Saturday, October 05, 2013

Is MERC going to really allow Consumers a choice - a REAL CHOICE??

This post is excerpted (is there a word like that?) from my latest submission to the Maharashtra Electricity Regulatory Commission (MERC) of which I am an Authorised Consumer Representative for a few Cases pertaining to electricity distribution in the State of Maharashtra.

The issue in the present case is the CHOICE of electricity supplier, in the event that two distribution licensees are present in an area. This situation exists in the Mumbai suburbs where Reliance Infrastructure and Tata Power both have a license to distribute electricity.

MERC has severely restricted the choice that consumers can exercise. Both companies have elaborate setups, expensive advocates, humungous resources and are/have been throwing loads of paper-work and contentions at each other and at MERC ...and also at us, Consumer Representatives.

There have been numerous hearings in the matter and what I wrote to them, was more of an Appeal than a formal submission. An appeal to give us back our right to chose the electricity supplier of our choice - and to remove the unnatural (and illegal!) constraints that had been created. 

Here are the excerpts...
(For those interested in the Chronology of events, a very brief Background is given at the end of the excerpt)
  • The Case is governed by the ruling of the Supreme Court allowing Consumers (please note, there is no reference/definition of the word, Customer) to have the liberty of choosing their electricity supplier if two distribution licensees exist in the same area. The Commission cannot lose sight of this guiding Order, while deciding this Case. 
  • The basic issue is that of CONSUMER CHOICE in a competitive scenario. The Supreme Court has clearly laid down not only a Strategic matter, but also, to some extent, given some general principles for Executive action. The Commission must not OVERSTEP (as it has done in the past, according to none other than the Supreme Court itself!) and distort the Order and its dilute its efficacy. 
  • All other issues like laying cables, cross subsidy, regulatory asset charge, consumer mix, etc., need to be dealt with while keeping the end objective in mind. The Commission MUST not be guided (or driven!) by Licensees and their own constraints!
  • I have read the numerous submissions made by both parties and the on-going charges and counter-charges and submissions and rejoinders and responses - this can go on ad infinitum (or should I say ad nauseum!) They are just seeking to further complicate the matter and delay the decision-making.  
  • Both parties, RInfra and TPC are repeatedly referring to the Supreme Court order - but using selective phrases/passages/paras out of context to suit themselves. While they get to present their views ably supported by professional advocates, the hapless consumer has to depend upon people like us (who are not available to devote themselves full-time to this activity).  
  • As a result, if a Consumers point is not put across forcefully (or even put across at all!) it is likely to be overlooked by the Commission who is drowned in the barrage of submissions made by both parties. It is therefore the prime duty and responsibility of the Commission to err on the side of the Consumer and not otherwise.
  • It is likely that the parties are further going to divide Consumers into various groups and then advocate the benefits that one group is receiving (or likely to receive) and pit that against the dis-benefits accruing to another group.
  • This artificial distinction has NOT been made out anywhere in the Law (the EA2003) or by the Supreme Court (which has upheld the principles in the preamble of the Act). When I request the Commission to uphold Consumer choice - it is WITHOUT bias to any group. Sometimes things need to be left to themselves and within the given constraints, equilibrium will be found. 
  • Yes, there WILL be heartache and heartburn, but a Regulator needs to know when to step aside and let market forces drive the situation. Give companies a constraint - and see how innovative they can get! 
  • The Reliance Group and the Tata Group have been at the forefront of innovation in many products and services and the Commission should back down and not try to ’protect’ one or the other. It should leave the two of them to fight for the winning the Consumer!
  • The Order in Case 151 itself, severely restricted consumer choice and subsequent tariff Orders further complicated the calculations and is confusing Consumers. This Order has the potential to undo all the confusion and restore Consumer choice (for ALL Consumers, across various ’groups’ as selectively and artificially defined by the two parties) devoid of the various ifs and buts that constrain it. 
  • The Commission MUST restore the right to choice of selecting electricity supplier. The methodology was already laid down in the earlier Interim Order and the scope of that should have been further widened - but it has been instead narrowed subsequently.

         The Commission must seriously ask itself....
  • Does the Consumer REALLY have a choice? 
  • The SAME choice that an Act of Parliament has granted it? 
  • The SAME choice that the Supreme Court reaffirmed in its Order? 
  • Or is the Commission again going to overstep’ itself - only to be censured later - at the cost of lakhs of consumers losing their right?? 

