Migration of consumers from Reliance Infrastructure to Tata Power in the city’s vibrant power sector has picked up slowly but steadily. On an average, Tata Power, with customer base of 300,000, daily receives around 300 to 350 consumer applications for changeover. In 2011-12 alone, around 120,000 customers changed over to Tata Power. The changeover customers span across all three segments -- residential, commercial and industrial. The residential segment accounts for a major part (88%) of the changeover, followed by the commercial segment (11%) and the Industrial segment (1%).
Industry experts admit that Tata Power's competitive tariff has been the leading factor for the surge in migration rate. According to the tariff proposals filed with the Maharashtra Electricity Regulatory Commission, the average billing rate of Reliance Infrastructure’s distribution wing comes to Rs 7.06 per unit compared with Tata Power’s distribution arm of Rs 5.20 per unit in 2010-11.
Tata Power has already launched an investment plan of Rs 1,000 crore for network expansion so that it can customers migrating from Reliance Infrastructure. A Tata Power spokesperson told Business Standard, “The company’s current power generation capacities allocated to the city is 900 Mw to its own customer base and 900 Me being supplied to BrihanMumbai Electric Supply and Transport. The process of migrating is very systematic and easy for customers, evident by the high changeover numbers as quoted above.”
However, what is Tata Power’s gain is turning out to be a loss -–both physical and financial-- to Reliance Infrastructure, which has a customer base of over 2.8 million. “Due to the migration of the cross-subsidised consumer from Reliance Infrastructure to Tata Power (75% of the migrated sale is from cross-subsidised categories) it is resulting in a cross-subsidy loss of over Rs 600 crore a year. This burden is getting accumulated and will be have to be borne by subsidised low-end consumers. This is because there are hardly any cross subsidizing consumers left in Reliance Infrastructure and if the burden gets passed on to the few in this segment who are still with us, it could result in a cascading effect of further migration,” the Reliance Infrastructure spokesman said.
Moreover, the spokesman explained that the tariff difference between the two companies is primarily driven by the power purchase price and consumer mix. “Despite having competent power purchase price, Reliance Infrastructure continues to lose consumers to Tata Power. The company has unfavourable consumer mix having cross-subsidy in excess of Rs 1,000 crore, it is supplying 2.2 million low-end consumers (75% of low end consumers stay in Mumbai) who receive supply at a tariff much lower than cost of supply, whereas Tata Power has negligible number of such consumers. Even to maintain same average tariff, the requirement of tariff applicable by each consumer category is significantly higher in case of Reliance Infrastructure,” the spokesperson said. The company informed that the Maharashtra Electricity Regulatory Commission has rejected its prayer made in the tariff revision proposal for 2011-12 that a drop in its power purchase price be considered to re-determine cross subsidy surcharge.
Curiously, Tata Power said the shift of consumers was not only because of attractive tariff but also due to rolling out of various value added services from time to time. “The company focuses on demand-side management which helps consumers migrate to energy efficient appliances. Besides, electrical safety audit is done to ensure customer premise is a safe place and energy audit is carried out to ensure optimum energy consumption,” the spokesperson noted.
