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 ...

1 comment:

pitfinder said...

Wow. At least when our utility companies steal from us they're pretty open about it. Years ago, the big telecommunications companies got the government to give them tax breaks and fee hikes of around 25 billion dollars to pay for the fiber network they never even started building.

Your situation sounds like a guy would need an advanced degree just to read the bill. Good luck with this mess.