Reliability charge

In the 1990s, when the first set of fast track projects like Dabhol was being pushed through, it was argued that the most expensive power in the world was no power "" that is, customers who had to shut down their units because there was no power, would pay virtually anything if there was power since they'd be able to produce and make profits. Comparisons were also made between the cost of running captive diesel generating sets with that from the projected cost of Dabhol power, to Dabhol's advantage. Yet, as the Maharashtra State Electricity Board (MSEB) discovered when the plant came on stream, there weren't many takers for high-cost power. So how is it that, a decade later, Pune, in the same state of Maharashtra, should be using even higher-cost power to take care of its power deficit? And can the Pune model be replicated elsewhere in the country?

The Pune model is a fairly straightforward one. Like other cities in the state, it began facing three to four hours of daily power cuts last year. The solution that the Confederation of Indian Industry came up with was to reduce the city's power consumption during the hours there was load shedding. Discussions were held with the MSEB and the state electricity regulatory commission, and public hearings were called. It was decided that, during these hours, firms like Tata Motors, Infosys and even the Blue Diamond Hotel (all large users with captive diesel-generating sets) would reduce their consumption. The MSEB, in turn, agreed that if consumption levels were reduced, the power cuts would go. In return, since Pune residents faced no power cuts, they agreed to pay firms like Tata Motors the difference between the fuel cost (Rs 11 per unit of power) of running these diesel sets (the firms absorbed the depreciation and other costs) and the lower price (Rs 5 per unit) that they would have paid had they got electricity from the grid. And since users consuming less than 200 units a day were not asked to pay, the others were charged a 42 paise "reliability charge" on each unit of electricity that they were billed for, which is an addition of 8-10 per cent. Since the system has been working since June last year, it must be presumed that users are satisfied with the way the scheme has operated.

Can this system be replicated elsewhere in the country? While Pune is admittedly an excellent example of citizens coming together to offer a solution, its replicability may be limited to cities with Pune's low theft levels and cohesiveness, where customers agree to pay more for reliable power and the captive power generators concur to charge for only fuel costs so as to keep tariffs under control. In a sense, even without citizens getting together as they have in Pune, similar experiments must be attempted in other cities as well, when electricity utilities buy small amounts of power for as much as Rs 8-10 a unit "" once pooled over a large number of customers, the tariff hike is not much. But expecting the entire country to agree to substantial hikes in power costs by using the high-cost Pune solution will not work, considering the high proportion of customers who don't even pay their subsidised electricity bills. That, however, should not deter other cities from trying to work out similar solutions.