CASE No. 110 of In the matter of

Transcription

1 Before the MAHARASHTRA ELECTRICITY REGULATORY COMMISSION World Trade Centre, Centre No.1, 13th Floor, Cuffe Parade, Mumbai Tel /65/69 Fax Website: CASE No. 110 of 2017 In the matter of Petition of Mumbai International Airport Pvt. Ltd. for clarification regarding applicability of Power Factor Incentive to Open Access consumption Coram Shri. Anand B. Kulkarni, Chairperson Shri. Azeez M. Khan, Member Shri. Deepak Lad, Member Mumbai International Airport Pvt. Ltd. Vs The Tata Power Co. Ltd. (Distribution)...Petitioner...Respondent Appearance For Petitioner: For Respondent: Shri. S. R. Nargolkar (Adv) Smt. Swati Mehendale (Rep.) ORDER Dated: 28 November, 2017 Mumbai International Airport Pvt. Ltd. (MIAL) has filed a Petition dated 4 July, 2017 citing Section 86 (1) (k) of the Electricity Act (EA), 2003 read with Regulation 37 of the MERC (Distribution Open Access) Regulations ( DOA Regulations ), 2016 for clarification regarding the applicability of Power Factor Incentive to the Open Access power consumption of HT consumers. 2. The prayers of MIAL are as follows:- MERC Order Case No. 110 of 2017 Page 1 of 15

2 a) Allow the present petition and clarify that the Petitioner is entitled for the power factor incentive on the monthly electricity bill, excluding taxes and duties, for Open Access consumption as well; b) Direct the Respondent to provide power factor incentive to the Petitioner, in its capacity as a consumer of the Respondent as well as in its capacity as an open access consumer, retrospectively from November, 2015, along with Delayed Payment Charge (DPC) and interest at such rates at which the Respondent is charging DPC and interest for the delayed payments of the bill amount by the consumers of the Respondent; The Petition states as follows: 3.1. As operator of the Mumbai Airport, MIAL provides requisite aviation infrastructure and requires continuous and non-fluctuating power supply to provide seamless and efficient services and facilities to the airlines and travelers, thereby incurring substantial expenses on procurement of power. Tata Power Co. Ltd. (Distribution) (TPC-D)is supplying electricity to MIAL from The services provided by MIAL are public utility services, and the management of aerodromes is an essential service under the Essential Services Maintenance Act, Mumbai Airport is the major transport interchange in India and a catalyst for economic growth and facilitator of commerce and industry on a national, regional and local scale MIAL is incurring a large proportion of its expenditure on the procurement of power in order to provide seamless service to the consumers. As such, non-grant of Power Factor Incentive on charges for Open Access will gravely prejudice MIAL MIAL meets a portion of its power supply requirement as a consumer of TPC-D and the remaining power requirement is fulfilled through an Electricity Trader independently through Open Access Trader. The Trader and TPC-D raise separate monthly bills based on the consumption of MIAL TPC-D raises its electricity bill as per the tariff rate approved by this Commission, which also includes Wheeling Charges, Regulatory Asset Charges (RAC), Cross- Subsidy Surcharge (CSS) and Electricity Duty on the Open Access consumption units In the last Multi-Year Tariff (MYT) Order dated October 21, 2016 in Case No. 47 of 2016 for TPC-D, the Commission held as follows: Power Factor Incentive MERC Order Case No. 110 of 2017 Page 2 of 15

