CASE No. 136 of 2018, 137 of 2018, 150 of 2018, 151 of 2018 and 155 of In the matter of

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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. 136 of 2018, 137 of 2018, 150 of 2018, 151 of 2018 and 155 of 2018 In the matter of (CASE No. 136 of 2018) Petition of Spentex Industries Ltd. and CIMMCO Spinners for clarification regarding applicability of Power Factor Incentive to Open Access consumption Spentex Industries Ltd. and CIMMCO Spinners V/s Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL)..Petitioners.. Respondent (CASE No. 137 of 2018) Petition of IndoCount Industries Ltd. and Pranavaditya Spinning Mills for clarification regarding applicability of Power Factor Incentive to Open Access consumption. IndoCount Industries Ltd. and Pranavaditya Spinning Mills V/s Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL)..Petitioners.. Respondent (CASE No. 150 of 2018) Petition of Sudarshan Chemical Industries Ltd. for not allowing Power Factor Incentive on Open Access charges by Maharashtra State Electricity Distribution Company Limited. Sudarshan Chemical Industries Ltd. V/s Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL)..Petitioner.. Respondent CASE No. 151 of 2018 Petition of Polygenta Technologies Ltd. for not allowing Power Factor Incentive on Open Access charges by Maharashtra State Electricity Distribution Company Limited Polygenta Technologies Ltd...Petitioner MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 1 of 48

2 V/s Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL).. Respondent CASE No. 155 of 2018 Petition of ETCO Industries Pvt. Ltd. for not allowing Power Factor Incentive on open access charges by Maharashtra State Electricity Distribution Company Limited ETCO Industries Pvt. Ltd. V/s Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL)..Petitioner.. Respondent Coram Shri Anand B. Kulkarni, Chairperson Shri Mukesh Khullar, Member Appearance in Case No. 136 &137 of 2018: For the Petitioners For the Respondent Appearance in Case No. 150, 151 & 155 of 2018): For the Petitioner For the Respondent ORDER : Shri S.R.Nargolkar (Adv.) : Shri Ashish Singh (Adv.) : 1. Shri T.N. Agrawal (Rep.) : 2. Shri Satish Shah (Rep.) : Shri Ashish Singh (Adv.) Dated: 23 July, 2018 CASE No. 136 of 2018 Spentex Industries Ltd. (SIL), A-60, Okla Industrial Area, Phase-II, New Delhi and CIMMCO Spinners, (A division of Spentex Industries Ltd.), A-60, Okla Industrial, Area, Phase-II, New Delhi have filed a Petition on 27 April, 2018 under MERC (Electricity Supply Code) Regulations, 2005 seeking clarification regarding applicability of Power Factor Incentive to Open Access consumption. 2. Petitioners prayers are as follows: MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 2 of 48

3 a) Allow the present petition and clarify that the Petitioners are entitled for the Power Factor Incentive on the monthly electricity bill on all charges, excluding the taxes and duties, on the Open Access Consumotion of the Petitiones; b) To direct the Respondents to provide Power Factor Inventives to the Petitioners in their capacity as a consumer of the Respondent as also in the capacity as Open Access Consumer of the Respondent retrospectively from the date on which the Petitioners have availed power supply through Open Access along with the Delayed Payment Charges {DPC} and interest as such rate at which the Respondent is charging Delayed Payment Charges and interest upon the delayed payments of their bills by the consumers of the Respondent. c) Costs of this Petition be provided for, in favour of the Petitioners. d) Such further and other reliefs as the nature and circumstances of the case may require be passed in favour of the Petitioners. 3. The Petitioner states as follows: 3.1 The Petitioners are HT consumers of MSEDCL. They are availing power from the MSEDCL as well as through Open Access. 3.2 Spentex Industries Ltd. (SIL) has its manufacturing unit at A -31 MIDC Area, Butibori Industrial Area, Nagpur and at D-48, MIDC Industrial Area, Baramati, District Pune. CIMMCO Spinners (CIMMCO) (A division of Spentex Industries Ltd) has works at B-1, MIDC Industrial Area, Chincholi, Kondi, Solapur. 3.3 SIL has sourced power through Open Access from November 2015 to January 2017 for their Baramati Plant for Consumer No and sourced power through Open Access from August 2015 to December 2016 for their Baramati plant for Consumer No SIL has sourced power through Open Access for the period from August 2015 to Sept 2016 for their Butibori Nagpur Plant having consumer No CIMMCO has sourced power through Open Access for the period from May 2015 to November 2016 for their Solapur plant having consumer No MSEDCL raises electricity bills as per the tariff rate approved by the Commission, which also includes billing charges, Wheeling Charges, Transmission Charges & Cross Subsidy Surcharge (CSS), electricity duty on Open Access Consumer units. 3.5 In the Multi Year Tariff Order for the period from FY to FY the Commission has held as follows: MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 3 of 48

4 8.28. Incentives and Disincentives. Power Factor Incentive Applicable for HT-1: Industry, HT II Commercial, HT-III: Railways, Metro & Monorail, HT-IV: PWW, HT-V: Agriculture, HT-VI: Group Housing Society, HT-VIII: Temporary supply, HT-IX: Public Service, LT-II: Non-Residential/Commercial (LT II(B), LT II (C)). LT III: Public Water Works, LT V (A) (ii): Industry Powerlooms (above 20 kw), LT V (B) (ii): Industry General (above 20 kw), LT X: Public Services [LT X(A)(iii), LT X (B) (ii) and LT X (B) (iii) categories. 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 bill excluding Taxes and Duties. Table 8-81: Power Factor Inventive approved for the 3 rd Control Period. Sr.No Range of Power Factor Power Factor Level Incentive to % to % to % to % to % to % Note: PF is to be measured/ computed up to 3 decimals, after universal rounding off. Power Factor Penalty- Applicable for HT-I: Industry, HT-II Commercial, HT-III: Railways, Metro & Monorail, HT-IV: PWW, HT-V: Agriculture, HT- VI: Group Housing Society, HT VIII Temporary Supply, HT IX : Public Service, LT II: Non-Residential/Commercial [LT II (B), LT II (C)], LT III: Public Water works, LT V(A) (ii): Industry Powerlooms (above 20 kw), LT V (B) (II): Industry General (above 20 kw), LT X: Public Services [LT X (A) (ii), LT X (A) (iii), LT X (B) (ii) and LT X (B) (iii) categories. Whenever the average PF is less than 0.9, penal charges shall be levied at the rate of the following percentages of the amount of the monthly bill excluding Taxes and Duties. Table 8-32: Power Factor Penalty approved for 3 rd Control Period. Sr.No Range of Power Factor Power Factor Level Incentive to % to % to % to % MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 4 of 48

5 to % to % to % 8 0,825 to % to % to % Note: PF is to be measured/computed up to 3 decimals, after universal rounding off. 3.6 Thus, the Power Factor Incentive (PFI) is to be given as per the table set out above excluding the taxes and duties. However, the same is not being extended and not being given to the Petitioners by MSEDCL considering the power availed through Open Access from Traders, alongwith MSEDCL. MSEDCL has been providing PFI for the electricity power as regular consumer of MSEDCL. However, while levying the charges for the Open Access Consumption including Wheeling Charges, Transmission Charges &, CSS etc., MSEDCL has failed to provide PFI, considering the power availed under Open Access, which is in violation of the Multi Year Tariff Order issued by the Commission. 3.7 The Appellate Tribunal for Electricity (APTEL) in its Judgment dated 14 November, 2013 in Appeal No.231 of 2012 (Jindal Stainless Ltd. v/s. Dakshin Haryana Bijli Vitharan Nigam and HDRC). The APTEL has addressed the issue of payment of CSS payable by all Open Access Consumer. It has been held that CSS is required to be treated as part of electricity charges and has to be factored in while deciding on the rebate admissible for the PFI to be given to the consumer. It has held that the CSS forms a part of sale of power and that accordingly the rebate should be allowed on the cross subsidy as well. 3.8 The entire purpose of PFI is to encourage consumers to improve their Power Factor and maintain it at a high level in order to reduce losses. If PFI is not given, this purpose would be lost and there will be no incentive to the consumer to maintain a high Power Factor. 3.9 APTEL in its Judgment dated 14 November, 2013 in Appeal No 231 of 2012 in its held as below: 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 MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 5 of 48

6 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 perusal of the relevant portions of the findings recorded by the APTEL, it can be noted that the principle of PFI has been arrived at on the basis of purely technical and engineering principles and that the source of power has no significance whatsoever. It is therefore, obvious that the PFI would be applicable to the power procured as a direct consumer equally as a consumer availing the power through Open Access and its denial would be prejudicial not only to the interest of the consumers but also to the interest of the Distribution Licensee and the system as a whole The APTEL while recording its finding and passing the afore mentioned Judgment has relied upon Regulation 3 of the Haryana Electricity Regulatory Commission, HERC Electricity Code, 2004 which provides for recovery of electricity charges from the consumer. This provision is pari materia with the stipulations contained in MERC (Electricity Supply Code and Conditions of Supply) Regulations, Thus in view of the Judgment of the APTEL (cited supra) and also the MERC Supply Code Regulations, 2005, the Petitioners are entitled to claim PFI from the MSEDCL even in their capacity as Open Access Consumer, in addition to power availed from MSEDCL. The grant of incentive is in line with the view taken by the APTEL in this regard and there is no justifiable reason for deviation from it. Hence the Petitioners addressed communications in the form of representations to MSEDCL. The Petitioners MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 6 of 48

