822.38 4,847.78
Gap/(Surplus) (457.49) (585.31) (297.29) (338.15) (296.35) (1,974.60)

Total
TSSPDCL FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19
(3rd Control Period)

Objector's Objector's Objector's Objector's Objector's Objector's

Particulars Approved Approved Approved Approved Approved Approved
Assessment Assessment Assessment Assessment Assessment Assessment

O&M 1,056.47 1,056.47 1,163.80 1,156.59 1,398.00 1,340.03 1,634.75 1,541.22 1,901.90 908.23 7,154.92 6,002.54
RoCE 278.00 234.71 376.00 257.23 490.00 329.12 610.00 387.14 730.00 447.99 2,484.00 1,656.19
Depreciation 497.00 457.00 562.00 545.00 635.00 673.00 705.00 772.00 774.00 856.00 3,173.00 3,303.00
Income Tax 14.40 - 19.48 - 25.39 - 31.60 - 37.81 - 128.68 -
Special
Appropriation for 30.00 - 35.00 - 40.00 - 45.00 - 50.00 - 200.00 -
Safety Measures
Other Expenditure 0.48 - 0.50 - 0.53 - 0.56 - 0.59 - 2.66 -

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Total
TSSPDCL FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19
(3rd Control Period)

Objector's Objector's Objector's Objector's Objector's Objector's

Particulars Approved Approved Approved Approved Approved Approved
Assessment Assessment Assessment Assessment Assessment Assessment

Gross ARR 1,876.35 1,748.18 2,156.78 1,958.82 2,588.92 2,342.15 3,026.91 2,700.35 3,494.30 2,212.22 13,143.26 10,961.73
Less: - - - - - - - - - - - -
Non-Tariff Income 241.30 253.10 326.16 493.48 320.55 384.75 362.72 225.35 395.46 542.81 1,646.19 1,899.48
Revenue from
Wheeling
- 0.22 - 1.15 - 4.64 - 27.23 - 24.46 - 57.70
Charges/Open
Access
Net ARR 1,635.05 1,494.87 1,830.62 1,464.20 2,268.37 1,952.77 2,664.19 2,447.77 3,098.84 1,644.95 11,497.07 9,004.55
Gap/(Surplus) (140.18) (366.42) (315.60) (216.42) (1,453.89) (2,492.52)

(All figures in Rs. Crores)

Total 4th Control Period
TSSPDCL FY 2019-20 FY 2020-21
(FY 19-21)
Objector's Objector's Objector's
Particulars Approved Approved Approved
Assessment Assessment Assessment
O&M 2,628.95 991.71 2,822.90 1,108.32 5,451.85 2,100.03
RoCE 573.77 422.53 647.43 393.56 1,221.20 816.09
Depreciation 759.54 986.56 850.02 1,066.58 1,609.56 2,053.14
Income Tax 39.05 - 44.06 - 83.11 -
Special Appropriation for Safety Measures 20.00 - 20.00 - 40.00 -
Other Expenditure - - - - - -
Gross ARR 4,021.31 2,400.80 4,384.41 2,568.46 8,405.72 4,969.27
Less: - - - - - -
Non-Tariff Income 450.65 390.53 456.87 446.05 907.52 836.58
Revenue from Wheeling Charges/Open
24.84 13.15 44.62 15.84 69.46 28.99
Access
Net ARR 3,545.82 1,997.12 3,882.92 2,106.57 7,428.74 4,103.70
Gap/(Surplus) (1,548.70) (1,776.35) (3,325.04)

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

True up for TSSPDCL as per Objector's Assessment

Particulars 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

O&M - - - - - - - -
RoCE -29.27 -43.09 -40.50 -48.17 -66.33 -63.85 -56.73 -19.79
Depreciation 8.10 -6.47 -18.85 -57.82 -119.67 -160.94 -188.94 -230.17
Income Tax 1.00 1.00 1.00 1.50 0.50 -0.50 -1.50 -1.50
Special Appropriation for
-5.00 -5.00 -5.00 -5.00 -5.00 -5.00 -5.00 -5.00
Safety Measures
Other Expenditure -4.47 - - - - - - -
Gross ARR -29.64 -53.56 -63.35 -109.49 -190.50 -230.29 -252.17 -256.46
Less: - - - - - - - -
Non-Tariff Income 198.01 289.45 43.66 354.23 394.81 67.00 85.78 39.89
Revenue from Wheeling
5.60 -3.41 -6.31 -6.22 - - 0.20 -
Charges/Open Access
Net ARR -233.24 -339.60 -100.70 -457.49 -585.31 -297.29 -338.15 -296.35

True up for TSSPDCL as per Objector's Assessment

Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Total

O&M - -7.21 -57.97 -93.53 -993.67 -1,637.24 -1,714.58 -4,504.19
RoCE -43.29 -118.77 -160.88 -222.86 -282.01 -151.24 -253.87 -185.99
Depreciation -40.00 -17.00 38.00 67.00 82.00 227.02 216.56 -201.18
Income Tax -14.40 -19.48 -25.39 -31.60 -37.81 -39.05 -44.06 -210.29
Special Appropriation for
-30.00 -35.00 -40.00 -45.00 -50.00 -20.00 -20.00 -280.00
Safety Measures
Other Expenditure -0.48 -0.50 -0.53 -0.56 -0.59 - - -7.13
Gross ARR -128.17 -197.96 -246.77 -326.56 -1,282.08 -1,620.51 -1,815.95 -5,388.78
Less: - - - - - - - -
Non-Tariff Income 11.80 167.32 64.20 -137.37 147.35 -60.12 -10.82 1,655.18
Revenue from Wheeling
0.22 1.15 4.64 27.23 24.46 -11.69 -28.78 7.09
Charges/Open Access
Net ARR -140.18 -366.42 -315.60 -216.42 -1,453.89 -1,548.70 -1,776.35 -7,051.05

47
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

SUMMARY OF REVENUE GAP/(SURPLUS) ON TRUE UP OF DISTRIBUTION BUSINESS FOR THE PERIOD

FROM FY 2006-07 TO FY 2020-21 AS PER OBJECTOR’S ASSESSMENT – TSNPDCL:
(All figures in Rs. Crores)
1st Control Period 2nd Control Period 3rd Control Period 4th Control Period
FY Amount FY Amount FY Amount FY Amount
2006-07 (233.24) 2009-10 (457.49) 2014-15 (140.18) 2019-20 (1,548.70)
2007-08 (339.60) 2010-11 (585.31) 2015-16 (366.42) 2020-21 (1,776.35)
2008-09 (100.70) 2011-12 (297.29) 2016-17 (315.60) Total (3,325.04)
Total (673.55) 2012-13 (338.15) 2017-18 (216.42) Grand Total (6,515.85)
TSSPDCL Claim (556.01) 2013-14 (296.35) 2018-19 (1,453.89)
Total (1,974.60) Uday Savings 1487.76
TSSPDCL Claim (1,630.03) Total -1,004.76

SUMMARY OF ALLOWABLE TRUE-UP AS PER OBJECTOR’S ASSESSMENT- TSNPDCL:

(All figures in Rs. Crores)

Total
TSNPDCL FY 2006-07 FY 2007-08 FY 2008-09
(1st Control Period)

Objector's Objector's Objector's Objector's

Particulars Approved Approved Approved Approved
Assessment Assessment Assessment Assessment

O&M 196.71 196.71 200.93 200.93 210.78 210.78 608.42 608.42

RoCE 77.51 73.78 87.01 74.43 93.66 89.53 258.18 237.74
Depreciation 82.38 90.00 90.27 102.00 98.10 115.00 270.75 307.00
Income Tax - 1.00 - 1.00 - 2.00 - 4.00
Special Appropriation for
5.00 - 5.00 - 5.00 22.00 15.00 22.00
Safety Measures
Other Expenditure 3.45 - - - - - 3.45 -

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Total
TSNPDCL FY 2006-07 FY 2007-08 FY 2008-09
(1st Control Period)

Objector's Objector's Objector's Objector's

Particulars Approved Approved Approved Approved
Assessment Assessment Assessment Assessment

Gross ARR 365.05 361.49 383.21 378.36 407.54 439.31 1,155.80 1,179.16
Less: - -
Non-Tariff Income - 128.71 - 70.42 - 43.66 - 242.78
Revenue from Wheeling
- - - - - - - -
Charges/Open Access
Net ARR 365.05 232.78 383.21 307.94 407.54 395.66 1,155.80 936.38
(132.27) (75.27) (11.88) (219.42)

(All figures in Rs. Crores)

Total
TSNPDCL FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14
(2nd Control Period)
Objector's Objector's Objector's Objector's Objector's Objector's
Particulars Approved Approved Approved Approved Approved Approved
Assessment Assessment Assessment Assessment Assessment Assessment
O&M 251.43 251.43 284.63 284.63 317.23 317.23 368.02 368.02 407.91 407.91 1,629.22 1,629.22
RoCE 113.70 117.81 130.93 122.36 148.12 126.91 156.79 136.30 159.13 157.89 708.67 661.27
Depreciation 150.00 143.00 184.00 147.00 232.00 161.00 276.00 174.00 319.00 186.00 1,161.00 811.00
Income Tax 1.25 2.00 1.25 2.00 1.50 1.00 1.50 - 1.50 - 7.00 5.00
Special Appropriation
5.00 31.00 5.00 18.00 5.00 1.00 5.00 1.00 5.00 - 25.00 51.00
for Safety Measures
Other Expenditure 3.90 - 3.97 - 4.03 - 4.11 - 4.19 - 20.20 -
Gross ARR 525.28 545.24 609.78 573.99 707.88 607.14 811.42 679.32 896.73 751.80 3,551.09 3,157.49
Less: - - -
Non-Tariff Income 5.86 128.71 5.91 74.27 5.95 71.03 6.00 61.65 6.05 72.13 29.77 407.80
Revenue from
Wheeling - - - - - - - - - - - -
Charges/Open Access
Net ARR 519.42 416.54 603.87 499.72 701.93 536.11 805.42 617.67 890.68 679.67 3,521.32 2,749.70

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 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Gap/(Surplus) (102.88) (104.15) (165.82) (187.75) (211.01) (771.62)

(All figures in Rs. Crores)

Total
TSNPDCL FY 2014-15 FY 2015-16 FY 2016-17 FY 2017-18 FY 2018-19
(3rd Control Period)

Objector's Objector's Objector's Objector's Objector's Objector's

Particulars Approved Approved Approved Approved Approved Approved
Assessment Assessment Assessment Assessment Assessment Assessment

O&M 628.00 628.00 740.00 673.66 883.00 743.61 1,026.00 879.19 1,194.00 580.99 4,471.00 3,505.46
RoCE 188.52 157.76 224.68 168.83 267.65 190.35 328.59 211.98 404.02 252.66 1,413.46 981.59
Depreciation 235.27 195.00 258.20 133.00 311.59 208.00 372.40 236.00 427.63 268.00 1,605.09 1,040.00
Income Tax 8.48 - 9.09 - 9.36 - 9.56 - 10.58 - 47.07 -
Special
Appropriation for 25.89 2.00 61.86 2.00 65.12 5.00 68.41 19.00 71.42 24.00 292.70 52.00
Safety Measures
Other Expenditure 1.25 - 1.31 - 1.38 - 1.45 - 1.52 - 6.91 -
Gross ARR 1,087.41 982.76 1,295.14 977.50 1,538.10 1,146.96 1,806.41 1,346.17 2,109.17 1,125.65 7,836.23 5,579.05
Less: - -
Non-Tariff Income 68.15 30.99 92.25 98.78 147.57 58.37 173.76 49.88 189.15 64.21 670.88 302.23
Revenue from
Wheeling
- - - - - - - - - - - -
Charges/Open
Access
Net ARR 1,019.26 951.77 1,202.89 878.71 1,390.53 1,088.59 1,632.65 1,296.30 1,920.02 1,061.45 7,165.35 5,276.82
Gap/(Surplus) (67.49) (324.18) (301.94) (336.35) (858.57) (1888.53)

(All Figures in Crores)

50
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Total 4th Control Period

TSNPDCL FY 2019-20 FY 2020-21
(FY 19-21)
Objector's Objector's Objector's
Particulars Approved Approved Approved
Assessment Assessment Assessment
O&M 1,874.91 644.69 2,050.88 711.51 3,925.79 1,356.20
RoCE 297.62 267.37 371.35 298.58 668.97 565.96
Depreciation 374.39 444.87 424.81 322.62 799.20 767.49
Income Tax 20.26 - 25.27 - 45.53 -
Special Appropriation for Safety Measures 20.00 20.34 20.00 19.85 40.00 40.19
Other Expenditure - - - - - -
Gross ARR 2,587.18 1,377.27 2,892.31 1,352.56 5,479.49 2,729.83
Less: - -
Non-Tariff Income 140.99 167.56 151.92 160.60 292.91 328.16
Revenue from Wheeling Charges/Open
- - - - - -
Access
Net ARR 2,446.19 1,209.72 2,740.39 1,191.96 5,186.58 2,401.68
Gap/(Surplus) (1,236.47) (1,548.43) (2,784.90)

(All Figures in Crores)

True up for TSNPDCL as per Objector's Assessment

Particulars 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14

O&M - - - - - - - -
RoCE -3.73 -12.58 -4.13 4.11 -8.57 -21.21 -20.49 -1.24
Depreciation 7.62 11.73 16.90 -7.00 -37.00 -71.00 -102.00 -133.00
Income Tax 1.00 1.00 2.00 0.75 0.75 -0.50 -1.50 -1.50
Special Appropriation for
-5.00 -5.00 17.00 26.00 13.00 -4.00 -4.00 -5.00
Safety Measures
Other Expenditure -3.45 - - -3.90 -3.97 -4.03 -4.11 -4.19
Gross ARR -3.56 -4.85 31.77 19.96 -35.79 -100.74 -132.10 -144.93
Less: - - - - - - - -
Non-Tariff Income 128.71 70.42 43.66 122.85 68.36 65.08 55.65 66.08

51
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

Revenue from Wheeling

- - - - - - - -
Charges/Open Access
Net ARR -132.27 -75.27 -11.88 -102.88 -104.15 -165.82 -187.75 -211.01

True up for TSNPDCL as per Objector's Assessment

Particulars 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 Total

O&M - -66.34 -139.39 -146.81 -613.01 -1,230.22 -1,339.37 -3,535.13
RoCE -30.76 -55.85 -77.30 -116.61 -151.36 -30.25 -72.77 -602.72
Depreciation -40.27 -125.20 -103.59 -136.40 -159.63 70.48 -102.19 -910.55
Income Tax -8.48 -9.09 -9.36 -9.56 -10.58 -20.26 -25.27 -90.60
Special Appropriation for
-23.89 -59.86 -60.12 -49.41 -47.42 0.34 -0.15 -207.51
Safety Measures
Other Expenditure -1.25 -1.31 -1.38 -1.45 -1.52 - - -30.56
Gross ARR -104.65 -317.64 -391.14 -460.24 -983.52 -1,209.91 -1,539.75 -5,377.08
Less: - - - - - - - -
Non-Tariff Income -37.16 6.53 -89.20 -123.88 -124.94 26.57 8.68 287.40
Revenue from Wheeling
- - - - - - - -
Charges/Open Access
Net ARR -67.49 -324.18 -301.94 -336.35 -858.57 -1,236.47 -1,548.43 -5,664.47

SUMMARY OF REVENUE GAP/(SURPLUS) ON TRUE UP OF DISTRIBUTION BUSINESS FOR THE PERIOD

FROM FY 2006-07 TO FY 2020-21 AS PER OBJECTOR’S ASSESSMENT – TSNPDCL:
(All Figures in Crores)
1st Control Period 2nd Control Period 3rd Control Period 4th Control Period
FY Amount FY Amount FY Amount FY Amount

52
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

2006-07 (132.27) 2009-10 (102.88) 2014-15 (67.49) 2019-20 (1,236.47)

2007-08 (75.27) 2010-11 (104.15) 2015-16 (324.18) 2020-21 (1,548.43)
2008-09 (11.88) 2011-12 (165.82) 2016-17 (301.94) Total (2,784.90)
Total (219.42) 2012-13 (187.75) 2017-18 (336.35) Grand Total (4,917.71)
TSNPDCL Claim (219.05) 2013-14 (211.01) 2018-19 (858.57)
Total (771.62) Uday Savings 745.08
TSNPDCL Claim (770.31) Total (1,143.45)

53
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

12.2. Notwithstanding the prayers at sections no. 2 to 5 of these Objections, it is prayed that the
Hon’ble Commission may approve a true down of Rs. 6515.85 Crores for TSSPDCL and
Rs. 4917.71 Crores for TSNPDCL Crores as assessed by the Objector against true up claim
of Petitioner which is Rs. 3259 Crores for TSSPDCL and Rs. 833.54 Crores for TSNPDCL.