3 Applicable for HT-I :Industry, HT II - Commercial, HT-IV : PWW, HT V- Railways, Metro & Monorail, HT-VI: Public Services [ HT VI (A) and HT VI (B)], HT VII - Temporary Supply, LT II: Non-Residential/Commercial [LT II (B), LT II (C)] (for Contract Demand/Sanctioned Load above 20 kw), LT III (B): Industry above 20 kw, LT IV- PWW, LT VII (B) Temporary Supply (Others), and LT IX : Public Service [LT IX (A) and LT IX (B)]. Whenever the average Power Factor is more than 0.95, an incentive shall be given at the rate of the following percentages of the amount of the monthly electricity bill, excluding Taxes and Duties: Power Factor Sr. No. Range of Power Factor Level Incentive to % to % to % to % to % to % Note: Power Factor shall be measured/computed upto 3 decimals, after universal rounding off Thus, the Power Factor Incentive is to be given as per the above Table, excluding taxes and duties. However, it is not being given to MIAL by TPC-D for the power availed through Open Access from Traders TPC-D has been providing Power Factor Incentive for the electricity consumption of MIAL as a consumer of TPC-D. While levying charges for Open Access consumption, including RAC, Wheeling Charges, CSS, etc., TPC-D has failed to provide Power Factor Incentive with respect to the same, which is in derogation of the MYT Order and of the Judgment of the Appellate Tribunal for Electricity (APTELE), and is also at variance with the settled law on this aspect In its Judgment dated in Appeal No. 231 of 2012 (Jindal Stainless Limited Vs. Dakshin Haryana Bijli Vitran Nigam and Haryana Electricity Regulatory Commission), the APTEL inter alia addressed the issue of payment of CSS payable by an Open Access consumer. It held that the CSS is required to be treated as part of the electricity charges and to be factored in while deciding on the rebate admissible for the Power Factor CSS has been held to form a part of sale of power. Accordingly, the Rebate should be allowed on the cross-subsidy as well. There is thus no occasion for TPC-D to differ from this settled position and deny the benefit of the Power Factor Incentive to MIAL. MERC Order Case No. 110 of 2017 Page 3 of 15

4 3.11. The entire purpose of the Power Factor Incentive is to encourage consumers to improve their Power Factor and maintain it at a high level in order to reduce losses. If Power Factor Incentive is not given, this purpose would be lost and there will be no incentive to the consumer to maintain a high Power Factor The APTEL has held in its Judgment as under: It is to be noted that current drawn an lower power factor also cause excessive voltage drop which would further increase the system losses. Thus, it is proved that lower power factor causes higher system losses and loss to the distribution licensee. The very purpose of providing higher power factor incentive is to encourage the consumers to improve their power factor by providing shunt compensation and bring it as close as possible to unity so that the system losses are reduced to the minimum. This is a pure technical and engineering principle and it does not distinguish as to whether the power has been drawn from the licensee or on availing the open access. 34. The above analysis would show that very purpose to provide higher power factor rebate is to encourage the consumer to maintain high power factor and to minimize the system losses. Any loss before the meter installed at consumer s premises is on account of the distribution licensee. In order to reduce these losses, the State Commission has incentivized high power factor based on pure technical and engineering principle. It has nothing to do with the source of power. Accordingly, power factor rebate is payable to the consumer who also avails open access We have carefully considered the submissions of the parties on this issue. High Power Factor reduces the system loss and vice-versa. This is purely a technical and engineering principle. It has universal application irrespective of source of power. If a consumer procures power from other sources through open access at high power factor, the system loss would be less as in the case of his drawal of power from the distribution licensees From a perusal of the relevant paragraphs of the APTEL Order, it may be noted that the principle of Power Factor Incentive has been arrived at on the basis of a purely technical and engineering principle and the source of power has no significance whatsoever. It is therefore clear that the Power Factor Incentive would be applicable to the power procured through Open Access as well, and its denial would be prejudicial to the interest of MIAL While arriving at this conclusion, APTEL has relied upon Regulation 3 of the Haryana Electricity Regulatory Commission (HERC) (Electricity Code), 2004, which provides for recovery of electricity charges from consumers. Similar provisions are stipulated in the MERC (Electricity Supply Code and Other Conditions of Supply) Regulations, 2005 ( Supply Code ). The relevant Regulation relating to recovery of electricity charges is reproduced below: MERC Order Case No. 110 of 2017 Page 4 of 15