7 have sent communication dated to MSEDCL in respect of four consumers accounts provided herein above of the Petitioners. Despite receipt of the detailed representations calling upon them to forthwith grant PFI for the past period, MSEDCL has neither responded nor has granted the PFI The Commission vide Order dated 28 November, 2017 in Case No. 110 of 2017 has held that the 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. The MYT Order for Tata Power Co. (Distribution) is pari materia with the Multi-Year Tariff Order for MSEDCL so far as it provides for Power Factor Incentive It was further held by the Commission that lower Power Factor causes higher system losses and consequent loss to the Distribution Licensee. It was further observed that although Open Access consumers source part 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. The Commission further observed that if the consumers have no incentives to maintain a higher power factor onus on the Distribution Licensees to take corrective measures to compensate for variation in Power Factor of such consumer 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 PFI provided in MYT Order for consumers sourcing power from the Distribution Licensees is equally applicable to the Open Access power, sourced by such consumers who also contribute by way of Wheeling or Transmission Charges and Losses, additional surcharges if any Thus recording independent reasons, the Commission has observed that Open Access consumers are entitled to claim PFI on the power sources from Open Access Trader as well as through their Distribution Licensees The Commission has also held that grant of PFI is also consistent with the Judgment of the Appellate Tribunal for Electricity delivered on 14 November, 2013 in Appeal No. 231 of 2012 in which the APTEL had held that 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. The Commission has relied upon a finding of the APTEL that any loss before the meter installed at consumer s premises is on account MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 7 of 48

8 of the Distribution Licensee and in order to reduce these losses, the Commission has incentivized high Power Factor based on pure technical and engineering principle The Commission has relied upon the observations of APTEL that this incentive has nothing to do with the source of power and that the Power Factor rebate is payable to the consumer who also avails Open Access. In the said case, the APTEL had also held that the surcharge i.e. Cross Subsidy Surcharge payable by Open Access Consumer is a part of the Charges and therefore, the incentive of Power Factor would also be applicable on this amount TPC-D, in the MIAL case cited supra, had raised an issue of levying Reactive Energy Charge on Open Access Consumer. However, the Commission observed that it has not determined any Reactive Energy Charges and hence the issue was not adjudicated upon. In view of the judgment of the APTEL and also in view of the Supply Code Regulations and also in view of MYT Tariff Order cited above, the Commission has allowed the Petition filed by MIAL and directed the Distribution Licensee to provide PFI not only to the Petitioners in the said case, but also to other similarly placed consumers. It has been directed that the incentive for the past period should be adjusted in the bills of the consumers and that the same should be with applicable interest This is a binding precedent and in view of this Judgment and Order dated 28 November, 2017 passed by the Commission in Case No.110 of 2017 in the case of Mumbai International Airport Pvt. Ltd. v/s. Tata Power Co.Ltd. (Distribution), it was incumbent on the MSEDCL to consider and allow the representations made by the Petitioners on 21 February, The charts showing the amount of PFI due and payable to the Petitioners are annexed to the Petition. 4. In its submission dated 19 June, 2018, MSEDCL stated that: 4.1 MSEDCL raised the following issues in the present case: (i) Tata Power s Case (Case No. 110 of 2017) is completely different from that of MSEDCL. (ii) Whether the APTEL s Judgment dated 14 November, 2013 in Appeal No. 231 of 2012 is applicable to the facts of the present case? (iii) Whether the Commission s Order dated 3 January, 2013 passed in Case No. 8 of 2012, Case No. 18 of 2012, Case No. 20 of 2012 and Case No. 33 of 2012 is binding Order? (iv) Can there be any retrospective effect of PFI as per the Order dated 28 MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 8 of 48

9 November, 2017 passed in Case No. 110 of 2017? (v) What is the real intent and purpose of Regulation 21 of the DOA Regulations, 2016 specifying the Reactive Energy Charges? (vi) When a separate charge Reactive Energy Charges is envisaged under the DOA Regulations, 2016 then why not fix the charge? (vii) Can a consumer who opts for Open Access still be considered as a consumer to the extent of Open Access? (viii) Can a partial Open Access consumer seek the same benefits under the retail Tariff Order which are available to a normal consumer when such partial Open Access consumer is governed by a different Regulatory regime i.e. DOA Regulations, 2016? (ix) Maintaining of Power Factor is a mandatory obligation cast upon a consumer. The consumer maintains the same out of operation of law. Moreover such consumers install equipment s before being Open Access consumers and subsequently shift to Open Access. Hence PFI cannot be made applicable to Open Access consumption more so when DOA Regulations, 2016 provides a different charge/penalty altogether. 4.2 Tata Power s Case (Case No. 110 of 2017) completely different than that of MSEDCL: (a) (b) (c) The Order dated 28 November, 2017 in Case No. 110 of 2017 in the matter of Mumbai International Airport Private Limited Versus Tata Power Company Limited was passed in the specific facts and circumstances of that Case and cannot be treated as a Judgment in realm rather it a Judgment in personam. The records of Case No. 110 of 2017 clearly reveal that Tata Power was charging/providing Power Factor Incentive/ Penalty on the Regulatory Asset Charges since July, 2013 to April, Neither MSEDCL has provided any PFI to Open Access consumers nor has MSEDCL levied any penalty on Open Access consumption. Hence Case No. 110 of 2017 cannot be strictly applied to the present Case. 4.3 Whether the APTEL s Judgment dated 14 November, 2013 in Appeal No. 231 of 2012 is applicable to the facts of the present Case? : (a) The APTEL Judgment dated 14 November, 2013 cannot be made applicable to the present Case as it was passed in the specific facts and circumstances of the case before the APTEL and after analyzing various provisions of the Haryana Electricity Regulatory Commission s Regulations. The major differences are as follows: (i) Existing metering was not adequate to record voltage during 15 minute MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 9 of 48

10 time slot. (ii) There was no recording of the corresponding energy drawal during the period when the frequency at the metering point is below 97% or above 103%. (iii) In the absence of active corresponding figures of the Active Energy and the Reactive Energy available from the meter, it is not possible to draw proportion of the two figures which are for different time durations. (iv) That apart, the Active Energy figures recorded for the entire month cannot be compared with the Reactive Energy recorded for the specific time duration corresponding to the specific variation in voltage at the metering point. (v) The Respondent, Distribution Licensee in Haryana till date has been recovering penalty on the low Power Factor and penalty for exceeding Contract Demand on the sale of power including CSS from embedded Open Access consumers. The Licensee cannot probate and approbate at the same time. Therefore, the State Commission 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. (b) Hence it can be seen from the above that the facts and circumstances leading to passing of the above Judgments were completely different. In the present case at hand MSEDCL submits that all the metering arrangements are in place and hence the Reactive Energy Charges can be determined and levied without any hurdles. Moreover there is no case of probating and approbating at the same time by MSEDCL as it has followed a consistent stand of not charging any Power Factor Penalty on Open Access consumption. Moreover the observation of the APTEL at Para (II) of the operative part is based on the specific facts of the Case and is not a Judgment in realm. 4.4 Whether the Commission s Order dated 3 January, 2013 passed in Case No. 8 of 2012, Case No. 18 of 2012, Case No. 20 of 2012 and Case No. 33 of 2012 is a binding Order? The Commission had clarified vide Order dated 3 January, 2013 that PFI is only applicable to consumers of MSEDCL on the Net energy supplied by MSEDCL and nothing beyond that. The relevant paragraph of Order is reads as below: The Commission is of the view of that levy of penalty or provide incentives for various parameters as specified by the Commission in Tariff Schedule of the Tariff Order of MSEDCL from time to time (e.g., Power MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 10 of 48

11 Factor incentive, Power Factor Penalty, Prompt Payment discount, etc.) shall be charged on the net energy supplied by MSEDCL to the open access consumer and captive user after adjusting the banked energy and actual generation during the month. 4.5 Can there be any retrospective effect of Power Factor Incentive as per the Order dated 28 November, 2017 passed in Case No. 110 of 2017? It has acted in complete compliance of the Order dated 3 January, 2013 passed in Case No. 8 of 2012, Case No. 18 of 2012, Case No. 20 of 2012 and Case No. 33 of 2012 by the Commission. Any new dispensation if allowed by the Commission can only be prospective as the earlier dispensation was governed by a Regulatory Order which was followed by MSEDCL. Hence without admitting that PFI is applicable to Open Access, even if the same is made applicable, then the same has to be prospective and not retrospective. 4.6 What is the real intent and purpose of Regulation 21 of the DOA Regulations, 2016 specifying the Reactive Energy Charges? While on one hand there is no specific provision to make the PFI applicable to Open Access on the other hand there is separate head created under the DOA Regulations, 2016 as Reactive Energy Charges which is applicable to Open Access consumers. Hence when the DOA Regulations, 2016 specifically provides for such Charges then the same has to be specifically fixed by the Commission. This issue has also been acknowledged by the Commission in its order dated 28 November, 2017 passed in Case No. 110 of 2017 under Paragraph 12. Operative part is reproduced as under: 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. 4.7 When a separate charge Reactive Energy Charges is envisaged under the DOA Regulations, 2016 then why not fix the charge? Any Charge which is not determined in accordance with the applicable principles and without a detailed study on the implication of such charge would certainly have a negative impact of MSEDCL. Hence, the nuances of PF and Reactive Energy although may seem to be similar but both of them are completely different as the charges terms applicable in money terms may be completely different. In such a case allowing PF to be applicable to Open Access consumers without studying the impact MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 11 of 48

12 of the same would certainly cause a negative impact on MSEDCL and would in a way offset the other charges payable by the Open Access consumers. 4.8 Can a consumer who opts for Open Access still be considered as a consumer to the extent of Open Access? Once a consumer surrenders its load with MSEDCL to the tune of Open Access then it can no longer be treated as a consumer of MSEDCL to the tune of Open Access availed by it. 4.9 Can a partial Open Access consumer seek the same benefits under the retail Tariff Order which are available to a normal consumer when such partial Open Access consumer is governed by a different regime i.e. DOA Regulations, 2016? A partial Open Access consumer cannot be equated to a retail consumer. While a retail consumer Tariff is fixed through a Tariff Order, a partial Open Access consumer s tariff is only fixed to the tune as to what he is liable to pay under the Electricity Act, 2003, DOA Regulations, 2016 as various charges on account of availing Open Access. Hence all these separate charges payable by an Open Access consumer is framed by a Regulatory process after analyzing all aspects. However the Petitioner stated that the PF which is fixed for retail consumers shall be passed to Open Access consumers without determining the impact of the same which cannot be done without initiating a regulatory process Maintaining of Power Factor is a mandatory obligation cast upon a consumer. The Consumer maintains the same out of operation of law. Moreover such consumers install equipment s before being Open Access consumers and subsequently shift to Open Access. Hence PFI cannot be made applicable to Open Access consumption more so when DOA Regulations, 2016 provides a different charge/penalty altogether. (a) The whole argument made by the Petitioners of incurring high cost in installing equipment s for maintaining high Power Factor is completely incorrect. It is to be noted that all these consumers have become Open Access consumers later in time and they all were normal retail consumers of MSEDCL in the beginning. Hence whatever equipment s they have installed, are under the mandate of law at the relevant point in time, when they were not Open Access consumers. (b) In case the Open Access consumer does not maintain the high Power Factor then it would be liable to the Reactive Energy penalty as will be determined by the Commission. Hence the Open Access consumer will be liable to any penalty as envisaged under law. MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 12 of 48

