While the reduction in TEC's demand would have serious implications on MSEB, the former wants to cut this demand primarily because its own consumer demand has fallen significantly in the past few years. In fact, often the power company has surplus power.

On the other hand, the stand by facility charges are payable by the power company to the MSEB even if it does not buy any power. Thus while it may cause a dent inMSEB's revenue stream, TEC too finds it difficult to pay the amount following the cut in its own consumer demand. TEC maintains that it does not require a stand-by facility for such a large amount.

TEC argues that the size of the stand-by facility was fixed long ago when it required more power to cater to its consumer demand. Secondly, its own generation capacity has gone up over a period of time. At present, TEC does not require to purchase power MSEB since it has excess of power both during peak and non-peak hours. It has also been supplying part of surplus power to MSEB.

TEC's generation increased when it completed its combined cycle programme in 1996 which added around 200mw and with the improvement of its pump storage facility at Bhira Hydel Power station which added another 150mw to its total capacity. While TEC improved the performance of its plants to enhance the capacity, the demand for power in its distribution area did not increase with the same pace.

This apart, one of its bulkconsumers-BSES-has also reduced the purchase of power. BSES cut down its purchase from TEC gradually because it set up its own power plant of 500 MW in Maharashtra. Hence, if there is no taker of power, TEC has to back down its plants at times. Though MSEB buys power from TEC, it has no obligation to do so. Thus, TEC can supply power to MSEB only if the later has a demand.

In the absence of a fixed power purchase agreement between the two, the board pays only nominal charges of around Rs 2 per unit to TEC. MSEB is reluctant to increase this price unless TEC gives a firm commitment of power supply and is ready to face penalty for not meeting the commitment.

Under the given circumstances, TEC believes that it does not require stand-by arrangement for 550 MVa and wants it to be lowered to 275 Mva.Besides, the company also believes that the existing charges of Rs 363 crore per year which had been fixed by MSEB in December 1998 are also steep. The dispute over this increased charges is yet to be resolved. TECconsists of three companies -- Tata Power Supply Company, Tata Hydro-electric Power Company and Andhra Valley Power Company.