Mumbai Power Crises – Consumers view point By: Shrikant Soman

Sr NoSlide No 1Issue: TPC’s decision to withdraw 500MW from Suburban consumers Concl: Tata Power’s Business objectives impacting consumer interest 1 2Issue - RInfra didn’t sign PPA with TPC: True or False allegation Concl: Both TPC and RInfra are responsible for non execution of PPA 2 3Issue - TPC’s freedom: reality or falacy Concl: Misrepresentation of Supreme Court Judgement 3 4Issue - Is TPC obligated to sell their power in Mumbai at Regulated rates Concl: Mumbai consumers have a right in the generation assets of Tata Power at Trombay 5 5Issue - Role of MERC Concl: MERC should complete the task for which the State Govt has laid the roadmap 6 Table of Contents

Sr NoSlide No 6Issue - Powers of MERC Concl: MERC has powers under EA Issue - Is TPC dominant as a generator? Concl: TPC is a dominant generator for Mumbai 8 8Issue - Is TPC’s actions anti-competitive? Concl: The agreement between TPC-G & TPC-D or TPC-G & BEST are anti-competitive 9 9Issue - Is TPC abusing its dominant position as a generator? Concl: TPC-G abusing its dominant position to protect TPC-D TPC signing PPA with BEST & declining to sign with RInfra 10 Forward Path: Consumer protection and competition should thrive 11 Table of Contents

TPC’s decision to withdraw 500MW from Suburban consumers Why?? TPC will be able to sell 500 MW in open market & make handsome profits TPC will be able to establish their monopoly in distribution business also Tata Power’s Business objectives impacting consumer interest Grounds?? No PPA with RInfra Hon. Supreme Court has given them the freedom to select their supplier Impact?? Retail Tariff in Suburban Mumbai will increase Or Load Shedding Mountain Springs, B3–I–6, Dahivali CHS, Kandarpada, Dahisar (W), Mumbai E Mail : web : Tel : (22) , Slide # 1

RInfra didn’t sign PPA with TPC: True or False allegation Both TPC and RInfra are responsible for non execution of PPA 1)In 2005 MERC directed to both RInfra & TPC to convert the existing arrangement into PPA? 2)TPC & RInfra engaged in discussions with respect to finalisation of PPA 3)TPC informed RInfra that they have allocated 800MW to BEST and 477 MW to its own distribution arm on May )Other than the quantity (762 MW or 500 MW) all other clauses in the draft PPA was approved by both TPC and RInfra 5)RInfra approached Supreme Court with the objective to get equitable allocation? 6)RInfra approached to sign PPA for 500 MW also with TPC in )TPC agreed to sign PPA on 13 th Apr )TPC declined to sign PPA for 500 MW with RInfra post Hon’ble SC order dated 6 th May 2009 Mountain Springs, B3–I–6, Dahivali CHS, Kandarpada, Dahisar (W), Mumbai E Mail : web : Tel : (22) , Slide # 2

TPC’s freedom: reality or falacy Hon’ble SC order dated 6 th May 2009 State Government has powers to direct a generator in extraordinary circumstances under section 11 of EA 2003 “Section 11 of 2003 Act empowers the Appropriate Government to issue directions but such direction can be issued only in extraordinary circumstances as stated in the explanation appended thereto i.e. arising out of threat to security of the State, public order or a natural calamity or such other circumstances arising in the public interest” “Could a generating company, despite Section 11 be subjected to any direction by the Commission in terms of Section 23 of the 2003 Act?” Commission has powers under section 60 of EA 2003 to direct a generator when he his abusing his dominance position “ If the generator is exercising his dominant position, Section 60 would come into play. It is only in a situation where a generator may abuse or misuse his position the Commission would be entitled to issue a direction.” Mountain Springs, B3–I–6, Dahivali CHS, Kandarpada, Dahisar (W), Mumbai E Mail : web : Tel : (22) , Slide # 3

TPC’s freedom: reality or falacy Misrepresentation of Supreme Court Judgement Hon’ble SC order dated 6 th May 2009 Generating companies are not completely decontrolled, in extraordinary Circumstances the Act provides for direction to generators “ It is, in the facts and circumstances of this case, not necessary for us to consider an extraordinary situation where the Commission may exercise its jurisdiction both under Section 86(1)(b) and Section 60 simultaneously. Assuming that such a contingency may take place and having regard to Sections 23 & 60 of the Act while issuing direction to the licensee company the right of a generating company may also be affected., but we are not concerned with such a situation.” “Generating companies are de-licensed hence cannot be subjected to any direction or regulation except for which are expressly been stated in the Act” Mountain Springs, B3–I–6, Dahivali CHS, Kandarpada, Dahisar (W), Mumbai E Mail : web : Tel : (22) , Slide # 4