13 (c) Maintaining of high Power Factor also helps the Open Access consumer in appropriating the maximum Open Access quantum wheeled. Hence arguments on the issue of high Power Factor leading to benefit to Grid and leading to low losses to MSEDCL is completely baseless and is rather opportunistic. CASE NO. 137 of 2018: 5. Indo Count Industries Ltd. (Indo Count), 301, Acadia, III floor, Nariman Point, Mumbai and Pranavaditya Spinning Mills (PSM), At & Post Alte, Hatkanangale. (Petitioners) have filed a Petition 27 April, 2018 under MERC (Electricity Supply Code) Regulations, 2005 for clarification regarding applicability of Power Factor Incentive to Open Access consumption. 6. Petitioner s prayers are as follows: (a) Allow the present petition and clarify that the Petitioners are entitled for the Power Factor Incentive on the monthly electricity bill on all charges, excluding the taxes and duties, on the Open Access Consumotion of the Petitiones; (b) To direct the Respondents to provide Power Factor Inventives to the Petitioners in their capacity as a consumer of the Respondent as also in the capacity as Open Access Consumer of the Respondent retrospectively from the date on which the Petitioners have availed power supply through Open Access along with the Delayed Payment Charges {DPC} and interest as such rate at which the Respondent is charging Delayed Payment Charges and interest upon the delayed payments of their bills by the consumers of the Respondent. (c) Costs of this Petition be provided for, in favour of the Petitioners. (d) Such further and other reliefs as the nature and circumstances of the case may require be passed in favour of the Petitioners. 7. The Petitioners states as follows: 7.1 The Petitioners are HT consumers of MSEDCL and availing power from MSEDCL as well as through Open Access. 7.2 Indo Count Industries Limited. (Indo Count) has its three Units and Plant located at Gokul, Shirgaon MIDC, (Spg. Divn.) Kagal MIDC [weaving division and processing division], and Petitioner at Alte, Hatkanangale in Maharashtra. The consumer number of the Petitioner s electricity supply at Gokul Shirgaon MIDC is and Petitioner is availing of electricity supply as consumer No and located at Kagal Five Star MIDC, Dist; Kolhapur. The consumer number of Petitioner at Alte Hatkanangale is MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 13 of 48

14 7.3 The Petitioners had sourced power through Open Access from August 2015 to November The Petitioners have been incurring large expenditure of money for procurement of power since the work and nature of the Petitioners industry is capital incentive and requires continuous power supply for manufacturing. 7.4 In the Multi Year Tariff Order for the period from FY to FY the Commission has held as follows: Incentives and Disincentives. Power Factor Incentive Applicable for HT-1: Industry, HT II Commercial, HT-III: Railways, Metro & Monorail, HT-IV: PWW, HT-V: Agriculture, HT-VI: Group Housing Society, HT-VIII: Temporary supply, HT-IX: Public Service, LT- II: Non-Residential/Commercial (LT II(B), LT II (C)). LT III: Public Water Works, LT V (A) (ii): Industry Powerlooms (above 20 kw), LT V (B) (ii): Industry General (above 20 kw), LT X: Public Services [LT X(A)(iii), LT X (B) (ii) and LT X (B) (iii) categories. 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 bill excluding Taxes and Duties. Table 8-81: Power Factor Inventive approved for the 3 rd Control Period. Sr.No Range of Power Factor Power Factor Level Incentive to % to % to % to % to % to % Note: PF is to be measured/ computed up to 3 decimals, after universal rounding off. Power Factor Penalty- Applicable for HT-I: Industry, HT-II Commercial, HT- III: Railways, Metro & Monorail, HT-IV: PWW, HT-V: Agriculture, HT-VI: Group Housing Society, HT VIII Temporary Supply, HT IX : Public Service, LT II: Non-Residential/Commercial [LT II (B), LT II (C)], LT III: Public Water works, LT V(A) (ii): Industry Power looms (above 20 kw), LT V (B) (II): Industry General (above 20 kw), LT X: Public Services [LT X (A) (ii), LT X (A) (iii), LT X (B) (ii) and LT X (B) (iii) categories. MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 14 of 48

15 Whenever the average PF is less than 0.9, penal charges shall be levied at the rate of the following percentages of the amount of the monthly bill excluding Taxes and Duties. Table 8-32: Power Factor Penalty approved for 3 rd Control Period. Sr.No Range of Power Factor Power Factor Level Incentive to % to % to % to % to % to % to % 8 0,825 to % to % to % Note: PF is to be measured/computed up to 3 decimals, after universal rounding off. 7.5 Thus, the PFI is to be given as per the table set out above excluding the taxes and duties. However, the same is not being extended and not being given to the Petitioners by the MSEDCL considering the power availed of, through Open Access from Traders, alongwith MSEDCL. MSEDCL has been providing PFI for the electricity power as regular consumer of the MSEDCL. However, while levying the charges for the Open Access Consumption including Wheeling Charges, Transmission Charges &, CSS etc. the MSEDCL has failed to provide PFI, considering the power availed under Open Access, which is in violation of the Multi Year Tariff issued by the Commission. 7.6 The Appellate Tribunal for Electricity (APTEL) has issued a Judgment dated 14 November, 2013 in Appeal No.231 of 2012 (Jindal Stainless Ltd. v/s. Dakshin Haryana Bijli Vitharan Nigam and HDRC). The APTEL has addressed the issue of payment of CSS payable by all Open Access Consumer. It has been held that CSS is required to be treated as part of electricity charges and has to be factored in while deciding on the rebate admissible for the PFI to be given to the consumer. It has been held that the CSS forms a part of sale of power and that accordingly the rebate should be allowed on the cross subsidy as well. 7.7 The entire purpose of PFI is to encourage consumers to improve their Power Factor and maintain it at a high level in order to reduce losses. If PFI is not given, this MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 15 of 48

16 purpose would be lost and there will be no incentive to the consumer to maintain a high Power Factor. 7.8 The APTEL in its Judgement dated 14 November, 2013 in Appeal No. 231 of 2012 has held as follows: 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. 7.9 From the above Judgement, it can be noted that the principles of PFI has been arrived at on the basis of purely technical and engineering principles and that the source of power has no significance whatsoever. It is, therefore, obvious that the power factor incentive would be applicable to the power procured as a direct consumer equally as a consumer availing the power through Open Access and its denial would be prejudicial not only to the interest of the consumers but also to the interest of the Distribution Licensee and the system as a whole The APTEL while recording its finding and passing the afore mentioned Judgment has relied upon Regulation 3 of the Haryana Electricity Regulatory Commission, HERC Electricity Code, 2004 which provides for recovery of electricity charges from MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 16 of 48

17 the consumer. This provision is pari materia with the stipulations contained in MERC (Electricity Supply Code and Conditions of Supply) Regulations, Thus in view of the APTEL s Judgment (cited supra) and also the Supply Code Regulations, 2005, the Petitioners are entitled to claim PFI from the MSEDCL even in their capacity as Open Access Consumer, in addition to power availed from MSEDCL. The grant of incentive is in line with the view taken by the APTEL in this regard and there is no justifiable reason for deviation from it. Hence the Petitioner addressed communications in the form of representations to MSEDCL. The Petitioners have sent communication dated to MSEDCL in respect of four consumer accounts provided herein above of the Petitioners. MSEDCL has neither responded nor has granted the Power Factor Incentive The Commission in its Order dated 28 November, 2017 in Case No.110 of 2017 has held that the 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 The MYT Order for Tata Power Co. (Distribution) is pari materia with the Multi- Year Tariff Order for MSEDCL so far as it provides for PFI. It was further held by the Commission that lower Power Factor causes higher system losses and consequent loss to the Distribution Licensee. It was further observed that although Open Access consumers source part 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. The Commission further observed that if the consumers have no incentives to maintain a higher Power Factor onus on the Distribution Licensees to take corrective measures to compensate for variation in Power Factor of such consumer 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 PFI provided in MYT Order for consumers sourcing power from the Distribution Licensees is equally applicable to the Open Access power, sourced by such consumers who also contribute by way of Wheeling or Transmission Charges and Losses, additional surcharges if any The Commission has observed that Open Access consumers are entitled to claim PFI on the power sources from Open Access Trader as well as through their Distribution MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 17 of 48

18 Licensees. The Commission has also held that grant of PFI is also consistent with the APTEL s Judgment delivered on in Appeal No.231 of 2012 in which the APTEL had held that 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 The Commission has relied upon a finding of the APTEL that any loss before the meter installed at consumer s premises is on account of the Distribution Licensee and in order to reduce these losses, the Commission has incentivized high Power Factor based on pure technical and engineering principle. The Commission has relied upon the observations of APTEL that this incentive has nothing to do with the source of power and that the Power Factor rebate is payable to the consumer who also avails Open Access. In the said case, the APTEL had also held that the surcharge i.e. CSS payable by Open Access Consumer is a part of the charges and therefore, the incentive of Power Factor would also be applicable on this amount TPC-D, in the MIAL case cited supra, had raised an issue of levying Reactive Energy Charge on Open Access Consumer. However, the Commission observed that it has not determined any Reactive Energy Charges and hence the issue was not adjudicated upon. In view of the judgment of the APTEL and also in view of the Supply Code and also in view of MYT Tariff Order cited above, the Commission has allowed the Petition filed by MIAL and directed the Distribution Licensee to provide PFI not only to the Petitioners in the said case, but also to other similarly placed consumers. It has been directed that the incentive for the past period should be adjusted in the bills of the consumers and that the same should be with applicable interest. This is a binding precedent and in view of this Judgment and order dated passed by the Commission in Case No.110 of 2017 in the case of Mumbai International Airport Pvt. Ltd. v/s. Tata Power Co. Ltd. (Distribution), it was incumbent on the MSEDCL to consider and allow the representations made by the Petitioners on The charts showing the amount of Power Factor Incentive due and payable to the Petitioners are annexed to the Petition MSEDCL has replied to the representations of the Petitioner. MSEDCL has rejected the representation on the sole ground that the Order passed by the Commission is only in respect of TPC-D consumers and not applicable to MSEDCL consumers. Hence, a clarification is necessary in this behalf. 8. MSEDCL reiterated the similar submissions dated 19 June, 2018, which is mentioned above at Para. 4. MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 18 of 48

