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1 Public Hearing Presentation Reliance Energy Limiteds Multi Year Tariff (MYT) Petition MERC Case Nos. 73, 74 & 75 of 2006 21 st March, 2007 by Sandeep.

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Presentation on theme: "1 Public Hearing Presentation Reliance Energy Limiteds Multi Year Tariff (MYT) Petition MERC Case Nos. 73, 74 & 75 of 2006 21 st March, 2007 by Sandeep."— Presentation transcript:

1 1 Public Hearing Presentation Reliance Energy Limiteds Multi Year Tariff (MYT) Petition MERC Case Nos. 73, 74 & 75 of st March, 2007 by Sandeep N. Ohri M.Com, CA. Member, Bombay Small Scale Industries Association

2 2 Endorsements Submission/Prayers endorsed by Bombay Small Scale Industries Association Submission/Prayers endorsed by Bombay Small Scale Industries Association Regd Association (7000+ members), Non-profit, Non- political, NGO, Approved by the Ministry of SSI Regd Association (7000+ members), Non-profit, Non- political, NGO, Approved by the Ministry of SSI Also by other Industrial Estates (2500+ units) Also by other Industrial Estates (2500+ units) Guru Gobind Singh (130) Shreyas (174) Guru Gobind Singh (130) Shreyas (174) New Satguru Nanik (100) Universal (98) New Satguru Nanik (100) Universal (98) Bombay Talkies (850)Satguru (150) Bombay Talkies (850)Satguru (150) Mittal (250)Sidhpura (50) Mittal (250)Sidhpura (50) Laxmi (350)Ghatkopar (110) Laxmi (350)Ghatkopar (110) Virwani (350)Sainath 1&2 (55) Virwani (350)Sainath 1&2 (55) Mungekar (55)Bhola Bhagwan (56) Mungekar (55)Bhola Bhagwan (56) Jai Bonanza (450)Majethia (50) Jai Bonanza (450)Majethia (50) Shah (85)Shivaji (25) Shah (85)Shivaji (25) Balaji (28)Sharma (35) Balaji (28)Sharma (35)

3 3 Endorsements Presenting on behalf of H-West Ward (Khar) Residents Association having lakhs of consumers Presenting on behalf of H-West Ward (Khar) Residents Association having lakhs of consumers Presenter is also the Moderator of bijlee – a discussion eGroup at YahooGroups Presenter is also the Moderator of bijlee – a discussion eGroup at YahooGroups

4 4 Tariff Fixing Procedures The State Commission to determine the Tariff The State Commission to determine the Tariff Section 86 (1) (a) Section 86 (1) (a) Tariff CANNOT be fixed without considering all suggestions and objections received from the public Tariff CANNOT be fixed without considering all suggestions and objections received from the public Section 64 (3) Section 64 (3) Tariff fixing has to involve safeguarding of consumers interest Tariff fixing has to involve safeguarding of consumers interest Section 64 (1) (d) Section 64 (1) (d) The Commission shall ensure transparency while exercising its powers and discharging its functions The Commission shall ensure transparency while exercising its powers and discharging its functions Section 86 (3) Section 86 (3)

5 5 The License Assignment Issue

6 6 The Suburban License The License for the Mumbai Suburban area is called The Bombay Suburban Electric License, 1926 The License for the Mumbai Suburban area is called The Bombay Suburban Electric License, 1926 It was granted to M/s Killick, Nixon & Company and M/s Callenders Cable & Construction Company Limited on 29 th May, 1926 It was granted to M/s Killick, Nixon & Company and M/s Callenders Cable & Construction Company Limited on 29 th May, 1926

7 7 1926: The License

8 8 1930: The Assignment Assigned to The Bombay Suburban Electric Supply Company Limited on 13 th May, 1930 Assigned to The Bombay Suburban Electric Supply Company Limited on 13 th May, 1930 New company formed just to take over the whole operation of the old business New company formed just to take over the whole operation of the old business Condition imposed by Government: Condition imposed by Government: No future assignment was allowed, without prior written permission No future assignment was allowed, without prior written permission

