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707662nd Apr.: MERC Public Hearing re: RINFRA Tariff Petition

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  • karmayog - tanya
    Apr 1, 2011


      Just wanted to share my submission with you all; hope you all have filed your comments / suggestions / objections.

      The Public Hearing is on Saturday, 2nd April at Rang Sharda Hall, Bandra Reclamation.

      With warm regards,

      Twitter: sandeepohri
      Blog: http://snohri.blogspot.com

      "Be the change you want to see in the world" - Mahatma Gandhi


      This is just to reconfirm that the MERC Public Hearing in the matter of RINFRA's
      Tariff Petition in Case 72 of 2010, WILL be held tomorrow, Saturday 2nd April.

      It will commence at 10.30am sharp. (Venue: Rangsharda Hall, Bandra Reclamation).

      A clarification was necessary in view of the Govt holiday announced by the State
      Govt and I have received this reconfirmation from MERC themselves.

      With warm regards,
      (Authorised Consumer Representative for this case





      The Secretary,

      Maharashtra Electricity Regulatory Commission

      13th Floor, Centre No 1, World Trade Center

      Cuffe Parade, Mumbai – 400 005

      (Fax No. : 2216 3976, email: mercindia@...)                       


      Dear Sir,

      Re: MERC Case No. 72 of 2010                              


      This is with reference to the above Case filed by Petitioners, M/s Reliance

      Infrastructure Ltd and scheduled for a Public Hearing on 02-Apr-2011.


      At the outset, I thank the Hon’ble Commission for authorising me to represent the

      interest of the consumers in this matter.


      Since the matter is a very complex one and requires in-depth study which is time

      consuming, I may add to this submission and I trust that the Hon’ble Commission will

      permit me to do so.


      The page numbers and paragraph numbers refer to printed, bound, hard copy of the

      Petition sent to me under the Cover Letter dated 9.12.2010. (Many different versions

      have been sent and I assume this is the latest one!)


      I will make additional submissions based on further reading of the said Petition,

      which is also be treated as a part of my official submissions.


      This is being emailed to the Petitioners (mullas@...) and the Hon’ble

      Commission (mercindia@...). Kindly acknowledge receipt.


      With warm regards,

      Sandeep N. Ohri

      Authorised Consumer Representative for this case

      Encl: As above





      In the matter of:

      Annual Performance Review towards: Truing up of ARR of FY09,

      APR of FY10 and determination of ARR and Tariff for FY11

      MERC Case No. 72 of 2010


      I, Sandeep N. Ohri, resident of A-74, Tirupati Towers, Thakur Complex, Kandivali

      (E), Mumbai-400101, authorised by the Hon’ble Commission u/s 94(3) of the

      Electricity Act, 2003 (“EA2003”) to represent the interest of the consumers in this

      matter, state as follows:


      1. The Petition deals with Annual Performance Review of M/s Reliance

      Infrastructure Limited’s Distribution business (hereafter, “RInfra-D” or

      “Petitioners”) towards the Truing up of ARR of FY 2008-09, APR of FY 2009-10

      and determination of ARR and Tariff for FY 2010-11.


      2. While ostensibly this Petition may seem to have only tariff and financial

      implications, a few issues raised herein are very complex and will have far

      reaching consequences for consumers – not just in Mumbai, but across the State

      and even across the country.


      3. Since there have been multiple hard copies sent to me, I would like to make it

      clear that the page numbers and paragraph numbers mentioned herein, refer to

      printed, bound, hard copy of the Petition sent to me under the cover letter dated

      09-Dec-2010, which, I assume, is the latest one. If not, this version may please be

      referred to, as I believe the information contained may not be materially very



      4. It is my humble submission that I point by point replies on all issues raised in my

      submission(s) and also request the Petitioner to provide details, even at the risk of

      repetition, in their response. I request that the replies such as “all details as

      required, have been submitted to the commission” are not given as has happened

      on a few occasions in the past.


      5. The Petition has been filed by M/s Reliance Infrastructure Limited (hereafter,

      “RInfra”), with its Registered Office at a Navi Mumbai address location. The

      Affidavit has been signed by one Mr. Ramesh Shenoy, Company Secretary, with

      his Office address as “Reliance Energy Centre, Santa Cruz East”. The Petitioner to

      clarify the status of the Santa Cruz East office premises, since this is, obviously,

      no longer the Registered Office of RInfra.


