MERC Public hearing

MERC’s Public Hearingin the matter of Reliance Infrastructure LtdCase Nos. 119, 120 & 121 of 2008 : 

MERC’s Public Hearingin the matter of Reliance Infrastructure LtdCase Nos. 119, 120 & 121 of 2008 By Sandeep N. Ohri Moderator-Bijlee Yahoo Group at http://groups.yahoo.com/group/bijlee sandeep.ohri@ymail.com 9833097575

No Sanctity of MYT Tariff Orders : 

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 … Increasing additional capex every year … Making a complete mockery of the law, every year … 2

The Result: Tariff Shock !! : 

The Result: Tariff Shock !! Has the weighted average of all input costs increased @ 34-45% since June 2008 ?? 3

Key Indicators – Past 30 months : 

Key Indicators – Past 30 months 4

and going ahead …?? : 

and going ahead …?? As per the latest World Bank report entitled ‘Global Economic Prospects 2009’ 5

Energy Purchase Data : 

Energy Purchase Data 6 R-Infra did not provide this data …

Consumer Data : 

Consumer Data 7 R-Infra did not provide this data …

Capital Expenditure Data : 

Capital Expenditure Data 8 Well … be prepared to provide all this data under RTI R-Infra did not provide this data …

New Category for Railways : 

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 purposes Should not be allowed, unless rate is on par with highest commercial / industrial tariff 9

Intervention under Section 23 : 

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 ? Doesn’t it have its own methodology and access to legal resources? 10

Intervention under Section 23 : 

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. Section 24. (Suspension of distribution license and sale of utility) 11

Intervention under Section 23 : 

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 It has got nothing to do with the allocation, distribution and/or ‘regulation’ (of supply) under any other circumstance 12

Intervention under Section 23 : 

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! Sure, these consumers are facing tariff shock – but because their category has been changed by Reliance and not because of any other reason 13

NAME CHANGES & THE LICENSE : 

NAME CHANGES & THE LICENSE BSES, REL, R-INFRA … 14

May 1926: The First License : 

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 15

May 1930: The First Assignment : 

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 16

Assignment Clause : 

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...” Clause 14, Bombay Suburban Electric License, 1926 17

More Legal Conditions : 

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 One-third of the profit of such “other business” to be deducted from ARR of Electricity business Regulation 79.1, MERC Tariff Regulations, 2005 18

Multiple Name Changes : 

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 Energy Ltd’ Even though required, Electricity License not amended 19

Jul 2004: MERC’s Order : 

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..” MERC Order, Case No 18 of 2003 dt 1.7.2004 20

But the Law is very clear ! : 

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 an application for License transfer In this case, NO transfer was ever asked for, nor ever done!! 21

Oct 2005: RTI Reply : 

Oct 2005: RTI Reply 22

Dec 2005: RTI Reply : 

Dec 2005: RTI Reply 23

Dec 2006: RTI Reply : 

Dec 2006: RTI Reply 24

May 2006: ATE Order : 

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 Electricity Order in Appeal No. 31 & 45 of 2005, dated 22.5.2006 25

Mar 2008: New Name..New Vision! : 

Mar 2008: New Name..New Vision! 26

Jun 2008: RTI Reply : 

Jun 2008: RTI Reply 27

Jul 2008: Rel-Infra Ad : 

Jul 2008: Rel-Infra Ad 28

Aug 2008: MERC’s Regulations : 

Aug 2008: MERC’s Regulations 29 “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.”

Aug 2008: MERC’s Regulations : 

Aug 2008: MERC’s Regulations 30 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 Regulations in favour of ‘Reliance Infrastructure Ltd (formerly known as Reliance Energy Ltd)’ – which is the correct legal manner..

Nov 2008: MERC’s ‘Recognition’ : 

Nov 2008: MERC’s ‘Recognition’ 31 Is ‘recognition’ of name change = Assignment/Transfer/Issue of License? Doesn’t the License itself have to be endorsed / stamped / amended ? Oops, I forgot…the License is LOST, right ??

March 2009: REL’s website : 

March 2009: REL’s website 32 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’

Mar 2009: Rel Infra’s website : 

Mar 2009: Rel Infra’s website 33 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. ??

Mar 2009: MERC’s website : 

Mar 2009: MERC’s website 34 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 which ones are ‘Utilities’ and which are ‘Licensees’?

JUST THE FACTS : 

JUST THE FACTS A Recap… 35

Just the Facts : 

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 The Electricity Act supercedes The Companies Act License Business must be taken over as a whole, not piecemeal 36

Just the Facts : 

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 than just a ‘name change’ Till Jun 2008, R-Infra was NOT a ‘Licensee’ as per MERC 37

Just the Facts : 

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 Electricity business and Other business, yet claims that “licensed assets are not being used for other business” 38

MORE QUESTIONS : 

MORE QUESTIONS Finally … 39

Isn’t anybody answerable ?? : 

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 ?? Since R-Infra claims that “Reliance Energy” is their Brand Name, did MERC grant Licensee status to a Brand Name? 40

Isn’t anybody answerable ?? : 

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? Isn’t MERC guilty of MISUSING Public money while conducting such farcical sessions?? 41

Let’s change the perception.. : 

Let’s change the perception.. 42 M E R C Merely Enhancing Reliance’s Coffers Minimising Electricity Rates Continuously

Tamasoma jyotir gamaya(From darkness unto light) : 

43 Tamasoma jyotir gamaya(From darkness unto light) Contact: Sandeep N. Ohri Email: sandeep.ohri@ymail.com Mobile: 98 33 09 7575 Moderator: http://groups.yahoo.com/group/bijlee I sincerely thank the Hon’ble Commission for this opportunity, the time and their patience! Happy Gudi Padva !!