Reliance Infrastructure (R-Infra), an Anil Dhirubhai Ambani Group company, is on the warpath with the state electricity regulator. Stung by the Maharashtra Electricity Regulatory Commission's (MERC's) decision to invite expressions of interest (EoIs) for the distribution of power to Mumbai's suburbs, R-Infra is examining the possibility of legal action.
R-Infra is a major power distributor in the Mumbai suburbs, with a consumer base of over 2.7 million. Its licence is due to expire on August 14 next year. This is the first instance of a power regulator auctioning a distribution licence. "R-Infra is evaluating the EoI notice and will take action, as may be legally advised. It will apply for extension of its licence period at an appropriate time and will continue to use assets owned by it to meet its licence obligations," a company spokesperson stated.
MERC has justified the move, saying it invited the EoIs under provisions of the Electricity Act, 2003, that deal with granting more than one licence to promote competition. As the EoI is not an order, it cannot be challenged in the Appellate Tribunal on Electricity, but R-Infra can challenge it in court, sources familiar with the developments said.
An MERC official, who did not wish to be named, told Business Standard that according to the provisions of the Electricity Act, 2003, anybody who wants to apply for a licence can do so, provided pre-conditions are met. "In the Mumbai suburbs, asset ownership would remain with R-Infra. Should the existing licensee not be granted a licence for the next 25 years, a new licensee can use those assets, subject to certain terms. The new licensees will not own the assets," he added.
R-Infra executives, however, disagree with that interpretation. "We are opposed to the manner in which MERC has invited EoIs for a distribution licence. Unless there is a revocation of licence, no competitive bidding process can be initiated," said one.
A Mumbai-based analyst recalled that three years ago, MERC had issued a licence to BrihanMumbai Electricity Supply and Transport for 25 years without competitive bidding. He wanted to know how MERC can apply a different yardstick for R-Infra.
Power analyst Ashok Pendse expressed doubts as to whether the auction process would benefit consumers. "The basic problem was R-Infra's failure to enter into a long-term power purchase agreement; it was procuring power from the open market at exorbitant rates. If R-Infra or a new licensee can address this issue, only then will the consumer benefit. Otherwise, the present exercise will merely bring about a cosmetic change," he said.
Observers said there was no provision in electricity laws for licence bidding.
