Case No. 141 of Coram. Shri. Azeez M. Khan, Member Shri. Deepak Lad, Member. V/s Maharashtra State Electricity Distribution Co. Ltd.

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1 Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade Centre, Centre No.1, 13 th Floor, Cuffe Parade, Mumbai Tel /65/69 Fax Website: Case No. 141 of 2015 In the matter of Petition of RattanIndia Power Ltd. regarding tariff applicable to start-up power, and for netting of start-up power with power supplied to Maharashtra State Electricity Distribution Co. Ltd. under PPAs dated and Coram Shri. Azeez M. Khan, Member Shri. Deepak Lad, Member RattanIndia Power Ltd. V/s Maharashtra State Electricity Distribution Co. Ltd. Petitioner Respondent Appearance For the Petitioner For the Respondent Adv. Sanjay Sen Adv. Nirav Shah ORDER Date: 31 July, 2017 M/s. RattanIndia Power Ltd. (RPL), M 62-63, Connaught Place, New Delhi, has filed a Petition on under Sections 61 and 62 read with 86 (1) (a),(b) and (f) of the Electricity Act (EA), 2003 for the settlement /netting of start-up power consumed by RPL with the power supplied to Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) as per the Power Purchase Agreements (PPAs) dated and ; for the application of MERC Order Case No. 141 of 2015 Page 1 of 26

2 appropriate tariff category for the start-up power; and consequent refund of excess start-up power charges paid by RPL from October, 2012 to May, 2015 amounting to Rs. 9,21,05, RPL s prayers are as under- a) Direct the Respondent licensee to permit settling / netting of consumption toward startup power in energy terms against the power which is being supplied in terms of the PPA dated and ; b) Declare that the Petitioner has to be classified as Industrial Category for the period October 2012 to May 2015 also for availing start-up power supply and accordingly the tariff applicable for industrial supply and accordingly the tariff applicable for industrial supply will be applicable to the Petitioner; c) Declare that recovery of Rs. 9,21,05,504/- as per Annexure 11 on account of start-up power during October May 2015 is illegal and unjust being without any authority of law, without jurisdiction and contrary to the provisions of the Electricity Act, 2003 and Regulations made there under ; d) Direct refund of amounts paid by the Petitioner towards start up power during October 2012 to May 2015 is Rs /- on account of excess recovery of charges for startup by incorrect categorization of Petitioner in to HT Commercial ; e) Award prime lending rate on the excess amounts recovered as per Annexure 11 and further interest till excess amounts are refunded to the Petitioner; 3. The Petition states as follows: 3.1. RPL is seeking adjudication of disputes with MSEDCL regarding excess Charges recovered by MSEDCL for supply of start-up power to RPL s power plant by wrongly categorizing RPL in the HT-Commercial tariff category and its refusal to allow netting of start-up power MSEDCL issued a Request for Proposal (RFP) dated for long-term procurement of power through competitive bidding. RPL participated in the bid, and MERC Order Case No. 141 of 2015 Page 2 of 26

3 was declared a successful bidder for supplying 1200 MW power to MSEDCL for 25 years RPL is aggrieved by the arbitrary and deliberate inaction of MSEDCL in not refunding Rs.9,21,05,504/- with interest, which was wrongly recovered from RPL by categorizing it in the HT-Commercial tariff instead of the HT-Industrial category. MSEDCL is thereby abusing its dominant position and violating its Distribution Licence conditions RPL is a Generating Company as defined in Section 2 (28) of the EA, In accordance with the Mega Power Policy of the Government of Maharashtra (GoM), RPL had invested more than Rs. 15,000 crore in the backward District of Amravati for setting up 2700 MW Thermal Power Project at the Nandgaonpeth Addl. MIDC Industrial Area, Amravati District ( Amravati TPP ). From Phase - I of the Amravati TPP with an installed capacity of 1350 MW (5 x 270 MW units), RPL agreed to supply 1200 MW of power to MSEDCL on long term basis by signing PPAs as below Date of PPAs Contracted Capacity (in MW) Beneficiary MSEDCL MSEDCL Thus, almost the entire power generated from RPL s Amravati TPP Phase-I is being supplied to MSEDCL under the PPAs For the purposes of setting up Phase-I of the Amravati TPP, RPL applied to MSEDCL for start-up power vide letter dated , whereby it sought sanction and supply of start-up power of kva. Vide letter dated , MSEDCL sanctioned start-up power subject to the condition of payment of the HT-Commercial Tariff, amongst other conditions In compliance of the conditions prescribed in the letter dated , RPL submitted the necessary undertakings and forms for release of the load for start-up power under covering letter dated MERC Order Case No. 141 of 2015 Page 3 of 26

4 3.7. Vide letter dated , MSEDCL sanctioned start-up power connection at 400 kv level subject to levy of tariff applicable to HT -Commercial category. The letter also stated inter-alia stated that the fresh power supply of kva on 400 kv was sanctioned subject to the payment of Rs. 5,04,32,295/-, which includes service connection charges, Security Deposit and others items calculated on the basis that the sanction is for HT-II Commercial category RPL was directed to execute an Agreement on for High Tension (HT) and Extra High Voltage (EHV) supply by MSEDCL and for obtaining the start-up power. Under another letter on the same date, MSEDCL informed RPL that start-up power towards EHV connection had been granted The development of law relating to start-up power and resultant levy of start-up power Charges on the Generators, particularly in the State of Maharashtra, needs to be noted. In Maharashtra, no separate category was provided in the Tariff Orders in respect of start-up power supplied by MSEDCL to Generating Companies. In the absence of a separate category, MSEDCL was following an arbitrary and ad-hoc approach in providing start-up power supply to different Generating Companies in the State. The Commission had examined this issue in the Case No.37 of In its Order dated , the Commission stated as follows: a. However, during the normal operation of Power Plant, requirement of auxiliary Power is met through own generation whereas in case of emergency such as tripping of Power Plant, grid support is required to feed the auxiliaries to start the Power Plant. Such a grid support is required only for period of few hours depending upon the type of Power Plant. As Power Plants being the most essential components of Power System, such a grid support has to be provided. However, how to treat this grid support i.e. whether to adjust the consumed units with the energy injected in to the grid or to charge the Power Plants for the energy consumed by them is needed to be decided. As this issue being not restricted to the State of Maharashtra but equally applicable at National level, the Commission is of the view that, Central Electricity Authority (CEA) being a technical body at the Central level is the appropriate authority to set guiding principles on the same. Therefore, the Commission directs both the parties to approach CEA on the above mentioned MERC Order Case No. 141 of 2015 Page 4 of 26

