MERC may scrutinise firms' capex plans

Maharashtra Electricity Regulatory Commission (MERC) on Thursday hinted that it might step in to regulate the equity-debt ratio and annual capital expenditure of power utilities in public interest.

The commission made this observation while considering the annual revenue requirement (ARR) document submitted by BSES (Reliance Energy).

During the hearing, a non-governmental agency, Prayas, submitted that Reliance Energy was making more capital investment in Mumbai than in New Delhi where there was more need for it.

Prayas said the New Delhi circle was in a worse power situation compared to Mumbai.

BSES is seeking a Rs 1.20 per kilo watt capital expenditure in Mumbai, citing technology changes and upgradation efforts.

"MERC should adopt a normative debt-equity ratio of 70:30 for calculating capital base and save Rs 207 crore annually for BSES consumers," the organisation said.

MERC sought to know from the BSES' chartered accountant what ratio he would suggest if appointed for the purpose.

When informed that a 50:50 debt-equity ratio would be proposed, the commission said, "If there is an inclination for large capital expenditure financed by almost 100 per cent equity when cheaper capital is available in the market, it would be the job of the electricity regulatory commission to protect the interest of the consumers and issue guidelines on the ratio."