5 3. Recovery of Charges 3.1 The Distribution Licensee is authorized to recover charges for the supply of electricity from any person requiring such supply in accordance with the provisions of the Act and these Regulations. 3.2 The charges that a Distribution Licensee is authorized to recover under these Regulations include- b) charges for electricity supplied by the Distribution Licensee in accordance with Regulation 3.4 below. 3.4 Charges for Electricity Supplied The Distribution Licensee is authorized to recover charges for electricity supplied in accordance with such tariffs as may be fixed from time to time by the Commission: Provided that in case of distribution of electricity in the same area by two or more Distribution Licensees, the Commission may fix only the maximum ceiling of tariff for retail sale of electricity The Distribution Licensee is also authorized to recover such surcharge and charges for wheeling as may be specified under the provisions of sub-section (2) and subsection (3) of Section 42 of the Act and such additional surcharge as may be specified under the provisions of sub-section (4) of Section 42 of the Act In addition to the charges fixed by the Commission, consumers shall be required to pay all taxes, duties and other statutory charges as may be required under any law for the time being in force In light of the APTEL Judgment and the Commission s Supply Code, MIAL is entitled to claim Power Factor Incentive from TPC-D even in its capacity as an Open Access consumer. The grant of Incentive is in line with the view taken by the APTEL in this regard, and there is no reason for any deviation from it Till April, 2017, TPC-D had been providing Power Factor Incentive on RAC. However, since May, 2017, TPC-D has stopped providing such Incentive Hence, TPC-D may be directed to provide Power Factor Incentive on the power consumed by MIAL as its consumer as well as in MIAL s capacity as an Open Access consumer, retrospectively from November, 2015; and the issue of providing such Incentive on the Open Access Charges by TPC-D may be clarified accordingly. 4. In its Reply dated , TPC-D stated as follows: MERC Order Case No. 110 of 2017 Page 5 of 15

6 4.1. MIAL is a consumer of TPC-D with a Contract Demand of MW. It is also procuring power through Open Access for part of its demand As a partial Open Access consumer, MIAL has an independent Power Purchase Agreement (PPA) with a Generator / Trader for part of its requirement. In line with the DOA Regulations, 2016, MIAL is scheduling Open Access power through Availability-based Tariff (ABT) metering arrangement in 15 minute time blocks as per its own estimates for its own use Distribution Licensees also have direct contracts with Generators for supply of power, which is also scheduled on 15 minutes time block basis, considering their own estimates and the demand of their direct consumers. Although the Distribution Licensees aggregate all the demands from Open Access consumers to arrive at their final schedule submitted to the Maharashtra State Load Despatch Centre (MSLDC), there is no responsibility on them for estimation of the requirements of such consumers or even for the quality or cost of power procured by them The billing for MIAL for its consumption from TPC-D and the usage of its distribution network for Open Access is carried out by TPC-D as per the relevant Regulations and Orders of the Commission In its Petition, MIAL has sought application of Power Factor Incentive on the billing related to its Open Access consumption In this regard, the DOA Regulations, 2016 specify the components of billing by Distribution Licensees to an Open Access Consumer as follows: 14. Billing The bill for use of the Distribution System for wheeling of electricity in its network shall be raised by the Distribution Licensee on the entity to whom the Open Access is granted, and shall indicate the following: (i) Wheeling Charges; (ii) Cross-Subsidy Surcharge; (iii) Additional Surcharge on the charges for wheeling; (iv) MSLDC fees and charges. Provided that, if the Distribution Licensee schedules power for the Open Access Consumer, Generating Company or Licensee, as the case may be, the MSLDC fees and charges payable by the Licensee shall be shared by them in the ratio of scheduled demand of Open Access sought to the total demand of the Distribution Licensee on a pro-rata basis for Long-term and Medium-term Open Access; MERC Order Case No. 110 of 2017 Page 6 of 15

7 Provided further that the scheduling and other operating charges, as may be applicable, shall be levied by the Distribution Licensee on the Shortterm Open Access Consumer, Generating Station or Licensee at the rate approved for Short-term Open Access by the Commission in its Order determining MSLDC Fees and Charges; Provided also that any specific methodology for charging MSLDC fees and charges as may be approved by the Commission from time to time through separate Order or other Regulations shall be applicable. (v) Transmission Charges: Provided that a Partial Open Access Consumer, Generating Station or Licensee, as the case may be, shall pay the Transmission Charges to the Distribution Licensee instead of the Transmission Licensee for using a transmission network; (vi) Any other charges, surcharge or other sum recoverable from the Consumer under the Act or any Regulation or Orders of the Commission Thus, the billing for Open Access consumers does not include Power Factor Incentive / Penalty to Open Access consumers of a Distribution Licensee However, the DOA Regulations, 2016 provide for application of Reactive Energy Charges to Open Access consumers: 21. Reactive Energy Charge The methodology for payment for the reactive energy charges by an Open Access Consumer, Generating Station or Licensee with load of 5 MW or more shall be in accordance with the State Grid Code and the Regulations of the Commission governing Multi-Year Tariff or relevant orders of the Commission The reactive energy charges in respect of Open Access Consumers with load less than 5 MW shall be calculated on Power Factor basis as may be specified in relevant orders of the Commission The reactive energy charges in respect of Renewable Energy Generating Stations shall be in accordance with the charges approved by the Commission in its relevant Tariff Orders Thus, the Power Factor of the Open Access consumer is to be utilized to arrive at the Reactive Energy Charges payable by it. While the methodology has been specified, the applicable Reactive Energy Charges have not been specified by the Commission in its Tariff Orders. MERC Order Case No. 110 of 2017 Page 7 of 15