          The matter is in your hands.


In 2004, MERC has incorrectly passed an Order disallowing Tata Power from supplying electricity to consumers because its license precluded it from doing so. Reliance continued to enjoy a monopoly and the rates kept going through the roof. Tata Power eventually won the case in the Supreme Court, in 2008, which upheld its legitimate claim that it did indeed have such a license and censured both the MERC and the Appellate Tribunal for Electricity for overstepping their jurisdiction. 

The Supreme Court in its Order, clearly stated that the electricity consumer MUST have a choice and a right to exercise that choice - upholding the Electricity Act 2003 and its preamble.

Subsequently, in 2009, MERC finally came out with a methodology of effecting this switch/change and consumers were happy that they finally had a choice!Reliance consumers promptly started switching over to Tata Power, whose tariff rates were lower.

...and then things went downhill thereafter. Reliance played spoilt-sport and complained to MERC that Tata was indulging in cherry-picking of only higher end consumers. Tata could not prove(!) that it wasn't proactively doing the cherry-picking, but yes, it was true that the higher consumption consumers, obviously, stood to benefit the most! And so MERC put a constraint on the switch/change and said that only those with consumption BELOW 300 units per month could switch/change!

Thereafter, a series of hearings, spanning months, and a few tariff orders later, the equation seemed to now become skewed in Reliance’s favour and MERC called for more hearings and this has been going on now. For those inclined to have details - please refer Case 151 of 2011 (Order passed) and now Case 85 of 2013 (present case, hearings still going on).

Friday, June 21, 2013

APTEL stays MERC Order on CSS

The Appellate Tribunal has stayed (for now) the MERC Order on Cross Subsidy Surcharge being levied by RINFRA.

The Order was passed today (21st June, 2013) and is available online, here:

In my opinion, this is an important Order even if simply from the perspective that ANY element of tariff CANNOT be levied without it being clearly discussed with the public/consumers.

Also the Commission needs to give SPEAKING ORDERS explaining their reasoning and the rationale behind it.

This is only an Interim Stay on collection of CSS and the status quo to be restored as what it was before the MERC Order. Merits of the case will be argued in the 1st week of August.

A few excerpts of the Order are given below for your reference...

"The R-Infra on 07.1.2013 filed a petition before the State Commission in case No.3 of 2013 i.e. the present proceedings, seeking for determination of Cross Subsidy Surcharge for Open Access consumers. In this petition, only the other distribution licensees and the Government of Maharashtra alone were impleaded as a party and only they were heard. In fact, on 7.2.2013 the Government of Maharashtra had sent a letter to the State Commission to de-link the trajectory for reduction in Cross Subsidy Surcharge from the determination of Cross Subsidy Surcharge." 

"When the prayer was made by the R-Infra in Case No.3 of 2013 seeking for the determination of Cross Subsidy Surcharge, the State Commission did not choose to issue notice to the consumers with reference to the said issue. On the other hand after hearing the distribution licensees and the Government, the State Commission has passed the impugned order dated 10.5.2013 revising the Cross Subsidy Surcharge applicable to changeover consumers by increasing the Cross Subsidy Surcharge to a great extent without hearing them." 

"We are unable to understand as to why the State Commission had hurriedly passed the impugned order with reference to this issue which is admittedly pending before the State Commission in MYT proceedings as well as in Appeal No.178 of 2011 before this Tribunal. No reasons have been given in the impugned order with regard to the urgency."

"It is also noticed that the State Commission has decided to determine Cross Subsidy in the present proceedings after getting the view of the Government of Maharashtra without hearing the parties who are likely to be affected due to the high increase in the Cross Subsidy Surcharge."

"We find that there is prima-facie merit in this contention. That apart, the balance of convenience also in our view lies in favour of the Appellants." 

"If the impugned order, with reference to the increase in Cross Subsidy Surcharge is not stayed pending adjudication of the present Appeals, the Appellants will have to pay Surcharge which is increased to 1000% and 400% respectively and this would cause grave prejudice to the consumers once such increase of Cross Subsidy Surcharge has been collected from the changeover consumers."