19 9. At the hearing held on 20 June, 2018, the Petitioners in both the Cases (136 of 2017 and 137 of 2018) stated that their Advocate had not reached during the timing of hearing. The Commission adjourned both the matters. CASE No. 150 of Sudarshan Chemical Industries Limited (SCIL), Plot No. 40, MIDC, Dhatav Roha, Dist. Raigad (Maharashtra), Pin , has filed a Petition on 14 May, 2018 citing Sections 142, 146 & 149 of Electricity Act, 2003 (EA, 2003), Regulation 16.3 of DOA Regulations, 2016 for not allowing PFI on Open Access charges by MSEDCL. 11. SCIL s prayers are as below: 1. To admit this petition as per section 32 of DOA regulations, 2016 for settlement of dispute about PF incentive refund claim of our both the plants availed open access power during the period from Sept-2013 to Dec-2016., Total amount of claim along with accrued interest may be paid by crediting in our ensuing monthly energy bill. 2. As per Commission s Order dt for Case No. 110 of 2017 MIAL Vs TPC and APTEL s judgment dt for Case No. 36 of 2018, power factor incentives is equally applicable on the OA charges collected by Licensees. To avoid discrimination, the MSEDCL may also be directed to pay the PF incentive due to us on the open access charges (Transmission charges, Wheeling loss/charges, CSS & Addl. SC etc.) collected. 3. To pay the interest applicable till date of credit on power factor incentive amount due for refund at bank rate permissible u/s 62(6) of Electricity Act, To impose penalty on the respondent as worked out as per section 142, 146 & 149 of Electricity Act 2003 for contravention of power factor Incentive Clause No of DOA Regulations, 2016 and also Section-45 of Electricity Act, To compensate towards mental agony, stress, travelling expenses and other misc. expenses, the licensee may be asked to pay ts.1.0 lakh. 6. To permit us to make further submission, addition & alteration in this petition as may be required from time to time. 7. To condone any error/omission and give us opportunity to rectify the same during the course of proceedings. 8. To pass any such order by Hon. Commission which may be in the interest of consumer & justice by safeguarding rights of the consumers 12. The Petitioner states that: MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 19 of 48

20 12.1 Sudarshan Chemical Industries Limited (SCIL).had availed Short Term Open Access (STOA) for its two different plants during the period from September, 2013 onwards as below. Plant Location/ Consumer No. Sudarshan Chemical Industries Limited Plot No. 40, MIDC, Dhatav, Roha, Dist. Raigad Consumer No: ) Sudarshan Chemical Industries Limited Plot No. A-19/1+2, MIDC Estate, Mahad, Dist- Raigad Consumer No: Open Access Duration Sept-2013 to Nov-2016 Conventional Power Sept-2013 to Dec-2016 Conventional Power 12.2 SCIL had paid MSEDCL Open Access charges such as Transmission charges, Wheeling Chargers, Cross Subsidy & Additional surcharges as per the directions issued by Commission. Although it maintained Power Factor to unity by investing in the capacitor banks, SCIL has not received PFI from MSEDCL on the Open Access charges paid Distribution Open Access Regulation 2005, 2014 & 2016 provides PF incentive & penalty for maintaining desired Power Factor, the relevant extract is reproduced below: Power Factor / Harmonics: It shall be obligatory for the Connector to maintain the average power factor of his load at levels prescribed by the Indian Electricity Rules, 1956 with such variations, if any, adopted by the Distribution Licensee in accordance with Rule 27 of the Indian Electricity Rules, 1956 and in accordance with the relevant orders of the Commission. It shall be obligatory for the Connector to control harmonics of his load at levels prescribed by the IEEE STD , and in accordance with the relevant orders of the Commission. The Distribution Licensee may require the Connector, within a reasonable time period, which shall not be less than three (3) months, to take such effective measures so as to raise the average power factor or control harmonics of his installation to a value not less than the prescribed norm: MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 20 of 48

21 Provided that the Distribution Licensee may charge penalty or provide incentive for low / high power factor and for harmonics, in accordance with relevant orders of the Commission 12.4 Although it has maintained Power Factor nearer to Unity during the above mentioned period of Open Access, MSEDCL failed to provide PFI as admissible under the Regulations & Tariff orders issued from time to time. Hence MSEDCL has violated Regulations16.3 of the DOA Regulations, Power Factor Incentive approved by the Commission in all previous Tariff Orders is as follows: Power Factor Incentive as per MYT tariff Order dt , Case No. 48 of 2016: Power factor Incentive Applicable for HT-I :Industry, HT II - Commercial, HT- III: Railways, Metro & Monorail, HT-IV : PWW, HT-V: Agriculture, HT-VI: Group Housing Society, HT VIII - Temporary Supply, HT IX: Public Service, LT II: Non-Residential/Commercial [LT II (B), LT II (C)], LT III: Public Water Works, LT V (A) (ii): Industry Powerlooms (above 20 kw), LT V (B) (ii): Industry General (above 20 kw), LT X : Public Services [LT X (A) (ii), LT X (A) (iii), LT X (B) (ii) and LT X (B) (iii) categories]. 2. 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 : Sr. No. Range of Power Factor Power factor Level Incentive to % to % to % to % to % to % 12.6 Thus, the PFI should have been given to us as per the above table, excluding taxes and duties. However, it is not been allowed by MSEDCL on the Open Access charges (Transmission charges, Wheeling loss/charges, CSS & Addl. SC etc.) paid through energy bills for the power availed through Open Access from Traders The Commission has passed Order dated 28 November, 2017 on the similar issue of MIAL against Tata Power Co, in Case No. 110 of The Commission in the Order MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 21 of 48

22 directed as 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 Tata Power had challenged the above Commission s Order with APTEL vide IA No. 192 of 2018 and demanded stay on impugned order in Appeal No. 36 of The APTEL vide judgment dated denied to grant stay on implementation of impugned Order Based upon decision of the Commission for Case No. 110 of 2017, it has filed an application with MSEDCL, Pen office on dt and Mumbai office on for refund of PFI on the Open Access charges paid during the period mentioned above. It had received letter dt from Chief Engineer Commercial, in which it was communicated that the directives given in Order of case No. 110 of 2017 are applicable to TPC-D and it doesn t specify for consumers of MSEDCL As per Regulation 32 of DOA Regulations, 2016, any dispute under these Regulations shall be adjudicated upon by the Commission. Hence this Petition is being filed with Commission for settlement of dispute/ grievance instead of approaching to CGRF/ Ombudsman under Regulations, CGRF, Nasik in its Order dated 14 December, 2017 in Case No. 630/ in the Grievance of Open Access consumers M/s Jindal Poly Films Limited, Nashik., has held as: As per the provision made in section 32 of DOA Regulations, it is being dispute regarding charging of demand charges (DOA & TOA Regulations), this forum has got no jurisdiction to resolve it, hence the consumer is advised to approach the Commission for the same Although; Open Access consumer, partly sourced power requirement from sources other than MSEDCL, it used the distribution system of the Licensees for wheeling of Open Access power. It also contributes reduction in system losses by maintaining Power Factor to Unity for which necessary infrastructure have been developed with huge investment. If the Petitioner has no incentive to maintain a high Power Factor, the distribution losses of MSEDCL would have gone up considerably and Distribution Licensees was responsible to take corrective measures to reduce the network losses. Further, Power Factor improvement can best be achieved if such measures are implemented at the consumer level. On this principle, the Power Factor Incentive / MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 22 of 48

23 Penalty provided in the MYT Order for consumers sourcing power from MSEDCL is equally applicable to the Open Access power sourced by us & contributed by way of Wheeling / Transmission Charges and Losses, CSS, and Additional Surcharge The 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 As per clause the MERC Supply Code Regulations, 2005, the surcharge referred to in Regulation 3 is the CSS payable by Open Access consumer is a part of the charges and, therefore, the incentive on Power Factor would also be applicable on this amount 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 purpose of providing higher PFI 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 The above analysis would show the 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 The Commission allowed PFI to the consumers of Tata Power (TPC) on the charges (Transmission charges, Wheeling loss/charges, CSS & Addl. SC etc.) payable by the Open Access consumers Total claim amount for both the plants is worked out as below: MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 23 of 48

24 Plant Location/ CN Period of Partial OA. Claim Amount Sudarshan Chemical Industries Limited Plot No. 40, MIDC, Dhatav, Roha, Dist. Raigad CN: ) Sudarshan Chemical Industries Limited Plot No. A-19/1+2, MIDC Estate, Mahad, Dist- Raigad CN: Sept-2013 to Nov-2016 Conventional Power Sept-2013 to Dec-2016 Conventional Power Rs.1,08,76,879/- + interest Rs.43,23,622/- + interest MSEDCL violated section 45 of Electricity Act, 2003 by not offering incentives as per the Regulations & Tariff fixed by the Commission, collecting the charges for electricity supplied by Distribution Licensee. 13. In its submission dated 22 June, 2018, MSEDCL stated that: 13.1 MSEDCL raised the following issues in the present Case: (i) Tata Power s Case (Case No. 110 of 2017) is completely different from that of MSEDCL. (ii) Whether the APTEL s Judgment dated 14 November, 2013 in Appeal No. 231 of 2012 is applicable to the facts of the present Case? (iii) Whether the Commission s Order dated 3 January, 2013 passed in Case No. 8 of 2012, Case No. 18 of 2012, Case No. 20 of 2012 and Case No. 33 of 2012 is binding Order? (iv) Can there be any retrospective effect of PFI as per the Order dated 28 November, 2017 passed in Case No. 110 of 2017? (v) Whether DOA Regulations, 2016 or the previous DOA Regulations, 2005 or 2014 envisages Power factor Incentive/Penalty on Open Access Consumers (Regulation 16) of the Connection Agreement? (vi) What is the real intent and purpose of Regulation 21 of the DOA Regulations, 2016 specifying the Reactive Energy Charges? (vii) When a separate charge Reactive Energy Charges is envisaged under the DOA Regulations, 2016 then why not fix the charge? (viii) Can a consumer who opts for Open Access still be considered as a consumer to the extent of Open Access? MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 24 of 48