8 4.10. Although Reactive Energy Charges and Power Factor Incentive / Penalty are dependent on the Power Factor, the applicability of the charges is different. While the Power Factor Incentive / Penalty is payable to / by a consumer of the Distribution Licensee irrespective of the voltage of the system (i.e. irrespective of whether the Power Factor at a particular time is helping the system or not), Reactive Energy Charges are dependent on the voltage. If the reactive energy drawal is at a time when the system voltage is high, it has to be incentivized; when the system voltage is low, it has to be penalized. This is clear from Regulation 67 of the MERC (Multi Year Tariff) Regulations ( MYT Regulations ), 2015 which specifies that Transmission System Users or Distribution Licensees shall be subjected to a incentive / disincentive to be compensated / levied by the MSLDC for maintaining the reactive energy balance in the transmission system: 67 Reactive Power Charges 67.1 A Generating Station shall inject/absorb the reactive power in to the grid on the basis of machine capability as per the directions of MSLDC Reactive power exchange, only if made as per the directions of MSLDC, for the applicable duration (injection or absorption) shall be compensated/ levied by the MSLDC to the Generating Station at rate of paise/rkvah for FY escalated at 0.50 paise/rkvah annually in subsequent Years of the Control Period, unless otherwise revised by the Commission The Transmission System Users shall be subjected to the following Incentive/Disincentive to be compensated/ levied by the MSLDC for maintaining the reactive power balance in the transmission system: Hence, in line with the DOA Regulations, 2016, Reactive Energy Charges are applicable to Open Access Consumers and not Power Factor Incentive / Penalty MIAL has referred to the APTEL Judgment in Appeal No. 231 of 2012, which is in the context of the HERC Open Access Regulations. In that matter, the consumer did not have a meter which recorded and stored the voltage in 15 minutes time block, MERC Order Case No. 110 of 2017 Page 8 of 15

9 and hence APTEL held that it was not possible to allocate the Reactive Energy consumption for arriving at the Reactive Energy Charges: 22. The meter dose not record and store the voltage in 15 minute's time blocks. It is true that with the availability of kvah and kwh in 15 minute's time blocks, the reactive power consumption can be easily computed for each time block using the formula kvarh = Sqrt (kva 2 - kwh 2 ) 23. But, in the absence of corresponding voltage for each time slot, it would not be possible to allocate the reactive power consumption for the purpose of reactive energy charges However, in the case of MIAL, the appropriate ABT meters have been installed in line with the relevant Regulations / Orders of the Commission, and are capable of recording reactive energy and voltage on 15 minute basis. Accordingly, Reactive Energy Charges can be computed and applied to MIAL. Hence, the APTEL ruling cannot be generalised and applied to the case of MIAL While there is no dispute that, as observed by APTEL, technically, the Power Factor maintained by a consumer benefits the network, but only when voltages are lower than the permissible level. Otherwise, it is detrimental to the system as consumers experience high voltages, and is also detrimental to electrical equipment. Further, the Open Access consumer gets the direct benefit of reduction in cost of power purchase through reduction in the quantum of power required; while, in the case of consumers of the Distribution Licensee, it reduces the overall power purchase cost of the Licensee, and hence the benefit is passed on to its consumers. In the case of an Open Access consumer, only that benefit should be passed on which is caused by the consumer, and hence, the Reactive Energy Charges. Passing on an additional benefit to Open Access consumers is not justified and will result in further burdening the consumers of the Distribution Licensees In fact, in the case of change-over consumers, who are akin to Open Access consumers as per the APTEL Judgment in Appeal No. 331 of 2013, TPC-D, as a Supply Licensee, is providing the Power Factor Incentive / Penalty. In other words, the Wheeling Licensee is not paying the Power Factor Incentive / Penalty to the change-over consumers for usage of its network. A similar principle has been followed for Open Access consumers Considering the above, the position is summarized as follows: a) Open Access and Supply from a Distribution Licensee are two distinct options of power procurement separately defined under Sections 42 and 43 of the EA, The mechanism, procedure, tariff and charges payable under each option is governed by different Regulations. Each option has its own set of charges, MERC Order Case No. 110 of 2017 Page 9 of 15

