Made by Sandeep N. Ohri on 26th March 2009 at MERC's Public Hearing on Reliance Infrastructure's Tariff hike Petition.

1. MERC’s Public Hearing
in the matter of
Reliance Infrastructure Ltd
Case Nos. 119, 120 & 121 of 2008
By
Sandeep N. Ohri
Moderator-Bijlee Yahoo Group at
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http://groups.yahoo.com/group/bijlee
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sandeep.ohri@ymail.com
9833097575
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2. No Sanctity of MYT Tariff Orders
• Existing laws require Multi Year Tariff (MYT)
principles to be followed
– Electricity Act 2003, MERC Tariff Regulations 2005,
National Tariff Policy 2006
• In April 2007, MYT Orders have been passed for 3
years 2007-08, 2008-09 and 2009-10
• However, electricity companies have been
– Increasing expenses every year …
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– Increasing additional capex every year …
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– Making a complete mockery of the law, every year …
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3. The Result: Tariff Shock !!
Proposed % Up in % Up in
Units Sep 2006 Jun 2008
Tariff 30 mths 12 mths
100 Rs. 205 Rs. 290 Rs. 419 104 % 45 %
400 Rs. 1,577 Rs. 2,189 Rs. 2,924 85 % 34 %
Has the weighted average of
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all input costs increased @
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34-45% since June 2008 ??
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4. Key Indicators – Past 30 months
Select Indicators, % Up /
Sep 2006 Q1 2009
Indices & Prices (Down)
Official Inflation (Mar 09) 7.02 % 3.03 % (57%)
BSE Sensex (Mar 09) 12,454 9,668 (22%)
Central Excise Rate (Mar 09) 14 % 8% (43%)
Service Tax (Mar 09) 12.36 % 10.30 % (17%)
Bank PLR 11.00/11.50 12.00/12.50 9%
WPI-based Inflation 5.16 % 4.9 % (5%)
CPI-based Inflation 6.30 % 10.5 % 67%
Coal, Australia (per m.t.) $ 47 $ 80 70%
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Crude Oil, Brent (per bbl) $ 63 $ 46 (27%)
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Copper (per m.t.) $ 7,602 $ 3,221 (58%)
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Lead (per m.t.) $ 134 $ 113 (16%)
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5. and going ahead …??
% change over
2009 2010
previous year
Energy (25.0) 0.9
Oil (26.4) 1.8
Natural Gas (10.8) (4.2)
Coal (23.1) (10.0)
Raw Materials (14.9) (2.7)
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Copper (32.2) (4.2)
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As per the latest World Bank report entitled
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‘Global Economic Prospects 2009’
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6. Energy Purchase Data
Particulars FY 06 FY 07 FY 08 FY 09 FY 10
Gross Energy Input (MU)
Gross Energy Input = Power Purchase
Cost (Rs. Cr.)
Standby Charges (Rs. Cr.)
Transmission Charges (Rs. Cr.)
SLDC Charges (Rs. Cr.)
Total (Towards Power Generation
& Transmission in Rs. Cr.)
Avge Cost of Power (Rs/unit)
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Sales (MU)
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7. Consumer Data
No. of Residential
Consumption Sales Revenue
Financial Year Consumers
(in MU) (in Rs. Cr.)
(LF1 + BPL)
FY 10 (Projected)
FY 09 (Actual/Est)
FY 08 (Audited)
FY 07 (Audited)
FY 06 (Audited)
FY 05 (Audited)
FY 04 (Audited)
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8. Capital Expenditure Data
Pending New projects taken
Tariff
execution at up after the MYT
Impact of
CapEx Item the time of Order (which were
the new
the MYT not approved in the
Projects
Order MYT)
(in Rs. cr) (in Rs. cr) (in Rs. cr)
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Well … be prepared to
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provide all this data under RTI
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9. New Category for Railways
• On an application from Metro One (its own
company), a new separate categorization for
‘Railways’ has been asked for
– Rate not proposed and/or mentioned
– No Consumption figures given
– No Revenue projection made
• Metro One project may be allowed to ‘develop’ the
surrounding land/built-up space for commercial
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purposes
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• Should not be allowed, unless rate is on par with
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highest commercial / industrial tariff
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10. Intervention under Section 23
• BEST and TPC-G already have a LTPPA in place
• Reliance has not signed a PPA even for 500 MW
• MERC has been asked to intervene (under Section
23) and redistribute the allocation of power
supplied by TPC-G
• Why should MERC ask Reliance to submit a legal
opinion ?
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• Doesn’t it have its own methodology and access to
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legal resources?
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11. Intervention under Section 23
• Section 22. (Provisions where no purchase takes
place)
• Section 23. (Directions to licensees)
If the Appropriate Commission is of the opinion that
it is necessary or expedient so to do for maintaining
the efficient supply, securing the equitable
distribution of electricity and promoting
competition, it may, by order, provide for regulating
supply, distribution, consumption or use thereof.