54
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

13 PRAYERS

Wherefore, the Objector most respectfully prays that this Hon’ble Commission may be pleased
to:

A. Consider the above Objection Statement filed by the Objector;

B. Declare that the instant Petitions filed by the Petitioners are opposed to and ultra vires the
Andhra Pradesh Electricity Regulatory Commission (Terms and Conditions for
Determination of Tariff for Wheeling and Retail Sale of Electricity) Regulations, 2005
and the Hon’ble TSERC’s Guidelines for Investment Approval (February 2006) and
Hon’ble TSERC’s directives as per TSERC Order dated 29.04.2020, and reject the same
in limine;

C. Direct the Petitioners to furnish the data requested by the Objector as per its Letter
attached herewith as Appendix-A, along with comprehensive workable excel model for
the same;

D. Notwithstanding Prayer B, consider the following Prayers of the Objector:

E. Ensure that the borrowings made by the state to takeover DISCOMs debt during 2016-17
would be transferred to the Discoms as a mix of grant, loan or equity are strictly in
accordance with the Terms of the UDAY MoU and that the other commitments of Govt.
of Telangana and the TS Discoms are being strictly complied with; Wherever there is
non-compliance of the Terms of the UDAY MoU, it is prayed that the Hon’ble TSERC
may take note of the same in its Order and disallow any claims made by the Petitioners
which are in violation of the Terms of the UDAY MoU in the instant Petition.

F. Limit the O&M expenses to the approved value for the period 2006-2015 and may allow
the O&M expenses (based on norms approved by the Hon’ble TSERC) as per Objector’s
Assessment for the period 2016-21.

G. Direct the petitioner to revise its Depreciation claims in accordance to the Regulation 15
of the APERC Tariff Regulations 2005, and subsequently allow Depreciation after due
prudence check.

H. Allow the ROCE as per Objector’s Assessment for the period 2016-21, subjected to
prudence check.

I. Allow the Non-tariff income as per audited accounts as assessed by the Objector and may
reduce the same from the claimed true up /ARR claim.

J. Disallow the truing up of other expenses as such claims are extraneous to the Tariff
Regulations;

K. Approve a true down of Rs. 6515.85 Crores for TSSPDCL and Rs. 4917.71 Crores for
TSNPDCL Crores as assessed by the Objector;

55
 SOUTH INDIAN CEMENT MANUFACTURERS' ASSOCIATION
Objections on True up Petition for FY 2006-2021 (Distribution Business)

L. Pass necessary orders as may be deemed appropriate in the facts and circumstances of the
case in the interest of justice

M. Permit the Objector to participate and make additional submission and produce additional
details and documentations before and during the course of the Public Hearing, in the
interest of justice and equity.

Injeti Gopinath
Chief Executive Officer
OBJECTOR

Date: 30TH September, 2022

Place: Hyderabad

56
 Judgment in OP No.1 of 2011

Appellate Tribunal for Electricity

(Appellate Jurisdiction)

OP NO.1 OF 2011

Dated: 11th Nov, 2011

Present: Hon’ble Mr. Justice M. Karpaga Vinayagam,
Chairperson,
Hon’ble Mr. Rakesh Nath, Technical Member
Hon’ble Mr.V J Talwar, Technical Member

Tariff Revision
(Suo-Motu action on the letter received from
Ministry of Power)

Counsel nominated by : 1. Mr. M.G. Ramachandran,

the Tribunal Amicus Curiae
2. Mr. R K Mehta, Amicus Curiae
3. Mr. Amit Kapur, Amicus Curiae.
4. Mr. Buddy A. Ranganadhan,
Amicus Curiae

Counsel for Commissions: Mr. G. Umapathy (Tamil Nadu)

Mr. C K Rai (Rajasthan & Tripura)

JUDGMENT

PER HON’BLE MR. JUSTICE M. KARPAGA VINAYAGAM,

CHAIRPERSON

1. Since, the interesting and important issues have been

raised, we have taken up this matter by treating the letter

sent by the Power Ministry as the suo-moto petition.

Page 1 of 92
 Judgment in OP No.1 of 2011

2. The Ministry of Power through its Secretary sent a letter to

the Chairperson of this Tribunal dated 21.1.2011

complaining that most of the State distribution utilities

have failed to file annual tariff revision petitions in time and

as a result in a number of States, tariff revision has not

taken place for a number of years and that State

Commissions constituted all over India have also failed to

make periodical tariff revisions suo-moto resulting in the

poor financial health of the State distribution utilities. Due

to this fact situation, the Power Ministry requested this

Tribunal to take appropriate action by issuing necessary

directions to all the State Commissions to revise the tariff

periodically, if required by suo moto action, in the interest

of improving the financial health and long term viability of

the electricity sector in general and distribution utilities in

particular.

Page 2 of 92
 Judgment in OP No.1 of 2011

3. In pursuance of the said request, the matter has been

posted before the Full Bench of this Tribunal for passing

necessary orders. Accordingly, the Full Bench entertained

the same as a suo-moto petition and issued notices to all

State Commissions and to the Forum of Regulators

inviting their responses through their status reports. On

receipt of these notices, all the State Commissions have

promptly sent their respective reports. The Secretary of

the Forum of the Regulators has also sent his report on

the basis of the information furnished by all the State

Commissions.

4. On perusal of these reports, we found that most of the

State Commissions have been complying with the

provisions of the Act, 2003. However, we have come

across that some of the State Commissions have not

complied with the statutory requirements as provided in

the Act. Those State Commissions have given some

explanation as to why they were not able to make

Page 3 of 92
 Judgment in OP No.1 of 2011

periodical tariff revision. Besides this, they have also

raised two issues regarding jurisdiction of the State

Commissions and the Tribunal to take suo-moto action for

determination of Tariff.

5. Those two issues relate to the following:-

(a) The jurisdiction of the State Regulatory Commissions

to suo-moto determine the tariff under the Tariff policy

under section 62, 64 and 86 of the Act, 2003, in the

absence of the application filed by the Utilities.

(b) The power of the Appellate Tribunal to issue

directions under section 121 of the Act to the Appropriate

Commissions for taking suo moto action for the

determination of the tariff under the Tariff policy.

6. On these two issues, all the State Commissions in all over

India have sent their respective status reports. The

Page 4 of 92
 Judgment in OP No.1 of 2011

perusal of the reports indicates that most of the

Commissions did not raise any question with reference to

the jurisdiction of the Tribunal to issue directions under

section 121 of the Act and the jurisdiction of the State

Commission in taking suo-moto action for determination of

tariff. On the other hand, they submitted that they have

been following the provisions and comply with the

directions issued by the Tribunal then and there.

7. However, 3 State Commissions namely Tamil Nadu,

Tripura and Rajasthan have raised the doubts with regard

to the authority of the State Commissions to take suo

moto action for determination of tariff in the absence of the

Tariff applications. Tamil Nadu and Tripura State

Commission also raised issue relating to the jurisdiction of

this Tribunal to invoke the power under section 121 of the

Act to direct the State Commissions to take suo-moto

action for determination of the tariff in the absence of the

Tariff applications.

Page 5 of 92
 Judgment in OP No.1 of 2011

8. Before dealing with these issues, it would be appropriate

to refer to the chronological events which led this Tribunal

to take up this case as a suo-moto petition for issuing

necessary directions to the State Commissions under

section 121 of the Act, 2003.

9. The relevant events are as under:

Ministry of Power, Government of India, through its

Secretary Mr. Uma Shankar, sent a letter to the Chairperson

of this Tribunal on 21.1.2011 complaining that periodical tariff

revisions by the State Commissions have not been taken

place in most of the States contributing to poor financial

health of the State Distribution utilities. According to the

Secretary, in most of the States, the Utilities have failed to

file Annual Tariff Revision Petitions in time and even then,

the State Commissions have not taken suo-moto action for

the revision of tariff by invoking the suo-moto powers.

Under those circumstances, the Power Ministry through its

Secretary, requested us to invoke our authority under section

Page 6 of 92
 Judgment in OP No.1 of 2011

121 of the Act, 2003 by taking suo-moto action and to issue

necessary directions to all the State Commissions to take

appropriate steps periodically, if required, suo-moto, for the

determination of Annual Revenue Requirements/tariff in the

interest of improving the financial health and long term

viability of electricity sector in general and distribution utilities

in particular.

10. We will now quote the contents of the letter sent by

the Secretary of the Power Ministry dated 21.1.2011

addressed to the Chairperson of the Appellate Tribunal for

Electricity:

“ As you are aware, most of the State distribution

utilities are under financial strain due to the gap between
the Average Revenue Realised (ARR) and Average Cost
of Supply (ACS). On an aggregate basis, the gap
between the average cost of supply and tariff is 107.32
paisa per KWH which results in financial loss for every unit
of power sold. Financial losses of State distribution
utilities are reported to be Rs.52,623 Cr in FY 2008-09
without subsidy. This is likely to rise to Rs.116,089 Cr by
FY 2014-15 at 2008 tariff level, with no increases,
according to a Mercadoes study for the 13th Finance

Page 7 of 92
 Judgment in OP No.1 of 2011

Commission. According to the PFC report for the year

2008-09, out of 39 utilities studied, 22 utilities have
negative net worth (35 utilities are incurring losses with
subsidy) and loss of Rs.32,197 Crores was incurred by the
utilities (on subsidy received basis) in 2008-09. This
leads to short term borrowing by distribution utilities to
bridge the gap between the revenue and expenditure
every year.

2. The debt trap of distribution utilities has serious

implication on the financial health of the electricity sector
as a whole. The distribution utilities should generate
adequate internal resources to honour the Power
Purchase Agreements (PPA) made with the generating
companies and hence any default in payment will have
repercussions on the financial institutions lending to
generating companies and future investments in capacity
addition. One of the most important reasons for poor
financial health of DISCOMS is the inadequacy of tariff to
cover the cost incurred by the utilities to procure and
supply electricity to the public. In a study conducted by
Forum of Regulators of ten States for assessment of tariff
revision and financial viability of DISCOMS (published in
November, 2010), it is estimated that additional increase
to the tune of 1% to 39% is required to fully recover the
cost of supply.

3. As per the information available with us tariff revision

has not taken place in several States as per details given
below:

Tariff Last No. Name of States

Changed States
Tamil Nadu, Madhya Pradesh,
2010 6 Uttaranchal, Gujarat, J&K, UP
AP, Delhi, Maharashatra, Goa,
2009 9 Chhattisgarh, Haryana, Assam,

Page 8 of 92
 Judgment in OP No.1 of 2011

Arunachal Pradesh, West

Bengal
2008 4 Meghalaya, Karnataka, Punjab,
Bihar,
2007 4 Kerala, Rajasthan, Jharkhand,
Orissa
Before 2006 6 HP, Nagaland, Sikkim, Tripura,
Mizoram,Manipur
29
(Details in Annexure)

4. One of the reasons for the delay in tariff revisions is

that the States have failed to file annual tariff revision
petitions in time.

5. As per the Para 8.1 (7) of the Tariff Policy, the

State Regulatory Authorities can suo-moto take up the
revision of tariffs even if the utilities are not filing the
revision petitions. It is also pertinent to mention that
under Section 121 of the Act directions can be issued
to the State Regulatory Authorities by the Appellate
Tribunal.

6. I request you to kindly consider issuing

directions under Section 121 of the Electricity Act to
the State Regulatory Authorities to revise the tariff
appropriately (suo-moto, if required), in the interest of
improving the financial health and long term viability
of electricity sector in general and distribution utilities
in particular”.

11. On receipt of this letter, as directed, the Registry put

up a note before the Chairperson to seek suitable

administrative orders for taking further action on this letter.

Page 9 of 92
 Judgment in OP No.1 of 2011

The Chairperson, by the administrative order dated

1.2.2011, directed the Registry to post the matter before

Full Bench of this Tribunal comprising of Hon’ble

Chairperson, Hon’ble Mr. Rakesh Nath, Technical Member

and Hon’ble Mr. V J Talwar, Technical Member, for

passing appropriate orders in the matter. Accordingly, the

matter was numbered as O.P. No.1 of 2011 and posted

before the Full bench on 4.2.2011.

12. As indicated above, the Full Bench of this Tribunal

decided to take suo-moto action and entertained this letter

as a suo-moto petition for consideration to issue

appropriate directions to the State Commissions on those

issues. As provided under Section 121 of the Act, before

issuing any directions to the State Commissions, they

have to be heard. So, we issued notices to all the State

Commissions.

Page 10 of 92
 Judgment in OP No.1 of 2011

13. Since the issues involve the interpretation of the

Regulations and policy as well as the provisions of the

Act, we have appointed the learned Counsel namely 1)

Mr. M.G. Ramachandran, 2) Mr. R.K. Mehta, 3) Mr. Amit

Kapur and 4) Mr. Buddy A Ranganathan as Amicus

Curiae Counsel to assist this Tribunal in this suo-moto

matter by the order dated 4.2.2011.

14. The relevant portion of the order dated 4.2.1011

issuing notices to all the State Commissions passed by

the Full Bench is given below:

“In view of the particulars given in the letter and also

request made by the Power Ministry, we deem it
appropriate to take up suo-moto action. Accordingly, we
entertain this letter as suo-moto petition.

While we issue notice to all the State Commissions,

we think it fit to appoint Mr. M.G. Ramachandran, Mr.
Amit Kapur, Mr. R.K. Mehta and Mr. Buddy A
Ranganadhan, the learned counsel as Amicus Curiae to
assist this Tribunal for passing appropriate further orders
in the matter.

Accordingly, we issue notice to all the State

Commissions/Joint Commissions to send the status report

Page 11 of 92
 Judgment in OP No.1 of 2011

with reference to the determination of annual revenue

requirement/ tariff for all the years from the date of the
constitution of the Commission to enable us to find out the
position and to pass suitable orders.

The Registry is directed to send intimation to all the

State Commissions/ Joint Commissions. We think it fit to
issue notice to the Secretary of the Forum of Regulators
as well. Accordingly, the Registry is directed to send
notice to the Secretary of the Forum of Regulators to
assist this Tribunal by collecting all the particulars from
the State Commissions concerned.

The Registry is also directed to send copy of the

letter sent by the Secretary, Ministry of Power to all
concerned along with the formats containing queries
requiring for the relevant particulars.

The State Commissions are required to give

necessary particulars and information in the form of status
report within one month from the date of receipt of this
notice. The said report must reach the Registry on or
before 7th March, 2011.

On receipt of the report, the Registry is directed to

give copies of the same to all the Amicus Curiae
Advocates to enable them to assist this Tribunal for
passing suitable orders.

Post the matter on 14.03.2011 for passing further

orders”.

15. When the matter was taken up on the next hearing

i.e on 14.3.2011, the Full bench noticed that most of the

Page 12 of 92
 Judgment in OP No.1 of 2011

State Commissions had sent their reports. Since some of

the States had not sent their response, the Full bench

again directed them to send their views with reference to

the contents of the letter sent by the Power Ministry.

