Maharashtra State Power Generation Co. Ltd.(MSPGCL), the state generating company in Maharashtra submitted its petition for true up for FY 2014-15, provisional true up for FY 2015-16 and Multi-Year tariff(MYT) process for the Period from FY 2016-17 to 2019-20.Prayas studied MSPGCLs petition for the public hearing process and noted that the petition lacks crucial data asked for by consumer representatives during the technical validation session. Moreover several factors considered in the petition could lead to future increase of tariffs for consumers. In this context, the commission should deliberate the issues raised by consumer representatives during the public hearing as these issues can have significant tariff impact on consumers.

MSPGCL’s current petition has several shortcomings. Many uncontrollable costs have been underestimated and controllable costs have been overestimated. In all likelihood, this will lead to additional costs which will be passed on to consumers in subsequent years.

Prayas recently developed an excel based transparent model called RATE (Revenue And Tariff analysis for Electric utilities), which allows for constructing scenarios to analyze the impact of government policies, regulatory interventions and utility performance on electric utility finances. Such scenario-based analysis can also be used to investigate the impact of uncertainties such as varying fuel prices and open access migration, thus helping identify early warning signs and assisting in more informed decision making. Inputs to the model are mostly from data available through regulatory processes.
We used the RATE model to estimate impact of the shortcomings in MSPGCL petition on consumer tariffs. We estimate a 6% to 10% increase in future consumer tariffs solely due to these shortcomings, and these will most likely be passed on to consumers through the FAC mechanism. Therefore MSPGCL’s claims and projected performance trajectories need to be examined more closely and steps should be taken to minimise impact on consumers.

Another grave issue highlighted in our presentation is backing down of MSPGCL capacity by MSEDCL. As per analysis using the RATE model, backing down itself can result in up to 21% increase in per unit fixed costs of MSPGCL. Due to the magnitude of these impacts, it is our submission that Merit Order Despatch be ensured and the Commission initiate a study to evaluate the need to run high cost units for technical reasons.  As sales migration is bound to increase in the future it is our submission that commission and utilities evolve innovative methods to address the issue of surplus power and arrange for alternate mechanisms to reduce impact on consumers. In addition, given the flux in the state's power sector, the Commission should not allow MSEDCL to sign any more PPAs with MSPGCL until a public process is undertaken to determine the need for additional long term power after estimating MSEDCL's future demand in the face of open access and renewable energy options.For the capacity under construction, MSPGCL should look to sign medium term or long term PPAs with trading licensees or other DISCOMs.