5 issue and thereafter considering all the pros and cons, if required, MSEDCL may propose separate Tariff Category for Start up Power Connection of Power Plant in its upcoming Tariff Petition. b. The Commission has also noted that, MSEDCL is treating the Start up Power requirement of Power Plant of Mahagenco and RGGPL differently than the other Power Plants in the State. This is due to the fact that, MSEDCL being sole procurer of Power generated from plants of Mahagenco and RGGPL, any charges levied by MSEDCL for Start up Power requirement of these Power Plants will be ultimately recovered by them from MSEDCL only. Such discrimination amongst the same class of consumers can not be allowed under the Electricity Act However, decision in this matter can be taken after considering recommendations of CEA on the issue of treatment of Start up Power requirement of Power Plant The Appellate Tribunal for Electricity (ATE) also examined the treatment of start-up power in Appeal No. 166 of 2010 (Chhattisgarh State Power Transmission Co. Ltd. vs. RR Energy Ltd.). In its Judgement dated , the ATE held that: 44. Start up Power has not been defined in the Electricity Act 2003 or in the Rules and Regulations framed there under. It has also not been defined in the repealed Acts viz., Indian Electricity Act 1910, Electricity (Supply) Act 1948 and Electricity Regulatory Commission Act Thus we have to go by its general meaning, in general parlance, word 'Start up' means to start any machine or motor. In terms of electricity, Start up Power is power required to start any machine. Thus Start up Power is power required to start a generator. Next question is why it is required. Thermal generating units, (to some extent large hydro generating units also) have many auxiliaries, such as water feed pump, coal milling units, draft pumps etc. These auxiliaries operate on electrical power and are essentially required to run before generating unit starts producing power of its own. These auxiliaries would draw power from grid till unit start producing power and is synchronized with the grid. Once unit is synchronized, requirement of 'start up power' vanishes. Thus 'start up power' is required only when all the generating units in a generating station are under shutdown and first unit is required to start up. MERC Order Case No. 141 of 2015 Page 5 of 26

6 Once any one unit in a generating station is synchronized, power generated by the running unit is used to start up other units. Period of requirement of start up would vary from few minutes to few hours depending upon the size of unit. 45. Above discussion shows that requirement of start up power is essential for every generating station and is very limited both in quantum (MW) and duration terms..ii. Question no 2: Whether a generating company can also be termed as a consumer only because it would be drawing 'start up power' from grid occasionally? Our answer is this: A generator requiring 'start up up power' from the grid occasionally cannot be termed as a consumer Thereafter, the ATE, vide its Judgement dated in Chhattisgarh State Power Distribution Company Ltd. vs ISA Power Limited, held that: 11. It is admitted that respondent No. 1 is a generating company which has entered into a PPA with the appellant for sale of energy from its bio-mass based power plant at a tariff determined by the State Commission. The power drawn by the respondent No. 1 from the grid of the appellant is for start-up purpose which is utilized only when the generating plant is under outage. There is no other use of electricity in the plant. It is also noticed from the impugned order that the Superintending Engineer (Vigilance) in its report dated on inspection of power plant of the respondent No. 1 has also not mentioned about any other type of load at the power plant. Till the FY , there was no specific tariff for start-up power. The Electricity Board vide its letter dated also communicated to the respondent No. 1 that the power drawn by the power plant of the respondent No. 1 from the Electricity Board's grid would be billed at the tariff applicable for temporary connection. MERC Order Case No. 141 of 2015 Page 6 of 26

7 12. However, the State Commission by its order dated for the FY with effect from specified specific start-up power tariff. In the subsequent FY , also the State Commission by its order dated applicable from continued the specific start-up power tariff. However, the start up power tariff was applicable to those generators who opted for it. 13.The learned counsel for the appellant has referred to the decision of the Tribunal dated 24 May, 2011 in Appeal No. 166 of 2010 in the matter of State Power Transmission Co. Ltd. vs. M/s. R.R. Energy Ltd. & Anr. which is reproduced as under: In light of above discussions a generator requiring 'start up power' from the grid cannot be termed as a consumer. The start-up power is drawn by the respondent No. 1 from the grid as a generator for running the station auxiliaries for starting the plant. 24. It is clear that in this case, the power drawn by the generating station of the respondentno.1 from the grid was only for start-up purpose. Even though the respondent No.1 did not choose to avail HT connection for start-up power, the appellant allowed the drawal from the grid on the inter-connecting line at tariff applicable for temporary connection. The temporary supply tariff was 1.5 times the normal tariff applicable for that category, according to the tariff order dated prevailing at that time. The State Commission in its order dated referred to above in paragraph 22 had also directed the appellant to apply "HV-6 - other HT Industries tariff" for start-up power by non-conventional energy plants as per its tariff order dated Accordingly, the appellant correctly billed the respondent No.1 earlier at 1.5 times the "HV-6-Other industries tariff", as applicable to temporary connection in terms of the condition specified in its letter dated Thereafter, the State Commission by its tariff order dated ,introduced a specific tariff for startup power by generators w.e.f , applicable to those who specifically opted for it. Subsequently, MERC Order Case No. 141 of 2015 Page 7 of 26

