The Hindu Business Line : Electricity Act spares BEST from future shocks — Consumers denied right to choose power source

ABOUT nine-lakh consumers in Mumbai who are supplied power by Brihanmumbai Electricity Supply and Transport Undertaking (BEST Undertaking) have been denied the right to choose their source of power supply under the recently enacted Electricity Act, 2003.

Under the Act, local authorities like BEST are exempt from a stipulation that makes it mandatory for distribution licensees to allow consumers in their area to disconnect their existing licensee and opt in for power supply from other sources, as and when the State power regulator allows it. This further means that BEST's future consumers cannot also switch suppliers at any later date unless it approves it on its own accord.

This seems a remote likelihood since BEST subsidises its bus transport operations through revenues earned in the power distribution business. If the consumers are allowed the freedom to choose their supplier, it will lose its ability to cross subsidise bus commuters.

Under the recently enacted Act, the local distribution licensee would be required to allow foreign suppliers access to their network to reach consumers in a non-discriminatory or `open access' manner, subject to regulations framed by the state regulator. Further, at the behest of the Congress Party's suggestion, the Government has announced that it will be shortly moving an amendment to the Act, whereby `Open Access' to the consumer is made mandatory within the next six years.

However, none of this will apply to local authorities since they are exempt under Section 42(3) of the Act. Interestingly, the exemption was slipped into the Act through a last minute amendment moved a few weeks ago. As part of the last minute amendments, the Act exempts local authorities from a stipulation whereby a licensee cannot subsidise its non-power related business through revenues earned as a power licence. Had the exemption not been incorporated under Section 51 of the Act, BEST would have been forced to bring down the consumer tariff and raise the bus ticket tariff for commuters in order to retain a status quo position on the financial front.

During fiscal 2001-02, BEST which recorded a loss of around Rs 16 crore, earned 68 per cent of its revenues from the electricity business with the remaining 32 per cent coming from the transport sector. However, on the expense front, it spent only 60.5 per cent of its proceeds on the electricity business and the remaining 35.5 per cent on the transportation business.

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