Ultimately, on 19.5.2011, we noticed that status reports

from all the State Commissions had been received by the

Registry. On the basis of those status reports, we framed

various issues in our order dated 19.5.2011 and again

issued notices to hear the State Commissions on those

issues. The relevant portion of the said order is as

follows:

“On the basis of these instances we feel that the

following issues have to be considered by this Tribunal.
These issues are as follows:-

a) Several State Commissions are leaving Regulatory

gaps in tariff fixation i.e. the tariff fixed for a particular year
is not sufficient to cover the ARR for that year;

b) Such Regulatory Gaps are left as a matter of course

and the gap is left to be filled up in the Truing up or in
subsequent years;
c) Delays in the tariff determination exercise;

Page 13 of 92
 Judgment in OP No.1 of 2011

d) Truing up is not being carried on regularly and

sometimes not even for several years at a time;

e) Several Commissions have not framed regulations

regarding Fuel Surcharge Adjustment Mechanism.

f) Suo moto action to be taken for initiating appropriate

proceedings for determination of ARR and tariff fixation in
the absence of the applications to be filed by the utilities.

On these issues, we want to hear all the

Commissions so that it would facilitate this Tribunal to
pass suitable orders and to give guidelines for the future
course of action on the basis of the views of the
Commissions.

Therefore, we deem it appropriate to issue notices

under Section 121 of the Electricity Act to all the State
Commissions to get their views on these issues.
Accordingly, the notices are issued to all the
Commissions. They are directed to send their
views/reports on or before 30th June, 2011 to this
Tribunal. Copies of these notices be sent to the Forum of
Regulators also.

After receipt of the copies of the reports from all the

Commissions the Registry is directed to give copies of
those reports/views regarding the issues referred to above
to Amicus Curiae counsel. A full and complete soft copy
of the information provided either on a CD or other similar
electronic media must accompany the hard copy.
Additionally, the full information provided must also be
sent by email to [email protected]. The
Commissions if they so desire can send their
representatives or the counsel to make their suggestions
to assist this Tribunal.

Page 14 of 92
 Judgment in OP No.1 of 2011

Post the matter for passing further order on 7th July,

2011 at 2.30 p.m.”.

16. When the matter was taken up on 7th July, 2011, it

was found out from the reply made by various State

Commissions to the effect, that they have been complying

with the provisions as well as the Regulations and they

would comply with the directions issued by the Tribunal in

future under section 121 of the Act. However, as noted

above, the State Commissions of Tamil Nadu and Tripura

raised the doubts regarding the jurisdiction of the State

Commission to take suo-moto action for determination of

tariff as well as the Tribunal to issue suo moto directions

regarding the same, through their affidavit and written

notes. When the jurisdictional question had been raised,

we thought it fit to send notices to all the State

Commissions with reference to the said issues.

Accordingly, notices were again issued to all the State

Commissions with reference to those issues raised by

Page 15 of 92
 Judgment in OP No.1 of 2011

these State Commissions by the order dated 7th July,

2011. We quote the said order dated 7th July,2011 which

is as follows:-

“Out of these State Commissions, the State

Commissions of Tamilnadu and Tripura have raised some
questions with reference to the jurisdiction. Tamilnadu
State Commission in its affidavit dated 2nd March, 2011
has stated as follows:

“7. I submit that the Appellate Tribunal is empowered to issue

orders, instructions or directions to a State Commission for the
performance of its statutory functions under this Electricity Act,
2003. A relevant question is whether the power of the
Appellate Tribunal extends to issue of directions to Appropriate
Commissions for the performance of their functions under the
Tariff Policy of the Ministry of Power.

12. I further submit that Section 64, thus, mandates an

application from the licensee and also fixes a time limit for issue
of tariff order. Section 64 apparently does not visualize suo
moto revision of tariff. Suo moto revision of tariff proposed in
clause 8.1.7 of the tariff policy conflicts with the requirement of
an application from the licensee under Section 64 of the
Electricity Act, 2003”.

In its additional affidavit dated June, 2011 it has

stated as follows:

“10. I further submit that issues such as Regulatory gaps,

Truing up, Fuel surcharge mechanism are quasi judicial matters
which come under the purview of State Electricity Regulatory

Page 16 of 92
 Judgment in OP No.1 of 2011

Commissions. On such issues, the aggrieved parties have the

right of appeal under Section 111 of the Electricity Act to this
Hon’ble Tribunal. Furthermore, I submit, that the Electricity Act
has to be amended suitably to make the filing of Annual
Revenue Requirement/tariff petitions by the utilities on annual
basis, mandatory. It may further be seen that all the issues
framed by this Hon’ble Tribunal related to tariff determination
exercise can be initiated only when a licensee or a generating
company files a petition under Section 64 of the Electricity Act,
2003. Hence, it is stated that the scope of the petition has been
broadened in the order No. OP‐1/2011 dated 19.5.2011 by
including various new issues which are within the domain of the
SERCs”.

Similarly, in Tripura Report dated 23rd June, 2011,

the State Commission, Tripura has also raised some
issue with regard to the question of jurisdiction in last
two paragraphs with reference to the views against
issue no. (f) as under:

“Views against Issue No. (f):‐ From the present status as seen by
the Commission the utility very seriously has undertaken the
process of compilation of Annual accounts for the current and
previous years. It is hoped that on completion of the Annual
accounts tentatively in the month of August 2011 the ARR shall
be submitted along with the petition and the determination
process of tariff shall be undertaken by the Commission
thereafter.

The Commission i.e. TERC reserves its view on Suo Moto

determination of tariff and for Suo Moto action to
determination of ARR fixation for following reasons:

That if the Commission takes the responsibility for fixation of

tariff at its own the public may raise objection fingering that

Page 17 of 92
 Judgment in OP No.1 of 2011

once the utility is not willing to submit the petition why

Commission takes such decision which is suffering to the
consumers budget.

Now keeping in mind the Clause 8 and Clause 9 of Section 61

and for the safeguard of the consumer interest as well
considering the sustainability of the utility the Suo Moto process
for determination of tariff may please be reviewed”.

In the light of the above issues raised by both

Tamilnadu and Tripura State Commission, it would
be appropriate to direct the Tamil Nadu and Tripura
State Commissions to appear before this Tribunal
either through their counsel or by any representative
to make submission on these issues to assist this
Tribunal in deciding these issues.

On these issues, it is open to the other Commissions

also to give their suggestions and views.

Post the matter on 25th July, 2011 at 2.30 p.m. for

hearing.”

17. On 25.7.2011, we received the response from

various State Commissions endorsing the existence of the

powers with reference to the jurisdiction of the State

Commissions for taking suo-moto action for tariff

determination as well as the power of the Tribunal for

issuing directions under section 121 of the Act to the State

Page 18 of 92
 Judgment in OP No.1 of 2011

Commissions. But this time, three State Commissions

namely Tamil Nadu, Tripura and Rajasthan filed Affidavits

raising the very same doubt relating to the question of

jurisdiction of the State Commission as well as the

Tribunal. In the light of these two preliminary questions

relating to jurisdiction, we requested the Amicus Curiae

Counsel to enlighten us with regard to those issues as

well. In the light of the doubts expressed by these three

State Commissions, with reference to the jurisdiction, we

framed following questions for consideration:-

(i) Whether the State Regulatory Commissions have the

jurisdiction to suo-moto initiate proceedings for

determination of tariff under section 62, 64 and 86 of

the Electricity Act, 2003 in the absence of the Tariff

application to be filed by the Utilities under Section

64 of the Act ?

Page 19 of 92
 Judgment in OP No.1 of 2011

(ii) Whether the Appellate Tribunal has got the powers to

issue directions under section 121 of the Act, 2003 to

appropriate Commissions for the performance of their

functions under the tariff policy issued by the Ministry

of Power by taking suo moto action for determination

of tariff in the absence of the Tariff application?

18. On these questions, we have heard the Learned

Counsel for the State Commissions of Tamil Nadu, Tripura

and Rajasthan who argued at length questioning the

jurisdiction of the State Commission and Tribunal for

taking suo-moto action for determination of Tariff.

Similarly, the Learned Amicus Curiae Counsel also made

elaborate submissions, in detail, contending that the State

Commissions have got the jurisdiction to take suo-moto

action for initiating proceedings for determination of ARR

and Tariff and the Tribunal also has got the powers

under Section 121 of the Act to issue such directions to

the State Commissions in this regard to ensure that

Page 20 of 92
 Judgment in OP No.1 of 2011

provisions of the Act and the Regulations framed by the

Commission are complied with in letter and spirit. They

also filed detailed written notes along with compilation of

Regulations framed by all the State Commissions and

various judgements rendered by this Tribunal as well as

Hon’ble Supreme Court in support of their plea.

19. Let us now deal with the first question as to whether

the State Commissions have got the jurisdiction to suo-

moto determine the tariff in the absence of tariff

application filed by the Utilities. The main grounds for the

objection raised by these three Commissions on this

question are summarised as follows:

(i) No suo- moto action can be initiated by the State

Commissions as it is violative of section 64 of the

Electricity Act.

(ii) The tariff determination could be done by the

Appropriate Commissions for the determination of

Page 21 of 92
 Judgment in OP No.1 of 2011

tariff only when the tariff application is filed by the

Utilities before the Commission.

(iii) The only option available with the Regulatory

Commissions concerned is to merely ask the Utilities

to comply with the provisions of the Act and to file a

tariff petition and nothing more.

20. The issues raised by the three Commissions involve

two questions:

(i) Whether the State Commissions can initiate suo-

moto proceedings for determination of tariff ?

(ii) If so, can the State Commissions determine the tariff

without such filing of tariff application by the Utilities?

21. Before dealing with this issue, it would be proper to

refer to the objects of the Act. The perusal of the

statement of objects and reasons, preamble and the

provisions of the Act would reveal, the following

Page 22 of 92
 Judgment in OP No.1 of 2011

objectives for the enactment of the Act providing the

Powers to the State Commissions to determine the Tariff.

(a) In order to distance the State Governments from

determination of tariff as the State Electricity Boards

have been unable to take decisions on tariff in an

independent manner and consequently tariff has

virtually been determined only by State

Governments which resulted in the cross-subsidies

reaching unsustainable levels.

(b) In order to take suitable measures conducive to

the development of the electricity industry and

rationalisation of electricity tariff.

(c) In order to lay down justiciable statutory

principles to mandatorily guide regular tariff

determination requiring cost-reflective and viable

tariff determination in terms of Section 61of the

Electricity Act read with the Tariff Policy.

Page 23 of 92
 Judgment in OP No.1 of 2011

22. In the light of the above objectives, it becomes necessary

to consider putting in place a mechanism to effectively

enforce the powers of suo-moto tariff determination in the

absence of application being filed by the Utility in exercise

of the various powers and functions under the Act read

with Regulations and conditions of licence. The tariff

determination ought to be treated as a time-bound

exercise. If there is any lack of diligence on the part of

the utility which led to the delay, then the State

Commissions have to intervene and to play a proactive

role in accordance with the Regulations framed and the

Statutory policy issued for the tariff determination in time.

23.In this context, it is to be pointed out that all the State

Commissions have been conferred with the delegated

legislative powers u/s 61 read with Section 181 of the Act,

2003 to frame Regulations. Data collected from all the

State Commissions relating to the Regulations framed

and approved by the legislature on this issue would

clearly indicate that the relevant Regulations relating to

Page 24 of 92
 Judgment in OP No.1 of 2011

the suo-moto tariff determination have been framed by

all the State Commissions including these three States

who raised the jurisdictional issue. These Regulations

specifically empower them to initiate suo-moto

proceedings for determination of tariff. As a matter of

fact, almost all the State Commissions including these

three State Commissions have exercised those powers

on various occasions in the past. This fact is not

disputed.

24. Instead of quoting the Regulations framed in this regard

by all the State Commissions we feel that it is enough to

quote the relevant Regulations framed by these three

States, indicating the existence of the said Powers of the

State Commissions to take suo-moto action. The

relevant tariff Regulations 2005 of Tamil Nadu with

reference to the same are as follows:

(Terms and Conditions for Determination of Tariff)

Regulations 2005

“5. Filing of Aggregate Revenue Requirement

Page 25 of 92
 Judgment in OP No.1 of 2011

(1) The Distribution / Transmission licensee shall file the

Aggregate Revenue Requirement (ARR) on or before
30th November of each year in the format prescribed,
containing the details of the expected aggregate
revenue that the licensee is permitted to recover at the
prevailing tariff and the estimated expenditure.

(2) ARR shall be filed every year even when no

application for determination of tariff is made.

6. Procedure for making application for

Determination of Tariff

(1) The licensee may file the application for

determination of tariff in Form 1 in Annexure 1 to the
TNERC Conduct of Business Regulations. The tariff
changes should normally be applied for to take effect
from the 1st day of ensuing financial year and hence
the application shall be filed before 30th November of
Current Year along with Aggregate Revenue
Requirement (ARR).

(8) In case the licensee does not initiate tariff filings

in time, the Commission shall initiate tariff
determination and regulatory scrutiny on suo motu
basis.

7. Decision on Application

(4) The Commission may conduct its proceedings in

accordance with the provisions of the Tamil Nadu
Electricity Regulatory Commission – Conduct of
Business Regulations, 2004.

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Conduct of Business Regulations, 2004.

“16(1) The Commission may initiate any

proceedings suo motu or on a petition filed by any
affected or interested person.

16 (3) While issuing the notice of inquiry the

Commission may, in suo motu proceedings and other
appropriate cases, designate an officer of the
Commission or any other person whom the
Commission considers appropriate to present the
matter in the capacity of a petitioner in the case.

43(1) The Commission may on its own or on the

application of any of the persons or parties concerned
within 30 days of the making of any decision, direction
or order, review such decision, directions or orders on
the ground that such decision, direction or order was
made under a mistake of fact, ignorance of any material
fact or any error apparent on the face of the record.

47 Subject to the provisions of the Act and these

Regulations, the Commission may, from time to
time, issue orders and directions in regard to the
implementation of the Regulations and procedure
to be followed and various matters which the
Commission has been empowered by these
Regulations to Specify or direct.

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48(1) Nothing in these Regulations shall be

deemed to limit or otherwise affect the inherent
power of the Commission to make such orders as
may be necessary.

25. Similarly, Tripura has also framed Regulations 2003 on

this issue in its Terms and Conditions for determination of

Tariff Regulation,2003 which are as follows:

(Terms and Conditions for Determination of Tariff)

Regulations 2003

“3. Procedure for calculation of expected revenue

All Generating Companies and the licensee shall

submit the petition to the Commission along with the
details of calculation with relevant information and
particular in line with Tripura Electricity Regulatory
Commission (Conduct of Business) Regulations 2004.

The Petition should be filed at least 120 days in

advance from the date of proposed effective date of
revised tariff.

The Commission reserves the right suo-moto to

ask the Generating Companies and the Licensees to
file such an application for variation in tariff and other
charges which should be filed as per TERC (CBR)
Regulation, 2004.

8 (iii) Nothing in these Regulations shall be deemed to

limit or otherwise affect the inherent power of the
Commission to make such orders as may be necessary

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for meeting the ends of justice or to prevent the abuse

of the process of the Commission.

Conduct of Business Regulations, 2004.

16. The Commission shall have the authority, either

on an application made by any interested party or
suo-moto, to review, revoke, revise, modify, amend,
alter, or otherwise change any order made or action
taken by the Secretary or the Officers of the
Commission.

23(1) The Commission may from time to time hold such

proceedings including consultations, meetings inquiries
etc. as it may consider appropriate in the discharge of
its functions. The Commission may appoint an officer
or any other person whom the Commission considers
appropriate to represent the matter as Commission’s
representative in the proceedings.

25(1) The Commission may initiate any

proceedings suo-moto or on a petition filed by any
affected person. The petition so filed shall become
a part of the proceedings.

25(2) When the Commission initiate the proceedings,

it shall be by a notice issued by the office of the
Commission and the Commission may give such orders
and directions as may be deemed necessary, for
service of notice to the affected or interested parties; for
the filling of replies and rejoinders in opposition or in
support of the petition in such form as the Commission
may direct. The Commission may, if it considers
appropriate, issue orders for advertisement of the

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petition inviting comments from the public or any class

of person on the issue involved in the proceedings in
such form as the Commission may direct.