8 in the tariff order dated for the FY also, the startup power tariff was continued. However, the respondentno.1 opted for the specific startup power tariff only w.e.f after entering into an agreement with the appellant. Therefore, till it had to pay for 1.5 times the tariff for other HT Industries as applicable for temporary supply. 26. Thus, it is clear that the respondent No. 1 was drawing start up power not by a separate HT connection but through the line on which the power plant was connected to the grid and was entitled to draw power at the tariff applicable to temporary connection i.e. 1.5 times the relevant tariff, as per the letter dated We feel that there is no need for the generator to take a separate connection for start up power as the same could be drawn from the interconnecting lines on which power is evacuated from the power plant. Only an agreement between the generator and the distribution licensee is required in terms of the tariff order and the applicable Rules & Regulations. In the absence of an agreement for start-up power which was eventually made applicable w.e.f after signing of an agreement between the appellant and the respondent No. 1, the appellant was entitled to start up supply at HT temporary connection tariff i.e. 1.5 times the applicable tariff. Admittedly, the respondent No. 1 has a valid PPA for supply of its entire power output to the appellant and is sometimes drawing power from the grid only for the purpose of start-up. In our opinion, in the circumstances of the case, the drawal of start-up power by the respondent No. 1 from the grid from the date of synchronization of its power plant till the date of entering into an agreement for start-up power could not be termed as unauthorized drawal 32. We do not agree with the State Commission that respondent No. 1 is a consumer under the definition of sub-section (15) of Section 2 of the Act. The definition indicates that it includes persons whose premises are for the time being connected for the purpose of receiving electricity with the works of a licensee. However, the generating company is connected to the licensees' network for supplying electricity and not for receiving electricity. If the explanation as given by the State Commission is applied, then all the MERC Order Case No. 141 of 2015 Page 8 of 26

9 generating companies will be consumers under the Act. The respondent No. 1 had also not entered into an agreement with the appellant for drawal of power for start-up purpose in terms of the tariff order of the State Commission for the FY and Having decided the dispute under Section 86(1)(f) treating the dispute between the respondent No. 1 as generator and the appellant as a licensee, the State Commission should not have allowed the relief to the respondent No. 1 under Section 56 (2) of the Act. Thus the tariff applicable to "other HT industries" for temporary supply would be applicable to the respondent No. 1 for drawal of power from the grid from to The last issue is regarding interest on excess amount charged by the appellant through the supplementary bills. 34. When the excess amount has been recovered by the appellant from the respondent No. 1 unlawfully the same has to be refunded along with the interest. The State Commission has decided that interest rate should be as per prime lending rate of the State Bank of India. 37. We do not agree with the contention of the appellant that the bank rate as stipulated under Section 62(6) is the rate at which the Central Bank lends money to the Commercial Banks. The money that the appellant or the respondent No. 1 borrow from a Commercial Bank will be governed by the prime lending rate of the bank. Therefore, it is logical that the money denied to the respondent No. 1 by the appellant should be linked to the prime lending rate of the Commercial Bank to its customers. Thus, we do not find any reason to intervene with the order of the State Commission to allow interest at prime lending rate of the State Bank of India Vide its Order dated in Case No. 51 of 2013, the Commission held as follows: 24. Regarding the issues at (B) i.e. tariff applicable for the start-up power consumption of the generation plant, the Petitioner has submitted that as per Article 11.9 of the executed PPA, the MSEDCL is required to provide start-up power at the rate of tariff applicable to the Industrial category. However, the MERC Order Case No. 141 of 2015 Page 9 of 26

10 Respondent, MSEDCL is levying Commercial tariff for them. On this issue MSEDCL has submitted that the said Article 11.9 of the PPA does not provide for billing of start-up power as per industrial tariff. The tariff is applicable as per the actual usage of Industrial consumer. It is further submitted that as the contention of the Petitioner is purely commercial, the only category within which the Petitioner could be classified is HT-II Commercial. 26. Regarding, MSEDCL submission of commercial nature of the power plant, the Commission observed that the power plant is an industrial premises where in fuel and water are used as an input to generate the electricity. Further, power plants are basic element of the electricity supply chain where electricity is generated. Thus, the start-up power consumption by such power plants which is used for starting of the power plant auxiliaries so that the electricity generation can be started should be treated as Industrial purpose only. Hence, inconsonance with the Article 11.9 of the executed PPA, the Commission directs the MSEDCL to apply the tariff of Industrial category to the start-up power consumption of the Petitioner s generating plant and also revise the earlier energy bills to that effect and credits the excess collected amount in the upcoming bills of the Petitioner. 27. The Petitioner has further requested for netting arrangement for start-up power consumption. The Petitioner has also mentioned about the Hon ble ATE Judgment in Appeal No. 166 of 2010 wherein it is ruled that power plants consuming the start-up power for generating the electricity cannot be termed as the consumer in the Electricity Act, The Hon ble ATE in its above Judgment ruled that a generator taking startup power from distribution licensee and supplying power to same licensee on start up, cannot be termed as a consumer. However, Hon ble ATE does not specify the methodology for accounting such start up power consumption of the generators. In such circumstances, the advice given by the CEA vide its letter dated 7 March, 2013 becomes important. CEA in its said letter has advice as follows: MERC Order Case No. 141 of 2015 Page 10 of 26

