Wednesday, November 29, 2006

Finally .. The TRUTH !!

Tamasoma jyotir gamaya (from darkness unto light).

Pretty ironic, since the issue is about light itself ! After struggling for 2 weeks .. here's the truth .. REL does not have the Licence to distribute electricity in Mumbai, in their own name !!

So technically, they are NOT the "Licencee" as per the law. I think they need to be SUED ..

Read on's lengthy, but I have tried to keep it simple..

The LAW:
1. Amongst other things, the distribution of electricity is governed by the Electricity Act 2003, which superceded the earlier Acts of 1910 and 1948.

2. This Licence cannot be transferred, sold, assigned, mortgaged, leased or otherwise given to any other company without express, prior, written permission of the authorities.

3. This Licence is always granted for a period of 25 years and then needs to be renewed, by formally applying to the authorities.

4. The electricity company CANNOT make a profit of more than 14% in the distribution of electricity.

5. The electricity company CANNOT enter OTHER BUSINESSES without PRIOR WRITTEN approval of the authorities.

6. The electricity company can only enter other businesses ONLY to leverage EXISTING assets.

7. Only a LICENCEE can disconnect supply to the user, after giving 15-days' notice in writing (VERY IMPORTANT, as you will see later).

8. In case of a dispute, Licencee will have to wait for 24-months before disconnecting supply to the consumer.

9. A change of name in a company generally implies that all rights automatically flow to the new company, as per the Companies Act.

10. The Companies Act also specifies that if there is any inconsistency with any other "Special" Acts, the sections of the "Special" Acts will prevail.

11. The Companies Act lists out Banking, Insurance and Electricity, being governed by "Special" Acts. Hence, provisions of Electricity Act prevail over Companies Act. Meaning, a mere change of user name cannot facilitate automatic transfer of Licence (MOST IMPORTANT).

12. The Electricity Act 1910 had granted the Mumbai distribution Licence to Killick Nixon for distributing electricity to Mumbai.

13. Later, the Licence was transferred by Killick Nixon, after due approval, in the name of The Bombay Suburban Electric Supply Limited.

14. The Bombay Suburban Electric Supply Limited last renewed their Licence on 15-8-1986 and this Licence is due to expire in 25 years, on 15-8-2011 (also admitted by REL, and which also means the Licence was in the name of Bombay Suburban Electric Supply Ltd, as neither BSES Ltd, nor REL were in existence in 1986).

15. The Bombay Suburban Electric Supply Limited officially changes its name to BSES Ltd in 1990s.

16. The BSES Ltd DOES NOT apply to either the Maharashtra Government or the MERC for change of user name of the Licence. (Yes, I have copies of the official letters !). Implying that the new company, BSES Ltd, does not own the Licence, as per Law.

17. The new company, BSES Ltd, is sold to REL in 2004.

18. REL does not apply for transfer of Licence. In any case they can't because even BSES Ltd is, technically, not the owner of the Licence.

19. The original Licence has been LOST (Ha!). REL failed to produce this in the Appellate Tribunal hearings in 2004. (I challenge REL to display it on its website).

20. REL's profits are more than 14% from electricity business (check its financials).

21. REL is into other businesses, without prior permission from the authorities (?).

22. REL has been BUYING fresh assets for its Mumbai Metro Rail projects, which it is legally not supposed to, if it has a Licence for distributing electricity - but since it doesn't, it is eating with both hands !

23. REL cannot disconnect supply as it is NOT the Licencee, in Law. (The earlier Bombay Suburban Electric Supply Ltd could disconnect the supply, as Licence existed in its OWN name, but not REL).

24. REL has unfair practices. Discount given for Prompt Payment is 1% only on ENERGY Consumed, while Delayed Payment Charges is on almost the WHOLE Bill. Look at your own bill and figure out what would be discount and what would be penal interest. Unilaterally, categories have been changed (50HP threshold has been brought down to 15HP). Arbitrarily, 300 units per month has been fixed as "higher consumption" users.

25. MERC and REL claim that rates for electricity is not more than Rs. 4-5 per unit. Bogus claim. Please check your own electricity bills and see the rate per unit (including all charges) for Sept 06 and for Oct 06 and divide by the number of units consumed in each month. That's the average rate per unit. Also, in subsequent bills, you will also be charged "Additional Energy Charge" (ALL users) and/or any "Time Of Day" charges (commercial/industrial users) !

Proposed Action:
# If we STOP paying our bills, REL cannot disconnect supply. Out of the lakhs of REL consumers, if even 5% people stop paying the bills, the Government will have to take cognizance of this injustice.