10 benefits, incentives and penalties which cannot be intermingled and overlapped. That would disturb the regulatory balance and should not be entertained. b) The components of billing for an Open Access consumer as per the DOA Regulations do not provide for Power Factor Incentive or Penalty on Open Access consumption, but provide for Reactive Energy Charges. Open Access consumers are procuring power through ABT metering and scheduling mechanism. Hence, 15 minute-wise records are available for recording the reactive energy, which can be used for levying Reactive Energy Charges to the Open Access consumers once they are determined by the Commission. c) The tariff components applicable to consumers of TPC-D are also applicable to partial Open Access consumers, but limited to the consumption of power procured from TPC-D. 5. At the hearing held on : 5.1. MIAL stated that a. TPC-D has been providing Power Factor Incentive for the electricity consumption of MIAL as a consumer of TPC-D, but not with respect to its Open Access consumption, inclusive of RAC, Wheeling Charges, CSS, etc. b. MIAL is relying on APTEL s Judgment dated in Appeal No. 231 of The very purpose of providing Power Factor Incentive is to encourage consumers to improve their Power Factor by providing shunt compensation and bring it as close as possible to unity so that system losses are reduced to the minimum. APTEL in its Judgment has also recorded that Power Factor rebate is also payable to a consumer who avails Open Access. If a consumer procures power from other sources through Open Access at a high Power Factor, the system loss would also be less, as in the case of his drawal of power from the Distribution Licensee. c. CSS payable by an Open Access consumer is a part of the consumer s bill and, therefore, the Power Factor Incentive would also be applicable on it. Accordingly, the rebate should be allowed on the CSS as well. d. The list of various charges in Clause 14.1 of the DOA Regulations, 2016 is not an exhaustive list. Power Factor Incentive should be applied on the entire bill, excluding taxes and duties TPC-D stated that MERC Order Case No. 110 of 2017 Page 10 of 15

11 a. In case of change-over consumers, which is akin to Open Access, the Supply Licensee (TPC-D) is providing the Power Factor Incentive, whereas in the present case of Open Access, MIAL is demanding Power Factor Incentive from TPC-D as the Wheeling Licensee. b. Power Factor Incentive or Penalty is payable to or by a consumer irrespective of voltage of the system, whereas Reactive Energy Charges are dependent on the voltage of the system. c. As regards the Judgment of APTEL in Appeal No. 231 of 2012, the consumer in that matter did not have a meter which records and stores RkVA component of power in 15 minute time blocks. Hence, it was not possible to allocate the Reactive Energy consumption for arriving at the Reactive Energy Charges. However, in the present case, TPC-D can record the consumption of MIAL in 15 minute time blocks. d. The views of other Distribution Licensees also need to be considered The Commission asked whether, in the event that Reactive Energy Charge is made applicable, Power Factor Incentive would be applicable. 6. In its Rejoinder dated , MIAL stated as follows: 6.1. TPC-D has sought to differentiate between consumers who are eligible for Power Factor Incentive based on the source of power i.e., between its direct consumers and Open Access consumers. Such differentiation between consumers is in blatant violation of the APTEL Order which has categorically held that the purpose of providing Power Factor rebate is to encourage the consumer to maintain high Power Factor and to minimize the system losses. To reduce these losses, the State Commission incentivized high Power Factor based on purely technical and engineering principles which have nothing to do with the source of power. APTEL, therefore, allowed for Power Factor Rebate to consumers who avail Open Access as well Without prejudice to its arguments and contentions in the Petition, MIAL s paragraphwise response to TPC-D s Reply is as follows Although the DOA Regulations, 2016 specify the component of billing of Open Access consumers for the use of the distribution system for wheeling of electricity, this cannot be read in isolation from the MYT Order. The MYT Order confirms the rates to be collected by the Distribution Licensee from the consumers. It specifically covers Power Factor Incentive which is applicable on the amount of the monthly electricity bill (excluding taxes and duties) whenever the average Power Factor level is MERC Order Case No. 110 of 2017 Page 11 of 15