11 The matter has been examined in Central Electricity Authority and views of CEA are given below: (i) the start up power may be categorized under the unscheduled interchange (UI) mechanism (ii) the limit of UI drawal within State may continue to be restricted as per the new provisions except in case of total grid failure (iii) wherein start up power for one or more units may be supplied from the other unit(s) under operation at that time (iv) the drawal of start up power by the Power Plant shall not be considered as drawal of UI by the State DISCOM. The Authority further suggested that the starting of the units in case of grid disturbance, the matter may be treated differently from the normal start of the unit by the generating station. 30. CEA in its above said letter dated 7 March, 2013 has recommended for categorising the start-up power under Unscheduled Interchange (UI) mechanism. However, frequency based UI mechanism which is applicable at National level is not applicable in the State of Maharashtra. Maharashtra has adopted Balancing Settlement Mechanism wherein generators are not pool participants. Therefore, it is difficult to adopt the advice given by the CEA for the State of Maharashtra. Hence, both the parties are required to once again approach the CEA on the issue of treatment of start-up power of the generating plant. Till such time, the start-up power consumption of the generating plant of the Petitioner should be billed as per the tariff applicable for industrial category. Summary of the Commission s Ruling: 32. The power plant is an industrial premise wherein fuel and water are used as an input to generate electricity. Further, power plants are basic element of the electricity supply chain where electricity is generated. Thus, the start-up power consumption by such power plants which is used for starting of the power plant auxiliaries so that the electricity generation can be started should be treated as Industrial purpose only. Hence, in accordance with the Article 11.9 of the executed PPA, the Commission directs the MSEDCL to apply the tariff of Industrial category to the start-up power consumption of the Petitioner s generating plant and also revised the earlier energy bills to that MERC Order Case No. 141 of 2015 Page 11 of 26

12 effect and credit the excess collected amount in the upcoming bills of the Petitioner. 33. CEA in its letter dated 7 March, 2013 recommended for categorizing the start-up power under Unscheduled Interchange (UI) mechanism. However, frequency based UI mechanism which is applicable at National level is not applicable in the State of Maharashtra. Maharashtra has adopted Balancing Settlement Mechanism wherein generators are not pool participant. Therefore, it is difficult to adopt the advice given by the CEA for the State of Maharashtra. Therefore, both the parties are required to once again approach the CEA on the issue of treatment of start-up power of the generating plant. Till such time, the start-up power consumption of the generating plant of the Petitioner should be billed as per the tariff applicable to industrial category as per Article 11.9 of executed PPA From the above decisions of the ATE and the Commission, the legal position with regard to start-up power, its usage, and with regard to levy of charges emerged as under: i. A Generator using start-up power is not a consumer with the meaning of the EA, ii. Discrimination among the same class of Generators under the EA, 2003 cannot be allowed. iii. There is no need for the Generator to take a separate connection for start-up power as it could be drawn from the inter-connecting line from which the power is evacuated from the same Plant. iv. Power Plant is an industrial premises wherein fuel and water are used as inputs to generate electricity. Further, Power Plants are basic elements in the electricity supply chain where electricity is generated. Thus, the start-up consumption by such Plants for starting the Plant and its auxiliaries should be treated as for industrial purpose only. v. A Distribution Licensee is competent to charge any reasonable expense incurred in providing any electric line used for giving that supply. If no such line is provided by the Distribution Licensee, the question of incurring any expenditure does not arise. Therefore, the Licensee is not entitled to recover MERC Order Case No. 141 of 2015 Page 12 of 26

13 vi. any service connection charges or any other charges, other than power consumption charges applicable to industrial purposes only. The unlawfully recovered amount has to be refunded along with interest On , RPL requested MSEDCL to allow the settling/ netting off of start-up power from the power supplied by the Project to MSEDCL as long as it supplies 100% power to MSEDCL under the PPA. It was also brought to the notice of the MSEDCL that it follows this netting-off principle in case of other Projects supplying 100% of their power to MSEDCL In the PPAs between RPL and MSEDCL, there is no mention of how the start-up power is to be treated and the charges for its use. For the first time, in its Multi-Year Tariff (MYT) Order dated in Case No. 121 of 2014 for MSEDCL, the Commission categorised the tariff for start-up power for Generating Stations as part of the he start-up power category. Pursuant to that Order, MSEDCL has issued Commercial Circular No. 243 accordingly regarding the revision in electricity tariff. The relevant extracts of the MYT Order and the Commercial Circular No. 243 are reproduced below: MYT Order HT I: HT-INDUSTRY This Tariff shall also be applicable for use of electricity / power supply for operating: (g) start up power for Generating Stations; Commercial Circular No Tariff Applicable to Various Activities: (f) HT:I Industrial Tariff category is applicable to Start up power for Generating Stations; Vide letter dated , RPL requested MSEDCL to modify its tariff category with retrospective effect from Commercial to Industrial. RPL referred to the case of Adani Power Maharashtra Ltd. wherein MSEDCL had modified the tariff category with retrospective effect and refunded the excess amount collected. RPL submitted computation sheets indicating the amount refundable by MSEDCL as Rs.9,21,05,504/- till June, MERC Order Case No. 141 of 2015 Page 13 of 26

