Is this the beginning of the end for Escoms?

With more than 10 major consumers, including Wipro and Toyota Kirloskar Motor Private Limited, opting out of the services provided by Bangalore Electricity Supply Company (Bescom), officials fear this is the beginning of the end for Electricity supply companies (Escoms) across Karnataka.

The Union power minister had earlier instructed states to implement an open-access system of Electricity Act, 2003, which allows a consumer to purchase power of more than 1 MW from any generator (supplier), explained Bescom managing director P Manivannan, when asked about the open-access system.

Officials blame cross-subsidies for this trend. The current policy provides subsidised power to farmers and highly subsidised cost for beneficiaries such as Bhagya Jyothi and weaker sections by levying higher charges to high-end consumers like commercial and industrial consumers. Now, many high-end consumers have switched to open-access system as they do not have to foot the subsidies bill.

Currently, commercial consumers pay Rs6.50 per unit as per the Karnataka Electricity Regulatory Commission’s tariff order in 2011; industrial units pay `4.90 per unit. “The open-access system allows them to pay even less as they purchase power directly from the generator. They pay approximately `1 less,” he said.
Although the open-access consumers also pay the cost of wheeling (the act of providing the service of transporting electric power over transmission lines) depending on the quantum of power they purchase, it still amounts to less than the current commercial and industrial rates.

Currently, the trend of consumers opting for open-access system will leave Escoms with just domestic and rural consumers, who will end up paying more. Domestic consumers pay `3.40 per unit. Escoms have sought a tariff hike by 80paise. This will translate into an increase in tariff in the coming days, explained.Manivannan.

“Open-access works like the share market. When a company or individual buys power over a long term when the price is low, it will benefit him,” said MG Prabhakara, energy expert.