Failing your customers

Private utilities too must place customers first

Does a utility have a duty to serve its customers first, even if there is short-term financial loss involved? The question has come up in the context of the huge power cuts the capital city has been facing in two of the three circles that are run by the Anil Ambani-managed BSES. The question acquires a sharper edge when the power distribution company in another part of the city, run by the Tata-managed NDPL, has amuch better record on meeting demand (as it does on cutting transmission and distribution losses). BSES will argue that the heat wave has raised the demand for electricity, while the shortage of water in hydel power projects affected supply (the company points to 500 MW of committed supplies having fallen short), but the plain fact is that a rival company has met the surge in summer demand by managing supply better.

 

The issue, it would appear, was not the scarcity of power that BSES could buy, but its price. The company seems to have decided at some stage that it would not buy expensive power in the open market to deal with the yawning power shortage in the city, because its tariffs are fixed at a lower level; but is that the way for a natural monopoly to conduct its affairs, leaving customers hot and steaming? BSES’ power supplies could not all have failed at the same time, and there must have been some advance warning of failure. NDPL was equally affected since it also gets power from the same sources. The difference is that while NDPL made arrangements to buy extra power before the onset of summer, the BSESoperated distribution companies did not do so. Power ministry officials in the state government point out that BSES did not bid as much as NDPL to buy power in the open market, and was not proactive in finding new suppliers.

 

Any worthwhile utility should know that it has a basic duty to ensure supplies, because it is operating in a natural monopoly and its customers have no choice. It may well be that there will be losses incurred on some power purchase contracts, but the company is profitable and can take the occasional shortterm hit. That, in any case, is better than having a city up in arms and questioning the wisdom of privatising power distribution; better also than having an embattled chief minister serve the company with a fourday ultimatum. In its defence, BSES might argue that it bought power on Sunday at Rs 13 a unit, but got only a fourth of the 100 MW it contracted because of a fault in Power Grid’s Mandola grid, but the argument does not wash—because the shortfall is not 100 MW but 10 times as much, and because it is strange that NDPL was able to get the 100 MW it bid for. The plain truth seems to be that consumer satisfaction does not figure very high in BSES’ list of priorities. When that attitude governs a utility service, it is time to read it the riot act.