# If we write to MERC, enclosing copies of Sept 06 and Oct 06 bills (with average rate calculation), they will be forced to review the Tariff Order.

# PIL, anyone ?

# Today it is REL, tomorrow it will be someone else. Let's get the Government to remove this exclusivity/monopoly in the supply of electricity. Let's garner support for this by signing the online petition at

# Forward this information to as many, to create awareness.

Vidya param balam (knowledge is strength supreme) ... was my school's motto ...

Well ... and that's how I feel ...

Saturday, November 25, 2006

More SHOCKing - Online Petition created

(The update is at the end of this post)

While the heated discussion on MERC/REL’s unjustified tariff hike in Mumbai, continues .. here’s more food for thought.

Technically, REL may not even be the owner of the "licence" for distributing electricity to Mumbai !!

If this is true, Boy, … what a FRAUD !

Here’s how, read on …

Point 2.5 (Page 24) of the MERC Tariff Order dated 3-10-2006 mentions this issue of actual validity of REL’s "ownership" of the licence.

It seems that the original licencee was the "Bombay Suburban Electric Supply Ltd" This later changed its name to "BSES Ltd" as it probably entered into some broadband / telephony business also.

Now there is a small, but important, technicality here – the old company (Bombay Suburban Electric Supply Ltd) needs to formally apply to the Government for transfer of licence to the new entity (BSES Ltd) – which apparently, DID NOT happen.

REL, please correct me here, if I’m wrong !

Meanwhile, the Reliance group bought over the new entity, BSES Ltd and changed its name to REL – and thereby has claimed that the licence of Mumbai distribution is now automatically with them !

Interestingly, an objection had been raised even in 2004 on this issue, which was dismissed by at that time, as REL had submitted that a "…mere change in name in terms of the provisions of the Companies Act, 1956 has no other legal implication and that, the entity remaining otherwise the same, no fresh issue of the licensee by the Commission is required."

However, this was NOT verified or ratified by MERC.

Now, there are three main points in REL's stand:
1. Mere change in name
2. Provision of the Companies Act
3. Entity otherwise remaining the same

However, a detailed reading of the provisions of the Companies Act, 1956 will tell you that the Act applies to all companies EXCEPT Electricity, Insurance and Banking Companies. Section 616 (c) mentions that in case of any inconsistencies, the provisions of the Electricity Act will prevail.

The Electricity Act has clearly laid down that licence once granted cannot be transferred or sold, without permission.

Also, maybe in 2004, what REL stated may have well been true as it was probably not involved in other businesses.

Today, however, the scenario is very different. REL is admittedly, not a mere distributor of electricity in Mumbai. It has several other interests also, extending to beyond supply of electricity – Mumbai Metro rail, etc.

In view of this the MERC should probably review the situation in a new light and again deliberate whether REL’s status as licencee is really valid or not !!

The reason I am raising this issue is just simple – since REL is trying to show all of us the rule book, someone needs to slam the same book into their face.

After all they are a public entity supplying a basic utility and cannot be expected to be above the purview of the law.

Let us Mumbai consumers benefit from fair competition by ending REL's MONOPOLY.

I have created an online petition at

This (I hope) will help us address the much larger issue of removal of exclusivity for supply of electricity to Mumbai.

Today it is REL, tomorrow it may be someone else, the issue remains that if EXCLUSIVITY continues, consumers WILL be arm-twisted, so the long term solution lies in removing the exclusivity !

Trust you will agree and sign the petition.

Well ... and that's how I feel !

Thursday, November 16, 2006

Electric SHOCK - The Full Story !!

The whole of Mumbai is reeling under the REL Billing Shock ! I thought I'd make the picture a little more clearer and explain exactly how these smart (?) guys have done us in!

Mumbai gets electricity from these suppliers:

1. Reliance Energy Limited (REL), which controls more than half of Mumbai, especially the growing suburbs. The Reliance group bought out Bombay Suburban Electric Supply Ltd (BSES) and renamed this as REL. Incidentally, REL has also got the contract for the Metro Rail, in

2. Tata Power Company Limited (TPC), whose supply is limited to some parts of the main city area and a few "bulk" consumers.

3. Maharashtra State Electricity Distribution Company Ltd (MSEDCL), part of the erstwhile MSEB, supplies electricity to a few extended suburban areas.

4. Bombay Electric Supply & Transport (BEST), supplies to parts of city centre.

All electricity supply in Maharashtra State is monitored and regulated by the Maharashtra Electricity Regulatory Commission (MERC).