25(3) While issuing the notice of inquiry the

Commission may, in suo-moto proceedings and other
appropriate cases, designate an officer of the
Commission or any other person whom the
Commission considers appropriate to present the
matter in the capacity of a petitioner in the case.

33(1) The Commission may, at any time before

passing order on the matter, require the parties or any
one or more of them or any other person whom the
commission considers appropriate, to produce such
documentary or other evidence as the Commission may
consider necessary for the purpose of enabling it to
pass orders.

33(2) The Commission may direct the summoning of

the witnesses, discovery and production of any
document or other material objects producible in
evidence, requisitioning any public record from any
office, examination by an officer of the Commission or
consultant, appointed by the Commission, the books,
accounts or other documents or information in the
custody or control of a person which the Commission
considers relevant for the matter.

33(3) In accordance with the Section 193 of the Indian

Penal Code 1860, whoever intentionally gives false
evidence in any of the proceedings of the Commission
or fabricate false evidence for the purpose of being
used in any of the proceedings shall be punishable with
imprisonment of either description for a term which may
be extended to seven years and shall also be liable to
be fined.

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38(1) The Commission may make such orders or

orders as it may consider appropriate for collection of
information, inquire, investigation, entry, search and
seizure and without prejudice to the generality of its
powers in regard to the following:-

(a) The Commission may, at any time, direct the

Secretary or any one or more officers or
consultants or any other person as the
Commission considers appropriate to study,
investigate or furnish information with respect to
any matter within the purview of the
Commission under the Act.

(b) The Commission may, for the above purpose

give such other directions as it may deem fit and
specify the time within which the report is to be
submitted or information furnished.

(c) The Commission may issue or authorize the

Secretary or an Officer to issue directions to any
person to produce before it and allow to be
examined and kept by an Officer of the
Commission specified in this behalf the books of
accounts etc. or to furnish information.

(d) The Commission may, for the purpose of

collecting any information particulars or
documents which the Commission consider
necessary in connection with the discharge of its
functions under the Act, issue such directions
and follow any one or more of the methods.

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(e) If any such report or information obtained

appears to the Commission to be insufficient or
inadequate, the Commission or the Secretary or
an Officer authorized for the purpose may give
directions for further inquire, report and
furnishing of information.

(f)The Commission may direct such incidental,

consequential and supplemental matters which
may be considered relevant in connection with
the above, be attended to.

43 (1) The Utilities shall provide to the Commission

during the period between 15th December to 31st
December every year details of its calculation for the
ensuing financial year of the expected aggregate
revenue from charges based on currently approved
tariff by the Commission.

47. (1) The Commission may, on its motion or on

the application of any of the person or parties
concerned, within 90 days of the making of any
decision, directions or order, review such decision,
directions or orders and pass such appropriate
orders as the Commission thinks fit.

53. (1) Nothing in these Regulations shall be

deemed to limit or otherwise affect the inherent
power of the Commission to make such orders as
may be necessary for meeting the ends of justice
or to prevent the abuse of the process of the
Commission.

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(2) Nothing in Regulations shall be the Commission

from adopting a procedure, which is at variance with
any of the provisions of the Regulations, if the
Commission, in view of the special circumstances, on
matter or class of matters and for reasons to be
recorded in writing deems it necessary or expedient.

58. Failure to comply with any requirement of these

Regulations shall not invalidate any proceedings
merely by reasons of the failure unless the Commission
is of the view that such failure has resulted in
miscarriage of justice.

26. We will now refer to the Regulations framed by Rajasthan

namely Tariff Regulations 2009 which are as follows.

(Terms and Conditions for Determination of Tariff)

Regulations 2009

5. Preparation & submission of Annual Accounts,

Reports etc.

(1) Every transmission licensee and distribution

licensee and generating company shall prepare
annual statement of accounts and also prepare annual
reports and statistics, giving an account of its activities
during the current and previous year and likely to be
undertaken in the remaining years of the MYT Control
Period, including the ensuing year.

The report of activities also indicate targets and

achievements in respect of various performance
parameters. These reports shall be furnished to

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the Commission in duplicate, by 30th November

every year.

(2) The Commission may also direct that, in addition to

submission of the annual statements of accounts, a
transmission licensee or distribution licensee or a
generating company shall submit to the Commission or
such other authority as it may designate in this behalf,
such additional information as the Commission may
require for the performance of its functions.

8. Annual Review of Performance

(1) Where the aggregate revenue requirement and

expected revenue from tariff and charges of a
Generating Company or Licensee is covered under a
multi-year tariff framework, then such Generating
Company or Licensee, as the case may be, shall be
subject to an annual performance review during the
Control Period in accordance with this Regulation.

(2) The Licensee or Generating Company shall

make an application for annual performance review
by November 30th of every year:

Provided that the Licensee or Generating Company, as

the case may be, submit to the Commission information
in such form as may be stipulated by the Commission
from time to time, together with the Accounting
Statements, extracts of books of account and such other
details as the Commission may require to assess the
reasons for and extent of any variation in financial
performance from the approved forecast of
aggregate revenue requirement and expected revenue
from tariff and charges:

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Provided further that the application for annual

performance review shall be submitted to and dealt with
by the Commission in the manner provided under the
procedure for
Determination of Tariff under these Regulations for
submission of and dealing with an application for
determination of tariff and within the time limit specified in
the Regulations for such application.

11. Periodicity of tariff determination

(1) The Commission shall determine the tariff of a

Generating Company, except Captive Power Plants
(CPP) and Renewable Energy Power Plants, or Licensee
covered under a multi-year tariff framework for each
financial year during the Control Period, at the
commencement of such financial year, having regard to
the following:

a) The MYT principles specified under these

Regulations;

b) The approved forecast of aggregate revenue

requirement and expected revenue from tariff and
charges for such financial year, including approved
modifications to such forecast;

(c) Impact of truing up for previous financial year;

and

(d) Approved gains and losses to be passed

through in tariffs, following the annual performance
review.

(2) The tariff for a transmission or distribution

licensee or a generating company shall ordinarily be

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determined not more than once in a year, except in case

of fuel cost adjustment, wherever applicable.

3) The tariff for CPP shall be determined as per RERC

(CPP) Regulations whereas the tariff for RE power
generating stations, shall be determined as per Part VII
of these Regulations.

12. (8) In case the transmission or distribution

licensee does not file petition under this regulation
within one and half months (that is by 15th January)
of submission of Annual Accounts, reports etc.
under Regulation 5, the Commission may, on its own
initiate proceedings for tariff determination: Provided
that the tariff determined for a particular financial year of
a Control Period shall remain applicable only till end of
such financial year, unless otherwise the Commission
approves the continuation of such Tariff for subsequent
financial years.

13.(2) After receipt of information or otherwise, the

Commission may make appropriate orders regarding
initiation of proceedings in accordance with the
provisions of the Rajasthan Electricity Regulatory
Commission (Transaction of Business) Regulations,
2005.

Conduct of Business Regulations, 2005.

18. Initiation of proceedings- the Commission may

initiate proceedings suo motu or on a petition field
by any affected person.

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19. When the Commission initiates the proceedings

in respect of any matter it shall be by a notice
issued by the office of the Commission and the
Commission may give such orders and directions as may
be deemed necessary, for service of notice to the
affected parties for the filing of replies and rejoinder in
opposition or in support of the matter in issue or for other
matters relating to conduct of the proceedings. The
commission may, if it considers appropriate, publish a
notice inviting comments on the issue involved in the
proceedings in such form as the Commission may direct.

20. In proceedings and inquiries initiated by the

Commission suo moto, the Commission may designate
an officer of the Commission or any other person whom
the Commission considers appropriate to present the
matter in the capacity of a petitioner in the case.

49. (1) The Commission may decide the matter on the

pleadings the parties or may call for the parties to
produce evidence by way of affidavit or lead oral
evidence in the matter.

50. Power of the commission to call for further

information, evidence, etc.- The Commission may, at any
time before passing order s on the matter, require the
parties or any one or more of them or any other person
whom the Commission consider appropriate, to produce
such documentary or other evidence as the
Commission may consider necessary for the purpose
of enabling it to pass orders.

51. The Commission may direct summoning of witnesses,

discovery and production of any document or other
material objects producible in evidence, requisitioning of

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any public record form any office, examination by an

officer of the Commission of books, accounts or other
documents or information in the custody or control of nay
person which the Commission considers relevant for
deciding the matter before it.

63. The Commission may make such order or orders as it

fit in terms of Section 96 of the Act for collection of
information, inquiry, investigation, entry, search, seizure
and without prejudice to the generality of its powers in
regard to the following:

a) The Commission may, at any time, direct the

Secretary or an Officer or consultants or any other
person as the Commission considers appropriate to
study, investigate or furnish information with respect
to any matter within the purview of the Commission
under the Act. 11

b) The Commission may for the above purpose give

such other directions as it may deem fit and specify
the time within which the report is to be submitted or
information furnished.

c) The Commission may issue or authorize the

Secretary or an Officer to issue directions to any
person to produce before it and allow to be examined
and kept by an Officer of the Commission, specified
in this behalf, the books, accounts, etc. or to furnish
to an Officer information, etc. as provided in of
Section 94 of the Act.

d) The Commission may, for the purpose of collecting

any information, particulars or documents which the
Commission consider necessary in connection with
discharge of its functions under the Act, issue such

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directions as may be considered necessary, as

provided for in Section 96 of the Act.

e) If any such report or information obtained

under these Regulations appears to the
Commission to be insufficient or inadequate, the
Commission or the Secretary or an Officer
authorised for the purpose may give directions for
further inquiry, report and furnishing of
information.

f) The Commission may direct such incidental,

consequential and supplemental matters be
attended to which may be considered relevant in
connection with the above

71. Issue of orders and directions- Subject to the

provisions of the and these Regulations, the
Commission may, from time to time, issue orders and
directions in regard to implementation of the
Regulations and procedure to be followed and other
matters in which the Commission has been
empowered by these Regulations to specify or direct.

72. Inherent powers of the Commission-. Nothing in these

Regulations shall be deemed to limit or otherwise
affect the inherent powers of the Commission to
make such orders as may be necessary for meeting
the ends of justice or to prevent the abuse of the
process of the Commission.

74. Nothing in these Regulations shall be deemed to bar

the Commission to deal with any matter or exercise any
power under the Act for which no regulation has been
framed, and the Commission may deal with such matters
or exercise such power in such manner as it thinks fit.”

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27. Thus, the above Regulations framed by these three State

Commissions would indicate that these Commissions have

been conferred with specific powers as well as inherent powers

to initiate suo-moto proceedings for tariff determination in the

absence of the Tariff applications. Further the status report of

these three States show that these State Commissions have, in

fact, exercised the said suo moto powers for determination of

Tariff in the absence of the application by Utilities in the past.

Tamil Nadu State Commission has exercised the said suo-moto

powers for various tariff related issues and passed the orders

including determination of tariff on the basis of the Tariff

Regulations 2004 and 2005 on a number of occasion in regard

to following aspects:

(a) Tariff for generating plants based on non

conventional energy sources,

(b) Tariff for fossil fuel based captive generating and co-
generation plants,

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(c) Tariff for grid interactive solar power generation

plants, and

(d) Tariff for solar thermal projects

28. Similarly, the Tripura State Commission have also

exercised these powers on various occasions, as admitted by

them.

29. The Rajasthan Commission also passed orders in 117

cases out of which 40 orders have been issued in exercise of

the suo-moto powers and over 10 orders relating to the tariff

determination. These orders involve determination of :

(a) Tariff for wind power

(b) Tariff for captive power plant,

(c) Transmission charges levy for short term open

access consumer, and

(d) Wheeling charges and cross subsidy surcharge

dated 20.03.2008 and 22.08.2007).

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30. In view of the above admitted fact situation, we raised

four questions to these 3 State Commissions seeking

clarification.

(A) Is it fair on the part of these State Commissions who

have actually framed the Regulation and notified

delegated legislation to vest suo-motu powers in their

hands and who have actually exercised such powers for

determination of tariff in the past, now to make a plea that

the said power does not exist or that such power through

Regulations can not be excercised as it is contrary to the

provisions of Electricity Act?.

(B) If that is the stand of these three Commissions, then

why these Commissions exercised those powers

conferred by the Regulations in the past by taking suo

moto action for tariff determination?

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(C)If it is their stand, that these Regulations were not in

consonance with Section 64 of the Act, then why these

Commissions had framed such Regulations at all ?

(D) Whether the State Commissions are the proper

authority to declare that their Regulations are wrong, so

long as those Regulations are in force?

31. There is no answer to these questions either in their

affidavits or in the written submissions filed by these State

Commissions. We are really surprised over the conduct of

these State Commissions who now plead as against their own

Regulations approved by the legislature. Another surprising

feature is that these Commissions, have failed to take note of

the findings given by this Tribunal in the several judgments

indicating the necessity to follow their Regulations, which are

binding on them.

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32. We will now refer to some of the judgments of this

Tribunal, which decided on the aspect of the suo moto Tariff

determination, by the State Commissions. These judgements

are as follows:

(a) In the judgement in Appeal No.204 of 2011 dated

11.8.2011 Faridabad Industries Association Vs Haryana

State Commission and Ors, this Tribunal has decided two

aspects:

(i) The State Commission can initiate suo-moto

proceedings and determine the tariff in the absence of

the proposal by the Utilities;

(ii) Such exercise by the State Commissions was valid

in view of its power under Electricity Act read with Tariff

Regulations.

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33. The relevant observations made by this Tribunal in the

above judgement are as follows:

“Whether the State Commission should have

rejected the Petitions of the Distribution Licensees not
containing any tariff proposal and, in the absence of any
tariff proposal could the State Commission enhance the
tariff suo moto?”

“Section 64 (3) of the 2003 Act provides for rejection

of the application filed by the licensee if such application is
not in accordance with the provisions of the Act and the
rules and Regulation made there under. However, in
terms of the Regulations and the Tariff Policy, the State
Commission is empowered to start suo-moto proceedings
to determine the tariff. The Regulations do not state that
the suo moto proceedings should be initiated only if the
tariff is to be reduced. On the other hand, the
Regulations clearly state that if the expected revenue
differs significantly from the revenue it is permitted to
recover, the State Commission, in the absence of a
proposal from the licensee for amendment of tariff, can
initiate the proceedings for determination of tariff. Thus,
the State Commission has correctly exercised its powers
under its tariff Regulations for determination of tariff, suo-
moto”

The State Commission has correctly exercised its

powers to determine the tariff suo-moto in the
absence of a tariff proposal by the Licensee, in
accordance with the Tariff Regulations.[emphasis
added).

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34. The next decision is in Appeal No.106, etc of 2006 titled

as Tamil Nadu Newsprint & Papers Ltd Vs Tamil Nadu State

Commission reported as 2007 APTEL 157. In this judgement

also, this Tribunal had the occasion to consider the suo-moto

tariff determination by the Tamil Nadu State Commission for

purchase of power from non-conventional energy sources and

held that the impugned suo-moto tariff order was valid having

been passed with a fair approach after due deliberations and

deep consideration. It was also held that the determination of

tariff was a mandatory obligation and duty of every Commission

which cannot brook any delay.