9 9 The Assignment Condition

10 10 Other Conditions At any time after commencement of this License, the Licensee may, with the previous consent in writing from the Government and subject to the compliance with such conditions upon which such consent may be given, assign this License, and transfer the whole of their undertaking... At any time after commencement of this License, the Licensee may, with the previous consent in writing from the Government and subject to the compliance with such conditions upon which such consent may be given, assign this License, and transfer the whole of their undertaking... Clause 14, Bombay Suburban Electric License, 1926 Clause 14, Bombay Suburban Electric License, 1926 No licensee shall at any time assign his license or transfer his utility, or any part thereof, by sale, lease, exchange or otherwise without the prior approval of the Appropriate CommissionNo licensee shall at any time assign his license or transfer his utility, or any part thereof, by sale, lease, exchange or otherwise without the prior approval of the Appropriate Commission Section 17 (3), Electricity Act, 2003 Section 17 (3), Electricity Act, 2003

11 11 Other Conditions The Licensee may do other business, only with prior intimation to the Commission The Licensee may do other business, only with prior intimation to the Commission Electricity business must not subsidise other business Electricity business must not subsidise other business Section 51, Electricity Act, 2003 Section 51, Electricity Act, 2003 One-third of the profit of such other business to be deducted from ARR of Electricity business One-third of the profit of such other business to be deducted from ARR of Electricity business Regulation 79.1, MERC Tariff Regulations, 2005 Regulation 79.1, MERC Tariff Regulations, 2005

12 : Name changes to BSES Bombay Suburban Electric Supply Co Ltd changes its name to BSES Ltd on 23 rd December, 1992 Bombay Suburban Electric Supply Co Ltd changes its name to BSES Ltd on 23 rd December, 1992 The (undivided) Reliance Group starts buying into BSES The (undivided) Reliance Group starts buying into BSES New business areas envisaged: Telecom, Infrastructure, etc. New business areas envisaged: Telecom, Infrastructure, etc.

13 : Another Change BSES Ltd changes its name to Reliance Energy Ltd on 24 th February, 2004 BSES Ltd changes its name to Reliance Energy Ltd on 24 th February, 2004 Not just change of name – this time ownership changes Not just change of name – this time ownership changes Reliance takeover of BSES is now complete Reliance takeover of BSES is now complete Piecemeal takeover took 12 years ( ) Piecemeal takeover took 12 years ( ) Other Businesses: Metro Rail, Highway Construction, Direct-to-Home Satellite TV Other Businesses: Metro Rail, Highway Construction, Direct-to-Home Satellite TV

14 14 RELs contention Mere change in name in terms of the provisions of the Companies Act, 1956 has no other legal implication and that, the entity remaining otherwise the same, no fresh issue of License … is required..Mere change in name in terms of the provisions of the Companies Act, 1956 has no other legal implication and that, the entity remaining otherwise the same, no fresh issue of License … is required.. MERC Order, Case No 18 of 2003 dt MERC Order, Case No 18 of 2003 dt

15 15 But the Law is Very Clear ! Section 616 (c) of the Companies Act, 1956 Section 616 (c) of the Companies Act, 1956 The Electricity Act supercedes the Companies Act, if there is a conflict The Electricity Act supercedes the Companies Act, if there is a conflict Sections 173 & 174 of the Electricity Act, 2003 Sections 173 & 174 of the Electricity Act, 2003 The Electricity Act has an over-riding effect on the Companies Act The Electricity Act has an over-riding effect on the Companies Act Even though Companies Act permits transfer of rights on change of name, the Electricity Act needs an application for License transfer Even though Companies Act permits transfer of rights on change of name, the Electricity Act needs an application for License transfer In this case, NO transfer was ever asked for, nor ever done!! In this case, NO transfer was ever asked for, nor ever done!!