25 (ix) Can a partial open access consumer seek the same benefits under the retail tariff order which are available to a normal consumer when such partial open access consumer is governed by a different regime i.e. DOAR, 2016? (x) Maintaining of Power Factor is a mandatory obligation cast upon a consumer. The consumer maintains the same out of operation of law. Moreover such consumers install equipment s before being Open Access consumers and subsequently shift to Open Access. Hence PFI cannot be made applicable to Open Access consumption more so when DOA Regulations, 2016 provides a different charge/penalty altogether Tata Power s Case in Case No. 110 of 2017 is completely different than that of MSEDCL: (a) The Order dated 28 November, 2017 in Case No. 110 of 2017 in the matter of Mumbai International Airport Private Limited Versus Tata Power Company Limited was passed in the specific facts and circumstances of that Case and cannot be treated as a Judgment in realm rather it a Judgment in personam. (b) The records of Case No. 110 of 2017 clearly reveal that Tata Power was charging/providing Power Factor Incentive/Penalty on the Regulatory Asset Charges since July, 2013 to April, (c) Neither MSEDCL has provided any Power Factor Incentive to Open Access consumers nor has MSEDCL levied any penalty on Open Access consumption. Hence Case No. 110 of 2017 cannot be strictly applied to the present Case Whether the APTEL s Judgment dated 14 November, 2013in Appeal No. 231 of 2012 is applicable to the facts of the present Case? (a) The Judgment dated 14 November, 2013 passed by the APTEL cannot be made applicable to the present case as the said Judgment was passed in the specific facts and circumstances of the case before the APTEL and after analyzing various provisions of the Haryana Electricity Regulatory Commission s Regulations. The major difference are as follows: (i) Existing metering was not adequate to record voltage during 15 minute time slot. (ii) There was no recording of the corresponding energy drawal during the period when the frequency at the metering point is below 97% or above 103%. (iii) In the absence of active corresponding figures of the Active Energy and the Reactive Energy available from the meter, it is not possible to draw proportion of the two figures which are for different time durations. (iv) The Active Energy figures recorded for the entire month cannot be compared with the Reactive Energy recorded for the specific time duration corresponding MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 25 of 48

26 to the specific variation in voltage at the metering point. (v) The Respondent Distribution Licensee in Haryana till date has been recovering penalty on the low Power Factor and penalty for exceeding Contract Demand on the sale of power including CSS form imbedded Open Access consumers. The Licensee cannot probate and approbate at the same time. Therefore, the State Commission cannot permit the Licensee, 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. (b) Hence it can be seen from the above that the facts and circumstances leading to passing of the above Judgments were completely different. In the present case at hand MSEDCL submits that all the metering arrangements are in place and hence the Reactive Energy Charges can be determined and levied without any hurdles. Moreover, there is no case of probating and approbating at the same time by MSEDCL as it has followed a consistent stand of not charging any penalty Power Factor penalty on Open Access consumption. (c) Moreover the observation of the APTEL at Para (II) of the operative part is based on the specific facts of the case and is not a Judgment in realm Whether the Commission s Order dated 3 January, 2013 passed in Case No. 8 of 2012, Case No. 18 of 2012, Case No. 20 of 2012 and Case No. 33 of 2012 is a binding Order? The Commission had clarified vide order dated 03 January, 2013 in the most unequivocal terms that PFI is only applicable to consumers of MSEDCL on the et energy supplied by MSEDCL and nothing beyond that. The relevant Para is reproduced as below: The Commission is of the view of that levy of penalty or provide incentives for various parameters as specified by the Commission in Tariff Schedule of the Tariff Order of MSEDCL from time to time (e.g., Power Factor incentive, Power Factor Penalty, Prompt Payment discount, etc.) shall be charged on the net energy supplied by MSEDCL to the open access consumer and captive user after adjusting the banked energy and actual generation during the month Can there be any retrospective effect of Power Factor Incentive as per the order dated passed in Case No. 110 of 2017? It has acted in complete compliance of the Order dated 03 January, 2013 passed in Case No. 8 of 2012, Case No. 18 of 2012, Case No. 20 of 2012 and Case No. 33 of 2012 by the Commission. Any new dispensation if allowed by the Commission can only be prospective as the earlier dispensation was governed by a Regulatory Order which was followed by MSEDCL. Hence, Power Factor Incentive is applicable to MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 26 of 48

27 Open Access, even if the same is made applicable, then the same has to be prospective and not retrospective Whether DOA Regulations, 2016 or the previous DOA Regulations of 2005 or 2014 envisages Power factor Incentive/Penalty on Open Access Consumers (Regulation 16) of the Connection Agreement? The reliance placed by the Petitioner on Regulation 16 of DOA Regulations, 2016 is completely incorrect as the same is a part of the model/sample Connection Agreement and not a Regulation under the DOAR, Moreover the model/sample Connection Agreement only governs the Generating Station/Licensee and not a consumer What is the real intent and purpose of Regulation 21 of the DOA Regulations, 2016 specifying the Reactive Energy Charges? While on one hand there is no specific provision to make the PFI applicable to Open Access on the other hand there is separate head created under the DOA Regulations, 2016 as Reactive Energy Charges which is applicable to Open Access consumers. Hence when the DOA Regulations, 2016 specifically provides for such charges then the same has to be specifically fixed by the Commission. This issue has also been acknowledged by the Commission in its Order dated passed in Case No. 110 of 2017 under Para 12. The Operative part is reproduced as below: 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 When a separate charge Reactive Energy Charges is envisaged under the DOAR, 2016 then why not fix the charge? Any charge which is not determined in accordance with the applicable principles and without a detailed study on the implication of such charge would certainly have a negative impact of MSEDCL. Hence, the nuances of PF and Reactive Energy although may seem to be similar but both of them are completely different as the charges terms applicable in money terms may be completely different. In such a case allowing PF to be applicable to Open Access consumers without studying the impact of the same would certainly cause a negative impact of MSEDCL and would in a way offset the other charges payable by the Open Access consumers. MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 27 of 48

28 13.9 Can a consumer who opts for Open Access still be considered as a consumer to the extent of Open Access? Once a consumer surrenders its load with MSEDCL to the tune of Open Access then he can no longer be treated as a consumer of MSEDCL to the tune of Open Access availed by it Can a partial Open Access consumer seek the same benefits under the retail Tariff Order which are available to a normal consumer when such partial Open Access consumer is governed by a different Regulatory regime i.e. DOA Regulations, 2016? A partial Open Access consumer cannot be equated to a retail consumer. While a retail consumer Tariff is fixed through a Tariff Order, a partial Open Access consumer s tariff is only fixed to the tune as to what he is liable to pay under the Electricity Act, 2003, DOA Regulations, 2016 as various charges on account of availing Open Access. Hence all these separate charges payable by an Open Access consumer is framed by a regulatory process after analyzing all aspects. However at present what is contented to be done is that the PF which is fixed for retail consumers shall be passed to Open Access consumers without determining the impact of the same. The same cannot be done without initiating a regulatory process Maintaining of Power Factor is a mandatory obligation cast upon a consumer (a) The consumers install equipment s before being Open Access consumers and subsequently shift to Open Access. Hence PFI cannot be made applicable to Open access consumption more so when DOA Regulations, 2016 provides a different charge/penalty altogether. (b) The whole argument made by the Petitioner of incurring high cost in installing equipment s for maintaining high Power Factor is completely incorrect. All these consumers have become Open Access consumers later in time and they all were normal retail consumers of MSEDCL in the beginning. Hence whatever equipment s they have installed, are under the mandate of law at the relevant point in time, when they were not Open Access consumers. (c) In case the Open Access consumer does not maintain the high Power Factor then he would be liable to the Reactive Energy penalty as will be determined by the Commission. Hence the Open Access consumer will be liable to any penalty as envisaged under law. (d) Maintaining of high Power Factor also helps the Open Access consumer in appropriating the maximum Open Access quantum wheeled. Hence arguments on the issue of high Power Factor leading to benefit to Grid and leading to low losses to MSEDCL is completely baseless and is rather opportunistic. MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 28 of 48

29 CASE No. 151 of Polygenta Technologies Limited (PTL), Gat No. 265/1-266, Village: Awankhed Tal- Dindori, Dist- Nashik , has filed a Petition on 14 May, 2018 citing Sections 142, 146 & 149 of Electricity Act, 2003 (EA, 2003), Regulation 16.3 of DOA Regulations, 2016for not allowing PFI on Open Access charges by MSEDCL. 15. PTL s prayers are as below: 1. To admit this petition as per section 32 of DOA regulations, 2016 for settlement of dispute about PF incentive refund claim of our both the plants availed open access power during the period from March-2016 to Dec-2016., Total amount of claim along with accrued interest may be paid by crediting in our ensuing monthly energy bill. 2. As per Commission s Order dt for Case No. 110 of 2017 MIAL Vs TPC and APTEL s judgment dt for Case No. 36 of 2018, power factor incentives is equally applicable on the OA charges collected by Licensees. To avoid discrimination, the MSEDCL may also be directed to pay the PF incentive due to us on the open access charges (Transmission charges, Wheeling loss/charges, CSS & Addl. SC etc.) collected. 3. To pay the interest applicable till date of credit on power factor incentive amount due for refund at bank rate permissible u/s 62(6) of Electricity Act, To impose penalty on the respondent as worked out as per section 142, 146 & 149 of Electricity Act 2003 for contravention of power factor Incentive Clause No of DOA Regulations, 2016 and also Section-45 of Electricity Act, To compensate towards mental agony, stress, travelling expenses and other misc. expenses, the licensee may be asked to pay Rs.50, 000/-. 6. To permit us to make further submission, addition & alteration in this petition as may be required from time to time. 7. To condone any error/omission and give us opportunity to rectify the same during the course of proceedings. 8. To pass any such order by Hon. Commission which may be in the interest of consumer & justice by safeguarding rights of the consumers 16. The Petitioner states that: 16.1 Polygenta Technologies Limited (PTL) availed STOA for its plants for the period from March 2016 to December, MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 29 of 48