35. The next judgement is MSEDCL Vs Maharashtra State

Commission in Appeal No.70 of 2007. In this judgement, this

Tribunal had the occasion to consider the interplay between

Part VII of the Electricity Act read with the applicable multi-year

tariff regulations vis-à-vis para 8.1 (7) of the National Tariff

Policy. In this judgement, this Tribunal gave specific

guidelines while discerning the underlying objective that when

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should the suo-moto tariff determination be resorted. The

relevant observations are as follows:

“5. We now proceed to examine the tariff policy,

paragraph 8.1.7 as extracted above. In our opinion the
entire paragraph has to be read to interpret the expression
given therein. The intention of the Government in this
part of the tariff policy is to maintain discipline in the
matter of date of commencement of every new tariff. The
policy says that is desirable that MYT tariff should come to
effect in the beginning of the financial year. The policy
does not say that the tariff changes will come into effect at
the commencement of the financial year irrespective of
any prohibitive situation that may arise for various
reasons. There can be no quarrel that if the tariff
changes take place at the beginning of the financial year it
becomes convenient for all the players in the electricity
market as well as for the end consumers. In order to
make this possible an advice is given to Appropriate
Commissions to initiate tariff determination and regulatory
scrutiny on a suo-moto basis in case the licensee does not
initiate filings in time. However, suo-moto initiation of
tariff determination may not be an easy process. A large
amount of data is required for determination of tariff.
Without a tariff petition being filed by a licensee the
Appropriate Commission may find it quite difficult to collect
and collate the necessary data and to fix a tariff. If the
appropriate Commissions able to so determine the tariff
on suo-moto scrutiny, the same may be different from the
tariff which could have been framed on an ARR and tariff
petition with relevant data filed by a licensee. It is in this
context that the tariff policy says that if there is a gap of
this nature the licensee should be made to bear the same.
This provision has been made to discourage the licensee

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from delaying its tariff petition and for compelling the

Appropriate Commission to go into suo-moto
determination of the tariff in the next financial year.

6. Undoubtedly, the suo-moto tariff determination will

commence only if the ARR filing is inordinately delayed.
It is not expected that whenever ARR filing is delayed the
Appropriate Commission would suo-moto start initiating
the exercise of tariff determination. In our considered
view, the last clause of Para 8.1.7 of the tariff policy
comes into play only when the ARR filing is so enormously
delayed that the appropriate Commission is made to issue
a tariff of its own suo-moto regulatory scrutiny.

36. In the above judgments, this Tribunal gave the following

directions and guidelines:

(a) The intention of the Government in this part of the

tariff policy is to maintain the discipline regarding the date

of commencement of every new tariff. To make it

possible an advice is given to appropriate Commissions to

initiate tariff determination and regulatory scrutiny on

suo-moto basis in case a licensee does not initiate

filing in time.

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(b) Without a tariff petition being filed by a licensee, the

Appropriate Commission may find it quite difficult to collect

and collate the necessary data and to fix the tariff. It is in

this context, the tariff policy says that if there is a gap on

account of delay in filing, the licensee should be made to

bear the same. This provision has been made to

discourage the licensee from delaying its tariff petition and

for compelling the Appropriate commission to go into suo-

moto determination of tariff for the next financial year.

(c) The suo-moto tariff determination will commence only

if the ARR filing is inordinately delayed. The last clause

of para 8.1.(7 ) of the tariff policy comes into play only

when the ARR filing is so enormously delayed that the

appropriate Commission is made to issue a tariff on its

own suo-moto regulatory scrutiny. The financial

implication of the delay is nothing but the carrying cost.

The consumers cannot be burdened with this resulting

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carrying cost because the delay has not been caused on

account of their default.

37. We will now see the other judgements. The next

judgement is in Appeal No.192 of 2010 dated 28.7.2011 titled

Tamil Nadu Electricity Consumers Association vs Tamil Nadu

Electricity Board. In this Judgement also the Tribunal has held

that in case the Utilities do not file the Petition for determination

of ARR and tariff in time, the State Commission should initiate

the tariff determination and Regulatory scrutiny on suo-moto

basis. The relevant observations made by this Tribunal is are

follows:

“7.6. While we do not want to interfere with the findings

of the State Commission regarding the accumulated
losses for the previous years, we are concerned with the
fact that the first respondent filed a petition for
determination of ARR and tariff after a gap of seven years.
The first tariff petition was filed by the first respondent in
September, 2002 on the basis of which the State
Commission passed the tariff order dated 15.3.2003.
Thereafter, the petition for determination of tariff/ARR was
filed only on 18.1.2010 for the Control Period 2010-13.
During the intervening period the respondent no. 1 has

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accumulated huge financial losses, to the tune of Rs.

16700 Crores ending FY 2008-09. We fail to understand
as to why the first respondent did not file the petition for
ARR and tariff every year during this period and if the first
respondent was failing to do so why the State
Commission did not initiate suo motu proceedings in the
matter. Besides the retail tariff, the State Commission
has to regulate the electricity purchase and procurement
process and approve capitalization of the assets of the
distribution licensee for which the Annual Revenue
Requirement has got to be approved by the State
Commission.

7.7. In this connection let us examine the 2005

Regulations. The relevant Regulation 5 is reproduced
below:

“5. Filing of Aggregate Revenue Requirement

(1) The Distribution / Transmission licensee shall file

the Aggregate Revenue Requirement (ARR) on or
before 30th November of each year in the format
prescribed, containing the details of the expected
aggregate revenue that the licensee is permitted to
recover at the prevailing tariff and the estimated
expenditure.

(2) ARR shall be filed every year even when no

application for determination of tariff is made”.

(6). Procedure for making application for

Determination of Tariff:

………………………………….

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(8) In case the licensee does not initiate tariff filings

in time, the Commission shall initiate tariff
determination and regulatory scrutiny on suo motu
basis”.

Thus, according to the Regulations the licensee

has to file the ARR every year even when no
application for determination of tariff is made and in
case the licensee does not initiate the tariff filing in
time, the State Commission has to initiate the same
suo motu.

7.8. In the present case the Regulations were clearly

violated by the first respondent and the State
Commission also remained a silent spectator.

7.9. The present situation in which the first respondent has

landed itself with large accumulated financial losses, is
neither in its own interest for smooth operation of the
system nor in the interest of the consumers for
maintaining a reliable power supply. If the first
respondent is in poor financial health, then it is doubtful
that it can maintain a reliable power supply to the
consumers. We, therefore,direct the first respondent and
its successor companies to regularly file their respective
petitions for determination of Annual Revenue
Requirement and Tariff every year, in time, according to
the Regulations. In case the successor companies do not
file the petition for determination of ARR and tariff in time,
the State Commission should initiate the tariff
determination and regulatory scrutiny on suo moto basis”.

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38. In this decision following findings and directions have

been given by this Tribunal:

(a) The first tariff order was filed by the Tamil Nadu

Electricity Board before the State Commission for

determination of ARR and tariff in September, 2002. The

State Commission passed the tariff order on the basis of

its petition on 15.3.2003. Thereafter, the Electricity Board

filed a petition only on 18.1.2010 i.e after a gap of seven

years. The Tribunal is not able to understand as to why

the electricity board did not file its petition for ARR and

tariff every year. Similarly, if the Electricity Board had not

filed the said petition, there was no reason as to why the

State Commission did not initiate suo-moto proceedings in

the matter.

(b) The relevant regulations 5.2 of the 2005 Regulations

would provide that ARR should be filed every year even

when no application for determination of tariff was made.

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The Regulation 5 (8) specifically provides that the

Commission should initiate tariff determination and

regulatory scrutiny on suo-moto basis in case the Utilities

had not initiated tariff filing in time. In the present case,

the State Commission remained as a silent spectator

without following the above Regulations.

(c) The Tribunal directed the Electricity Boards and its

successor Companies to regularly file their petitions for

determination of tariff and ARR every year according to

Regulations. In case they do not file the petition in time,

the State Commission should initiate the tariff

determination and tariff scrutiny on suo-moto basis.

39. Thus the above issues have already been decided as the

ratio and suitable directions have been issued by this Tribunal

on the strength of the Regulations framed by the State

Commissions in the judgments already rendered by the

Tribunal. These judgements of this Tribunal have attained

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finality. There is one more aspect to be mentioned here. In

the matter of Tamil Nadu Electricity Consumers Association Vs

TNEB the Tribunal rendered a judgment in Appeal No.192/2010

on 28.7.2011, which we have earlier mentioned. In the present

matter, Tamil Nadu State Commission filed the written

submission before this Tribunal, stating that the Tamil Nadu

Commission had followed Tariff Regulations which followed

the National Tariff Policy which are in consonance with the

provisions of the Electricity Act, 2003. We have accepted this

plea by the State Commission. When such being the case, we

are unable to understand as to why Tamil Nadu State

Commission has now taken a different stand that they may not

be able to follow the Regulations.

40. As indicated above, this present stand taken by these

State Commissions is exactly opposite to the earlier stand

taken as well as the ratio decided by this Tribunal in various

judgements including the last judgement which was rendered

on 28.7.2011 in Appeal No.192 of 2010.

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41. As a matter of fact, the Hon’ble Supreme Court has held

that the Regulations framed by the Commissions are binding as

a delegated legislation on the Commissions and as such the

Regulatory Commissions are obliged to determine tariff in

exercise of the powers in accordance with these Regulations.

The relevant observations made by the Hon’ble Supreme Court

in the matter of Power Trading Corporation Vs CERC is as

follows:

“40. As stated above, the 2003 Act has been enacted in

furtherance of the policy envisaged under the Electricity
Regulatory Commissions Act, 1998 as it mandates
establishment of an independent and transparent
Regulatory Commission entrusted with wide ranging
responsibilities and objective, inter alia, including
protection of the consumers of electricity. Accordingly,
the Central Commission is set up under Section 76 (1) to
exercise the powers conferred on, and in discharge of the
functions assigned to, it under the Act. On reading
Sections 76 (1) and 79 (1) one finds that Central
Commission is empowered to take measures/steps in
discharge of the functions enumerated in Section 79 (1)
like to regulate the Tariff of generating companies, to
regulate the inter-State transmission of electricity, to
determine Tariff for inter State transmission of electricity,
to issue licences, to adjudicate upon disputes, to levy

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fees, to specify the Grid Code, to fix the trading margin in

inter- State trading of electricity, if considered necessary
etc. These measures, which the Central Commission is
empowered to take, have got to be in conformity with the
Regulations under Section 178, wherever such
Regulations are applicable. Measures under Section 79
(1), therefore, have got to be in conformity with the
Regulations under Section 178. To regulate is an
exercise which is an exercise which is different from
making of the regulations. However, making of a
regulation under Section 178 is not a pre-condition to the
Central Commission taking any steps/measures under
Section 79(1). As stated, if there is a regulation, then the
measure under Section 79(1) has to be in conformity with
such regulation under Section 178. This principle flows
from various judgments of this Court which we have
discussed hereinafter. For example, under Section
79(1)(g) the Central Commission is required to levy fees
for the purpose of the 2003 Act. An Order imposing
regulatory fees could be passed even in the absence of a
regulation under Section 178. If the levy is unreasonable,
it could be the subject matter of challenge before the
Appellate Authority under Section 111 as the levy is
imposed by an Order/decision making process. Making of
a regulation under Section 178 is not a pre-condition to
passing of an Order levying a Regulatory fee under
Section 79(1)(g). However, if there is a regulation under
Section 178 in that regard then the Order levying fees
under Section 79(1)(g) has to be in consonance with such
regulation. Similarly, while exercising the power to frame
the terms and conditions for determination of tariff under
Section 178, the Commission has to be guided by the
factors specified in Section 61. It is open to the Central
Commission to specify terms and conditions for
determination of tariff even in the absence of the
regulations under Section 178. However, if a regulation is
made under Section 178, then, in that event, framing of

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terms and conditions for determination of tariff under

Section 61 has to be in consonance with the regulation
under Section 178. One must keep in mind the dichotomy
between the power to make a regulation under Section
178 on one hand and the various enumerated areas in
Section 79(1) in which the Central Commission is
mandated to take such measures as it deems fit to fulfil
the objects of the 2003 Act. Applying this test to the
present controversy, it becomes clear that one such area
enumerated in Section 79(1) refers to fixation of trading
margin. Making of a regulation in that regard is not a
pre-
condition to the Central Commission exercising its powers
to fix a trading margin under Section 79(1)(j), however, if
the Central Commission in an appropriate case, as is the
case herein, makes a regulation fixing a cap on the
trading margin under Section 178 then whatever
measures a Central Commission takes under Section
79(1)(j) has to be in conformity with Section 178. One
must understand the reason why a regulation has been
made in the matter of capping the trading margin under
Section 178 of the Act. Instead of fixing a trading margin
(including capping) on a case to case basis, the Central
Commission thought it fit to make a regulation which has
a general application to the entire trading activity which
has been recognized, for the first time, under the 2003
Act. Further, it is important to bear in mind that making of
a regulation under Section 178 became necessary
because a regulation made under Section 178 has the
effect of interfering and overriding the existing contractual
relationship between the regulated entities. A regulation
under Section 178 is in the nature of a subordinate
Legislation. Such subordinate Legislation can even
override the existing contracts including Power Purchase
Agreements which have got to be aligned with the
regulations under Section 178 and which could not have

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been done across the board by an Order of the Central

Commission under Section 79(1)(j)”

42. The above mandate issued by the Hon’ble Supreme Court

would reveal the following factors.

(a) Making of a Regulation under section 178 is not a

pre-condition to passing of an order levying a regulatory

fee under section 79 (1) (g). However, if there is a

Regulation under Section 178 in that regard, then the

order levying fees under Section 79 (1) (g) has to be in

consonance with the Regulation.

(b) Similarly, while exercising the power to frame the

terms and conditions for determination of tariff under

section 178, the Commission has to be guided by the

factors specified in Section 61. It is open to the Central

Commission to specify terms and conditions for

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determination of Tariff even in the absence of

Regulations.

(c) If a Regulation is made under Section 178, then in

that event framing of terms and condition for determination

of tariff under Section 61 has to be in consonance with the

Regulation under Section 178.

(d) All these observations which relate to the Central

Commission, would apply to the State Commissions as

well, as the State Commissions have got the powers to

frame Regulations under Section 181 of the Act, 2003

43. It is strangely contended by the Tamil Nadu Commission

that the Regulations would not prevail over Section 64 of the

Act. It is settled position of law that the procedures as

provided under section 64 of the Act are to be considered as

handmaid of justice which cannot be read in a manner to

frustrate the letter and spirit of the underlying statutory

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provisions and substantive rights related to regular, cost

reflective tariff determination and the statements of objects and

reasons read with Section 62 of the Electricity Act. Further,

as held by the Hon’ble Supreme Court as well as this Tribunal

in various decisions that the quasi judicial authorities (like the

State Electricity Regulatory Commissions) are vested with more

liberal powers to adopt more flexible processes to fulfil their

statutory objectives with purposeful efficiency. This principle

has been laid down in the following decisions:

(i) National Sewing Thread Co. vs. James Chadwick:

AIR 1953 SC 357 at paras 8 & 9 .

(ii) Vasanlal Maganbhai Sanjanwada vs. State of

Bombay: AIR 1961 SC 4 at paras 4,6,9,16 & 17.

(iii) B Prabhakar Rao vs. Desari Panakala Rao: (1976) 3

SCC 550 at paras 10 and 13.

(iv) AR Antulay vs. RS Nayak: (1988) 2 SCC 602 at para

83.

(v) Shree Vijay Cotton & Oil Mills Ltd., vs. State of
Gujarat (1991) 1 SCC 262 at para 16.

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(vi) Dhannalal vs. Kalwatibai & Ors (2002) 6 SCC 16 at

para 20-24.

(vii) Uday Shankar Triyar vs. Ram Kalewar Prasad Singh

(2006) 1 SCC 75, para 17.

(viii) SIEL Ltd. Vs. Punjab SERC: 2007 ELR

(APTEL)1931 at para 48 (Placed in AC Vol V at page 319-
407).

44. In view of the ratio laid down in these decisions, the

contention of these three State Commissions that the only

option available with the Commission is merely to ask the

licensee to comply with the provision of the Act and to file the

tariff petition under section 64 and nothing more is wholly

misconceived and misplaced. Therefore, we are to conclude

that the State Commissions can initiate suo-moto proceedings

and collect the data and information and give suitable directions

and then to determine the tariff even in the absence of the

application filed by the utilities by exercising the powers under

the provisions of the Act as well as the tariff regulations. Thus,

the 1st question is answered accordingly.

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45. Let us now deal with the next Question i.e. “Whether

this Tribunal has got jurisdiction to issue directions to the State

Commissions under Section 121 of the Act for suo-moto

determination of tariff”?