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• Section 24. (Suspension of distribution license and
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sale of utility)
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12. Intervention under Section 23
• It is an established principle that interpretation of
sections of an Act are to be done with respect to
the position with respect to adjacent sections and
not to be applied in isolation
• Objective behind S 23 was to empower the
Commission to step in and take appropriate steps to
‘regulate’ supply in the event a licensee’s business
was closing down, or was to be closed down and/or
disposed off
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• It has got nothing to do with the allocation,
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distribution and/or ‘regulation’ (of supply) under
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any other circumstance
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13. Intervention under Section 23
• Reliance states that tariff shock has resulted, since
MERC is not intervening under Section 23!
– Citing increased number of Appeals being filed at ATE by
Multiplex Association, Spencer & Co., Inorbit Mall, Trent
Limited, Hypercity, Shopper’s Stop, etc.
• Facts being twisted – all Appellants are in the Retail
Shopping business
– Appeals are on account of NEW categorization LT-IX that
was done specifically for Shopping Malls!
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• Sure, these consumers are facing tariff shock – but
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because their category has been changed by
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Reliance and not because of any other reason
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14. BSES, REL, R-INFRA …
NAME CHANGES & THE LICENSE
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15. May 1926: The First License
• The License for the Mumbai Suburban area is called
“The Bombay Suburban Electric License, 1926”
• It was granted to M/s Killick, Nixon & Company and
M/s Callender’s Cable & Construction Company
Limited on 29th May, 1926
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16. May 1930: The First Assignment
• Assigned to “The Bombay Suburban Electric Supply
Company Limited” on 13th May, 1930
• New company formed just to take over the whole
operation of the old business
• Condition imposed by Government:
– No future assignment was allowed, without prior written
permission
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17. Assignment Clause
• “At any time after commencement of this License,
the Licensee may, with the previous consent in
writing from the Government and subject to the
compliance with such conditions upon which such
consent may be given, assign this License, and
transfer the whole of their undertaking...”
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– Clause 14, Bombay Suburban Electric License, 1926
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18. More Legal Conditions
• “No licensee shall at any time assign his license or
transfer his utility, or any part thereof, by sale,
lease, exchange or otherwise without the prior
approval of the Appropriate Commission”
– Section 17 (3), Electricity Act, 2003
• Electricity business must not subsidize ‘other
business’
– Section 51, Electricity Act, 2003
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• One-third of the profit of such “other business” to
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be deducted from ARR of Electricity business
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– Regulation 79.1, MERC Tariff Regulations, 2005
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19. Multiple Name Changes
• Dec 1992: Name changed from ‘Bombay Suburban
Electric Supply Ltd’ to ‘BSES Ltd’
– Even though required, Electricity License not amended
• 1992-2003: Reliance starts buying up BSES Ltd
• Feb 2003: New Businesses included in MoA of BSES
Ltd (Real Estate, Infra, DTH, Cellular, Mutual Funds)
• Jun 2003: Electricity Act 2003 comes into force
• Feb 2004: ‘BSES Ltd’ changes its name to ‘Reliance
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Energy Ltd’
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– Even though required, Electricity License not amended
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20. Jul 2004: MERC’s Order
• “Mere change in name in terms of the
provisions of the Companies Act, 1956 has no
other legal implication and that, the entity
remaining otherwise the same, no fresh issue
of License … is required..”
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– MERC Order, Case No 18 of 2003 dt 1.7.2004
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21. But the Law is very clear !
• The Electricity Act supercedes the Companies Act, if
there is a conflict
– Section 616 (c) of the Companies Act, 1956
• The Electricity Act has an over-riding effect on the
Companies Act
– Sections 173 & 174 of the Electricity Act, 2003
• Even though Companies Act permits transfer of
rights on change of name, the Electricity Act needs
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an application for License transfer
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– In this case, NO transfer was ever asked for, nor ever
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done!!
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22. Oct 2005: RTI Reply
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23. Dec 2005: RTI Reply
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24. Dec 2006: RTI Reply
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25. May 2006: ATE Order
• “It is seen that Reliance has not placed a copy
of license in its favour, so also the contract
entered … has not been placed before MERC
or before us. It is stated, licenses and the
contract are lost and not traceable.”
– Para 40, Page 22, Hon’ble Appellate Tribunal for
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Electricity Order in Appeal No. 31 & 45 of 2005,
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dated 22.5.2006
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26. Mar 2008: New Name..New Vision!
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27. Jun 2008: RTI Reply
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28. Jul 2008: Rel-Infra Ad
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29. Aug 2008: MERC’s Regulations
“Provided that the Appropriate Commission shall, within
one year from the appointed date, specify any general or
specific conditions of licence applicable to the licensees
referred to in the first, second, third, fourth and fifth
provisos to section 14 after the expiry of one year from
the commencement of this Act.”
