New factor in Mumbai power discoms' battle

A decision by Maharashtra's electricity regulator to levy a cross-subsidy surcharge on high-end customers might re-energise the battle between Mumbai's private distribution companies, Reliance Infrastructure and Tata Power, for consumers.

This surcharge is to be levied on high-end commercial and industrial consumers of Mumbai’s suburbs who use the network of Reliance Infrastructure and draw supply from other distribution companies. R-Infra owns underground distribution networks in the suburbs, and the other discom which supplies power in the area will have to use its infrastructure. The consumers who shift to Tata Power already pay a wheeling charge of around 88p to Reliance Infra for using their networks. This surcharge will be over and above this charge to commercial consumers.

Even as the regulator is yet to decide the amount to be levied, R-Infra says it will benefit. "The only difference in tariff is the burden of cross-subsidy. Our power costs this year have been low and if the surcharge is added to it, our tariffs will be almost equal," an R-Infra spokesperson told Business Standard.

The rules allow a distribution company to charge high amounts to commercial and industrial users, and use the money to subsidise their low-end consumers, who take up to 100 units per month.

Reliance Infra has 2.1 million such low-end consumers of a 2.8 mn total. After Tata Power extended services to the area which R-Infra traditionally supplied, a number of commercial users who contributed to the subsidy moved to Tata. R-Infra says it lost 180,000 customers in the past 18 months and among these were also many high-end customers, who contributed to an annual subsidy of around Rs 400 crore. The more consumers it lost, the higher its rates became.

The company had blamed consumer migration as the reason behind its own higher rates (which made Tata's rates attractive) and now says the situation could be reversed. "We hope that the pace at which consumers are migrating to other networks will reduce, are we are also expecting reverse migration of customers," said a Reliance spokesperson.

"We have studied the order and yes, Maharashtra Electricity Regulatory Commission, has laid across a cross-subsidy surcharge for the changeover customers. However, the surcharge amount is yet not computed and is awaited.A clear picture on cross-subsidy surcharge will emerge for the customers once the amounts get announced. The customer will continue to find us an attractive supplier of choice," Tata Power said in a statement.

MERC has completed a series of public hearings on the matter and is likely to come up with a decision on the extent of surcharge to be levied, a determining factor on which company can offer the lowest rate and gain more consumers.