      6. Further to the above, since no Office Number, Block Number, Floor Number,

      Gala Number or Unit Number or any other such identification has been provided:


      a) Is the whole building to be treated as RInfra’s Office? Or is it RInfra-D’s

      Office only?


      b) Does RInfra own this building (or office, as the case may be)? Or does

      RInfra-D own this Office?


      c) Does RInfra occupy the entire building? Or Does RInfra-D occupy this

      entire building? If no, please provide details of which other companies

      have their Offices (whether as Registered Office or not) or activities being

      carried out in this building at Santa Cruz East.


      d) Petitioner to supply proof to substantiate each response to the above

      queries. The proof could be in the form of Title Deed, Rent Receipt, etc.


      7. Please refer Serial A.1.2, page 9 of 80. The third Para states “...and hence REL is

      joined as a Petitioner in the present petition.” On a scrutiny, the Petition is seen to

      be filed/signed ONLY by RInfra. The Petitioner to clarify whether REL is joined

      as a Petitioner in this Petition.


      8. The same Para further states “...to be required to be amended for which the

      Commission will separately initiate the process of carrying out the amendment to

      RInfra License.” Petitioner to provide details of any Order, or communication,

      from the Hon’ble Commission, which states a clear intent that the Hon’ble

      Commission will ‘separately initiate’ such a process in this regard.


      9. The last Para on page 9 of 80 refers to “remaining requisite approvals which are

      awaited.” The Petitioner to provide details as follows:


      a) Which are these approvals which are yet awaited?


      b) Who are the authorities who can grant these approvals?


      c) What is the present status of these approvals? (Details such as date of

      filing for these approvals, estimated time taken to receive these, etc. are



      10. In the first Para on page 10 of 80, it is stated, “Consequently, this petition has

      been filed by RInfra-Distribution Business (RInfra-D) as the petitioner.” It is clear

      that RInfra and RInfra-D are being treated as two separate entities by the Hon’ble

      Commission, however the reality is that RInfra-D is not a separate legal entity.

      Even the recognition granted under the MERC (Specific Conditions of

      Distribution License) Regulations 2008 also refer to a legal entity known as

      RInfra. The Petitioner himself has stated that RInfra is a Distribution Licensee (in

      Serial A.1.1 on page 8).The Petitioner to clarify whether RInfra is being

      considered as the Distribution Licensee or RInfra-D? This is relevant when it

      comes to apportioning expenses and ascertaining Regulatory Assets and

      consequently, their expenses and treatment, thereof.               


      11. Please refer Para A.3.1 on page 11 of 80. It is stated, “The principles set forth by

      the Hon’ble ATE have been …” The Petitioner to provide a copy of the full order

      of the Hon’ble ATE as this needs to be examined from the point of view of the

      context given.


      12. Further, in the next Para, on the same page 11 of 80, it is stated that the Petitioner

      has filed a statutory appeal against the Hon’ble Commission’s Tariff Order dated

      15-Jun-2009 and that the impact of that has not been considered in the present

      Petition. The Petitioner to provide a summary on what is the likely impact if the

      reliefs are granted in its favour by the Hon’ble ATE.


      13. Please refer Serial A.3.1.2 on page 11 of 80. The Petitioner has stated that it has

      considered interest on the amount of funding of working capital done via internal

      accruals. The principle behind this, needs to be elaborated by the Petitioner or the

      Hon’ble Commission. Which means that if a Discom is funding its own working

      capital through internal accruals of any amount. This would “deprive” them of

      earning “market-based returns” on the same amount, elsewhere. This ‘opportunity

      loss’ is being calculated based on the SBI PLR and the Discom would be entitled

      to claim the interest amount when calculating revenue requirement. By the same

      logic, the amount of moneys held by the Petitioner as ‘Security Deposit’ (as

      mentioned in Serial A.3.1.4 on page 12 of 80) should also be calculated at the SBI

      PLR rate and accordingly given to consumers, since they could have ‘invested’ it

      elsewhere and are incurring a similar ‘loss’.


