Mumbaikars will be able to choose their power co

In a first in the country, Maharashtra?s state electricity regulator is planning a regime of multiple distribution licensees in the Mumbai suburban area. The move could bring in competition among last-mile power suppliers in this market.

The Maharashtra Electricity Regulatory Commission (MERC) plans to allow a couple of more players to supply power in the Mumbai suburban area. Reliance Infrastructure, the sole power supplier with own network in the area, is facing consumer ire for the high cost of its power. Although the tariffs are determined by the regulator, it is bound to allow the company higher tariffs and avoid load shedding because it sources power from the open market under short-term contracts.

?This (allowing a couple of more licences) is a possibility,? MERC chairman VP Raja told FE, adding, ?Multiple players are required to ensure tariff competition in the area.?

Private players, namely Torrent Power, Lanco and Indiabulls and state-owned Mahrashtra State Electricity Distribution Company (MSEDCL) have already submitted expression of interest (EoI) to the regulator for parallel distribution licences. Reliance Infra?s existing power distribution licence for the area is set to expire on August 15. A new licence is likely to be issued to the company, which implies that in the new regime, there would be three players for supply of power in the area.

Although the Electricity Act, 2003, envisages multiple suppliers in each power market, this has not become a reality anywhere in the country due to a lack of regulatory initiative. The fact that each ?parallel licensee? in such a regime would need to build its own distribution infrastructure also has come in the way of implementing multiple licensing.

Parallel licensing is different from the open access regime, a key objective of the Electricity Act. Under the open access system, a consumer can buy electricity from anywhere and use the network of the local discom for wheeling power. On the other hand, each parallel licensee must have its own distribution network to supply power in the area. A power supplier cannot become a parallel licensee in a distribution area unless it has its own network to supply electricity in the area.

Although power sector analysts are rather sceptical about the feasibility of new licensees getting the right of way to lay their network, the regulator is going ahead with its plan. ?Applicants will have to set up their own network for distribution of power in the area on being issued licence,? Raja said.

There were 27.24 lakh electricity consumers in the area as on March 31, 2010. If the MERC has its way over, competition in the area might intensify as tariff would be decided by electricity suppliers themselves and not by the regulator, as is the case at present. The regulator will, however, determine connection charges to avoid the possibility of new licensees overcharging for new connections.

The regulator expects to begin public hearing soon with the firms which submmited EoIs. ?We have sought more information from them on their network roll-out and capital expenditure plans. Once we receive the information, we will start public hearings,? the MERC chairman said.

?Under the Electricity Act, 2003, we do have a provision for more than one distribution licensees in the same area. However, second or subsequent licnesee cannot be allowed cherrypicking high-paying customers. They will have to discharge universal service obligation,? said former Union power secretary RV Shahi.

Meanwhile, the regulatory issue relating to the ?minimum area requirement? for granting new licences has also been resolved, with the additional solicitor general Parag P Tripathi clarifying that rules can be ignored if they violate the Act. Only a municipal council or municipal corporation or a revenue district can qualify as power distribution area as per the explanation given in the Electricity Act, 2003. However, Reliance Infra?s distribution area does not meet any of these criteria. The sixth proviso to section 14 of the Electricity Act, 2003, provides that whenever a regulator gives a second or subsequent licence in an area where a licencee already exists, the ?minimum area requirement? must be complied with.

MERC plans to issue a fresh licence to Reliance Infra instead of renewing its existing licence. ?Since there is no provision in the Act to renew a licence, Reliance Infra has submitted a fresh application,? Raja said.