30 16.2 PTL maintained Power Factor to unity by investing in the capacitor banks, and it has not received PFI from MSEDCL on the Open Access charges paid Distribution Open Access Regulation 2005, 2014 & 2016 provides PF incentive & penalty for maintaining desired Power factor. The relevant para. is reproduced below: Power Factor / Harmonics: It shall be obligatory for the Connector to maintain the average power factor of his load at levels prescribed by the Indian Electricity Rules, 1956 with such variations, if any, adopted by the Distribution Licensee in accordance with Rule 27 of the Indian Electricity Rules, 1956 and in accordance with the relevant orders of the Commission. It shall be obligatory for the Connector to control harmonics of his load at levels prescribed by the IEEE STD , and in accordance with the relevant orders of the Commission. The Distribution Licensee may require the Connector, within a reasonable time period, which shall not be less than three (3) months, to take such effective measures so as to raise the average power factor or control harmonics of his installation to a value not less than the prescribed norm: Provided that the Distribution Licensee may charge penalty or provide incentive for low / high power factor and for harmonics, in accordance with relevant orders of the Commission 16.4 Although PTL has maintained Power Factor nearer to Unity during the above mentioned period of Open Access, MSEDCL failed to provide PFI as admissible under the Regulations & Tariff Orders issued from time to time. Hence the MSEDCL violated Regulation 16.3 of DOA Regulations, Power factor incentive approved by Commission in all previous tariff orders is as follows: Power Factor Incentive as per MYT tariff Order dt , Case No. 48 of 2016: Power factor Incentive Applicable for HT-I :Industry, HT II - Commercial, HT- III: Railways, Metro & Monorail, HT-IV : PWW, HT-V: Agriculture, HT-VI: Group Housing Society, HT VIII - Temporary Supply, HT IX: Public Service, LT II: Non-Residential/Commercial [LT II (B), LT II (C)], LT III: Public Water Works, LT V (A) (ii): Industry Powerlooms (above 20 kw), LT V (B) (ii): Industry General (above 20 kw), LT X : Public Services [LT X (A) (ii), LT X MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 30 of 48

31 (A) (iii), LT X (B) (ii) and LT X (B) (iii) categories]. 2. 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 : Sr. No. Range of Power Factor Power factor Level Incentive to % to % to % to % to % to % 16.6 Thus, the PFI should have been given to it as per the above table, excluding taxes and duties. However, it is not been allowed by MSEDCL on the Open Access charges (Transmission charges, Wheeling loss/charges, CSS & Addl. SC etc.) paid through energy bills for the power availed through Open Access from Traders The Commission has passed Order dated 28 November, 2017 on the similar issue of MIAL against Tata Power Co, Case No. 110 of The Commission in the order directed as 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 Tata Power had challenged the above Commission s Order with APTEL vide IA No. 192 of 2018 and demanded stay on impugned order in Appeal No. 36 of The APTEL vide Judgment dated 23 April, 2018 denied to grant stay on implementation of impugned Order Based upon decision of the Commission for Case No. 110 of 2017, PTL had filed application with MSEDCL, Nashik office on dt and Mumbai office for refund of PFI on the Open Access charges paid during the period mentioned above. PTL had not received any communication so far As per Regulation 32 of DOA Regulations, 2016, any dispute under these Regulations shall be adjudicated upon by the Commission. Hence this Petition is being filed with the Commission for settlement of dispute/ grievance instead of approaching to CGRF/ Ombudsman under Regulations, MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 31 of 48

32 16.11 Nashik CGRF vide its Order dated14 December, 2017 passed in Case No. 630/ in the Grievance of Open Access consumers M/s Jindal Poly Films Limited has. ruled that: As per the provision made in section 32 of DAA Regulations, it is being dispute regarding charging of demand charges (DOA & TOA Regulations), this forum has got no jurisdiction to resolve it, hence the consumer is advised to approach the Commission for the same PTL is Open Access consumer, partly sourced power requirement from sources other than MSEDCL. PTL contribute reduction in system losses by maintaining power factor to Unity for which necessary infrastructure has been developed with huge investment. If PTL have no incentive to maintain a high Power Factor, the distribution losses of the Distribution Licensee would have gone up considerably and Distribution Licensees was responsible to take corrective measures to reduce the network losses. Further, 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 MSEDCL is equally applicable to the Open Access power sourced by it & contributed by way of Wheeling / Transmission Charges and Losses, CSS, and Additional Surcharge The 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 As per Regulation of Supply Code Regulations, 2005, the surcharge referred to in Regulation 3 is the CSS payable by Open Access consumer is a part of charges and, therefore, the incentive on Power Factor would also be applicable on this amount 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 purpose of providing higher PFI 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. MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 32 of 48

33 16.16 The above analysis would show the 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 The Commission allowed PFI to the consumers of Tata Power (TPC) on the charges (Transmission charges, Wheeling loss/charges, CSS & Addl. SC etc.) payable by the Open Access consumers. In the same line we appeal to allow PFI on the OA charges paid to MSEDCL along with the interest charges applicable u/s 62(6) of Electricity Act, This will avoid discrimination in the same state of Maharashtra amongst the consumers of different license Total claim amount for the plant is Rs.19, 62,886/- and interest for the period March 2016 to December, MSEDCL violated section 45 of Electricity Act, 2003 by not offering incentives as per the Regulations & Tariff fixed by the Commission, collecting the charges for electricity supplied by Distribution Licensee. 17. MSEDCL in its submission dated 22 June, 2018 reiterated the similar submission as mentioned above at Para. 13. CASE No. 155 of ETCO Industries Pvt. Ltd. (ETCO) Plot No. B-2 & B-3, MIDC, Parbhani, Dist- Parbhani has filed a Petition on 14 May, 2018 citing Sections 142, 146 & 149 of Electricity Act, 2003 (EA, 2003), Regulation 16.3 of DOA Regulations, 2016 for not allowing PFI on Open Access charges by MSEDCL. 19. ETCO s prayers are as below: 1. To admit this petition as per section 32 of DOA regulations, 2016 for settlement of dispute about PF incentive refund claim on OA charges for power availed through open access during the period from June-2015 to Nov Total amount of claim along with accrued interest may be paid by crediting in our ensuing monthly energy bill. MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 33 of 48

34 2. As per Commission s Order dt for Case No. 110 of 2017 MIAL Vs TPC and APTEL s judgment dt for Case No. 36 of 2018, power factor incentives is equally applicable on the OA charges collected by Licensees. To avoid discrimination, the MSEDCL may also be directed to pay the PF incentive due to us on the open access charges (Transmission charges, Wheeling loss/charges, CSS & Addl. SC etc.) collected. 3. To pay the interest applicable till date of credit on power factor incentive amount due for refund at bank rate permissible u/s 62(6) of Electricity Act, To impose penalty on the respondent as worked out as per section 142, 146 & 149 of Electricity Act 2003 for contravention of power factor Incentive Clause No of DOA Regulations, 2016 and also Section-45 of Electricity Act, To compensate towards mental agony, stress, travelling expenses and other misc. expenses, the licensee may be asked to pay Rs.50, 000/-. 6. To permit us to make further submission, addition & alteration in this petition as may be required from time to time. 7. To condone any error/omission and give us opportunity to rectify the same during the course of proceedings. 8. To pass any such order by Hon. Commission which may be in the interest of consumer & justice by safeguarding rights of the consumers. 20. The Petitioner states that: 20.1 ETCO Industries Pvt. Ltd. (ETCO) has availed STOA power for its plant during the period from June, 2015 to November, ETCO has maintained Power Factor to unity by investing in the capacitor banks; it has not received any PFI from MSEDCL on the Open Access charges paid Distribution Open Access Regulation 2005, 2014 & 2016 provides PF Incentive & penalty for maintaining desired Power Factor, the relevant para. is reproduced below: Power Factor / Harmonics: It shall be obligatory for the Connector to maintain the average power factor of his load at levels prescribed by the Indian Electricity Rules, 1956 with such variations, if any, adopted by the Distribution MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 34 of 48

35 Licensee in accordance with Rule 27 of the Indian Electricity Rules, 1956 and in accordance with the relevant orders of the Commission. It shall be obligatory for the Connector to control harmonics of his load at levels prescribed by the IEEE STD , and in accordance with the relevant orders of the Commission. The Distribution Licensee may require the Connector, within a reasonable time period, which shall not be less than three (3) months, to take such effective measures so as to raise the average power factor or control harmonics of his installation to a value not less than the prescribed norm: Provided that the Distribution Licensee may charge penalty or provide incentive for low / high power factor and for harmonics, in accordance with relevant orders of the Commission 20.3 ETCO has maintained Power Factor nearer to unity during the above mentioned period of Open Access, MSEDCL has failed to provide PF Incentive as admissible under the Regulations & Tariff orders issued from time to time. Hence MSEDCL violated Regulation 16.3 of DOA Regulations, Power factor incentive approved by the Commission in all previous Tariff Orders is as follows: Power Factor Incentive as per MYT tariff Order dt , Case No. 48 of 2016: Power factor Incentive Applicable for HT-I :Industry, HT II - Commercial, HT-III: Railways, Metro & Monorail, HT-IV : PWW, HT-V: Agriculture, HT- VI: Group Housing Society, HT VIII - Temporary Supply, HT IX: Public Service, LT II: Non-Residential/Commercial [LT II (B), LT II (C)], LT III: Public Water Works, LT V (A) (ii): Industry Powerlooms (above 20 kw), LT V (B) (ii): Industry General (above 20 kw), LT X : Public Services [LT X (A) (ii), LT X (A) (iii), LT X (B) (ii) and LT X (B) (iii) categories]. 2. 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 : Sr. No. Range of Power Factor Power factor Level Incentive to % to % MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 35 of 48