The rates are determined by MERC for each individual provider after taking into consideration a detailed analysis of the costs, expenses and investments of each supplier - as these may be different for different suppliers. So actually, there is an "approved" inequality of electricity
rates across the city and suburbs.

These rates are set for each year and then reviewed with actual expenses (whose details are subsequently submitted by the suppliers). MERC can then actually grant rebates to consumers or, alternately, allow suppliers to recover certain discounts/benefits given earlier !

As per the latest MERC order of October 2006, new rates for 2006-07 were finally frozen for all these suppliers.

Now, this would be pretty much a routine affair, except that REL wants to lynch the public and hence they have managed to get a few more things "approved" by MERC.

As a matter of routine, the rates were upped slightly to adjust for rising costs (of fuel, etc.) and capital expenditure.

Also MERC has redefined the types of consumers and re-categorised them - this is what has caused part of the problem. Now there has been no explanation or logical or practical reason (there never is, is there ?) for doing this.

As of now these are the main categories of consumers:
1. Domestic / Residential low usage (LF-1) - these are home users who have a single-phase or three-phase meter.
2. Light Commercial users (LF-2) - shops, etc.
3. Low Tension / Commercial / Industrial low usage (LTP-1) - users who have a sanctioned load of less than 15HP (down from 50 HP).
4. Low Tension / Commercial / Industrial high usage (LTP-2) - where the sanctioned load is greater than 15HP (down from 50 HP).

For the current discussion, I have ignored the other categories of High Tension (HT) users, Large Industries, Housing Societies, Streetlamps and Agriculture.

Now, because of the MERC Order, each consumer NOW needs to pay the following:

1. Energy Charge - based on actual units consumed. (This was constant in my bill as I was averaging 11 units per month.)

2. Time Of Day Charge penalty - this is for LTP-2 consumers only. REL has installed meters that can record the usage at a particular time. To prevent higher usage between 6pm and 10pm it will levy a penalty of 17% higher on the basic Energy Charge. (I was lucky here as the place was shut anyway.)

3. Fixed Demand Charge - this is a fixed amount that all users have to pay every month, irrespective of how much electricity they use. This is based on the category and/or depending on the sanctioned load, whether used or not ! The actual figure is a complex "higher of three figures" calculation that works in favour of REL. Also, if anyone exceeds the "contracted demand / sanctioned load" then there is a penalty at the rate of 150% of the Demand Charge ! Here's where most consumers in the 15-50HP category got hammered. (I fall in LTP-2 now and this part of my bill went from Rs. 150 to Rs. 7,441, even though my actual consumption
was still 14 units.)

4. Fuel Adjustment Charge - magnanimously at ZERO now - but this is subject to revision anytime based on the cost of fuel .. or even if REL pays a higher purchase price for power !!

5. Power Factor Charge - (This is brilliant) There is a non-transparent methodology of calculating "Power Factor" - and if the average power factor is less than 92%, then there is a charge @ 2% of the Demand Charge for EVERY 1% fall lower than 92% !!! (Here's where my bill went from ZERO to Rs. 2,827 !!)

6. Load Management Charge - In view of the acute power shortage across the State, consumers are now being forced to reduce consumption. High consumption users have been defined as those consuming more than 300 units in a month. These users have to reduce their consumption by 20% (over the same period in the previous year) failing which they would
face a "penalty" in the form of an increased charge @ 100% of the highest rate chargeable. (Here's where my bill went from ZERO to Rs. 39 just because the annual average has been constant across the 12 month period).

7. Additional Energy Charge - This is great ! The erstwhile BSES apparently had given some incorrect rebates to certain consumers about 3-4 years back and the Courts have now decreed that REL can "recover" these amounts from its subscribers ? which means you and me !! This additional charge is at the rate of additional 27% of the energy charge, irrespective of category, to be charged from Oct 06 to Mar 07. But, because of public outcry this has now been "deferred" - not cancelled, mind you !

8. Taxes - The State Govt levies a tax @ 6% which hasn't changed. However, since the basic bill itself has gone up, the Govt stands to gain as is apparent from my bill. (My bill went from Rs. 14 to Rs. 454, so obviously the Government?s coffers are also being filled !!)

