MERC considering R-Infra's out-of-turn tariff hike proposal

Reliance Infrastructure's recent petition seeking steep electricity tariff hikes of up to 93% is being considered by the state regulator, Maharashtra Electricity Regulatory Commission (MERC). However, such high tariffs could have been passe if the regulator had implemented a directive by the Appellate Tribunal for Electricity (Aptel) issued in November 2014.

According to R-Infra's petition in January this year, which came up for public hearing in mid-March, the proposed hike is 10% for its direct consumers in the 0-100 unit slab while it's a whopping 93% for changeover consumers of Tata Power Company (TPC) in the same unit class.

In the 300-500 unit bracket, the broad category in which most of the over 23 lakh R-Infra consumers fall, the proposed hike is 45% and for the nearly six lakh consumers who opted out of R-Infra for TPC after 2009, the increase in their overall bill due to hikes in various recovery components will be 58%.

The disproportionate hikes for changeover TPC consumers have been largely due to high cost of power purchased by R-Infra when they were with the company. The regulator had permitted this cost to be recovered from these consumers over a period of six years under 'regulatory asset charges (RAC)'. However, R-Infra now wants this cost to be recovered in one year's time, starting April 2015.

The reasons R-Infra cites are: (i) Six lakh faulty meters of changeover TPC consumers, which led to low billings, thereby increasing losses in wheeling charges; and (ii) the Aptel Order that permits complete switchover to TPC will impact recovery of Rs1,300 crore in RAC as this charge cannot be applied to the six lakh changeover consumers.

Switchover consumers are those who can move over completely to the networks of the new service provider unlike changeover consumers, who use existing networks but different service providers and pay several charges for that.

"It is the fear of losing these changeover consumers, who contribute a huge chunk of R-Infra's RAC, that has made the company pitch for a one-year steep tariff hike," said consumer activist Sandeep Ohri, adding that, "end of the day we see, no matter who commits the blunder, it's the consumer who is punished and the government must act now."

Aptel in its four orders of November 2014 had slammed MERC for exceeding its jurisdiction and directed the regulator to lay down norms for switchover of consumers. The regulator is yet to work out the modalities and critics see this as a delaying tactic for letting R-Infra enjoy a year of high tariffs from changeover consumers.

Email queries sent to MERC remains unanswered.

With two Supreme Court orders (of July 2008 and May 2014) and the Aptel ruling going in favour of the consumers, legal experts are divided over whether who needs to be pulled up for 'contempt of court', the state or MERC. Now, the only option left with consumers, they say, is to move the high court and get an interim stay, said a senior advocate.

"Courts are reluctant to haul up regulatory bodies for contempt. Consumers are better advised to approach the government to pass binding instructions to regulatory bodies. If the government fails, the government can be held for contempt," said Ramesh Vaidyanathan, partner at Advaya Legal, on non-implementation of the Aptel order.

The state government on its part can invoke special powers under section 108 (i) and (ii) of the Electricity Act 2003 and issue written directions in matters relating to public interest, which would be final and binding on the regulator.

Chief minister Devendra Fadnavis, under whose jurisdiction MERC comes, is yet to respond to dna queries. We will print his version once we get the response.

Earlier, despite the July 2008 apex court ruling in favour of the consumers, it took MERC a good 15 months to lay down rules and permit changeover. That too was put to an abrupt halt by the regulator as R-Infra accused TPC of cherry picking its high end consumers, a reason that did not hold water in Aptel's observation.

"MERC is flouting its own Multi-Year Tariff (MYT) Regulation 2011 under section 19.2, which provides no extension for MYT submission beyond September 2014. The petition seeks higher wheeling charges when such charges are to be levied by MERC. A service provider has no right to claim higher wheeling charges," said Raksh Abrol, another consumer activist.

According to an R-Infra spokesperson, "R-Infra-D has proposed recovery of past revenue gaps in one year so that consumers are not burdened with interest of Rs1,000 crore. R-Infra's tariff hike would be only 1% for majority of consumers, if the recovery is spread over a span of six years, alike proposed by other utility. Appellate tribunal has directed that the period of recovery of past revenue gaps should be identical for licensees in the common area of supply."

"R-Infra is fully aware that once MERC lays down the switchover norms, it will have no recourse to recover past RAC and, therefore, will be forced to pass on the burden to its direct consumers. This will make its tariffs more uncompetitive," said Ohri.