14 3.17. In response, MSEDCL revised the tariff category of RPL from HT-Commercial to HT-Industrial with effect from June, Thus, MSEDCL had categorized the Startup Power connection of RPL under HT-Commercial. Only after continuous follow up and after the MYT Order it changed RPL tariff category from HT-Commercial to HT-Industrial. However, MSEDCL has not yet responded to the request of RPL for refund of the differential amount recovered. MSEDCL has also not replied to RPL request for netting of the power consumed. Thus, as MSEDCL, even though this has been the practice followed by MSEDCL in respect of Government-owned Plants like those of MSPGCL Since MSEDCL had wrongfully categorised RPL into HT- Commercial and has been charging excess amount from October, 2012 onwards, and since it has wrongly withheld the excess amount, RPL is entitled to interest on this amount at the prime lending rate of commercial banks. The ATE, vide its Judgment dated in Appeal No. 47 of2011 (Chhattisgarh State Power Distribution Co. Ltd. Vs. ISA Power Limited) has awarded interest at the Prime Lending Rate on the excess amounts recovered by the Distribution Licensee. Thus, the total claim of RPL with respect to start-up power billing from MSEDCL in relation to category change from October, 2012 to May, 2015 is Rs. 9,21,05,504/- with interest at the Prime Lending Rate of State Bank of India (SBI) Under the circumstances, aggrieved by the aforesaid arbitrary and unreasonable inaction on the part of MSEDCL in refunding the excess amounts, RPL has been compelled to approach the Commission under Sections 61, 62 and 86 (1) (a), (b) and (f) of the EA, 2003 for adjudication of its claims on account of wrongful treatment/ classification of RPL s Generating Station MSEDCL has erroneously treated the start-up power availed by a Generator on the same footing as the supply received by a consumer. Such an interpretation is in contravention of the provisions of the EA, 2003 and the ATE Judgments. Section 2(15) of the EA, 2003 defines consumer as follows: (15) "consumer" means any person who is supplied with electricity for his own use by a licensee or the Government or by any other person engaged in MERC Order Case No. 141 of 2015 Page 14 of 26

15 the business of supplying electricity to the public under this Act or any other law for the time being in force and includes any person whose premises are for the time being connected for the purpose of receiving electricity with the works of a licensee, the Government or such other person, as the case may be; Thus, the consumer is a person who is supplied with electricity for his own use. However, the ATE has held that start-up power is supplied to a Generator to start-up its Generation Unit. Once the Unit is synchronized with the grid, the power is supplied to the Licensee. Without start-up power, Generators cannot start and produce power. Thus, in a way, start-up power is supplied only for the benefit of the Licensee, and a Generator taking start-up power from a Distribution Licensee and supplying power to the same Licensee on start-up cannot be termed as a consumer Section 43 of the EA, 2003 casts a duty upon the Licensee to supply power to any person on demand. No restriction has been placed on the consumers with regards to the quantum of power which may be consumed or the duration of drawal. However, start-up power by its very nature is limited in quantum and duration. The Power Plant has a requirement of start-up power only during commissioning or planned/ forced outages. After considering all these factors, the ATE in Appeal No.166 of 2010, held that: 44. Start up Power has not been defined in the Electricity Act 2003 or in the Rules and Regulations framed there under. It has also not been defined in the repealed Acts viz., Indian Electricity Act 1910, Electricity (Supply) Act 1948 and Electricity Regulatory Commission Act Thus we have to go by its general meaning. In general parlance, word Start up means to start any machine or motor. In terms of electricity, Start up Power is power required to start any machine. Thus Start up Power is power required to start a generator. Next question is why it is required. Thermal generating units, (to some extent large hydro generating units also) have many auxiliaries, such as water feed pump, coal milling units, draft pumps etc.,. These auxiliaries operate on electrical power and are essentially required to run before generating unit starts producing power of its own. These auxiliaries would draw power from grid till unit start producing power and is synchronized with the grid. Once unit is synchronized, requirement of start up power vanishes. MERC Order Case No. 141 of 2015 Page 15 of 26

16 Thus start up power is required only when all the generating units in a generating station are under shutdown and first unit is required to start up. Once any one unit in a generating station is synchronized, power generated by the running unit is used to start up other units. Period of requirement of start up would vary from few minutes to few hours depending upon the size of unit 48. With such restrictions, supply given to a generator as start up power cannot be termed in pursuance to section 43 of the Electricity Act, In light of above discussions a generator requiring start up power from the grid cannot be termed as a consumer RPL s legal submissions and grounds are as under: i) The Commission cannot permit discrimination in the treatment of drawal of start-up power by a private Generator vis-a-vis a State Generator. It is a matter of fact that the Distribution Licensee allows netting of start-up power drawn by a State Generator from its exports, which is not the case when start-up power is provided to a private Generating Company. ii) Private Generators provide continuous support to the grid and help in meeting the energy demand and supply gap. They help in securing reliable, quality and cost effective power, create employment opportunities and also take some burden off State Generators in meeting the power requirements of the State. Thus, the facility of netting off as is at present being extended to State Generating Companies ought to have been made applicable to RPL. Thus, for the purposes of tariff and nature of supply, a private Generator stands on the same footing as a State Generating Station. The fact that the State is the owner of the State Generating Stations does not at all change the application of law. iii) The ATE, in case of non-conventional energy sources, by Judgment dated , has observed in Appeal No. 20 of 2006 (Chhattisgarh Biomass Energy Developers Association and Ors. vs. Chhattisgarh State Electricity Regulatory Commission &Ors.) that netting of the monthly export of energy to the grid by the Non-Conventional Energy plants against the import of start-up power from the grid is a sound MERC Order Case No. 141 of 2015 Page 16 of 26