All of this leaves a lot of unanswered questions. Here they are:

~ Why was this new categorization done ?
~ Why was LTP-1 threshold reduced from 50HP to 15HP ?
~ Why were the consumers falling in this severely affected category of 15-50 HP not told in advance that they could end up paying close to 100 times more ? (My own bill has gone from Rs. 200 to Rs. 10,800)
~ How did the figure of 20% reduction come up ?
~ What if some users tried to reduce and managed only 15% ? Still they would be penalized ?
~ How did MERC determine that high usage consumers are those that use at least 300 units ? Why don't they make this calculation public ? (In terms of consumption of an average urban household: 3 fans, 7 lights, 1 geyser, 1 fridge, 1 TV, 1 stereo, 1 VCD player and so on.)
~ Was the overall impact of rate hike seen before approving these various changes ?
~ Why is the 1% "rebate for prompt payment" only on the Energy Charge ? In my case the Energy Charge is Rs. 49 while the total bill is Rs. 10,810 !

The Additional Energy Charge allowed by MERC, is a sum of Rs. 350 crore that BSES has "wrongly" paid out as rebates to "certain consumers."

There seems to be a lot of mischief here, which becomes apparent when you consider the facts:
1. If BSES has given greater / incorrect rebates in the past to certain consumers - shouldn't REL have paid a lower amount for BSES (since it was entitled to collect this back) ? Oh sure, REL will argue that the matter was undecided at that point ! And if REL would have bid a lower value, it would not have even managed to buy BSES in the first place !!

2. Why should ALL consumers be made to pay for this incorrect rebate ? Let it be made public as to WHICH consumers were given this incorrect rebate and let REL collect this from those consumers only. I'm sure data is available to identify these consumers.

There are numerous other issues - why is REL's cost of purchase higher than TPC's - why is REL's increase in rates higher than TPC's - REL's Sales projections are dependant on TPC staying out else it will raise the rates again - why is TPC not being allowed to sell to REL's consumers - why is REL getting this preferential treatment - why is the government
allowing this kind of blatant non-transparency ...

All of this smacks of a lot of hand-in-glove public hood-winking and I hope the above information will enable those in power (or maybe some more of us ??) to stop this fraud being committed on the people of Mumbai.

Well ... and that's how I feel ...

Monday, November 13, 2006

Electric SHOCK !!

If you live in Mumbai and have Reliance Energy Ltd (REL) as your electricity supplier .. be ready for a SHOCKing Bill !!

This is what happened to me yesterday .....

I have a small factory area, which remains closed most of the time and is used only for storage of material. The usual electricity bill I get is, generally, less than Rs. 200 (annual average units consumed is less than ELEVEN units).

This month's bill is Rs. 10,810 - for just 14 units consumption !!

As per REL, there's no mistake ... see the calculations given below .. REL has connived with the Maharashtra Electricity Regulatory Commission (MERC) and is hood-winking the people of Mumbai, BIG TIME...

Month..Units..Bill..Fxd Demand..Energy Chg..FAC..Taxes..PFC..LMC
Mar 06...12.....213........150.............48...............1......14.........0.......0
Apr 06...12.....213........150..............48...............1......14........0.......0
May 06...10.....206.......150.............40...............3......13........0.......0
Jun 06...13.....220.......150...............52...............3......15........0.......0
Jul 06...10.....206........150...............40...............3......13........0.......0
Aug 06...14.....225.......150...............56..............4......15........0........0
Sep 06...11.....211........150..............44...............3......14........0.......0
Oct 06...14...10,810...7,441.............49..............0.....454...2,827...39

FAC = Fuel Adjustment Charge
Taxes = Govt. Duties + Mah. Govt. tax
PFC = Power Factor Surcharge
LMC = Load Management Charge

While REL seems to have "appeased" the general public by (apparently) NOT increasing the rates in the Residential areas, but under the garb of two new "approved by MERC" charges, it is lynching the Industrial and Commercial consumers.

Very sneakily, these two new charges have been included - Power Factor Surcharge (PFC) and Load Management Charge (LMC), which are applicable to ALL consumers (irrespective of type)... which means that, shortly, even Residential users will also be affected.

A detailed study of the 124 page MERC report belies all claims that REL has been making about how it will NOT increase the rates in Mumbai.

In fact, be prepared for an increase over and above these rates, starting from whenever they decide to collect back the (incorrect) rebate given in earlier years, under the garb of a new "Additional Energy Charge."

Somewhere in the lengthy report I read that there is also some clause to the effect that REL's competitor, Tata Power Company, is actually prohibited from supplying electricity to existing consumers of REL !!

I think somebody should haul up REL under the MRTP Act (if it is still in force).

With increasing consumer-awareness about one's rights, the fact that such things can be allowed to take place .. is a cruel joke on all of us !

Well ... and that's how I feel ...