      14. Please refer Serial A.3.1.5 on page 13 of 80. Since the FY 2011 is over on 31-

      Mar-2011, the Petitioner to provide full details of depreciation based on assets that

      have been commissioned.


      15. Please refer Serial A.3.2 on page 13 of 80. It is stated that the compliance report

      detailing benefits of all capex schemes since FY 04-05 has been submitted to the

      Commission by RInfra-D vide letter dated 24-Nov-2009. The Petitioner to clarify

      whether the Hon’ble Commission has ‘accepted’ these benefits as being valid. If

      there is no such explicit acceptance from the Hon’ble Commission, the amount of

      Rs. 285.29 crore should not be treated as total actual capitalization and all

      numbers need to be reworked accordingly. A similar effect has been reflected in

      Serial A.4.10 on page 20 of 80. Both these will need to be reconsidered, if the

      Hon’ble Commission has not formally ‘accepted’ the contents of the said

      compliance report.


      16. Please refer Serial A.4.11 on page 21 of 80. The normative loan repayment tenure

      is stated to be 10 years for FY 2004-05 and FY 2005-06 and 20 years from FY

      2006-07 onwards. Petitioner to explain the reason for this change.


      17. Please refer Serial A.4.12.1 on page 21 of 80. Employee Expenses have increased

      12% on account of shift attributed to moving from GPA structure to CTC.

      Petitioner to clarify:

      a) What do these terms, GPA and CTC mean?


      b) How is the calculation different? Examples to be given.


      c) What is the reason for this shift in terms?


      d) What is the exact amount of increase, of the 12%, that is attributed to

      increase in DA.


      e) A few of these questions were raised in the TVS but were not answered.


      18. Please refer Serial A.4.12.2 on page 22 of 80. It is stated that A&G expenses have

      increased on a number of counts. Petitioner to provide details:


      a) Where is the new premises that is being used as a godown?


      b) What is the break up of the Rs. 1.20 crore spent on new customer mailers?

      How much towards explaining ‘increase in tariffs’, how much towards

      ‘increase in disconnection notices’ how much towards ‘customer

      awareness mailers’, etc.


      c) Also, a copy of a few sample mailers of EACH type to be provided.


      d) The increase in Security Charges of Rs. 1.81 crore is attributed towards

      increase in deployment and increase in installations. The break up between

      these two to be provided.


      19. Please refer Serial A.4.19 on page 25 of 80. Income Tax considered is Rs. 121.0

      crore. Please also refer Serial A.5.20 on page 54 of 80, with respect to data for FY

      2009-10 and FY 2010-11. Petitioner to state what would be the respective

      amounts if the Income Tax is calculated by the existing method. No change should

      be permitted till such time the Hon’ble ATE passes any Order.


      20. Please refer Serial A.4.21 on page 25 of 80. Details of non-tariff income of Rs.

      141.06 crore to be provided.


      21. Please refer Serial A.4.22 on page 26 of 80 and Serial A.5.24 on page 56 of 80.

      Petitioner to provide detailed break up of Tax on Sale of Electricity (TOSE) and

      Electricity Duty, even though apparently these have no tariff bearing.


      22. Please refer Serial A.5.1.2 on page 30 of 80 and Serial on page 76 of 177.

      These speak of Sales Forecast. The Petitioner has stated that since the different

      categories have different growth rates, a different CAGR has been considered for

      each of these, in order to arrive at FY 11 Base Case Sales. Mere statements that

      certain categories are showing have shown a certain trend are not sufficient; these

      have to be substantiated with relevant data and proven.


      a) For instance, for LT Residential category it is stated, on page 76 of 177,

      that “The growth rate in LT Residential has shown a reasonable

      consistency over past five years and hence a five year CAGR of has been

      considered for forecasting sales..” It seems a particular percentage seems

      to have been omitted in this sentence. Also, the Petitioner has to provide

      the past six years’ data of this category and show that there is a consistent

      trend in CAGR.                    


      b) Similarly, for the LT Commercial category it is stated, on page 76 of 177,

      that “The growth rate in LT Commercial has shown a rapid decline in last

      few years. A 2-year CAGR of is assumed to be a fair representative of

      growth..” Again, a particular percentage seems to be missing in this

      sentence. The Petitioner to provide details of the past six years and prove

      why only a 2 year CAGR has been considered.


      c) To calculate the CAGR for 5 years, data for 6 years needs to be provided.