17 proposal for settlement of bills as it reduces the hassles of accountings. Hence, MSEDCL has an obligation to accept such principle of netting, which has judicial approval. iv) Netting off is being permitted by MSEDCL for its own Generation Stations. Since the State Generating Companies are being permitted settling of consumption towards start-up power in energy terms against the export of power to the grid, it is only just and equitable that such facility be extended to private Generators as well. Neither the tariff principles enshrined in the Commission s Tariff Regulations nor the EA, 2003 permit any differentiation between private Developers and State Generating stations. Thus, RPL may be treated on the same footing as State Generating Stations and be extended the facility of settling/ netting off, particularly in view of the fact that its entire power output will be supplied to the State Distribution Company under long term PPA. v) In the alternative, as per the provisions of the EA, 2003 and various ATE Judgments, the Appropriate Commission shall classify tariff categories reflecting the nature and purpose of supply. A Generator receiving start-up power cannot be classified as a consumer, as discussed earlier. A consumer is (a) a person who is supplied with electricity for his own use and (b) whose premises are fore the time being connected for the purpose of receiving electricity with the works of a Licensee. Start-up power is supplied to a Generator to start-up its generation unit. When there is a long term PPA against which capacity charges are paid by the procurer, the procurer is the owner of the said capacity. The start-up power requirement is to satisfy the PPA requirement under which the capacity of the station is owned by the procurer. So start-up power is required for the use of the procurer and not the own use of the Generator. Once the unit is synchronized with the grid, the power so generated is supplied to the licensee. Without start-up power, Generators cannot start and produce power. This principle has been recognised by the ATE in its Judgment in Appeal No. 166 of 2010, wherein the ATE has held that a Generator taking start-up power from a Distribution Licensee and supplying power to the same Licensee on start-up cannot be termed as a consumer. Further, no separate infrastructure has been laid down by the Licensee for providing start-up power to the Generator. In the context of the definition of consumer, the Generating Unit is only connected with the works of the Licensee for the purposes of MERC Order Case No. 141 of 2015 Page 17 of 26

18 exporting power. The supply of start-up power is only incidental to the commissioning of the power plant. vi) The tariff is guided by the principles enshrined in Section 61 of the EA, 2003, The Commission is required to determine a cost-reflective tariff. In the present case, the tariff being charged by MSEDCL is certainly not cost-reflective since the supply of start-up power is limited both in quantum and duration unlike supply to an Industrial consumer. The quantum and duration of supply to a Generator availing start-up power is limited. vii) In its Order dated in Case No. 51 of 2013, the Commission has held that a Generator cannot be treated as a consumer, and the issue regarding the tariff which could be made applicable has to be resolved. Till such time, the start-up power has to be billed as per Industrial tariff. As such, the bills raised upon RPL from October, 2012 to May, 2015 at the Commercial tariff need to be revised, as has been held by the Commission in the above Order. The Distribution Licensee cannot adopt a different classification for similar supply, i.e. Start-up Power in the case of RPL MSEDCL wrongly categorised RPL as HT- Commercial and has subjected RPL to an excess recovery from October, 2012 onwards and has wrongly withheld the excess amounts. Hence, RPL is entitled to interest on the excess amount at the Prime Lending Rate of commercial banks The Commission has the jurisdiction to entertain the present Petition and grant relief as sought. Consequent to the change in tariff category of RPL by MSEDCL in respect of start-up power from HT II: Commercial to HT I : Industrial, RPL has requested refund of the excess recovery made by MSEDCL during the period October, 2012 to May, Start-up power has not been defined in applicable MSEDCL Tariff Orders by the Commission. Since the Commission had determined the tariff under Section 86(1) (a), it alone has the jurisdiction to adjudicate the disputes arising out of the change of tariff category. Therefore, the Commission has the jurisdiction to adjudicate the claim of RPL for refund of the excess amount recovered from RPL prior to the change of category of the start-up power supplied by MSEDCL. The Commission has the jurisdiction under Sections 61 and 62 read with 86 (1) (a), (b) and (f) of the EA, 2003 to adjudicate the present dispute between a Generating Company and a MERC Order Case No. 141 of 2015 Page 18 of 26

19 Distribution Licensee which pertains to issues relating to regulation and determination of tariff. The Petition also relates to netting of start-up power consumed with the future export of power to the grid as per the long term PPAs. 4. At the hearing held on , RPL stated that the Commission, vide its MYT Order dated , has categorised the activity of start-up power of a Generating Station under the HT-I Industrial category. This classification by the Commission is on the basis of activity and its purpose. MSEDCL has levied the tariff as per the HT-II Commercial category from October, 2012 to May, 2015.MSEDCL stated that RPL is being charged as per that MYT Order prospectively, whereas RPL is contending that it should do so retrospectively. To a query of the Commission, RPL responded that there is no provision in the PPA for treatment of start-up power. Moreover, in the Order dated in Case No. 51 of 2013, the Commission has categorically classified start-up power as power required for industrial purpose. That Order of the Commission has not been challenged. The Commission gave MSEDCL time to file its Reply, and for RPL to submit its Rejoinder, if any, thereafter. 5. In its Reply dated , MSEDCL has stated as follows: 5.1. RPL has entered into PPAs on 22.4 and for supply of 1200 MW (450 MW & 750 MW) for 25 years with MSEDCL under Case 1 bidding RPL had commenced power supply from June, 2013 at the levelised rate of Rs. 3.26/kWh. The Petition has been filed under Sections 61, 62 and 86 of the EA, 2003 regarding Settlement/ Netting of Start-up power consumed by RPL with the power supplied under the PPAs RPL applied to MSEDCL for start-up power vide its letter dated to the extent of kva. Vide its letter dated , MSEDCL sanctioned the startup power connection at 400 kv level subject to levy of tariff applicable to HT (Commercial) category consumers. MSEDCL stated that the fresh power supply of kva on 400 kv was sanctioned subject to the payment of charges which were calculated on the basis that the sanction is for HT-II Commercial. MERC Order Case No. 141 of 2015 Page 19 of 26