36 to % to % to % to % 20.5 Thus, the PFI should have been given to ETCO as per the above table, excluding taxes and duties. However, it is not been allowed by MSEDCL on the Open Access charges(transmission charges, Wheeling loss/charges, CSS & Addl. SC etc.) paid through energy bills for the power availed through Open Access from Traders The Commission has passed order dt.28/11/2017 on the similar issue of MIAL against Tata Power Co, Case No. 110 of The Commission in the Order directed as 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 Tata Power had challenged the above Commission s Order with APTEL vide IA No. 192 of 2018 and demanded stay on impugned order in Appeal No. 36 of The APTEL vide judgment dated denied to grant stay on implementation of impugned Order Based upon decision of the Commission for Case No. 110 of 2017, ETCO had filed application with MSEDCL, Parbhani office (on dt ) and Mumbai office for refund of PFI on the Open Access charges paid during the period mentioned above. ETCO had not received any communication so far As per Regulation 32 of DOA Regulations, 2016, any dispute under these regulations shall be adjudicated upon by the Commission. Hence this petition is being filed with the Commission for settlement of dispute/ grievance instead of approaching to CGRF/ Ombudsman under Regulations, Nashik CGRF vide its Order dated in Case No. 630/ in the Grievance of open Access consumers M/s Jindal Poly Films Ltd. ruled that: As per the provision made in section 32 of DAA Regulations, it is being dispute regarding charging of demand charges (DOA & TOA Regulations), this forum has got no jurisdiction to resolve it, hence the consumer is advised to approach the Commission for the same. MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 36 of 48

37 20.11 Although; ETCO is an Open Access consumer, partly sourced power requirement from sources other than MSEDCL, it used the distribution system of the Licensees for wheeling of OA power. ETCO also contribute reduction in system losses by maintaining Power Factor to unity for which necessary infrastructure have been developed with huge investment. If ETCO has no incentive to maintain a high Power Factor, the distribution losses of MSEDCL would have gone up considerably and Distribution Licensees was responsible to take corrective measures to reduce the network losses. Further, 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 MSEDCL is equally applicable to the Open Access power sourced by us & contributed by way of Wheeling / Transmission Charges and Losses, CSS, and Additional Surcharge The 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 As per Regulation of Supply Code Regulations, 2005, the surcharge referred to in Regulation 3 is the CSS payable by Open Access consumer is a part of charges and, therefore, the incentive on Power Factor would also be applicable on this amount 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 purpose of providing higher PFI 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 The 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 MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 37 of 48

38 of power. Accordingly, power factor rebate is payable to the consumer who also avails Open Access On the above points, the Commission allowed power factor incentive to the consumers of Tata Power (TPC) on the charges (Transmission charges, Wheeling loss/charges, CSS & Addl. SC etc.) payable by the Open Access consumers Total claim amount for both the plants is Rs.3, 245,568/- and interest for the period June 2015 to November, MSEDCL violated section 45 of Electricity Act, 2003 by not offering incentives as per the Regulations & Tariff fixed by the Commission, collecting the charges for electricity supplied by Distribution Licensee. 21. MSEDCL in its submission dated 22 June, 2018 reiterated the similar submissions as mentioned above at Para At the hearing held on 25 June, 2018, the Commission heard the combined Cases as mentioned above. The Advocate/Representatives of the Petitioners and Respondent reiterated their submissions as made in their Petitions/ Replies. On request of Petitioners in all five cases, the Commission granted a week time to file their Rejoinder submissions. 23. In its Rejoinder dated 28 June, 2018 in Case No. 150 of 2018, SCIL stated that: 23.1 SCIL has filed a Petition based upon Distribution Open Access Regulations, 2016 and also in support of the Commission s decision in Case No. 110 of MSEDCL violated the Regulations and Orders of the Commission The system of levy of Reactive Energy Charges on Open Access consumers has not been finalized by the Commission so far in Maharashtra The Order in Case No. 8 of 2012 related with wind energy for which banking is allowed. The views of the Commission regarding penalty and incentives are related with specific case of wind energy having provisions of banking. Any Regulations can t be changed or overruled by any Order The Commission in Order in Case No. 110 of 2017 allowed PF rebate for past period and these charges may be adjusted in the ensuing bill of MIAL and other such consumers along with applicable interest. MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 38 of 48

39 23.5 MSEDCL is misleading by saying that the clause 16 is a part of Connection Agreement only governs the Generating Stations and not the consumer. In this regards, definition 2.1 (13 of DOA Regulations, 2016 stipulates that: 2 (13) Connection Agreement means the agreement to be entered into on approval of grant of Connectivity between a Distribution Licensee and Generating Station or a captive generating plant or a Consumer or a Licensee, as the case may be; 23.6 From the above, it is clearly envisaged that Connection Agreement is also applicable for Distribution Licensee and a consumer. Hence, clause No of this agreements to be complied by MSEDCL It is wrong to say that allowing PF rebate will offset Open Access charges paid by the consumer. The table below shows Open Access charges paid by the consumers versus PF rebate admissible: Table 1: Open Access charges for 22 kv consumers for FY S.N. Open Access charges Rs. /Unit 1 Transmission Charges Wheeling Charges Cross Subsidy Surcharge Additional Surcharge 1.11 Total charges 4.06 For Unity PF, PF Incentive 7 % After comparing total Open Access charges paid to MSEDCL and PF rebate admissible, 93% of Open Access charges remains with MSEDCL, then by such small amount how PF rebate (7%) will offset the Open Access charges (93%) As per the definition of consumer i.e. Section 2 (15) and Section 42 (3) of Electricity Act, 2003, it is clear that partial Open Access user is a consumer of MSEDCL. Hence, retail tariff is also applicable with all other parameters of Tariff Order including CSS Wheeling Charges, Temporary charges, PF rebate etc. 24. In its Rejoinder dated 28 June, 2018 in Case No. 151 of 2018, PTL made similar submission as mentioned at Para. 23 above. 25. In its Rejoinder dated 28 June, 2018 in Case No. 155 of 2018, ETCO made the similar submission as mentioned at Para. 23 above. MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 39 of 48

40 26. In its Rejoinder dated 6 July, 2018 in Case No. 136 of 2017, Petitioners stated that : 26.1 The entire case of the Petitioners is not based on the Order dated 28 November, 2017 in Case No.110 of 2017 by the Commission, as contended by MSEDCL. Though the Petitioners claims parity on the basis of the said Order, that is not the sole ground on which the Petitioners bases its entire case. However, it is the prayer of the Petitioners that a similar Order passed in Case No.110 of 2017 be passed by the Commission in favour of the Petitioner above named in as much as the relevant facts of the present case are similar, if not identical with the case No.110 of 2017 decided by the Commission by Order dated The facts in Case No.110 of 2017 are not different, much less completely different, than that of MSEDCL. The Commission has already taken a view on this aspect insofar as the applicability of the Judgment of APTEL in Appeal No.231 of 2012 on 14 November, 2013 is concerned The Commission s Order dated 3 January, 2013 in Case No.8 of 2012, Case No.18 of 2012, Case No. 20 of 2012 and Case No. 22 of 2012 cannot be said to be a binding Orders insofar as the controversy in the present case is concerned. The nature and scope of proceedings before the Commission in the said cases are entire different than the scope and nature of the present Petition. In any case, after a Tariff Order has been issued by the Commission whereby the entitlement of consumer such as the Petitioner has been declared by the Commission, the Order dated 3 January, 2013 pales into insignificance. A similar Tariff Order has been interpreted by the Commission by an Order passed on 28 November, 2017 in Case No.110 of 2017 (MIAL v/s. TPC-D). Thus the earlier Order of the Commission dated 3 January, 2013 has no relevance or significance any longer There is no question of any retrospective effect of Power Factor Incentive being given inasmuch as the entitlement of the Petitioner arises and springs from the Tariff Order issued by the Commission and failure on the part of MSEDCL to comply with the Tariff Order and to extend the Power Factor Incentive to the Petitioner, though they are entitled for the same cannot be a ground to say that the effect is retrospective. On and from the date of passing of the Tariff Order, the consumers are entitled to Power Factor Incentive, provided they maintain Power Factor as specified by the Tariff Order at the prescribed percentage and above Reactive Energy Charges may be envisaged under the DOA Regulations 2016, no such charges have been fixed by the Commission in its wisdom. This is a non-issue as rightly held by the Commission in Order dated 28 November, 2017 in Case No.110 of MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 40 of 48

41 26.6 The incentive is granted for maintaining higher Power Factor and though he may be obligated to do so, once the Tariff provides for such incentive, it is the duty of the Licensee to extend the same to consumers who maintain the high Power Factor. In case the MSEDCL was not agreeable to such entitlement, the Tariff Order ought to have been challenged at the appropriate stage before the Appellate Tribunal for Electricity on this ground The Tariff Order has been effective over its period and now it is too late in the day for the Distribution Licensee to say that the consumers cannot be granted Power Factor Incentive. Further more, it is immaterial as to when the consumer installed the equipment in order to maintain a high Power Factor. The ultimate object in granting incentive is to benefit the system at large, so that more power is available for disposal at the system. It is a benefit to all concerned stake holders including the consumers and the licensees (Transmission, Distribution and Generation) The Order in Case No.110 of 2017 on lays down the principle on the basis of which Power Factor Incentive and its eligibility is to be determined. It cannot be said to be an Order passed in the specific facts and circumstances of that case. In any case, once it is demonstrated that the Tariff Order in respect of TPC-D is identically worded with the Tariff Order in respect of MSEDCL, there is no scope for declining the relief to similarly placed consumers such as the Petitioner The Commission in its full strength of three members including the Chairman presiding has ruled in favour of the consumers and all the objections that have been taken in the present case were dealt with in Case No.110 of 2017 by the Commission and therefore, under the doctrine of Stare Decisis, it is imperative that same relief be extended to similarly placed consumers The Commission s Order in Case No.110 of 2017 is passed not only on the Tariff Order passed in respect of TPC-D which is identical in terms with the Tariff Order passed in respect of MSEDCL, but it is also based upon the judgment of APTEL which lays down that entitlement for Power Factor Incentive is purely upon an engineering principle- in that the system benefits when the Power Factor is maintained as prescribed or at a higher level It is immaterial that the Licensee in Case No.110 of 2017 was charging/providing Power Factor Incentive/Penalty for a particular period and that later on it was discontinued. Denial of Power Factor Incentive despite entitlement was the cause of action in respect of Case No.110 of 2017 and is also the cause of action in respect of present Petitioner. The fact that TPC-D was earlier providing incentive for a particular MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 41 of 48