16 16 Replies Received Under RTI No separate License issued to REL No separate License issued to REL Honble MERC, Oct 2005 Honble MERC, Oct 2005 License stands in the name of Bombay Suburban… (original co.)... and they did not ask for it to be assigned to BSES Ltd License stands in the name of Bombay Suburban… (original co.)... and they did not ask for it to be assigned to BSES Ltd Maharashtra Govt., Dec 2005 Maharashtra Govt., Dec 2005 Licenses still not issued Licenses still not issued Honble MERC, Dec 2006 Honble MERC, Dec 2006

17 17 5 th Oct 2005

18 18 16 th Dec 2005

19 19 19 th Dec 2006

20 20 ATE Order, 22 nd May 2006 It is seen that Reliance has not placed a copy of license in its favour, so also the contract entered … has not been placed before MERC or before us. It is stated, licenses and the contract are lost and not traceable. It is seen that Reliance has not placed a copy of license in its favour, so also the contract entered … has not been placed before MERC or before us. It is stated, licenses and the contract are lost and not traceable. Para 40, Page 22, Honble Appellate Tribunal for Electricity Order in Appeal No. 31 & 45 of 2005, dated Para 40, Page 22, Honble Appellate Tribunal for Electricity Order in Appeal No. 31 & 45 of 2005, dated

21 21 REL - Not giving License copies ! INSPECTION OF LICENSE AND SUPPLY OF COPIES A person who has been granted a distribution licence shall … make available copies of such licence … for public inspection, subject to payment of a cost, which shall not be more than the cost of photocopying and sale (printed copies), …. Provided that an applicant making request for information shall not be required to give any reason for requesting the information or any other personal details except those that may be necessary for contacting him. Reg 5.4.1, MERC (General Conditions of Distribution License) Regulations, 2006 dt

22 22 Summary of Facts The Mumbai Suburban License is LOST and not traceable ! The Mumbai Suburban License is LOST and not traceable ! In any case, if License was never assigned to BSES Ltd, how can it now belong to REL ? In any case, if License was never assigned to BSES Ltd, how can it now belong to REL ? License MUST be assigned, as per Electricity Act License MUST be assigned, as per Electricity Act For assignment, prior written permission must be taken For assignment, prior written permission must be taken The Electricity Act supercedes The Companies Act The Electricity Act supercedes The Companies Act License Business must be taken over as a whole, not piecemeal License Business must be taken over as a whole, not piecemeal Electricity companies must take permission for doing Other business Electricity companies must take permission for doing Other business Other business profits must subsidise electricity business Other business profits must subsidise electricity business

23 23 Why all of this is important to us RELs Other business profits are NOT subsidising electricity business, currently RELs Other business profits are NOT subsidising electricity business, currently In fact, funds collected from Electricity business are possibly being used in Other businesses In fact, funds collected from Electricity business are possibly being used in Other businesses No separate accounts maintained; no transparency No separate accounts maintained; no transparency LTP Categorisation and Supply (Single/Three phase) not as per MERCs Regulations LTP Categorisation and Supply (Single/Three phase) not as per MERCs Regulations Result: Higher Tariff, Repeated Tariff Shocks, No Transparency, High-handed Approach, Consumer harassment, Non-compliance, Against Public Interest and Policy, Increased litigation, etc. Result: Higher Tariff, Repeated Tariff Shocks, No Transparency, High-handed Approach, Consumer harassment, Non-compliance, Against Public Interest and Policy, Increased litigation, etc.

