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Petition
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Petition
requesting approval of Fuel & Other Cost Adjustment (FOCA formula
and Fuel & Other Cost Adjustment charge for increase in costs
during 2000-01
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Section
1. Background
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The tariff
for electricity had a component called Fuel Cost Adjustment
(FCA). The FCA included expenses on coai, furnace oil and other
oils consumed in the power stations together with cost of transportation
of fuel and'other incidental charges. It also included cost
on staff directly utilised on the coal handling equipment. The
FCA was determined on month to month basis on actual expenses
upto previous month and projected expenditure thereafter. :
The Government of Maharashtra (GoM) had appointed a Committee
under the Chairmanship of Shri V.G.Rajadhyaksha to make recommendations,
interalia, to improve the finances of Maharashtra State Electricity
Board (MSEB). In its Report, the Committee suggested that the
scope of the then existing Fuel Cost Adjustment component should
not only cover the incremental fuel and other related costs
but also cover other costs which were outside the control of
MSEB. The GoM accepted this recommendation of the Committee
and it directed MSEB to examine the legal aspects of expanding
the scope of the FCA. Subsequently, MSEB took legal opinion,
which indicated that in the light of the various courts' judgements
d the provisions of the Electricity (Supply) Act, 1948, the
Board could impose such a surcharge to recover additional costs
so as to maintain the statutory surplus as per provisions of
Section 59 of the Electricity (Supply) Act, 1948.
MSEB then submitted a proposal to GoM to expand the scope of
the then prevailing FCA to cover non -controllable elements
of costs which the Board proposed to call Fuel and 'Other Cost
Adjustment (FOCA). The GoM accepted MSEB's proposal and agreed
that FOCA should be introduced.
In its Tariff Order dated May 5, 2000, the Maharashtra Electricity
Regulatory Commission (MERC) has directed MSEB to provide data
related to the FCA every quarter. The MERC has also directed
that FCA should not be charged by MSEB ,vithout prior approval
of MERC and that the MERC would prescribe the methodology for
charging the FCA. Accordingly, MSEB has not charged any FCA
in the tariff during 2000-01 so far.
For the quarter ending June, MSEB submitted its calculations
for FCA to the Commission in the first week of August 2000.
For the quarter ending September 2000, data relating to FCA
was again submitted to the Commission in the last week of December
along with a proposal to charge FCA on consumption from the
month of December onwards up to March 2001. Following a meeting
with the Commission, various additional inputs were required
from MSEB, vide letter, dated 25/01/2001. Accordingly a revised
proposal including a generalised formula was submitted to the
Commission on February 12 2001. The revised proposal also included
updated calculations of FOCA for period May 2000 to December
2000 in accordance with the proposed formula. The Commission
issued a letter dated February 22, 2001 requiring, interalia,
a Supplementary Note providing certain details. The Supplementary
Note was submitted and discussions for two days were held on
March 12 and 13, 2001. During the discussions along with the
Commission members, Prayas and Thane Belapur Industries Association
also made suggestions on MSEB's proposal.
Accordingly, based on the discussions, this revised petition
for approval of FOCA formula, and FOCA calculation for the period
May to December is being submitted.
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Section
2. Objective of FOCA: |
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MSEB's
tariffs for an ensuing year would be determined by MERC based
on the estimated costs for the ensuing year. In estimating
the costs, a number of asumptions are made. The actual costs
incurred by MSEB may be different from the estimated costs based
on the assumptions. The Fuel and Other Cost Adjustment (FOCA)
formula is being designed to enable adjustments in tariffs to
reflect changes in costs that are due to reasons beyond MSEB's
control. This is in accordance with the "cost plus" philosophy
of tariffs, reficcted in Section 59 of Electricity Supply Act
(1948). |
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