42 period and later on discontinued the incentive being provided is wholly immaterial in determining the issue before this Commission The APTEL Judgment dated 14 November, 2013 in Appeal No.231 of 2012 is applicable and binding inasmuch as principle laid down in the said Judgment squarely covers the controversy in the present case as also Case No.110 of 2017 decided by the Commission The Order dated 3 January, 2013 passed in Case No.8 of 2012, Case No.18 of 2012, Case No.20 of 2012 and Case No.33 of 2012 have no relevance or significance and are not applicable in determination of the controversy raised in the present Petition The issue as to whether Reactive Energy Charges under Regulation of 2016 can be a determining factor or not was dealt with in Case No.110 of 2017 by the Commission. The Commission has ruled that there is no determination of Reactive Energy Charges in the Multi Year Tariff Order and that the Licensees are at liberty to propose such determination The consumer who has opted for Open Access is still a consumer within the meaning of the Electricity Act and the Regulations. In any case, it has been ruled by the APTEL as well as the Commission that it is immaterial as to the source of power being drawn and whether the consumer is a Open Access Consumer or not, in determining the Power Factor Incentive entitlement. The only consideration is that grant of Power Factor Incentive would be based upon the principle that the system would benefit if a High Power Factor is maintained by the consumer and this has to be incentivized by the Distribution Licensee. Consequently, it is immaterial as to whether the consumer opts for Open Access or not. 27. In its Rejoinder dated 7 July, 2018 in Case No. 137 of 2018, Petitioners made similar submission as mentioned at Para. 26 above. Commission s Analysis and Ruling: 28. All these Petitioners have filed these Petitions seeking clarification as to whether they are entitled for PFI excluding taxes and duties on its Open Access consumption. All these Petitioners are consumers of MSEDCL and also have been availing power under Open Access. MSEDCL has been providing PFI to these consumers for the electricity consumption from MSEDCL. However, MSEDCL has not provided PFI on Open Access Consumption. MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 42 of 48

43 29. MSEDCL has opposed for the PFI on Open Access consumption and contented that: (a) The Order dated 28 November, 2017 in Case No. 110 of 2017 (in the matter of Mumbai International Airport Private Limited Versus Tata Power Company Limited) was passed in the specific facts and circumstances of that Case and cannot be treated as a Judgment in realm rather it a Judgment in personam. (b) MSEDCL has neither provided any Power Factor Incentive to Open Access consumers nor has levied any Penalty on Open Access consumption therefore Case No. 110 of 2017 cannot be applied to MSEDCL. (c) The APTEL Judgment dated 14 November, 2013 cannot be made applicable to the present Case as the said Judgment was passed in the specific facts and circumstances of the Case before the APTEL and after analyzing various provisions of the Haryana Electricity Regulatory Commission s Regulations. (d) Any charge which is not determined in accordance with the applicable principles and without a detailed study on the implication of such charge would certainly have a negative impact on MSEDCL. Hence, the nuances of PF and Reactive Energy although may seem to be similar but both of them are completely different as the charges applicable in money terms may be completely different. In such a case allowing PF to be applicable to Open Access consumers without studying the impact of the same would certainly cause a negative impact on MSEDCL and would in a way offset the other charges payable by the Open Access consumers. (e) Once a consumer surrenders its load with MSEDCL to the tune of Open Access then it can no longer be treated as a consumer of MSEDCL to the tune of Open Access availed by it. 30. The Commission notes the submission of MSEDCL that it has followed a consistent approach of not levying any Power Factor Penalty on Open Access consumption. The Commission also notes the submission of MSEDCL that it has been following the Commission s Order dated 3 January, 2013 in Case No. 8, 18, 20 and Case No. 33 of 2012 wherein the Commission has viewed that levy of penalty or provide incentives for various parameters as specified by the Commission in Tariff Schedule of the Tariff Order of MSEDCL from time to time (e.g., Power Factor incentive, Power Factor Penalty, Prompt Payment discount, etc.) shall be charged on the net energy supplied by MSEDCL to the Open Access consumer and captive user after adjusting the banked energy and actual generation during the month. MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 43 of 48

44 31. The Commission has dealt with the issue of Power Factor in Case No. 110 of 2017 as under: 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. 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 MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 44 of 48

45 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). 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. 32. The Commission notes that the contentions raised by MSEDCL have some merit as the cases cited by Petitioners, the Order of Commission in Case No. 110 of 2017 and APTEL Judgment in Appeal No. 231 of 2012 are on different footing. In both these cases, Distribution Licensees were either extending Power Factor Incentive to the Open Access consumers or were charging Penalty for low Power Factor. In the instant case, MSEDCL has not been extending any such incentive to the Open Access consumers using its distribution network nor levying any Penalty. It is true that Power Factor Incentive should be extended purely on engineering principles and should not be differentiated on source of supply of power. However, the issue of PFI to Open Access consumers in the Case No. 110 of 2017 and APTEL Judgment cannot be directly applied to this Case as MSEDCL has neither provided any Power Factor Incentive to Open Access consumers nor levied any Penalty on Open Access consumption in accordance with the Commission s earlier Order dated 3 January, MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 45 of 48

46 2013 in Case No. 8, 18, 20 and Case No. 33 of Admittedly the equipment installed by Petitioners is on account of statutory mandate as well as a continuation of past practice when they were full consumer of MSEDCL. Therefore, the Commission is inclined to accept submission of MSEDCL in this regard that the two cases referred by the Petitioners are not applicable to MSEDCL. 33. In view of the foregoing, the Commission clarifies that even if the Power Factor Incentive (or levy Power Factor Penalty, as the case may be) is applicable on the power sourced through Open Access in view of the APTEL Judgment only on engineering principles, it cannot be granted to the Petitioners and that too with retrospective effect for the reasons cited in above para No. 32. Further, the impact of providing such Incentives/ Penalties has not been considered in the MYT Order of MSEDCL and hence there is no ground for Petitioners to seek Power Factor Incentive in isolation of other provisions relating to reactive energy charges and other associated measures which have not yet been determined by the Commission. Therefore the Commission is not inclined to accept the prayers of the Petitioners for Power Factor Incentives without simultaneously making the Petitioner accountable for the incidences of low power factor including the correction of lead part of power factor whenever required. 34. On the issue of applicability of Reactive Energy Charges to Open Access consumers, the Commission notes that Regulation 16.4 of State Grid Code Regulations, 2006 provides the necessity of Reactive Power compensation as below: 16.4 Reactive Power Compensation Reactive Power compensation and/or other facilities shall be provided by Users, as far as possible, in the low voltage systems close to the load points thereby avoiding the need for exchange of Reactive Power to/from the InSTS and to maintain the InSTS voltage within the specified range Line Reactors may be provided to control temporary over voltage within the limits as set out in connection agreements The additional reactive compensation to be provided by the User shall be indicated by State Transmission Utility in the Connection Agreement for implementation Users shall endeavour to minimize the Reactive Power drawal at an interchange point when the voltage at that point is below 95% of rated voltage, and shall not inject Reactive Power when the voltage is above 105% of rated voltage. Interconnecting Transformer taps at the respective MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 46 of 48

47 drawal points may be changed to control the Reactive Power interchange as per a User s request to the State Load Despatch Centre, but only at reasonable intervals Regulation 21 of DOA regulations, 2016 provides the applicability of Reactive Energy charges as below: 21. Reactive Energy Charges 21.1The 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. 21.2The 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. 21.3The 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. 36. On the issue of rationalization of Power Factor Incentives, the Commission in its Order dated 3 November, 2016 in Case No. 48 of 2016 has held as below: 7.23Rationalisation of Power Factor Incentive Directive The Commission directs MSEDCL to study selected cases of PF (lead/lag) incentive/penalty along with their voltage profiles, and explore the possibility of implementing kvah metering for selected categories. MSEDCL should submit its study report along with case scenarios with its next Petition for Tariff determination. MSEDCL s Response The matter is under consideration and appropriate compliance is being submitted separately. Commission s Ruling As detailed in Chapter 8 of this Order, the Commission has kept the existing incentive/penalties structure unchanged. However, MSEDCL should submit its report with the MTR Petition. MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 47 of 48

48 37. It is pertinent to note that the Distribution Licensees have filed their Petitions for Mid Term Review of MYT for the third control period from to The Commission notes that, MSEDCL has proposed the kvah based billing for all HT consumers instead of Power Factor Incentive/ Penalty. Introduction of kvah billing will automatically ensure the commercial settlement for the Power Factor improvement to unity and thereof the reactive power compensation. The Commission may take a call on the issue of kvah billing during the Mid Term Review of MYT of MSEDCL. The Petitions of Spentex Industries Ltd. and CIMMCO Spinners in Case No. 136 of 2018, IndoCount Industries Ltd. and Pranavaditya Spinning Mills in Case No. 137 of 2018, Sudarshan Chemical Industries Ltd. in Case No. 150 of 2018, Polygenta Technologies Ltd. in Case No. 151 of 2018 and ETCO Industries Pvt. Ltd. in Case No. 155 of 2018 stands disposed of accordingly. Sd/- (Mukesh Khullar) Member Sd/- (Anand B. Kulkarni) Chairperson MERC Combined Order in Case No. 136, 137, 150, 151 and 155 of 2018 Page 48 of 48