      Hence, the Petitioner is required to provide data in the following tabulated

      format to facilitate easier understanding:

      TABLE 1: Sales in MU

      Category 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR

      LT1 Res

      LT2 Comm

      LT3 Ind

      LT Street Lt

      LT Others

      HT Ind

      HT Comm

      HT Housing

      HT Others



      TABLE 2: Sales in Rs. Crore

      Category 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR

      LT1 Res

      LT2 Comm

      LT3 Ind

      LT Street Lt

      LT Others

      HT Ind

      HT Comm

      HT Housing

      HT Others



      TABLE 3: Average Number of Consumers during the year

      Category 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 CAGR

      LT1 Res

      LT2 Comm

      LT3 Ind

      LT Street Lt

      LT Others

      HT Ind

      HT Comm

      HT Housing

      HT Others



      It is understood that certain categories have been recast in different years and

      the Petitioner may group these as state the reasoning for the groupings


      23. Please refer Serial A. on page 50 of 80. Petitioner has increased Employee

      expenses to counteract high attrition. Petitioner to provide attrition rate for each of

      the FY from 2004-05 onwards.


      24. Please refer Serial A.5.13.2 on page 51 of 80. It is stated that average inflation rate

      has been considered for calculating projections of Employee Expenses, A&G

      Expenses and R&M Expenses for FY 2010-11. Petitioner to provide average

      inflation rates for FY 2007-08, FY 2008-09 and FY 2009-10 and state reasons for

      deviation, if any, in the increase in these particular expenses for each of these

      years in respect of each of these expenses.


      25. It is observed that in the entire Petition, the Petitioner has not once mentioned his

      own lapse of entering into a Long Term Power Purchase Agreement. He has made

      it out to be the (un)doing of TPC-G, whereas the EA2003 clearly puts the

      responsibility on the Distribution utility to secure cheap power to protect the

      interest of their own consumers.


      26. Regarding proposed Cross Subsidy Surcharge, the Petitioner to provide details of

      any law or rule or regulation under the Electricity Act which explicitly permits

      levy of a ‘cross subsidy surcharge’ with retrospective effect, on consumers who

      have migrated away, in a parallel license distribution model. The relevant Section

      Number of the particular Act or Rule or Regulation to be reproduced in full.

      Failing which it should not be permitted.                                  


      27. The Petitioner seems to be creating the ‘ghost’ of tariff shock on its subsidised

      consumers, knowing fully well that it has itself to blame for the situation it is in.

      Such a lapse of responsibility has caused lakhs of consumers to suffer at the hands

      of a private monopoly for many years. It is only now that consumers have a choice

      of electricity provider and the Petitioner is seeking to dismantle that choice too, by

      a levy of a ‘draconian’ Cross Subsidy Surcharge. This must not be permitted

      under any circumstance and the Hon’ble Commission will be doing a great

      disservice to the consumers and the nation if it permits this levy.


      28. Based on the above, I therefore pray that:


      a) No additional tariff be levied on consumers until the Petitioner provides all

      data and reasoning as asked for above.


      b) The Hon’ble Commission to scrutinise in detail each and every expense,

      not merely with its accounting accuracy, but from a perspective of

      reasonableness as well.                                    


      c) No levy of Cross Subsidy Surcharge be permitted on consumers who have

      migrated away. In any case a levy with a retrospective effect is inherently



      d) All points raised by me, in this submission and thereafter, after receiving

      replies from the Petitioner, be taken into consideration before grant of any



      e) Any other reliefs to consumers, as may be possible, be granted.


      29. I trust that these issues will be considered in depth before the Hon'ble Commission

      arrives at a firm decision and that my humble prayers be granted. As stated, I

      reserve the right to make additional submissions based on the information

      received hereafter, which should be taken on record and treated as a part of my

      official submissions.


      Sandeep N. Ohri

      Email: sandeep.ohri@...

      Place: Mumbai

      Date: 27-Mar-2011