Mumbai power sector has been in a crisis like situation for quiet some time with tariff for suburban consumers reaching extremely high levels. Alarmed by the public outcry over increasing tariffs, in June 2009 the Government of Maharashtra intervened for the first time using section 108 of Electricity Act 2003 and directed Maharashtra Regulatory Commission (MERC) to investigate the reasons behind the sharp increase in tariff.  Meanwhile following a Supreme Court judgment, in June 2009 Tata Power Company announced its decision to withdraw the 500MW generation capacity that it was supplying to Reliance Infra from 1st April 2010. Withdrawal of the 500MW generation by Tata Power would mean further increase in power purchase cost of RInfra, which has no long term contracted power procurement source, except its own generation of 500 MW, while its demand is over 1500 MW. This situation becomes more critical in light of the peculiar competition scenario in Mumbai, which allows TPC and RINfra to operate as parallel licensees. MERC has formalized consumer switch-over mechanism, allowing RInfra consumers to migrate to Tata Power, and vice-versa , if they so desire. As the Tata Power’s tariff is significantly lower than RInfra tariff for large consumers, many large industrial and commercial consumers have shifted to Tata Power. Sensing the possible adverse consequences of emerging scenario for suburban consumers, the Government once again intervened and appointed a five member committee to analyze the issue and recommend possible alternatives. The Government, based on the committee report, asked MERC to arrive at a solution which would protect consumer interests.  In the light of these developments, distribution licensees in Mumbai, viz RInfra, Tata Power and BEST filed various petitions before MERC. On 28th June 2010 and 3rd July 2010 the MERC held public hearings on these matters.

During the public hearing, Prayas highlighted the importance of these proceedings for assessing the ability of Indian Electricity Regulatory Framework to make distribution licensees accountable for core duties such as rational power purchase planning. Based on detailed review of reasons for Rinfra’s failure to have long term PPA, Prayas submission during this public hearing demanded the need to evolve solution based on following guiding principles and also made specific suggestions for the same.

- Protecting interest of consumers, especially small consumers and dis-advantaged sections of society
- Making the distribution licensee, i.e.RInfra accountable for its power purchase planning failure, in spite of repeated warnings and directives from commission and government
- Ensuring that assets created based on certainty of regulated revenue and Mumbai demand should not be used for profit maximization by Tata Power