20 5.4. RPL never raised any objection with regard to the charges being levied as per HT-II Commercial tariff in response to that letter. RPL is not a consumer of MSEDCL. It was only after the Order dated in Case No. 51 of 2013 that RPL is taking the benefit of the Order and has sought to be charged as per the Industrial Tariff In the PPAs, there is no provision of tariff for supply of start-up power. Further, in case of the PPA with APML, Article 11.9 provides for Industrial Tariff for supply of Start-up Power to the Generator. Therefore, the Commission passed an Order to apply Industrial tariff as per provisions of Article 11.9 of that PPA. MSEDCL has exercised its role as a State Entity, being a State Distribution Licensee, for supplying electricity to RPL to be used for the purpose of Start-up. The Start-up Power is the requirement of RPL as a Generator. MSEDCL has uniformly charged the Generators in Maharashtra, with the exception of Generators selling their entire power under Section 62 of the EA, 2003 to MSEDCL. This charge is uniform, at a rate as decided by the Recovery Committee of MSEDCL, originally constituted under the Orders of the High Court, Bombay, and on the basis of the Minutes of the Meeting dated 10 October, 2011 of the Recovery Committee classifying the various types of Generators. The classification is fair, just and equitable and having a nexus with the objective sought to be achieved, namely to ensure reasonable payment towards the energy supplied to the Generators for Start-up Power. RPL and other similarly situated Generators form a well-defined class. In contrast, the MSPGCL and the Ratnagiri Gas and Power Pvt. Ltd. (RGPPL) which (then) provided the entire power generated by them to MSEDCL, upon determination of Tariff under Section 62 by the Commission, constitute another well-defined class. RPL and other similarly situated Generators are supplying energy to MSEDCL under Section 63 of the EA, 2003 after a competitive bidding process. For the first time, the Commission, in its MYT Order in Case No. 121 of 2014,has come out with a tariff for start-up power as under: HIGH TENSION (HT) TARIFF HT I: HT- Industry Applicability MERC Order Case No. 141 of 2015 Page 20 of 26

21 This category includes consumers taking 3-phase electricity supply at High voltage for industrial purposes of manufacturing. This Tariff shall also be applicable (but not limited to) for use of electricity / power supply g) Start up power for Generating Stations; Pursuant to the Order of the Commission, MSEDCL has applied HT-I: HT Industrial tariff to start-up power supplied to RPL. Thus, MSEDCL has complied with the Order of the Commission The Commission has not specified any Charges for start-up power prior to the MYT Order dated The Charges applied to RPL had been decided on a mutual basis between MSEDCL and RPL, and earlier RPL has never raised any objection for applying the Commercial tariff. Thus, the question of any refund or retrospective impact does not arise. The letter dated sanctioning the load for start-up power was on the condition of applicability of Commercial charges which was accepted by RPL. The Commercial Charges were computed on the basis of the Tariff Order dated in Case No. 111 of 2009 prevailing at that. As per Annexure II of the Tariff Order as follows: HT II (A) (B) (ii) Others This category includes consumers taking supply for Construction purposes at HT voltages, including Infrastructure Projects, Buildings, Hill Station, etc. on Express / Non-Express feeder The charge for start-up power was stipulated considering the above Order and considering the RPL Generating Station as an infrastructure project for which the start-up power is provided on a temporary basis only As per the provisions of the PPA, the Seller (RPL) shall be liable to execute the project in a timely manner so as to commission the Unit within the stipulated time and also fulfil all other obligation, including to build, own and operate the project RPL has contended that MSEDCL is permitting MSPGCL and RGPPL to settle consumption towards start-up power. However, there is a basic difference between the PPAs with MSPGCL and RGPPL, and the PPAs with RPL. MSEDCL has been MERC Order Case No. 141 of 2015 Page 21 of 26

22 procuring power from MSPGCL and RGPPL through the Memorandum of Understanding (MoU) route whereas the PPA with RPL is based on the Competitive Bidding Guidelines and the terms and conditions of the PPA are binding on both the parties (i.e. RPL and MSEDCL). The PPA with MSPGCL is on a cost plus basis (escalable charges) and approved by the Commission whereby any cost levied on start-up power will pass on to MSEDCL by way of the Aggregate Revenue Requirement (ARR) as 100% of the power is procured from MSPGCL. However, the netting off of units in case of RGPPL is not in existence from October, 2011.With regard to Generating Plants tied-up under the Competitive Bidding route, the Generator while bidding has considered the cost of start-up charges while bidding and any netting off will provide RPL an undue advantage at the cost of consumers. Thus, there is no question of netting off of start-up power supplied to RPL MSEDCL also intimated RPL vide letter dated about the applicability of the HT Commercial Tariff: M/s. Indiabulls Power Ltd. has requested & applied for the start-up power & the start up power will be required perpetually for commencing generation, temporary tariff cannot be applied in this case because as per MERC Order dt the HT temporary supply can be given for decorative lightening for exhibition, film shooting, marriages & religious purposes only for a period up to one year only. At present such type of use is not covered in any of the existing tariff categories. Considering the Commercial aspect we may levy HT Commercial Category Tariff, since the applicant required the start up power supply for setting up of 5 x 270 MW Thermal Power Plant at Nandgaon Peth, Amravati. When the power is not drawn from this connection, the applicant is liable to pay the demand charges as per HT-Commercial Tariff In the case of APML, MSEDCL has additionally relied on applying Industrial charges for start-up power due to the binding provisions of Articles 11.9 and (d) of the PPA dated with APML, which provides for charges to be levied at the Industrial tariff rate. MERC Order Case No. 141 of 2015 Page 22 of 26