46. According to Tamil Nadu State Commission, the

jurisdiction of this Tribunal under Section 121 of the Act is

limited to the issuance of directions to the Appropriate

Commissions for performance of its statutory functions under

the provisions of Electricity Act alone and it cannot issue

directions to the State Commission for suo-moto determination

of tariff under the tariff policy as the same would be beyond

jurisdiction.

47. This is a preposterous proposition. As referred to in the

earlier paragraphs, we have held that the suo-moto jurisdiction

is vested in the hands of the State Commissions by way of

Regulations. According to Hon’ble Supreme Court, these

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Regulations are statutory and binding delegated legislations

which have to be mandatorily followed by the Commissions. In

case of failure on the part of the Commissions to follow their

own Regulations for performing their statutory duties, this

Tribunal has certainly got the powers under section 121 of the

Electricity Act to issue such directions to the State

Commissions to perform those statutory functions in

accordance with the Regulations. The relevant portions of the

Supreme Court judgement in PTC India Ltd v CERC and Ors

reported as (2010) 4 SCC 603/ELR (SC) 269 are as follows:

“52. Before concluding on this topic, we still need to

examine the scope of Section 121 of the 2003 Act. In this
case, appellant(s) have relied on Section 121 to locate
the power of judicial review in the Tribunal. For that
purpose, we must notice the salient features of Section
121. Under Section 121, there must be a failure by a
Commission to perform its statutory function in which
event the Tribunal is given authority to issue orders,
instructions or directions to the Commission to perform its
statutory functions. Under Section 121 the Commission
has to be heard before such orders, instructions or
directions can be issued.

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53. The main issue which we have to decide is the

nature of the power under Section 121. In the case of M/s
Raman and Raman Ltd. v. State of Madras and Ors.
reported in AIR 1959 SC 694, Section 43A of Motor
Vehicles Act, 1939, ("1939 Act"), as amended by Madras
Act 20 of 1948, came for consideration before the
Supreme Court. Section 43A conferred power on the State
Government to issue "orders" and "directions", as it may
consider necessary in respect of any matter relating to
road transport to the State Transport Authority or a
Regional Transport Authority. The meaning of the words
"orders" and "directions" came for interpretation before the
Supreme Court in the said case. It was held, on
examination of the Scheme of the Act, that Section 43A
was placed by the legislature before the sections
conferring quasi-judicial powers on Tribunals which clearly
indicated that the authority conferred under Section 43A
was confined to administrative functions of the
Government and the Tribunals rather than to their judicial
functions. It was further held that the legislature had used
two words in the section: (i) orders; and (ii) directions.
This Court further noticed that under the 1939 Act there
was a separate Chapter which dealt with making of
"rules" which indicated that the words "orders" and
"directions" in Section 43A were meant to clothe the
Government with the authority to issue directions of
administrative character. It was held that the source of
power did not affect the character of acts done in exercise
of that power. Whether it is a law or an administrative
direction depends upon the character or nature of the
orders or directions authorized to be issued in exercise of
the power conferred. It was, therefore, held that the words
"orders" and "directions" were not laws. They were
binding only on the Authorities under the Act. Such orders
and directions were not required to be published. They
were not kept for scrutiny by legislature. It was further
held that such orders and directions did not override the

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discretionary powers conferred on an authority under

Section 60 of the 1939 Act. It was observed that non
compliance of such orders, instructions and directions
may result in taking disciplinary action but they cannot
affect a finding given by the quasi-judicial authority nor
can they impinge upon the rules enacted by the rule-
making authority. It was held that such orders and
directions would cover only an administrative field of the
officers concerned and therefore such orders and
directions do not regulate the rights of the parties. Such
orders and directions cannot add to the
considerations/topics prescribed under Section 47 of the
1939 Act on the basis of which an adjudicating authority is
empowered to issue or refuse permits, as the case may
be.

54. Applying the tests laid down in the above judgment to

the present case, we are of the view that, the words
"orders", "instructions" or "directions" in Section 121 do
not confer power of judicial review in the Tribunal. It is not
possible to lay down any exhaustive list of cases in which
there is failure in performance of statutory functions by
Appropriate Commission. However, by way of
illustrations, we may state that, under Section 79(1)(h)
CERC is required to specify Grid Code having regard to
Grid Standards. Section 79 comes in Part X. Section 79
deals with functions of CERC. The word "grid" is defined
in Section 2(32) to mean high voltage backbone system
of interconnected transmission lines, sub-station and
generating plants. Basically, a grid is a network. Section
2(33) defines "grid code" to mean a code specified by
CERC under Section 79(1)(h). Section 2(34) defines "grid
standards" to mean standards specified under Section
73(d) by the Authority. Grid Code is a set of rules which
governs the maintenance of the network. This
maintenance is vital. In summer months grids tend to trip.

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In the absence of the making of the Grid Code in

accordance with the Grid Standards, it is open to the
Tribunal to direct CERC to perform its statutory functions
of specifying the Grid Code having regard to the Grid
Standards prescribed by the Authority under Section 73.
One can multiply these illustrations which exercise we do
not wish to undertake. Suffice it to state that, in the light of
our analysis of the 2003 Act, hereinabove, the words
orders, instructions or directions in Section 121 of the
2003 Act cannot confer power of judicial review under
Section 121 to the Tribunal, which, therefore, cannot go
into the validity of the impugned Regulations 2006, as
rightly held in the impugned judgment”.

48. The above decision would make it clear that even

though this Tribunal has no powers to go into the validity of the

Regulations framed by the Commissions the powers are

vested with this Tribunal to interpret those Regulations. If the

Tribunal finds that those Regulations have not been followed by

the State Commissions, then this Tribunal certainly has got the

powers, to direct the Commissions to perform its statutory

functions as per the Regulations. As a matter of fact, this

Tribunal is duty-bound to give directions to the Commissions to

strictly follow the Regulations to achieve the objective of the

Act. The Tribunal can not simply keep quiet as a idle spectator.

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If the Tribunal has not given such directions through timely

intervention, it would be a dereliction of duty on the part of this

Tribunal.

49. Let us now see the other judgments. The next decision is

in the case of Uttar Pradesh Power Corporation Ltd Vs NTPC

reported as (2009) 6 SCC 235 dated 03 March, 2009 which is

as under:

“46. The Concept of regulatory jurisdiction provides for

revisit of the tariff. It is now a well-settled principle of law
that a subordinate legislation validly made becomes a part
of the Act and should be read as such”.

50. In the above decision, the Hon’ble Supreme Court has

laid down that subordinate legislation, namely Regulations,

validly approved by the legislation, would become the part of

the Act and should be read as such.

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51. The next decision is in the case of Cellular Operators

Association of India vs Union of India reported as (2003) 3 SCC

186 which is as under:

“27. TDSAT was required to exercise its jurisdiction in

terms of Section 14A of the Act. TDSAT itself is an
expert body and its jurisdiction is wide having regard to
sub-section (7) of Section 14A thereof. Its jurisdiction
extends to examining the legality, propriety or correctness
of a direction/order or decision of the authority in terms
of sub-section (2) of Section 14 as also the dispute made
in an application under sub-section (1) thereof. The
approach of the learned TDSAT, being on the premise
that its jurisdiction is limited or akin to the power of judicial
review is, therefore, wholly unsustainable. The extent of
jurisdiction of a court or a Tribunal depends upon the
relevant statute. TDSAT is a creature of a statute. Its
jurisdiction is also conferred by a statute. The purpose of
creation of TDSAT has expressly been stated by the
Parliament in the Amending Act of 2000. TDSAT, thus,
failed to take into consideration the amplitude of its
jurisdiction and thus misdirected itself in law. TDSAT was
required to exercise its jurisdiction in terms of Section 14A
of the Act. TDSAT itself is an expert body and its
jurisdiction is wide having regard to sub-section (7) of
Section 14A thereof. Its jurisdiction extends to
examining the legality, propriety or correctness of a
direction/order or decision of the authority in terms of
sub-section (2) of Section 14 as also the dispute made in
an application under sub-section (1) thereof. The
approach of the learned TDSAT, being on the premise
that its jurisdiction is limited or akin to the power of judicial
review is, therefore, wholly unsustainable. The extent of

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jurisdiction of a court or a Tribunal depends upon the

relevant statute. TDSAT is a creature of a statute. Its
jurisdiction is also conferred by a statute. The purpose of
creation of TDSAT has expressly been stated by the
Parliament in the Amending Act of 2000. TDSAT, thus,
failed to take into consideration the amplitude of its
jurisdiction and thus misdirected itself in law.

52. In this case the Hon’ble Supreme Court held that TDSAT

is an expert body and its jurisdiction is wide and it was required

to exercise its jurisdiction as per the provisions of the Act. This

would apply to this Tribunal as well.

53. Now let us quote Section 121 of the Electricity Act. The

same is reproduced below:

“Section 121 of the Electricity Act.

The Appellate Tribunal may, after hearing the

Appropriate Commission, or other interested party, if any,
from time to time, issue such orders, instructions, or
directions as it may deem fit, to any Appropriate
Commission for the performance of its statutory functions
under this Act.”

54. This section confers powers to Appellate Tribunal to issue

such directions to any Appropriate Commission whenever it

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finds that the Commission has not performed its statutory

functions. This power has been conferred on this Tribunal to

ensure that the statutory functions of the Commission as

prescribed under the Act and the Regulations are performed by

the Commissions.

55. We will now refer to Section 94 of the Act. It vests

extensive powers in the hands of the State Electricity

Regulatory Commissions to summon, discover and enforce

production of documents/records, receive evidence, etc. In

furtherance of those powers various State Electricity Regulatory

Commissions have notified Regulations under Section 181 and

94 of the Electricity Act. As stated above, these three State

Commissions which have raised the jurisdictional issue, have

framed Regulations conferring powers on the Commissions to

summon and enforce production of documents, public records

and evidence etc, and to direct the Utilities to follow the

mandates. In the event of failure to comply with directions,

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the Commissions have got the powers to punish those Utilities

for non compliance of those directions.

56. It is to be pointed out in this context, that the legislative

intent in enacting the Act, 2003 is to secure effective

Regulations characterised by tariff rationalisation with timely

cost reflective tariff determination based on the principles set

out in Section 61 read with the National Tariff Policy. The

various provisions such as Section 94, 128, 129, 130, 142 and

146 empower the State Commissions to secure discovery of all

relevant materials and enforce directions. Similarly, the

respective tariff regulations and conduct of business

Regulations notified by the State Commissions have enough

provisions to call for and collect information and to enforce

directions. Therefore, the hands of the State Commission

cannot assumed to be tied-up to prevent them from enforcing

the statutory mechanism. There are decided cases by the

Hon’ble Supreme Court as well as by this Tribunal in which it is

held that the State Commissions have complete powers to

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impose conditions, to frame regulations and to issue directions

as also to enforce them. The relevant decisions are as under:

(a) The relevant portion of the decision rendered in the

case of Maharashtra Electricity Regulatory Commissions

V Reliance Energy Ltd reported as (2007) 8 SCC 381 is

as under:

“9. The question before us is: what is the power of

the and to what extent the Commission can issue
directions. Suffice it to say that the Regulatory
Commission was constituted under the Electricity
Act, 2003. The Act was a new enactment which was
promulgated by superseding the Electricity Act, 1910
and the Electricity (Supply) Act, 1948. The
statement of objects and Reasons of the Act which
have been summarised in the Preamble reads as
under:

“An act to consolidate the laws relating to

generation, transmission, distribution, trading
and use of electricity and generally for taking
measures conducive to development of
electricity industry, promoting competition
therein, protecting interest of consumers and
supply of electricity to all areas, rationalisation of
electricity tariff, ensuring transparent policies
regarding subsidies, promotion of efficient and

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environmentally benign policies, constitution of

Central Electricity Authority, Regulatory
Commissions and establishment of Appellate
Tribunal and for matters connected therewith or
incidental thereto”.

16. A comprehensive reading of all these provisions

leaves no manner of doubt that the Commission is
empowered with all powers right from granting
licence and laying down the conditions of licence and
to frame regulations and to see that the same are
properly enforced and also power to enforce the
conditions of licence under sub section (6) of Section
128”.
(b) The next decision is in the case of Central Power

Distribution Co. Vs CERC reported as (2007) 8 SCC 197:

“22.3: As already noticed, the Central Commission

has the power and function to evolve commercial
mechanism such as imposition of UI charges to
regulate and discipline. It is well settled that a power
to regulate includes within it the power to enforce”

(c) The next decision is in the case of BSES Rajdhani

Power Ltd Vs Delhi Electricity Regulatory Commission &
Anr reported as (2009) ELR (APTEL) 0352: The relevant
observations are as follows:

“18. To find out the answer for this question, it is

appropriate to refer to the relevant observations
made by the Supreme Court in 2007 8 SCC 381,

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MSEDC Vs. Reliance Energy Ltd. and the same is

contained in para 18, which is as follows:

“There can be no manner of doubt that the

Commission has full powers to pull up any of its
licensee to see that the rules and Regulations
laid down by the Commission are properly
complied with. After all, it is the duty of the
Commission under Sections 45(5), 52, 55(2), 57,
62, 86, 128, 129, 181 and other provisions of the
Act to ensure that the public is not harassed
………..”

The above observation would clearly indicate

that the Supreme Court endorses the power of the
State Commission to pull up the licensee/distribution
company and punish them, whenever the
Commission finds that there are violations of rules
and Regulations, and licensing conditions framed by
the State Commission. It is further mandated by the
Supreme Court that it is the duty of the State
Commission to take action against the distribution
licensees who harass the consumer public, by
violating the rules and conditions under the powers
conferred under the Sections 45, 52, 55, 57, 62, 86,
128, 129 and 181 of the Act. In other words, the
Supreme Court gives clear indication about the
existence of the independent powers of the State
Commission to deal with breach of licensing
conditions and Regulations by the distribution
licensees to protect the interest of the public.

57. This Tribunal has repeatedly held that regular and timely

truing-up expenses must be done since:

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(a) No projection can be so accurate as to equal the real

situation.

(b) The burden/benefits of the past years must not be

passed on to the consumers of the future.

(c) Delays in timely determination of tariff and truing-up

entails:

(i) Imposing an underserved carrying cost burden to

the consumers, as is also recognised by para 5.3 (h)

(4) of National Tariff Policy.

(ii) Cash flow problems for the licensees.

58. A similar position is reflected in the tariff Regulations

framed by various State Commissions. These regulations

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would stipulate that the approved gains and losses have to be

passed through the tariff following the True-up.

59. Tariff determination ought to be treated as a time bound

exercise. If there is any lack of diligence on the part of the

Utilities which has led to the delay, the State Commission must

play a pro-active role in ensuring the compliance of the

provisions of the Act, Regulations and the Statutory Policies

under the Electricity Act, 2003.

60. In the absence of the performance of functions and

duties enjoined under the Act and Regulations by the State

Commission, it is the duty of the Tribunal to intervene and wake

them up from their deep slumber and to make them act to

ensure that the Regulations are being followed scrupulously by

the Commissions as well as the Utilities.

61. It is quite strange on the part of the State Commissions to

contend that they may not follow their own Regulations as they

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would not prevail over Section 64 of the Act and therefore, they

have to keep quite without taking any steps for performing their

functions. This plea is made by these Commissions even

though they have got the powers to take a suo-moto action for

determination of tariff by virtue of the Regulations and the

policies. As indicated above, Section 64 provides for

procedure to ultimately achieve the purpose which is more

important. It is quite surprising to notice that the State

Commissions have taken up the stand to plead before this

Tribunal that their own Regulations are wrong. How can they

take such a stand, so long as those Regulations approved by

the legislature are in force? This monstrous plea taken by the

three State Commissions would indicate only one thing i.e.

State Commissions have ventured to give mere lame excuses

for non performance of their statutory duties. In such a

surprising and shocking situation, it becomes our bounden duty

to invoke the powers under section 121 of the Act, to intervene

and to put the house in proper order.

