The section 43 (A) of the Electricity Act deals with efficient supply of electricity. MERC, which was hearing the MSEB's proposal of fuel and other cost adjustment (FOCA) charges, wanted to know whether its PPA with the DPC meets these conditions and also whether it was legally tenable.

MERC chairman P Subrahamaniam and its member Jayant Deo wanted to know whther the PPA was legally enforceable. MSEB accounts member A Krishna Rao, who led the team of officials, assured the MERC that it would file the necessary affidavit in this regard as early as possible. He, however, brought to the notice of the MERC that the PPA has been cleared not only by the state government, but also by the Central Electricity Authority (CEA).

He said that the MSEB has been making the payment of power purchase bills as per the provisions of the PPA.

Mr Subrahamaniam and Mr Deo also wanted the MSEB to clarify how the fixed cost of power purchase from DPC varies on account of the US inflation indices. The fixed cost also varies due to fluctuations in the rupee/dollar exchange rate, Indian inflation indices, and number of hours in a month.

Simultaneously, the MERC chairman and Mr Deo asked the MSEB how the fixed cost, which was permissible at Rs 85 crore per month has gone up to Rs 95 crore during power purchase from DPC. They also wanted to know whether the MSEB has crossed the limit of 3,044 million units of Dabhol power purchase prescribed in the May 5, 2000, tariff order, while not going in for cheap power.

On variable cost of power for DPC, the MSEB said that it has worked out on an hour to hour basis as it gives hour to hour dispatch instructions to DPC.

As far as the variable cost of plants run by the National Thermal Power Corporation and Nuclear Power Corporation is concerned, the variable cost is based on variable charges as fixed by the Centre, the power ministry, subject to fuel price adjustments which are determined through a specific formula.

On MSEB's transmission and distribution (T&D) losses of 40 per cent, Mr Subrahamaniam and MERC member Mr Venkat Chary criticised the board for its inefficiency in its reduction. Mr Chary referred to the MSEB's projection of T&D losses increasing up to 65 per cent in the coming future and asked the MSEB to term it separately as "theft surcharge" while recovering the bills.

The MERC asked the MSEB to rework the FOCA proposal in a bid to make it more simple and intelligible for its benefit as well as for the consumers. It directed the MSEB to come up with the simplified proposal by March 23, on which it would continue further hearing.