24 24 The Re-Categorisation Issue

25 25 Categories Defined b) Four wire, three phase, 240 volts between phase wires and neutral, general supply exceeding 40 amperes and sanctioned load not exceeding 80 kW/ 100 kVA (107 HP) in all areas, except in Municipal Corporation areas where such limit would be 150 kW/ 187 kVA (201 HP) c) Three phase, 50 cycles, 11 kV/ 22 kV – all installations with contract demand above 80 kW/ 100 kVA (107 HP) in all areas, except in Municipal Corporation areas where such limit would be 150 kW/ 187 kVA (201 HP) and up to 1,500 kVA Regulation 5.1, MERC (Standards of Performance) Regulations, 2005

26 26 Agreement not required for Sanctioned Load up to 67 HP The Distribution Licensee may require the applicant to execute an agreement for obtaining a new connection, for change of name and for enhancement of sanctioned load: Provided that for sanctioned load of less than fifty kilo- watts (67 HP / 63 kilo-volt-amperes), the agreement provided for in this Regulation 6.1 shall not be required and the application form submitted and accepted shall constitute the agreement Regulation 6.1 of MERC (Supply Code) Regulations, 2005

27 27 Two-part Tariff – Govt. Policy Two-part tariffs featuring separate fixed and variable charges and Time differentiated tariff shall be introduced on priority for large consumers (say, consumers with demand exceeding 1 MW) …. Tariff Policy, Govt of India, 2006

28 28 Hence, Proper Supply.. Sanctioned Load is up to 150 kW (201 HP) Sanctioned Load is up to 150 kW (201 HP) No agreement required upto 50 kW (67 HP) No agreement required upto 50 kW (67 HP) Single Part Tariff, no Demand Charges Single Part Tariff, no Demand Charges Contract Demand is beyond 150 kW (201 HP) Contract Demand is beyond 150 kW (201 HP) Agreement is a MUST Agreement is a MUST Two part Tariff for Fixed Demand Charge Two part Tariff for Fixed Demand Charge REL has now charged Two-Part Tariff, with Fixed Demand Charge and Power Factor Penalty to consumers who are above 15 HP !! REL has now charged Two-Part Tariff, with Fixed Demand Charge and Power Factor Penalty to consumers who are above 15 HP !! Till Sept 2006, this slab was at 50 HP Till Sept 2006, this slab was at 50 HP

29 29 Earlier Re-Categorisation REL had recommended this 15 HP slab vide Order passed in July 2004 also REL had recommended this 15 HP slab vide Order passed in July 2004 also A huge Tariff Shock was felt at that time too A huge Tariff Shock was felt at that time too Subsequently this was withdrawn and reversed Subsequently this was withdrawn and reversed Interim Order was issued on , withholding this hike Interim Order was issued on , withholding this hike Final Order was issued on , reversing this, with retrospective effect Final Order was issued on , reversing this, with retrospective effect

30 30 Landmark Order dated As a result, the bills of many consumers in this category have risen very sharply. Shri Shah (of REL) stated that REL have around 12,000 consumers in the LTP-2 category, and in many cases their bill amounts have increased by several times. As a result, the bills of many consumers in this category have risen very sharply. Shri Shah (of REL) stated that REL have around 12,000 consumers in the LTP-2 category, and in many cases their bill amounts have increased by several times. Para 5, MERC Order dt The Commission has also observed that the actual revenue earned by REL from the LTP-2 category over the two-month period of July and August 2004 is much higher than that estimated by the Commission in the Tariff Order for the same period. The Commission has also observed that the actual revenue earned by REL from the LTP-2 category over the two-month period of July and August 2004 is much higher than that estimated by the Commission in the Tariff Order for the same period. Para 16, MERC Order dt

31 31 Landmark Order dated The Commission does not normally revise tariffs with retrospective effect. However, in this case, having found that there has been an inadvertent and unintended tariff shock because of a combination of factors, going against its basic philosophy of tariff fixation, the Commission has now decided to apply the recategorisation and consequent change in tariff at para 13, earlier effected prospectively, with retrospective effect from The excess billing and recovery from the concerned consumers arising from such retrospective application should be refunded to them by REL by adjustment through energy bills or by other means by the end of March, 2005, along with refunds arising from the change in billing demand definition as at para 17 above. Para 18, MERC Order dt

32 32 Landmark Order dated REL have urged the Commission to retain the earlier categorization of LTP-1, wherein even lift, water pump and fire fighting equipment, etc. upto 15 HP, and non- industrial load upto 20 kW were included under LTP-1, considering the fact that they would face a significant loss in revenue. The Commission does not find any merit in this request. Hence, RELs request for review on this count is rejected. Para 36, MERC Order dt