12 more than TPC-D has ignored the fact that the MYT Order has not limited the applicability of Power Factor Incentive to direct consumers of the Distribution Licensee and has not discriminated against any type of consumer. Further, the MYT Order explicitly stipulates that the Power Factor Incentive shall be applicable on monthly electricity bills, which would include charges towards power procured through Open Access as well. As per Regulation 21.2 of the DOA Regulations, the reactive energy charges for Open Access Consumers with load below 5 MW are calculated on Power Factor basis. Admittedly, MIAL s average load is below 5 MW, and hence it ought to be calculated on the basis of Power Factor, for which the specific methodology has already been set out in the MYT Order. Thus, Regulation 21.2 merely sets out the basis for computing the Reactive Energy Charges and in no manner affects the Power Factor Incentive criteria, the applicability of which is clearly set out in the MYT Order. As regards TPC-D s contention based on Regulation 67 of the MYT Regulations, 2015 that Reactive Energy Charges are only applicable to Open Access Consumers and not Power Factor Incentive, APTEL has dealt with this in detail: payment has to be made to the beneficiary when it draws reactive power during the period of voltage being higher than 103% of the rated voltage or he returns reactive power, when voltage is lower than 97% of the rated voltage. Further, it was held that while the reactive energy charges deal with debit and credit based on injection or drawal of reactive power at particular interval when the supply voltage is above 103% or below 97% of the rated voltage, whereas the active power flow is right throughout the day irrespective of the period of threshold limits of the supply voltage. Hence, the methodology adopted by the State Commission is without application of mind. Hence, the conclusion by the State Commission cannot be held to be valid. Thus, it is clear that Reactive Energy Charges are applicable only on the drawal of reactive energy, which in the case of MIAL is nil. As MIAL is only consuming active power, Reactive Energy Charges are not applicable to it. Further, APTEL has clearly indicated that the methodology adopted was itself incorrect and without any application of mind, and hence has held it to be invalid in that matter. Thus, TPC-D s contention is baseless as Reactive Energy Charges are not relevant to MIAL, and in any case have nothing to do with the applicability of the Power Factor Incentive to it MIAL denies that there is any additional benefit, as alleged, that MIAL (in its capacity as an Open Access Consumer) would receive, thereby burdening the direct consumers of TPC-D. In fact, as held in the APTEL Judgment, providing Power Factor Incentive would encourage consumers to maintain the Power Factor at a level so as to minimize system losses, which would benefit consumers across the State Open Access and change-over are two different methods of power purchase by consumers which are dealt with in separate Regulations. In case of change-over MERC Order Case No. 110 of 2017 Page 12 of 15

13 consumers, the Supplier collects all charges, i.e. Supply + Network, from the consumers, as a result of which they are liable to pay the Power Factor Incentive also. However, in case of an Open Access consumer, the Supplier/Trader is not collecting network charges from the consumer. These charges are collected by the Wheeling Licensee, TPC-D in this case, as per the MYT Order. Accordingly, since it is a component of the monthly electricity bill raised by the Distribution Licensee, TPC-D is liable to provide such Power Factor Incentive to MIAL. Commission s Analysis and Ruling 7. The last MYT Order for TPC-D stipulates as follows with regard to Power Factor Incentive: Power Factor Incentive Applicable for HT-I : Industry, HT II - Commercial, HT-IV : PWW, HT V- Railways, Metro & Monorail, HT-VI: Public Services [ HT VI (A) and HT VI (B)], HT VII - Temporary Supply, LT II: Non-Residential/Commercial [LT II (B), LT II (C)] (for Contract Demand/Sanctioned Load above 20 kw), LT III (B): Industry above 20 kw, LT IV- PWW, LT VII (B) Temporary Supply (Others), and LT IX : Public Service [LT IX (A) and LT IX (B)]. Whenever the average Power Factor is more than 0.95, an incentive shall be given at the rate of the following percentages of the amount of the monthly electricity bill, excluding Taxes and Duties: Power Factor Sr no. Range of Power Factor Level Incentive to % to % to % to % to % to % Note: Power Factor shall be measured/computed upto 3 decimals, after universal rounding off. 8. Power Factor Incentive / Penalty has been provided in the electricity tariffs of TPC-D and other Distribution Licensees since long to encourage consumers to improve their Power Factor by providing shunt compensation and bring it as close as possible to unity so that system losses are reduced. Lower Power Factor causes higher system losses and consequent loss to the Distribution Licensee. MERC Order Case No. 110 of 2017 Page 13 of 15

