Cheaper electricity from April 2018

Maharashtra Electricity Regulatory Commission (MERC) has issued a significant order on September 23 that will benefit 10 lakh Mumbaikars from the island city who draw electricity from Brihanmumbai Electricity Supply and Transport (BEST). For the first time (BEST started its supply business in 1905) they are choosing to go for competitive bidding instead of depending on Tata Power, which will result in cheaper power starting April 2018 as their power purchase agreement with Tata Power will end on March 2018.

On September 23, MERC, in its order, stated: 'In this case, BEST as the Distribution Licensee has itself proposed to procure its requirement of 750 MW through competitive bidding in terms of Section 63 of the Electricity Act, 2003 and not under Section 62 from TPC-G or MSEDCL. Thus, it is that proposal which the Commission is required to consider in this Order. TPC-G and MSEDCL are, of course, free to participate in the competitive bidding process for supply of power to BEST subject to the Competitive Bidding Guidelines and the relevant provisions of the EA, 2003'.

MERC has stated that buying 750MW for 5 years (2018-19 to 2022-23) on medium-term will be the most appropriate option for BEST. The Commission has asked BEST to review the performance and decided on the next 5 years as well. Ideally now, BEST has a freehand to choose its supplier from which it would buy electricity and distribute to the island city.

For so many years, BEST and Tata Power Corporation (TPC) had an agreement where the latter was supplying 932MW from its Trombay power plants. But now the Undertaking has stated that since there is surplus electricity available, they would prefer buying cheaper power through competitive bidding. They have also been purchasing 70MW of solar and bio-mass from other companies, which shall continue.

Sources at BEST have said that they have been buying electricity from Tata Power at Rs 3.94 per unit, which they now intend to buy at Rs 2.50 per unit or even less once they get a new power supplier through competitive bidding. This will bring big relief to consumers as their monthly electricity bills will come down by Rs 200-500, depending on consumption.

The island city from Colaba to Sion/Mahim consumed up to 900-950MW during October and the summer season between March-May, while normally it uses close to 700-750Mw. BEST spends Rs 3,200 crore on power purchase agreement, and now with the competitive bidding, they expect it to drop to Rs 2,300 crore annually.

"On September 26, there was a pre-bid meeting where interested companies had come forward. We are expecting bidders to submit their bids by October end or so after which the lowest bidder will be decided," said a BEST official. Some of the companies that participated were Adani Power, Tata Power, MSEDCL, Ideal Energy, Power Trading Corporation, GMR, Torrent and others.

Sources in BEST said that the balance 180MW that shall be needed during peak season will be bought from an open market, where power is available at about Rs 2 per unit. The officials said that there could be three biddings: For 300MW that will be round the clock power supply, 200MW that will be additionally needed between 7pm to midnight, and 250MW needed between 9am to 7pm.

Experts speak:

This is a good judgement which would benefit people at large — VP Raja, former Chairman, MERC.

Buying power through competitive bidding will bring down per unit cost for BEST from Rs 4 to Rs 3 or even less. This will benefit the consumers whose consumption cost will drop by Re 1 to Rs 1.50 per unit — Ashok Pendse, power expert.

Competition is the best way to control cost. This will ensure that common man will get cheaper electricity — Sandip Ohri, power expert.