Power Tarrif - PRICING

ReLIk\ ce Energy

Anil Ohirubhai Ambani Group

What is/the controversy about power allocation and why didn't I hear about it all these years?

Because. for 80 lonlJ years availability of power was more than demand of Mumbai city!

Allow us to explain:

· Mumbai power requirement is served by three distribution companies, namely - Reliance Energy:
largest customer base of 26,3 lakh in the suburbs, BEST: 9,7 lakh customers in the upmarket island city and Tata Power: only about 22000 high-end customers, The distribution companies in turn source all their power requirements from TPC who as per its licences is obliged to meet all their requirements, Reliance Energy also supplements its requirements from its own 500 MW Dahanu power plant.

· Till 2005, life was simple, There was more power available than the city's demand,

Power sharing of the TPC's 1777 MW was as per the natural demand of each distribution company, That's why you didn't hear about power allocation,

· Come 2006, Mumbai's power demand iRcreased beyond availability, MERC stepped in and allocated TPC's 1777 MW power equitably amongst the three distribution companies in accordance the requirements of their respective customers and asked the balance demand to be met by procurement from other sources, As per this allocation, Reliance Energy got 762 MW of power in 2007 -08,

In December 2005, MERC also directed the distribution companies to sign Power Purchase Agreements (PPAs) with TPC to formalize the historical informal power sharing protocol of 80 years, Reliance Energy could not sign the same,

Why didn't Reliance Energy si n the Power Purchase Agreement with TPC?

Because TPC offered only 500 MW instead of 762 MW that was allocated in year 2007-08. In order not to compromise the interest of the 26.3 lakh suburban customers, we didn't alJree.

Reliance Energy's contention is:

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· The citizens of the suburban Mumbai have paid for TPC's generation assets for decades by way of tariffs and have therefore equitable entitlement to this low cost power. Besides the consumer have contributed Rs 533 crores towards project reserve,

· The citizens of the suburban Mumbai must get the same 762 MW that MERC itself recognized as equitable and allocated to Reliance Energy in 2007 -08,

Reliance Energy agreed to all other terms and conditions of the agreement, However, TPC has now allocated and signed a Power Purchase Agreement with BEST for 800 MW and also allocated itself 477MW leaving only 500 MW for the suburban customers, And these agreements have been approved by MERe.


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This sounds unfair. What is Reliance Energy doing to protect its customers' interest?

Retia

promptness and continues to fieJht for its suburban customers, viz:

· Challenged the PPAs at the Apellate Tribunal (Apex judicial body for handling electricity matters) who accepted the contention that the suburban customers have for decades paid for creating the TPC generation assets and now should have entitlement for their fair proportionate requirements, The Tribunal has asked MERC to review the PPAs afresh, TPC and BEST have approached the Supreme Court, who due to its summer vacations and pending full hearing has stayed the ATE order,

· Petition with MERC for continued equitable allocation for the current year too due to shortage of power, The decision is awaited,

Why this mess, why hasn't the power generation capacity for Mumbai been improved?

Reliance EnereJY has tried its best - in fact, has done the most!

· The last time generation capacity was added for Mumbai was in 1995: 500 MW by Reliance Energy and 1 80 MW by TPe.

· In year 2001 Reliance Energy proposed to set up an additional 495 MW at Safale, This was rejected by CEA based on TPC's contention that they possessed enough capacity to meet any further requirement of Mumbai and would provide power for Reliance Energy needs!

· Reliance Energy has also been campaigning to be allowed to expand the capacity of its Dahanu power plant, Currently land acquisition is in progress at Shahpur, Raigad for setting up a 4000 MW power plant, Also, a 300 MW plant is being set up at Butibori from which 150 MW will be surplus,

What now?

The citizens of suburban Mumbai will have to either suffer power shortaeJes or bear a burden of Rs 600 crores for buyineJ expensive outside power if MERe disallows our petition!

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· The Supreme C9urt & MERC respective decisions are awaited,

· In the meantime on 4th June 2008 MERC has passed the tariff order for year 2008-09 considering only 500 MW allocation out ofthe TPC capacity for Reliance Energy Customers,