23 5.13. The advice given by CEA regarding start-up power may not be applicable as the CEA letter dated addressed to the Commission is merely an advice and suggestion and does not constitute Regulations or Rules superseding earlier mutual agreements retrospectively. Frequency-based Unscheduled Interchange (UI) Mechanism is not applicable in the State of Maharashtra, where the Balancing and Settlement Mechanism is applicable. There is no provision for netting of units under the Balancing and Settlement Mechanism Rights and obligations of the parties have to be considered in terms of the PPA and mutual understandings entered into between the parties. Therefore, RPL is bound to pay for the power and energy consumed for start-up of the Project and its commissioning to MSEDCL at the then prevalent rates payable for such commercial consumption. 6. Commission s Analysis and Ruling 6.1. RPL applied for 12 MVA start-up power on Its Head Office sanctioned it on at the HT-Commercial category tariff at 400 kv RPL submitted the required undertaking for release of start-up power on MSEDCL s Amravati office again sanctioned the same power, with demand for payment of Rs crore on at with HT-Commercial tariff at 400 kv. MSEDCL and RPL executed an agreement for release of this start-up power on The energy bill shows the date of connection as No specific or separate tariff for start-up power had been expressly stipulated in the Tariff Orders which were in force when the connection was sanctioned or released by MSEDCL to RPL. The PPAs between MSEDCL and RPL also have no specific provision for the tariff for start-up power. For the period from October, 2012 till May, 2015 (after which the tariff determined in the MYT Order dated came into effect), MSEDCL applied the HT-II Commercial tariff for the start-up power to RPL as determined in the Tariff Order dated in Case No. 19 of The applicability of that tariff category was defined as follows (which was also in line with the preceding Tariff Order): HT II: HT- Commercial MERC Order Case No. 141 of 2015 Page 23 of 26

24 Applicability HT II (A): EXPRESS FEEDERS Applicable for use of electricity / power supply at High Tension on Express Feeders in all non-residential, non-industrial premises and/or commercial premises for commercial consumption meant for operating various appliances used for purposes such as lighting, heating, cooling, cooking, washing/cleaning, entertainment/leisure, pumping in following (but not limited to) places: l) Construction purposes;... The provision for supply on non-express Feeders was similar Thus, the HT-II Commercial tariff was essentially for construction purposes, and was applied by MSEDCL to start-up power in the absence of any specific stipulation regarding the latter. However, the power for construction purposes cited in the Tariff Order refers to the power required for the construction activities of a Project. In the context of a Generating Station, its meaning cannot be stretched to the entirely different requirement of start-up power, which comes into play after the Project is completed and for the initial commissioning of the Power Plant and its Auxiliaries so as to be in readiness for commercial operation, and for subsequent eventualities. Thus, the power required for construction, as envisaged in the HT-II Commercial tariff category cited above, and for start-up is entirely different in nature. The nature of start-up power has been summarised by the ATE in its Judgment dated in Appeal No. 176 of 2010 as follows: Auxiliaries of power station are integral part of the generating unit. It is immaterial whether start-up supply is used by an existing unit under breakdown/outage or by a new unit for initial commissioning of a generating unit and its auxiliaries. Start-up power can be utilised for initial commissioning of a generator and its auxiliaries... MERC Order Case No. 141 of 2015 Page 24 of 26

25 6.4. In Case No. 51 of 2013 concerning APML, the Commission noted that the PPA in that matter expressly provided that start-up power be charged at the tariff applicable to Industry. However, in its Order dated , which has achieved finality, the Commission set out the general principle that the requirement of start-up power should be treated as being for an Industrial purpose: 32. The power plant is an industrial premise wherein fuel and water are used as an input to generate electricity. Further, power plants are basic element of the electricity supply chain where electricity is generated. Thus, the start-up power consumption by such power plants which is used for starting of the power plant auxiliaries so that the electricity generation can be started should be treated as Industrial purpose only The issue of the applicable tariff category in the present matter and in Case No. 51 of 2013 is identical in nature as far as the principle is concerned even though, unlike the APML PPAs, the PPAs between RPL and MSEDCL do not address the tariff applicable for start-up power. The Commission notes that the subsequent MYT Orders dated and expressly provide that the Industrial tariff category be applied to start-up power This principle having been settled by its Order dated in Case No. 51 of 2013, the HT Industrial tariff will be applicable to the start-up power availed by RPL for its Generating Units from the date of that Order till , when the MYT Order dated came into effect and following which there is no dispute. For this purpose, MSEDCL should satisfy itself as to whether RPL has drawn the power from the Grid during that period for (a) Power Plant and related construction activities; or for (b) (1) Initial commissioning of the Plant and its Auxiliaries so as to be ready for commercial operations, (2) Start-up of the Plant after outage for scheduled maintenance or otherwise, or (3) Start-up of the Plant in the event of Grid failure. MERC Order Case No. 141 of 2015 Page 25 of 26

26 The power supplied for the requirements at (b) above shall be billed as per the HT-I: Industrial tariff determined in the Tariff Order dated in Case No. 19 of 2012 which was applicable at that time The amount of refund arising from this dispensation may be adjusted over the next 3 months bills of RPL, with interest in accordance with the provisions of Section 62 (6) of the EA, 2003 which reads as follows: 62(6) If any licensee or a generating company recovers a price or charge exceeding the tariff determined under this section, the excess amount shall be recoverable by the person who has paid such price or charge along with interest equivalent to the bank rate without prejudice to any other liability incurred by the licensee As regards the netting-off arrangement claimed by RPL on the analogy of the dispensation provided to some other Generators by MSEDCL, the Commission is of the view that PPAs under Sections 62 and 63 of the EA, 2003 are distinct in nature, and the dispensation agreed to under Section 62 (as in the case of those Generators) cannot be required to be provided in case of PPAs entered into under the Competitive Bidding Guidelines under Section 63. In this context, in its Order in Case No. 139 of 2014 (with regard to APML), the Commission has held as follows: In view of the above, the prayer of the Petitioner regarding netting the power drawn cannot be accepted as the power supplied by the plant is through Competitive bidding process. The Petition of RattanIndia Power Ltd. in Case No. 141 of 2015 stands disposed of accordingly. Sd/- (Deepak Lad) Member Sd/- (Azeez M. Khan) Member MERC Order Case No. 141 of 2015 Page 26 of 26