Page 78 of 92
 Judgment in OP No.1 of 2011

62. Let us now refer to some of the strange features that we

noticed from the information furnished by the State

Commissions. It is seen that some of the Commissions are

leaving uncovered revenue gap in the ARR as a routine, with or

without creating regulatory assets. The interest charges on the

regulatory assets are also not being allowed in the ARR of the

Tariff Order. This, in our view, is not in order as it may create a

problem of cash flow for the distribution licensees which are

already burdened with heavy debts. The cash flow problem

may result in constraints in procurement of power by the

distribution licensees and operation and maintenance of the

distribution net work affecting the reliability of power supply to

the consumers. This Tribunal in a recent Judgment in Appeal

no. 192 of 2010 dated 28.07.2011 in the matter of Tamil Nadu

Electricity Consumers’ Association vs. Tamil Nadu Electricity

Board, etc. has dealt with the issue of Regulatory Assets. The

relevant extracts are reproduced below:

Page 79 of 92
 Judgment in OP No.1 of 2011

“8.4. Let us first examine the provisions of the Tariff Policy

in this regard. The relevant extracts are as under:

“8.2.2. The facility of a regulatory asset has been

adopted by some Regulatory Commissions in the past to
limit tariff impact in a particular year. This should be done
only as exception, and subject to the following guidelines:

a. The circumstances should be clearly defined through

regulations, and should only include natural causes or
force majeure conditions. Under business as usual
conditions, the opening balances of uncovered gap
must be covered through transition financing
arrangement or capital restructuring;

b. Carrying cost of Regulatory Asset should be allowed to

the utilities;

c. Recovery of Regulatory Asset should be time-bound

and within a period not exceeding three years at the
most and preferably within control period;

d. The use of the facility of Regulatory Asset should

not be repetitive.

Page 80 of 92
 Judgment in OP No.1 of 2011

e. In cases where regulatory asset is proposed to be

adopted, it should be ensured that the return on equity
should not become unreasonably low in any year so
that the capability of the licensee to borrow is not
adversely affected”.

The Tariff Policy stipulates creation of the regulatory asset

only as an exception subject to the guidelines specified

above. According to the guidelines the circumstances

under which the regulatory assets should be created are

under natural causes or force majeure conditions.”

“8.8. We are of the opinion that the regulatory asset

created by the State Commission is not in consonance

with the Tariff Policy and its own Regulations. Moreover,

the impugned order does not provide for recovery of the

regulatory assets with the carrying cost as envisaged in

the Regulations and the Tariff Policy.”

“8.10. Now, the question arises whether the creation of

the regulatory asset is in the interest of the distribution

company and the consumers. The respondent no. 1 will

Page 81 of 92
 Judgment in OP No.1 of 2011

have to raise debt to meet its revenue shortfall for meeting

its O&M expenses, power purchase costs and system

augmentation works. It is not understood how the

respondent no. 1 will service its debts when no recovery of

the regulatory asset and carrying cost has been allowed in

the ARR. Thus, the respondent no. 1 will suffer with cash

flow problem affecting its operations and power

procurement which will also have an adverse effect on

maintaining a reliable power supply to the consumers.

Thus, creation of the regulatory asset will neither be in the

interest of the respondent no. 1 nor the consumers. “

“8.12. According to Shri Rajah, learned Senior counsel

for the appellants, the regulatory assets could not be

created for the anticipated shortfall in revenue. We are in

agreement with the contention of the Senior counsel. The

Regulations clearly state that the Regulatory Asset can be

created when the licensee could not fully recover the

reasonably incurred cost at tariff allowed for reasons

Page 82 of 92
 Judgment in OP No.1 of 2011

beyond his control under natural calamities and force

majeure conditions. Thus, we hold that the creation of the

regulatory assets on the basis of projected shortfall in

revenue, that too without any directions for time bound

recovery for the regulatory asset alongwith its carrying

cost, is in contravention of the Tariff Policy and the 2005

Regulations”.

63. In this case the Tribunal held that the regulatory asset

created by the State Commission was not in consonance with

the Tariff Policy and the Tariff Regulations of the State

Commission which clearly define the circumstances under

which the regulatory asset can be created. Further, the

creation of the regulatory asset without any directions for

carrying cost and time bound recovery was neither in the

interest of the distribution licensee nor the consumers.

64. We also notice that most of the State Commissions have

not provided in their Regulations Fuel & Power Purchase Cost

Page 83 of 92
 Judgment in OP No.1 of 2011

Adjustment Formula for allowing the increase in fuel and power

purchase cost during the tariff year. The fuel and power

purchase cost adjustment mechanism provided in most of the

states is after completion of the financial year through a

separate proceeding which takes a long time. The power

purchase cost is a major expenditure in the ARR of the

distribution licensee. The fuel and power purchase cost is also

uncontrollable and it has to be allowed as quickly as possible

according to the Tariff Policy. The Electricity Act, 2003 under

Section 62(4) has specific provision for amendment of the tariff

more frequently than once in any financial year in terms of Fuel

Surcharge Formula specified by the Regulations. A major part

of power procured by the distribution company comes from the

Central Sector Generating Companies whose tariff is regulated

by the Central Commission and the State owned Generation

Companies whose tariff is regulated by the State Commissions.

The Central Commission in its Tariff Regulations has already

provided a formula for fuel price adjustment and the charges of

the generation companies are increased as and when the fuel

Page 84 of 92
 Judgment in OP No.1 of 2011

prices are increased. In view of the present precarious

financial conditions of the distribution companies, it would be

necessary that the State Commissions also to provide for

Power Purchase Cost Adjustment Formula as intended in the

section 62(4) of the Act to compensate the distribution

companies for the increase in cost of power procurement

during the financial year. In the above situation, as indicated

above it has become necessary for this Tribunal to give

appropriate directions, to correct this situation by invoking the

powers under Section 121 of the Act which is permissible under

law. So, the second question is also answered accordingly.

65. In view of the analysis and discussion made above, we

deem it fit to issue the following directions to the State

Commissions:

(i) Every State Commission has to ensure that

Annual Performance Review, true-up of past expenses

and Annual Revenue Requirement and tariff

Page 85 of 92
 Judgment in OP No.1 of 2011

determination is conducted year to year basis as per

the time schedule specified in the Regulations.

(ii) It should be the endeavour of every State

Commission to ensure that the tariff for the financial

year is decided before 1st April of the tariff year. For

example, the ARR & tariff for the financial year 2011-

12 should be decided before 1st April, 2011. The State

Commission could consider making the tariff

applicable only till the end of the financial year so that

the licensees remain vigilant to follow the time

schedule for filing of the application for determination

of ARR/tariff.

(iii) In the event of delay in filing of the ARR, truing-

up and Annual Performance Review, one month

beyond the scheduled date of submission of the

petition, the State Commission must initiate suo-moto

proceedings for tariff determination in accordance

Page 86 of 92
 Judgment in OP No.1 of 2011

with Section 64 of the Act read with clause 8.1 (7) of

the Tariff Policy.

(iv) In determination of ARR/tariff, the revenue gaps

ought not to be left and Regulatory Asset should not

be created as a matter of course except where it is

justifiable, in accordance with the Tariff Policy and the

Regulations. The recovery of the Regulatory Asset

should be time bound and within a period not

exceeding three years at the most and preferably

within Control Period. Carrying cost of the

Regulatory Asset should be allowed to the utilities in

the ARR of the year in which the Regulatory Assets

are created to avoid problem of cash flow to the

distribution licensee.

(v) Truing up should be carried out regularly and

preferably every year. For example, truing up for the

Page 87 of 92
 Judgment in OP No.1 of 2011

financial year 2009-10 should becarried out along with

the ARR and tariff determination for the financial year

2011-12.

(vi) Fuel and Power Purchase cost is a major

expense of the distribution Company which is

uncontrollable. Every State Commission must have

in place a mechanism for Fuel and Power Purchase

cost in terms of Section 62 (4) of the Act. The Fuel

and Power Purchase cost adjustment should

preferably be on monthly basis on the lines of the

Central Commission’s Regulations for the generating

companies but in no case exceeding a quarter. Any

State Commission which does not already have such

formula/mechanism in place must within 6 months of

the date of this order must put in place such formula/

mechanism.

Page 88 of 92
 Judgment in OP No.1 of 2011

66. We direct all the State Commissions to follow these

directions scrupulously, and send the periodical reports by 1st

June of the relevant financial year about the compliance of

these directions to the Secretary, Forum of Regulators, who in

turn will send the status report to this Tribunal and also place it

on its website.

67. Before parting with this case, we are duty bound to record

our heartfelt appreciation for the services rendered by all the

leanred Amicus Curiae Counsel namely Mr. M G

Ramachandran, Mr. R K Mehta , Mr. Amit Kapur, and Mr.

Buddy A Ranganadhan who made thorough preparation and

filed their written submissions to enable this Tribunal to have a

clarity over the core of the issues and to give suitable directions

to all the State Commissions on a proper conclusion.

68. In particular, we shall make a special mention about Mr.

Amit Kapur, the learned Amicus Curiae Counsel who argued

the matter elaborately and effectively in a lucid language for a

Page 89 of 92
 Judgment in OP No.1 of 2011

number of days on behalf of all the Amicus Curiae Counsel

which made our task easy. We express our gratitude to all the

Amicus Curiae Counsel, who have rendered valuable services

by taking enormous pain for preparation and presentation of the

matter on all the hearings which were held on several days.

69. In view of their contribution, we feel that they are to be

suitably remunerated. In fact they have not only spent time

during several hearings but also they would have incurred

expenditure in preparing the documents and copies of

Regulations of all the State Commissions in all over India and

filing the same in the spiral bound form in several volumes.

Therefore, we deem it appropriate to fix their legal fees at Rs.1

lac each for all the 4 Amicus Curiae Counsel. Accordingly, the

Registry is directed to pay the amount of Rs.1 lac each to the

learned Amicus Curiae Counsel.

70. It is also our duty to record our appreciation for the

prompt services rendered by the Secretary of Forum of

Page 90 of 92
 Judgment in OP No.1 of 2011

Regulators who collected all data and information from all the

State Commissions and placed it before the Tribunal.

71. Similarly, the initiative taken by Mr. P. Uma Shankar, the

Secretary of the Power Ministry to send a letter to this

Tribunal giving the details about the snail-speed functioning of

the various State Commissions and requesting us to intervene

and to give suitable directions to all the State Commissions,

which gave opportunity for us to deal with these legal as well as

the technical issues in depth, and to give appropirate directions

to make the statutory authorities functional, is quite

commendable. Accordingly, we record our appreciation over

the anxiety shown by the Power Ministry to take steps to make

the Power Sector in whole of India more effective and

energetic.

72. Similarly, we have to appreciate the learned Counsel

appearing for the three State Commissions for having

Page 91 of 92
 Judgment in OP No.1 of 2011

presented the case well, even though we did not accept their

plea made on behalf of these Commissions.

73. The Registry is directed to send copies of this judgment to

all the State Commissions and the Secretary of the Forum of

Regulators as well as to the Secretary of the Power Ministry

and to the learned Amicus Curiae Counsel.

74. With these observations, this suo-moto petition is

disposed of.

(V J Talwar) (Rakesh Nath) (Justice M. Karpaga Vinayagam)

Technical Member Technical Member Chairperson

Dated: 11th Nov, 2011

REPORTABLE/NON-REPORTABALE

Page 92 of 92
 GUIDELINES FOR INVESTMENT APPROVAL
(FEBRUARY 2006)

1.1 As per the provisions of paragraph 10 of the Transmission and Bulk Supply Licence
(Licence No. 1/2000) and paragraph 9 of the Distribution & Retail Supply License
(Licence No. 12/2000), the Licensee shall promptly notify the Commission of any
Schemes pertaining to the Transmission or Distribution System which the Licensee
from time to time proposes to implement.

As per the Licence conditions, the Licensees are required to obtain prior approval of
the Commission for any investment above Rs.500 lakhs (major investment). The
Licensee needs to demonstrate to the satisfaction of the Commission that:

(a) there is a clear need for the major investment and it forms part of the
Licensee’s Resource Plan. In case the major investment proposed in any year
of the control period is not covered under the approved Resource Plan, the
Licensee has to establish the need, justification and urgency to take up the
scheme in the time-frame proposed and

(b) the Licensee has examined the economic, technical, system and environmental
aspects of all viable alternatives to the proposal.

1.2 For the purpose of this guideline, the term:

“Scheme” shall mean a proposal for investment in the Transmission or Distribution

System embracing a single or a series of investments in or acquisition of any
facility/facilities planned at a point of time, with a defined objective and within a
defined time frame.

1.3 For Schemes involving major investment, before committing any resources (other
than those towards making of Detailed Project Report, feasibility studies and other
similar preliminaries), the Licensee must receive the approval from the Commission.
The Licensee shall approach the Commission for its approval for major investments at
least 90 clear days before the proposed start of the Scheme.

1.4 The application for approval should be accompanied with information as prescribed
by the Commission in these guidelines.

1.5 For the purpose of these guidelines, the Schemes may be categorised in the following
groups:

(a) System improvement: The schemes under this category shall be those which
are primarily driven by a need to improve the performance of the system in
terms of reducing losses and/or improving quality and reliability of supply.
The Licensee must ensure that the schemes submitted under this category are
part of the “System Improvement Plan” component of the Resource Plan.

Page 1 of 7
 (b) System expansion: The schemes under this category shall be those which are
primarily driven by expected load growth in an area or to serve new
connections, and thus include network reinforcement or expansion to cater to
such load growth. The Licensee must ensure that these schemes are a part of
the “System Expansion Plan” component of the Resource Plan.

(c) Generation Evacuation: The schemes under this category shall include those
which are framed for the purpose of evacuation of power generated from a
generating station. The Licensee must ensure that these schemes are a part of
the “Generation Evacuation Plan” component of the Resource Plan.

(d) System Replacement: The schemes under this category shall include those
which are formulated for the purpose of replacing existing assets due to
obsolescence of technology, destruction due to accidents/natural calamities or
on expiry of its life period.

Information Requirement

1.6 For the approval of any Scheme, the licensees must submit the following:

(a) The proposal shall have the following Details:

(i) Brief outline of the different components that constitute it and the
salient features of the Scheme.

(ii) The objectives of the Scheme and justification for taking it up. The
Licensee shall quantify the objectives for each scheme depending
upon the category to which the scheme belongs. For each category,
the objectives could be including, but not limited to:

– System Expansion schemes: The objective is to meet the load

growth. This objective could be quantified, say in number of
consumers required to be connected, MWs of capacity to be
created, expected sales in MUs, number of villages/hamlets/
dalitwadas to be electrified, etc. These schemes should be
correlated with the existing/proposed network expansion
plans of other licensees and their consent obtained wherever
applicable.

– System Improvement schemes: The objective is to maintain

the standards of quality of supply. This objective could be
quantified as the extent of loss reduction expected, quantified
improvement in reliability or quality of supply or reduction in
DTR failures, etc.

– Generation Evacuation Schemes: The objective is to ensure

adequate capacity to evacuate generation. This could be
quantified as MWs of power required to be evacuated.

Page 2 of 7
 (iii) The Licensee shall ensure that the proposed investment is a part of
the Resource Plan submitted to the Commission in accordance with
the paragraph 3 of the Commission’s Guidelines for “Load Forecast,
Resource Plans and Power Procurement”.

(b) The licensee shall provide inter-alia the following along with the proposal :

(i) Complete details of the Scheme such as transmission and/or

distribution lines, substations, extension of bays at the existing
substations, communication equipment, metering, other ancillary
services, etc, as the case may be.

(ii) Detailed cost estimates for each item of work covered by the Scheme,
erection charges, expenses projected for contingencies, estimated
extend of interest during construction, establishment and other
charges etc. The cost estimates shall be worked out by the Licensee
based on latest cost data. The Licensee, shall as far s possible ensure
that the scheme is the same as that contained in the Resource Plan. In
case of any deviations, the Licensee shall justify the same to the
Commission.