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30. Aug 2008: MERC’s Regulations
But ‘Reliance Energy Ltd’ has ceased to exist!!
If MERC wanted to draw a reference to REL’s original
application for transfer, it could have issued the
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Regulations in favour of ‘Reliance Infrastructure Ltd
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(formerly known as Reliance Energy Ltd)’ – which is
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the correct legal manner..
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31. Nov 2008: MERC’s ‘Recognition’
Is ‘recognition’ of name change =
Assignment/Transfer/Issue of License?
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Doesn’t the License itself have to be endorsed /
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stamped / amended ?
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Oops, I forgot…the License is LOST, right ??
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32. March 2009: REL’s website
What is meant by ‘Reliance Energy companies’ – As per R-
Infra, ‘Reliance Energy’ is a brand name – but in Delhi their
name is BSES! Yet their website states that ‘Reliance
Energy companies distributes electricity … including
Mumbai & Delhi’
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33. Mar 2009: Rel Infra’s website
R-Infra’s Registered Office is the same ‘Reliance Energy
Centre’ at Santa Cruz (E). Yet R-Infra claims that ‘none of
the licensed assets are used for other business’. When the
Office building itself is the same, how can we be sure our
tariff is not paying for the other investments in Road,
Urban Infrastructure, Specialty Real Estate, etc. ??
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34. Mar 2009: MERC’s website
• MERC’s own website
still lists REL in their
“List of Utilities /
Licensees”
• R-Infra claims that
“Reliance Energy” is
their Brand Name.
Did MERC grant
Licensee status to a
Brand Name?
• Can MERC clarify
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which ones are
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‘Utilities’ and which
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are ‘Licensees’?
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35. A Recap…
JUST THE FACTS
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36. Just the Facts
• The Mumbai Suburban License is LOST and not
traceable !
• In any case, as per RTI, this License never belonged
to BSES Ltd – so how could it now belong to REL?
• An Electricity License MUST be assigned, on
transfer, as per Electricity Act
• For assignment, prior written permission must be
taken
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• The Electricity Act supercedes The Companies Act
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• License Business must be taken over as a whole, not
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piecemeal
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37. Just the Facts
• Electricity companies must take permission for
doing ‘Other business’
• ‘Other business’ profits must subsidise electricity
business
• REL has been doing ‘Other business’
• MERC rules that ‘mere name change’ does not
require a fresh License
• BSES to REL and REL to R-Infra were much more
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than just a ‘name change’
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• Till Jun 2008, R-Infra was NOT a ‘Licensee’ as per
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MERC
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38. Just the Facts
• In Aug 2008, MERC issued Regulations stating that
was treating REL as a Licensee under proviso to
Section 16 – ‘recognises’ name change to R-Infra
• R-Infra tells its consumers that ‘Reliance Energy’ is a
brand name, while Reliance Infrastructure is the
company name
• MERC still lists REL in list of Utilities/Licensees
• R-Infra has ONE Registered Office (building) for
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Electricity business and Other business, yet claims
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that “licensed assets are not being used for other
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business”
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39. Finally …
MORE QUESTIONS
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40. Isn’t anybody answerable ??
• Since REL itself is admitting (publicly and proudly)
that it has been doing other businesses for the past
2 ½ years, does MERC still feel that ‘BSES Ltd’ to
‘Reliance Energy Ltd’, was a “mere change of
name”?
• Can a Public Hearing for issue of License (u/s 16) be
held in the name of REL, and subsequently License
be issued to (valid for) R-Infra?? Was legal opinion
on this matter taken ??
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• Since R-Infra claims that “Reliance Energy” is their
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Brand Name, did MERC grant Licensee status to a
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Brand Name?
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41. Isn’t anybody answerable ??
• Can LT PPA be signed for 5 or 10 years when the
present License, whoever it belongs to, will expire
on 15th Aug, 2011 (in 2 years)??
• Can MERC interpret the EA 2003 to infer that
“submission of separate accounts” is the same as
“reconciling accounting figures” ? Has MERC taken
legal opinion on this or provided any justification ??
• Why haven’t the ‘Consumer Representatives’ raised
any of these issues during the validation sessions?
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• Isn’t MERC guilty of MISUSING Public money while
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conducting such farcical sessions??
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42. Let’s change the perception..
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Minimising
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Electricity
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Rates
Continuously
C Coffers
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43. Tamasoma jyotir gamaya
(From darkness unto light)
I sincerely thank the Hon’ble Commission for this
opportunity, the time and their patience!
Happy Gudi Padva !!
Contact: Sandeep N. Ohri
Email: sandeep.ohri@ymail.com
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Mobile: 98 33 09 7575
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Moderator: http://groups.yahoo.com/group/bijlee
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