33 33 Tariff Shock! Account No. September 2006 October 2006 % increase in rate Categ. Rs. per Unit Categ LTP-14.85LTP % LTP LTP % LTP-15.45LTP % LTP-14.96LTP % LTP-14.85LTP % LTP-14.90LTP % LTP-14.82LTP % LTP-14.76LTP % We have thousands of such bills and can present them if required

34 34 Tariff Shock! Account No. September 2006 October 2006 % increase in rate Categ. Rs. per Unit Categ LTP-15.53LTP % LTP-15.13LTP % LTP-14.94LTP % LTP LTP % LTP-17.44LTP % LTP-17.81LTP % LTP-14.82LTP % LTP-15.43LTP % We have thousands of such bills and can present them if required

35 35 Tariff Shock! Account No. September 2006October 2006 % increase in rate Categ. Rs. per Unit Categ LTP-14.84LTP % LTP-14.81LTP % LTP-14.85LTP % LTP-14.83LTP % LTP-14.74LTP % LTP-14.86LTP % LTP-14.79LTP % LTP-14.82LTP % We have thousands of such bills and can present them if required

36 36 Humble Request We need the Honble Commission to come up with another Landmark Order, reversing this re-categorisation, with retrospective effect.

37 37 The Multi Year Tariff Data Issues

38 38 Capital Expenditure REL is NOT maintaining separate accounts for Mumbai Electricity and Other businesses REL is NOT maintaining separate accounts for Mumbai Electricity and Other businesses Other businesses inlcude: Other businesses inlcude: Other States Electricity business: BSES Kerala, BSES Delhi, BSES Goa, Orissa Discom, Dadri Project, Sobla Hydro, Tato Hydro, Shahpur Project, Rosa Power, Parbati/Koldam Transmission, etc. Other States Electricity business: BSES Kerala, BSES Delhi, BSES Goa, Orissa Discom, Dadri Project, Sobla Hydro, Tato Hydro, Shahpur Project, Rosa Power, Parbati/Koldam Transmission, etc. Mumbai Metro Rail Project Mumbai Metro Rail Project Highway Projects in TN and Andhra Highway Projects in TN and Andhra Reliance BlueMagic Direct-to-Home Satellite TV Reliance BlueMagic Direct-to-Home Satellite TV Are Mumbai consumers paying for these ?? Are Mumbai consumers paying for these ?? When asked, REL has refused to give data !! When asked, REL has refused to give data !!

39 39 Higher Interest Rate Claimed MYT states Interest on borrowings (loan and working 10.25% p.a. MYT states Interest on borrowings (loan and working 10.25% p.a. RELs 77 th Annual Report (June 2006) proudly proclaims that Average cost of borrowing is 4.5% p.a. RELs 77 th Annual Report (June 2006) proudly proclaims that Average cost of borrowing is 4.5% p.a. REL has also issued Zero Rate FCCBs in Nov 2006 REL has also issued Zero Rate FCCBs in Nov 2006 When asked, REL has stated that these are as per MERC Tariff Regulations When asked, REL has stated that these are as per MERC Tariff Regulations Should expenses be approved, even if NOT incurred?? Should expenses be approved, even if NOT incurred?? Commission to disallow higher interest rates, even for earlier years Commission to disallow higher interest rates, even for earlier years

40 40 Power Purchase - Discrepancies RELs Petition, page 5 of REL-D, Table 3 RELs Petition, page 5 of REL-D, Table 3 TPC-G will supply 3981 MU and TPC-D will supply 787 MU in FY TPC-G will supply 3981 MU and TPC-D will supply 787 MU in FY TPCs Petition, page E-20, Table 1-19 TPCs Petition, page E-20, Table 1-19 TPC will supply REL only 3127 MU in FY TPC will supply REL only 3127 MU in FY There is no formal Purchase Agreement yet, between TPC and REL There is no formal Purchase Agreement yet, between TPC and REL How can the Public actually comment on expenditure or the tariff, since the purchase price and quantum itself is not fixed?? How can the Public actually comment on expenditure or the tariff, since the purchase price and quantum itself is not fixed??