(iii) A comprehensive sketch / single line diagrams of the proposed work,

grid maps of relevant areas (i.e. areas where the scheme is proposed
to be executed).

(c) The scheme shall be supported by the results of the load flow study, or any
other appropriate tools/techniques employed by the Licensee to simulate the
impact of the scheme on network performance. The results of the load flow
shall be provided for each year up to a period of five years from the date of
commissioning of the scheme.

(d) Benefits:

(i) Physical benefits: The proposal shall enumerate the physical benefits
such as reduction in transmission / distribution losses, improvement
in voltages, reliability of supply, and any other benefits such as
increase in sales to subsidising consumers, etc. As far as possible, the
benefits shall be indicated depending upon the category of the
scheme. In case the schemes are not beneficial, the necessity for
schemes must be established clearly.

(ii) Financial benefits: The proposal shall bring out the financial benefits,
by way of anticipated reduction in losses, etc.. The financial benefits
must be supported by detailed calculations and, discounted cash
flows are to be shown to demonstrate the payback period of the
investment.

Page 3 of 7
 (iii) The Licensee shall also propose the methodology of evaluation and
measurement of the benefits accruing out of the investment.

(e) Cost - Benefit analysis: The Licensee shall carry out a study to bring out all
possible alternatives to the proposed scheme, including non-network
alternatives, to achieve the desired objectives and to ensure the proposed
option was the least cost option available. The Licensee shall, while
conducting this study, examine the economic, technical and environmental
aspects of all such alternatives. Detailed description of the alternatives and the
analysis done to evaluate them will have to be submitted to the Commission.

(f) Sanctions and Statutory clearances

(i) The total project cost shall be matched by corresponding means of

financing. The financial plan will contain details regarding the
Funding agency and the loan terms and conditions such as interest
rate, repayment schedule, moratorium period, exchange rate, etc.

(ii) Submission of documents pertaining to administrative clearance and

financial tie-up or in principle approval for the same.

(g) Commissioning schedule

(i) The planned commissioning schedule shall indicate commissioning

for the works/modules including the components comprising the
Scheme. If the scheme consists of separate, independently usable
modules, separate commissioning schedules shall be indicated for
each such module of the scheme.

(ii) The Licensee shall furnish information regarding the phasing of

expenditure year wise for each work/module, supported with details
of corresponding sources of funding. The Licensee must endeavour
that the cumulative total expenditure on a Scheme does not exceed
the amount as approved by the Commission.

(h) Downstream Arrangements

The proposal shall contain the downstream arrangements if any and

their status for utilisation of the benefits from the proposed Scheme.
The details of the downstream arrangements, their status and the
programme for their completion shall be furnished.

(i) Constraints

(i) Physical and financial constraints, if any, in execution of the Scheme

may be highlighted.

Page 4 of 7
 (ii) Likely uncertainties or risks the Licensee expects to meet and the
decisions made under these uncertainties shall be mentioned. The
plan adopted by the Licensee to mitigate these risks and uncertainties
shall be furnished to the Commission.

(iii) The Licensee should indicate to the Commission if it has any

information constraint. If Licensee is not in a position to provide the
above details for any Schemes, it should indicate to the Commission
the costing of one indicative work and indicate the budgetary
provision for the entire Scheme.

1.7 As part of the approval granting process, the Commission can ask the Licensee to
furnish additional information as and when the Commission feels it appropriate. Each
Licensee shall furnish to the Commission the information on or before such date as
may be directed by the Commission.

Periodic Reporting

1.8 The Licensee shall submit to the Commission periodic progress reports duly
correlated to the commissioning schedules. This monitoring shall take place at the end
of every half-year. The Licensee shall submit to the Commission a progress report
within 15 days of end of each such monitoring period. This progress report should
provide details of the progress made in each of the approved Schemes.

1.9 The Licensee shall indicate the expenditure incurred till the reporting period vis-à-vis
the provisions approved by the Commission while approving the investment Scheme.

1.10 The Licensee shall submit the details of the Scheme completed indicating the original
cost, interest during construction, expenses capitalised and original schedule of
completion, as approved by the Commission for such scheme along with the actual
cost, interest during construction, expenses capitalised, etc. and, date of completion.

1.11 On completion of a scheme or a usable module of the scheme, a Physical Completion

Certificate (PCC) to the effect that the work in question has been fully executed,
physically, and the assets created are put to use, is required to be issued by the
engineer concerned not below the rank of Superintendent Engineer. The PCC shall be
accompanied with a Financial Completion Certificate (FCC) to the effect that the
assets created have been duly entered in the Fixed Assets Register by transfer from
the CWIP register to OCFA. The FCC shall have to be issued by an officer not below
the rank of Senior Accounts Officer. The Licensee shall submit these certificates to
the Commission within 60 days of completion of work/module/scheme, at the latest.

1.12 The Commission or its authorized representative shall have the right to verify the
correctness of the PCC and FCC.

Page 5 of 7
1.13 The Licensee shall also undertake a post-completion review of the Scheme to assess
whether the objective of the investment is met or not and whether or not the desired
benefits are accruing from the Scheme and submit a report to the Commission after
twelve months of its completion.

General

1.14 The waiver granted for implementing Schemes below Rs. 500 lakhs relaxes only the
requirement of obtaining prior Commission approval for the investment. The
Commission still retains the authority to assess the efficiency and economy with
which the Licensee makes any investment and to verify that these investments are
consistent with the spirit of the Licence and the Act, and for this purpose may require
the Licensee to furnish details of any such scheme, from time to time.

1.15 If it comes to the Commission’s notice that the quality of supply to consumers in a
particular area is below the standards set out by the Commission due to lack of
investments in the Transmission System or Distribution System in that area, the
Commission may suo motou direct the Licensee to make investment in Schemes that
would result in improvement of the quality of supply. Provided however that while
issuing such a direction, the Commission would take into consideration the Licensee’s
resource position.

1.16 Based on the information provided by the Licensee as per the process as specified in
the preceding paragraphs, the Commission may, if it comes to the conclusion that the
Licensee had not followed the provisions of the guidelines or has been guilty of
negligence or wilful default in implementing a Scheme which are not consistent with
the objectives sought to be achieved by such investments, disallow recovery of such
cost in the Tariff Order or pass such other orders, as the Commission may consider
appropriate.

1.17 If the assessment suggests that the company has overestimated the amount needed for
investments, the Commission reserves the right to reduce the project cost of the
scheme and take any other action it deems appropriate.

1.18 The Commission retains the power to add, vary, alter, amend, change, modify or
otherwise substitute the above guidelines or any part thereof in such manner and at
any time the Commission may consider appropriate. The Licensee shall not claim any
vested right in the facility given by these guidelines, if the Commission decide to add,
modify, alter, change etc the guidelines or any part thereof.

1.19 Without prejudice to the above the Commission may at any time direct the Licensee
to comply with such further or other conditions as the Commission may consider
appropriate for undertaking investments consistent with the objects of the Andhra
Pradesh Electricity Reform Act, 1998 (Act No. 30 of 1998), the Electricity Act, 2003,
the Regulations framed thereunder and the terms and conditions contained in the
Licences issued by the Commission.

Page 6 of 7
1.20 Any violation of these conditions shall be a breach of the obligations assumed by the
Licensee under Transmission & Bulk Supply Licence and/or the Distribution and
Retail Supply Licence and may be subjected to the same proceedings as if the terms
of the licence conditions have been violated or not complied with by the Licensee.

Page 7 of 7
 O&M Norms approved in MYT Order Dated. 27.03.2015 and 29.04.2020 - (A)

TSSPDCL (in Rs) FY 16 FY 17 FY 18 FY 19 FY 20 FY 21

Employee cost per Substation 63,06,348 68,80,946 75,07,898 69,17,951 72,31,070 75,58,362
Employee cost per KM of Line ckt.km) 34,653 37,810 41,255 16,328 17,067 17,840
Employee cost per DTR 32,632 35,605 38,849 5,467 5,715 5,973
Employee cost per Consumer 1,329 1,450 1,582 545 570 595
A&G cost per Substation 18,08,036 19,72,774 21,52,522 5,00,056 5,22,690 5,46,347
A&G cost per KM of Line(ckt.km) 8,521 9,297 10,144 1,180 1,234 1,290
A&G cost per DTR 8,018 8,749 9,546 395 413 432
A&G cost per Consumer 321 350 382 39 41 43

TSNPDCL (in Rs) FY 16 FY 17 FY 18 FY 19 FY 20 FY 21

Employee cost per Substation 53,29,633 58,15,238 63,45,089 60,24,137 62,96,800 65,81,806
Employee cost per KM of Line(ckt.km) 24,488 26,720 29,154 13,474 14,084 14,722
Employee cost per DTR 25,551 27,879 30,419 5,950 6,219 6,501
Employee cost per Consumer 1,103 1,204 1,313 590 616 644
A&G cost per Substation 12,40,150 13,53,145 14,76,436 3,11,889 3,26,005 3,40,761
A&G cost per KM of Line(ckt.km) 5,698 6,217 6,784 698 729 762
A&G cost per DTR 5,945 6,487 7,078 308 322 337
A&G cost per Consumer 257 280 306 31 32 33

Elements TSSPDCL TSNPDCL

Norms for R&M expenses in % of opening GFA 1.92% 1.72%
FY 19- FY 21 1.01% 1.19%

Cost Drivers ( C ) %
No. of Substations 49%
Line Length in KM 21%
No. of DTRs 10%
No of Consumers 20%
Total 100%
 Information as per Audited Accounts (B)

TSSPDCL FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
No. of Substations 1,239 1,344 1,407 1,488 1,593 1,644 1,675
Line Length in KM 2,48,812 2,55,613 2,62,889 2,78,106 2,89,253 2,98,932 3,55,613
No. of DTRs 2,92,653 3,18,765 3,44,763 3,98,586 4,11,372 44,35,453 4,57,384
No of Consumers 65,86,208 68,97,922 73,21,151 76,24,732 82,53,998 87,52,121 91,07,326

TSNPDCL FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
No. of Substations 1050 1110 1195 1283 1368 1405 1439
Line Length in KM 213249 216224 213606 218194.71 262158.52 267844.43 272083.83
No. of DTRs 226885 242539 255087 266213 282666 295018 305031
No of Consumers 5034446 5178054 5274360 5429988 5705258 5981954 61,77,230

TSNPDCL (in Rs. Crores) FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21

GFA 3,944.50 4,274.97 4,807.36 5,421.14 6,042.99 7,030.47 7,887.88

TSSPDCL (in Rs. Crores) FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21

GFA 8,652.99 7,806.35 9,716.10 11,264.81 12,524.39 14,192.11 16,417.37
Computation of O&M Cost for TSSPDCL as per Objector -Based on approved Norms
(D = A*B*C )
Employee Cost ( A*B)
Particulars (In Rs.Crores) FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
No. of Substations 847.57 968.15 1,117.18 1,102.03 1,188.79 1,266.03
Line Length in KM 885.78 993.98 1,147.33 472.29 510.19 634.41
No. of DTRs 1,040.19 1,227.53 1,548.47 224.90 2,534.86 273.20
No of Consumers 916.73 1,061.57 1,206.23 449.84 498.87 541.89

Allowable Employee cost correlating with cost drivers (A*B*C)

Particulars (In Rs.Crores) FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
No. of Substations (49%) 415.31 474.39 547.42 539.99 582.51 620.35
Line Length in KM (21%) 186.01 208.74 240.94 99.18 107.14 133.23
No. of DTRs (10%) 2.00 2.04 2.08 1.72 2.19 1.75
No of Consumers (20%) 183.35 212.31 241.25 89.97 99.77 108.38
Total 786.67 897.48 1,031.69 730.86 791.61 863.71

A&G Cost (A*B)

Particulars (In Rs.Crores) FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
No. of Substations 224.02 265.14 302.86 74.41 83.26 89.82
Line Length in KM 212.01 237.64 266.67 32.82 35.69 38.56
No. of DTRs 234.65 278.89 329.11 15.74 16.99 191.61
No of Consumers 211.42 241.43 279.67 29.74 33.84 37.63

Allowable A&G Cost correlating with cost drivers (A*B*C)

Particulars (In Rs.Crores) FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
No. of Substations (49%) 109.77 129.92 148.40 36.46 40.80 44.01
Line Length in KM (21%) 44.52 49.91 56.00 6.89 7.50 8.10
No. of DTRs (10%) 23.46 27.89 32.91 1.57 1.70 19.16
No of Consumers (20%) 42.28 48.29 55.93 5.95 6.77 7.53
Total 220.04 256.00 293.25 50.87 56.76 78.80

Allowable R&M Cost as per approved percentage of GFA

Particulars (In Rs.Crores) FY 15 FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
GFA 8,652.99 7,806.35 9,716.10 11,264.81 12,524.39 14,192.11 16,417.37
R&M 166.14 149.88 186.55 216.28 126.50 143.34 165.82

Allowable O&M cost as per Norms for TSSPDCL

Particulars (In Rs.Crores) FY 16 FY 17 FY 18 FY 19 FY 20 FY 21 -
Employee Cost 786.67 897.48 1,031.69 730.86 791.61 863.71
A&G 220.04 256.00 293.25 50.87 56.76 78.80
R&M 166.14 149.88 186.55 216.28 126.50 143.34
O&M Expenses 1,172.85 1,303.36 1,511.48 998.02 974.87 1,085.85
Computation of O&M Cost for TSNPDCL as per Objector -Based on approved Norms
(D = A*B*C )
Employee Cost ( A*B)
Particulars (In Rs.Crores) FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
No. of Substations 591.59 694.92 814.07 824.10 884.70 947.12
Line Length in KM 529.49 570.76 636.12 353.23 377.23 400.56
No. of DTRs 619.71 711.16 809.79 168.19 183.47 198.30
No of Consumers 571.14 635.03 712.96 336.61 368.49 397.81

Allowable Employee cost correlating with cost drivers (A*B*C)

Particulars (In Rs.Crores) FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
No. of Substations (49%) 289.88 340.51 398.90 403.81 433.50 464.09
Line Length in KM (21%) 111.19 119.86 133.59 74.18 79.22 84.12
No. of DTRs (10%) 1.90 1.93 1.95 1.67 1.68 1.70
No of Consumers (20%) 114.23 127.01 142.59 67.32 73.70 79.56
Total 517.20 589.30 677.03 546.98 588.10 629.47

A&G Cost (A*B)

Particulars (In Rs.Crores) FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
No. of Substations 137.66 161.70 189.43 42.67 45.80 49.04
Line Length in KM 123.20 132.80 148.02 18.30 19.53 20.73
No. of DTRs 144.19 165.47 188.43 8.71 9.50 10.28
No of Consumers 133.08 147.68 166.16 17.69 19.14 20.38

Allowable A&G Cost correlating with cost drivers (A*B*C)

Particulars (In Rs.Crores) FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
No. of Substations (49%) 67.45 79.23 92.82 20.91 22.44 24.03
Line Length in KM (21%) 25.87 27.89 31.08 3.84 4.10 4.35
No. of DTRs (10%) 14.42 16.55 18.84 0.87 0.95 1.03
No of Consumers (20%) 26.62 29.54 33.23 3.54 3.83 4.08
Total 134.36 153.21 175.98 29.16 31.32 33.49

Allowable R&M Cost as per approved percentage of GFA

Particulars (In Rs.Crores) FY 15 FY 16 FY 17 FY 18 FY 19 FY 20
GFA 3,944.50 4,274.97 4,807.36 5,421.14 6,042.99 7,030.47
R&M 67.85 73.53 82.69 93.24 71.91 83.66

Allowable O&M cost as per Norms for TSNPDCL

Particulars (In Rs.Crores) FY 16 FY 17 FY 18 FY 19 FY 20 FY 21
Employee Cost 517.20 589.30 677.03 546.98 588.10 629.47
A&G Expenses 134.36 153.21 175.98 29.16 31.32 33.49
R&M 67.85 73.53 82.69 93.24 71.91 83.66
O&M Expenses 719.41 816.04 935.69 669.38 691.34 746.62