Is TPC obligated to sell their power in Mumbai at Regulated rates Mumbai consumers have a right in the generation assets of Tata Power at Trombay Reasons for TPC’s obligation to supply power in Mumbai 1)TPC has collected Rs 534 Crs for financing their asset creation from Mumbai consumers. 2)The assets created, including their generation plants, are still in operation and hence the benefit should reach the consumers 3)TPC took clearances such as environmental, etc from the Govt under the pretext that it would supply power to Mumbai 4)The GoM in its Memorandum dated 7 th May 2010 has stated that GoM has supported TPC in setting up the power plant in Trombay 5)TPC committed to meet the power demands of Mumbai till )MERC failed to build this commitment in License conditions of TPC 7)TPC’s generation asset at Trombay should not enjoy the same benefit as other IPPs who have created the generation asset by their own funding and by making other arrangements like land, fuel linkage etc on its own Mountain Springs, B3–I–6, Dahivali CHS, Kandarpada, Dahisar (W), Mumbai E Mail : web : Tel : (22) , Slide # 5

Role of MERC MERC should take suitable measures for protecting the interest of consumers: 1 ) TPC’s obligation to supply power at regulated rates to the distribution licensees of Mumbai on priority and not take advantage of its dominant position in the absence of PPA with RInfra 2) RInfra’s obligation to procure balance power at reasonable rates 3) Mechanism to protect subsidized consumers from abnormal tariff increase due to migration 4) Sale of surplus power amongst utilities at average cost Mountain Springs, B3–I–6, Dahivali CHS, Kandarpada, Dahisar (W), Mumbai E Mail : web : Tel : (22) , Slide # 6 MERC should complete the task for which the State Govt has laid the roadmap

Powers of MERC 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. Mountain Springs, B3–I–6, Dahivali CHS, Kandarpada, Dahisar (W), Mumbai E Mail : web : Tel : (22) , Slide # 7 MERC has powers under EA 2003

Is TPC dominant as a generator? 1)TPC objected to BSES setting up generation plant at Palghar and Saphale under the pretext that TPC was the Sole Bulk Licensee fro Mumbai Metropolitan Region. 2)Currently Mumbai is being supplied by: a)TPC generation capacity: 2027 MW b)RInfra capacity:500MW c)Other Sources: 600MW Hence TPC who supplies ~65% of the Mumbai demand is a dominant generator Shortage level in the country: 15-20% Peak Generators in the country with untied capacity: Not too many Generators ready to sign PPA with distribution utilities: Not too many Generators ready to sell their power in open market and make huge profits: Many Mountain Springs, B3–I–6, Dahivali CHS, Kandarpada, Dahisar (W), Mumbai E Mail : web : Tel : (22) , Slide # 8 TPC is a dominant generator for Mumbai

Is TPC’s actions anti-competitive? The agreement between TPC-G & TPC-D or TPC-G & BEST are anti-competitive Anti-competitive agreements: Any agreement entered into between enterprises or associations of enterprises or persons or associations of persons or between any person and enterprise or practice carried on, or decision taken by, any association of enterprises or association of persons, including cartels, engaged in identical or similar trade of goods or provision of services, which— (a) directly or indirectly determines purchase or sale prices; (b) limits or controls production, supply, markets, technical development, investment or provision of services; (c) shares the market or source of production or provision of services by way of allocation of geographical area of market, or type of goods or services, or number of customers in the market or any other similar way; (d) directly or indirectly results in bid rigging or collusive bidding, shall be presumed to have an appreciable adverse effect on competition Mountain Springs, B3–I–6, Dahivali CHS, Kandarpada, Dahisar (W), Mumbai E Mail : web : Tel : (22) , Slide # 9

Is TPC abusing its dominant position as a generator? TPC-G abusing its dominant position to protect TPC-D TPC signing PPA with BEST & declining to sign with RInfra - abuse of its dominant position Abuse of dominant position (1) No enterprise or group shall abuse its dominant position. (2) There shall be an abuse of dominant position under sub-section (1), if an enterprise or a group (a) …… (e) uses its dominant position in one relevant market to enter into, or protect, other relevant market. Explanation.—For the purposes of this section, the expression— (a) "dominant position" means a position of strength, enjoyed by an enterprise, in the relevant market, in India, which enables it to— (i) operate independently of competitive forces prevailing in the relevant market; or (ii) affect its competitors or consumers or the relevant market in its favour. Mountain Springs, B3–I–6, Dahivali CHS, Kandarpada, Dahisar (W), Mumbai E Mail : web : Tel : (22) , Slide # 10

Forward Path: Consumer protection and competition will continue to thrive MERC should take the following actions keeping in mind the consumer interest: 1) Direct TPC-G to sign PPA with RInfra for minimum 360 MW atleast till 2014 as per TPC’s committment 2) Direct TPC-G to supply 100 MW from Unit 8 to TPC-D and not let their consumers suffer the burden of expensive power. 3) Cross-Subsidy surcharge which will be linked to the prevalent cross- subsidy in the tariff structure of a utility and will go on reducing as cross-subsidy reduces 4) Sale of surplus energy within Mumbai should be at average cost so that historical inequitable allocation will not impact the tariffs Mountain Springs, B3–I–6, Dahivali CHS, Kandarpada, Dahisar (W), Mumbai E Mail : web : Tel : (22) , Slide # 11

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