14 9. Although Open Access consumers source part or all of their power requirement from sources other than their Distribution Licensees, they use the distribution system of the Licensees for wheeling of this power and, hence, also contribute to system losses (unless they are independently connected to a Generator and physically isolated from the rest of the Licensee s network). If they have no incentive to maintain a high Power Factor, the onus on the Distribution Licensees to take corrective measures to compensate for the variation in Power Factor of such consumers will be correspondingly greater. Moreover, Power Factor improvement can best be achieved if such measures are implemented at the consumer level. On this principle, the Power Factor Incentive / Penalty provided in the MYT Order for consumers sourcing power from TPC-D is equally applicable to the Open Access power sourced by such consumer, who also contribute by way of Wheeling / Transmission Charges and Losses, CSS, and Additional Surcharge, if any. 10. This is also consistent with the Judgment dated in Appeal No. 231 of 2012 in which APTEL held as follows: 56. Summary of the findings:- II. The very purpose to provide higher power factor rebate is to encourage the consumer to maintain high power factor and to minimize the system losses. Any loss before the meter installed at consumer s premises is on account of the distribution licensee. In order to reduce these losses, the State Commission has incentivized high power factor based on pure technical and engineering principle. It has nothing to do with the source of power. Accordingly, power factor rebate is payable to the consumer who also avails open access. III. As per clause 2(19) of the Supply Code, the surcharge referred to in Regulation 3 is the Cross Subsidy Surcharge payable by Open Access consumer is a part of SoP charges and, therefore, the incentive on power factor would also be applicable on this amount. The Respondent till date has been recovering penalty on the low power factor and penalty for exceeding contract demand on the sale of power including Cross Subsidy Surcharge from embedded open access consumers. The licensee cannot probate and approbate at the same time. Therefore, the State Commission now cannot permit the utility, the Respondent to use different yardstick to the consumer while giving rebate and recovering MDI penalty, when both are to be charged on sale of power. Therefore, this treatment is contrary to the commercial principles. 11. The list of charges specified in Regulation 14 of the DOA Regulations, 2016 has been cited by TPC-D. However, that is not an exhaustive list of the charges leviable while billing Open Access consumers, as will be seen from Regulation 14.1(v) (quoted earlier in this Order). MERC Order Case No. 110 of 2017 Page 14 of 15

15 12. With reference to Regulation 21 of the DOA Regulations, 2016, TPC-D has raised the issue of levying a Reactive Energy Charge on Open Access consumers. As present, in the MYT Orders in respect of TPC-D and other Distribution Licensees, the Commission has not determined any Reactive Energy Charge. In its forthcoming Mid-Term Review Petition, TPC-D is at liberty to propose such determination. 13. In view of the foregoing, the Commission directs TPC-D to provide Power Factor Incentive (or levy Power Factor Penalty, as the case may be,) to MIAL and other similarly placed consumers on the charges it levies on the power sourced by them through Open Access. For past periods, these may be adjusted in the ensuing bills of MIAL and other such Open Access consumers, along with applicable interest. The Petition of M/s Mumbai International Airport Ltd. in Case No. 110 of 2017 stands disposed of accordingly. Sd/- Sd/- Sd/- (Deepak Lad) (Azeez M. Khan) (Anand B. Kulkarni) Member Member Chairperson MERC Order Case No. 110 of 2017 Page 15 of 15