41 41 Poor Responses REL did not provide any data, as requested REL did not provide any data, as requested Mentioned that all details, as were necessary, were sent to MERC, in the formats, as specified by MERC Mentioned that all details, as were necessary, were sent to MERC, in the formats, as specified by MERC In other words, REL did not part with any data, as requested for, by the Public In other words, REL did not part with any data, as requested for, by the Public Public will have no option but to invoke the Right to Information and bring such errant agencies to book Public will have no option but to invoke the Right to Information and bring such errant agencies to book Meanwhile, Honble MERC to take strict action and penalise electricity utilities for such inadequate disclosures Meanwhile, Honble MERC to take strict action and penalise electricity utilities for such inadequate disclosures

42 42 REL is Profitable : FY Up 10% Up 25% In Rs. Crores. Source: REL 77 th Annual Report , page 13

43 43 REL is Profitable : 9 Mo FY Up 17% Up 18% In Rs. Crores. Source: REL Quarterly Result dt

44 44 Tariff Impact in 6 Mo: Sep-Apr Residential User of 100 units Normal: Up 20 % With ATE: Up 39 % Normal: Up 32 % With ATE: Up 60 %

45 45 Tariff Impact in 6 Mo: Sep-Apr Residential User of 400 units Normal: Up 40 % With ATE: Up 77 % Normal: Up 42 % With ATE: Up 80 %

46 46 Our Humble Prayers to the Honble MERC

47 47 Reject this MYT; direct REL to file revised one Reject this MYT; direct REL to file revised one Direct REL to revert this unholy recategorisation of LTP-1 Consumers Direct REL to revert this unholy recategorisation of LTP-1 Consumers Direct REL to refund, within 60 days, the extra amounts collected Direct REL to refund, within 60 days, the extra amounts collected Direct REL to waive any DPC and Interest Charges on any late paid (or unpaid) bills of such re-categorised consumers Direct REL to waive any DPC and Interest Charges on any late paid (or unpaid) bills of such re-categorised consumers Condone any delay in making this Appeal – Tariff shock took months to set in Condone any delay in making this Appeal – Tariff shock took months to set in Humble Prayers to Honble MERC

48 48 Re-examine RELs claim to being a Licensee in light of the facts presented Re-examine RELs claim to being a Licensee in light of the facts presented Penalise REL for such wilful misleading (penalty at least equivalent to License Fees) Penalise REL for such wilful misleading (penalty at least equivalent to License Fees) Direct REL to refund, with interest, to the consumers, all the amounts collected as Revenue Gaps in the ARR, since 1992 Direct REL to refund, with interest, to the consumers, all the amounts collected as Revenue Gaps in the ARR, since 1992 Direct REL to make a public apology in leading National and Regional dailies Direct REL to make a public apology in leading National and Regional dailies Humble Prayers to Honble MERC

49 49 Humble Prayers to Honble MERC Reschedule all the Public Hearings for all electricity utilities; declare new dates, giving the public at least 60 days notice Reschedule all the Public Hearings for all electricity utilities; declare new dates, giving the public at least 60 days notice Henceforth, allow the public to file responses, comments via Henceforth, allow the public to file responses, comments via DPC and Prompt Payment Discounts to be levied on the same items DPC and Prompt Payment Discounts to be levied on the same items Increase time period for filing Appeal, to 90 days from Date of Order Increase time period for filing Appeal, to 90 days from Date of Order

50 50 Tamasoma jyotir gamaya (From darkness unto light) Contact: Sandeep N. Ohri Member: Bombay Small Scale Industries Association Mobile: Blog: Moderator: I sincerely thank the Honble Commission for this opportunity, the time and their patience!


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