Mumbai Power Mess: The Greatest Ever Mockery of Public Interest. By Mohit Jadhav, Advocate, High Court

confidential 2 An Act to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalisation of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, constitution of Central Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto. Preamble of Electricity Act 2003

confidential 3 How to paint Competition? MERC claims to be the only regulator to introduce competition in Mumbai. Function of MERC is also to protect Consumer’s Interest …. Are they?

confidential 4 Mumbai – Power Suppliers. It is evident from above that only Tata Power can compete with BEST and Reliance This situation is undesirable for following reasons:  Tata Power’s tariffs are at 50% discount to its competition hence competition is only tariff based  Tata Power can choose to refuse the cross-subsidized categories of consumers as they already are with their competitors  Tata Power is in generation as well in distribution. Hence it will try to allocate more power to its own distribution arm which is competing with other suppliers BEST: Supplies electricity to Mumbai island Reliance Energy: Supplies electricity to Mumbai Suburban consumers Tata Power Company: has license to supply electricity to both Mumbai island and suburbs MSEDCL: supplies electricity to Mulund and Bhandup

confidential 5 Only Tariff Based Competition Consumer Category Energy Charge (Rs./unit) RelianceTPCBEST LT – Residential Above LT- Commercial LT-Industrial HT – Housing HT – Industry HT- Commercial Is there a competition when one supplier is 50% cheaper than the competitor ? Should MERC encourage competition only for the sake of it? Is the time ripe for competition?

confidential 6 Consumer Migration Then Who is changing their power supplier and Why? Statistics reveals: 38% of total High Tension Commercial consumers opt to shift. 25% for High Tension Industries opt to shift. 30% of total Low Tension Commercial consumers opt to shift. Reasons A carrot of cheapest tariffs for commercial and industrial consumers coupled with Tata Power’s Marketing & Sales efforts to get them on priority basis. What about and for, You & I, In This Beautiful Mumbai.

confidential 7 Changing supplier. Obviously consumers from industrial & commercial side or those having high usage in domestic side would prefer changing their power supplier to obtain benefits of heavy tariff difference. Tata Power targets such consumers on top priority, as the Airport Authority seen changing its supplier on very first day. Why not others, who are the real beneficiaries and burdened with heavy power tariffs for years together. But unfortunately Tata Power made all efforts to stop Common Man / Residential Consumers to migrate … How? Let us see.

confidential 8 Consumer Rejection Tata Power way of rejecting Unwanted Consumers: No infrastructure created in last two years despite favouring SC Order in 2008….. Why? Where are Customer Care Centres, Bill Payment Facilities, Complaints Centres to lodge power supply interruption complaints? What compliance Commission has taken? No proper dissemination of information on the existence; rather, the existing information was removed….. Why? Is it not the violation of MERC Order dtd 15 th June 2009? What is MERC’s take on this? All payments accepted via cheque only. How many consumers from slum areas who earn their bread and butter on daily basis maintain bank account? Is the company, who is a well known CSR master, unaware with this fact? Or a sheer avoidance. Low consumption consumers discouraged by TPC officials on the grounds of Tata’s high FAC etc Common consumes with less usage of power have to undergo a Metal Detector Test, i.e., getting power connection is subject to stringent checks and multiple visits. Min Security Deposit of Rs 1000/ - which was later on waived. This was under which rule or regulation or law? And was this with Commissions’ go ahead since Commission has not initiated any action against several complaints made to them? Signing of agreement for min 5 yrs which was later waived. Was this not an attempt to create another monopoly? Was this not an attempt to deny consumers their legitimate right to choose their power suppliers?

confidential 9 Tata: Reliance did not sign PPA Reliance: Tatas backed out after committing to meet their load till 2014 Who is telling the truth? Should consumer suffer because of the corporate fight? Is Tatas abusing their dominant position as a generator by killing the competitor?

confidential 10 Who is dominating the situation? You only judge ……. MERC thought of ending monopoly of BSES/Reliance for several yrs on distribution side only ….. But, simultaneously, it gave birth to another Monopoly of Tata Power in Generation. …. How? Just see below: Objection was raised for existing Dahanu Power Station. Thanks to the GoM; it didn’t work. But strategically, proposed power project of 495 MW at Palghar; 495 MW at Saphale; 360 MW at Deonar were objected in all Forums with a Commitment of Supplying and managing growing demand of entire Mumbai upto Despite the known facts of growing demand for power seen due to the heavy population inflows, real estate developments, etc. every year and against the self commitment, Tata Power added merely 250 MW in last 15 years; and now it is proved that even that power is going out Mumbai and pockets of Share holders of Tata Power are being filled instead of benefiting Mumbai consumers.

confidential 11 Section 60: The Appropriate Commission may such issue directions as it considers appropriate to a licensee or a generating company if such licensee or generating company enters into any agreement or abuses its dominant position or enters into a combination which is likely to cause or causes an adverse effect on competition in electricity industry Abusing its dominant position Tata signing 100 MW PPA with BEST in Nov 2009 and refusing to sign PPA with Reliance in May Is its abuse of its freedom as a generator? Tatas unilateral allocation of its capacity to its own distribution arm and BEST impacts the tariffs of Reliance inturn its ability to compete

confidential 12 Subsidy Power Play Who is Cross Subsidized today in Mumbai? The Selected High End Commercial/ Industrial Consumers of Tata Power Or Mass based Residential Consumers of Reliance Energy….. Let us Understand in Details

confidential 13 Subsidy What is Cross Subsidy? Residential Consumers are cross subsidized by Commercial / Industrial Consumers Reliance serves ~22 lakh residential consumers consuming below 300 units per month i.e. ~ 75% of total Reliance consumers and these consumers are subsidized by high end commercial and industrial consumers. Because of the saliently unique mixed categories of consumers, burden of Cross Subsidy in suburban Mumbai is at the peak and has almost crossed a figure of Rs.1000 Crs.

confidential 14 Subsidy Why is Cross Subsidy an issue now? Cross Subsidy depends on Consumer Mix as Tariffs are based on Consumer Type Shift in Consumer Mix increases or decreases Cross Subsidy based on which way the consumer mix is tilting Parallel License in Mumbai came into effect the day Tata started retailing 85% of Tariff is Cost of Power. Cost of Power is Controlled by Tata being a Monopolistic Dominant Generator for Mumbai MERC has to intervene in the matter of loss of Cross Subsidy due to Migration. Cross subsidy charge is one answer Regulated (cheaper) electricity is being diverted to luxurious use by consumers with paying capacity at the cost of poor consumers who use electricity for their bare essentials

confidential 15 Result: Chaotic Mess of Migrating Cross Subsidy

confidential 16 In this messy situation ….What we can hope, is nothing but the only Dark Future….

confidential 17 1)Don’t encourage competition just for the heck of it 2)In case competition is to stay here please make mechanisms which will ensure there is no predatory competition. 3)Protection of consumer interest should be also given the same amount of importance as compeition 4)Mechanism to compensate for Loss of Cross subsidy is MERC Responsibility to ensure Residential Consumers with lower paying capacity are not adversely affected Role of MERC

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