Slowly, but steadily, the migration of consumers from Reliance Infrastructure to Tata Power in the city’s vibrant power sector has gathered pace. Tata Power, with a customer base of 300,000, receives 300-350 consumer applications for a switch daily.
In 2011-12, about 120,000 customers switched to Tata Power. Of these, the residential segment accounted for 88 per cent, followed by the commercial segment (11 per cent) and the industrial segment (one per cent).
Industry experts say Tata Power’s competitive rates led to the surge in migration. According to the proposal for rates filed with the Maharashtra Electricity Regulatory Commission, in 2010-11, the average billing rate of Reliance Infrastructure’s distribution wing stood at Rs 7.06 a unit, against Rs 5.20 a unit for Tata Power’s distribution arm.
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Tata Power plans to invest Rs 1,000 crore on network expansion, and so, it can accommodate more Reliance Infrastructure customers who wish to switch. A Tata Power spokesperson told Business Standard, “The company’s current power generation capacity allocated to the city is 900 Mw to its own customer base and 900 Mw to Brihanmumbai Electric Supply and Transport. The process of changeover is very systematic and easy, evident through the high changeover numbers.”
A Reliance Infrastructure spokesman said, “The migration of cross-subsiding consumers of Reliance Infrastructure to Tata Power (75 per cent of the migrated sale is from cross-subsidising categories) is resulting in an annual cross-subsidy loss of about Rs 600 crore, the burden of which is being accumulated. This would be have to be borne by subsidised low-end consumers for primarily two reasons. First, there are hardly any cross-subsidising consumers left with Reliance Infrastructure. Second, if the burden is passed on to cross-subsidising consumers, it would lead to more migration.”
He added the difference in rates between the two companies was primarily driven by the power purchase price and consumer mix. “Despite having a competent power purchase price, Reliance Infrastructure continues to lose consumers to Tata Power. The company has an unfavourable consumer mix. With cross-subsidy of more than Rs 1,000 crore, it supplies 2.2 million low-end consumers (75 per cent of low-end consumers are in Mumbai) who receive supply at rates significantly lower than the cost of supply. However, Tata Power has a negligible number of such consumers. To maintain the average rates, rates for each consumer category have to be significantly higher in the case of Reliance Infrastructure,” the spokesperson said.
Reliance Infrastructure said the Maharashtra Electricity Regulatory Commission had rejected its suggestion that the fall in its power purchase price be considered to re-determine cross-subsidy surcharge.
Tata Power said the shift of consumers was not only due to attractive rates, but also due to various value-added services. “The company focuses on demand side management, which helps consumers migrate to energy-efficient appliances. Besides, electrical safety audits are carried out to ensure customer premises are safe and energy audits ensure optimum energy consumption,” said the company spokesperson.