Tatas challenge CEA view on fee by Reliance

'Reliance hired authority as consultant'.

The fight between Tata Power and Reliance Energy on the standby charges issue has developed into a full-fledged corporate war with Tata Power stating in an affidavit before the Bombay High Court that the advice given by the Central Electricity Authority (CEA) to the Maharashtra Electricity Regulatory Commission (MERC) on standby charges was biased.

It has based its allegations on the ground that Reliance Energy appointed the CEA to provide engineering consultancy services for installation of a flue gas desulphurisation plant at the Dahanu thermal power station for an estimated feecharge of Rs 55 lakh.

The issue assumes significance as the MERC had consulted the CEA before passing an order earlier this month that said Tata Power would have to refund the money collected as standby charges to Reliance Energy.

Tata Power will be required to pay at least Rs 322 crore as refund to Reliance Energy. However, Reliance Energy contends that the amount should be Rs 373 crore.

Tata Power filed a writ petition before the Bombay High Court on Monday seeking a stay on the MERC order. Today, it filed the affidavit. Tata Power is making the allegations on the basis of certain documents it received from the Environmental Association of Dahanu.

"The said Environmental Association of Dahanu have informed Tata Power that the CEA is still providing consultancy services to Reliance Energy under the said agreement and is charging fees therefore. I respectfully say and submit that if the CEA has and is still rendering services to Reliance Energy and acting in close association with Reliance Energy, it could not have advised the MERC on the disputes between Tata Power and Reliance Energy with regard to the sharing of standby charges. Both the CEA and Reliance Energy ought to have disclosed the said fact to Tata Power and the MERC. Tata Power were not aware of the said fact until Tata Power received the said information and copies of documents on June 14, 2004," Tata Power Company Secretary Bomi Shroff said in the affidavit.

"The CEA report, which is completely biased and was merely adopted by the MERC while passing the impugned order, is not a report of an independent body. The impugned order, which is based on the CEA report, is also thereby vitiated, contrary to natural justice and illegal and is liable to be set aside on this ground alone," Shroff has contended.

Reliance Energy will respond in the Bombay High Court to the writ petition filed by Tata Power Company.

"Reliance Energy will make appropriate submission to the Bombay High Court in response to the writ petition filed by Tata Power today challenging the MERC's order, as the matter is currently sub judice," Reliance Energy said in a media statement.

It also pointed out that the Bombay High Court had declined to grant a stay on the MERC order and the matter was adjourned to June 22.

The MERC spokesperson declined to comment on the issue. However, sources close to the commission said: "The MERC issues its order in a particular case after considering all aspects and does not base it on a single factor alone. The order is available on the MERC website and reading through it will make this point amply clear."

When contacted, HL Bajaj, chairman, CEA, said, "We have entered into an agreement with Reliance Energy last week to undertake a study involving load projections for its new power station in Uttar Pradesh." He said Section 73N of the Electricity Act allowed the CEA to undertake studies at rates set out by the government.

"We have the expertise to undertake systems study and electricity planning. After generation has been delicensed, many companies have approached us," Bajaj said.

According to Section 73N, the CEA can "advise the appropriate government and the appropriate commission on all technical matters relating to generation, transmission and distribution of electricity".

When asked if such a study could bias an MERC order, Bajaj said, "It can never influence any awards."

In fact, he said, the CEA had also been approached by Tata Power recently to undertake a feasibility of a 1,000 mw power station in Delhi.

"We have already provided Tata Power a draft of a memorandum of understanding to be signed between the CEA and the company," Bajaj said. He added that the CEA was open to providing consultancy and advice to any company.

Tata Power and Reliance Energy (formerly BSES) have been feuding on standby charges for around seven years. Tata Power has a standby arrangement with the Maharashtra State Electricity Board (MSEB) under which it pays Rs 746 crore annually for agreeing to provide instant power in an emergency.

Tata Power also has a similar arrangement with Reliance Energy. It has been demanding that Reliance Energy pay it 50 per cent of the charges that it is paying the MSEB. Reliance Energy has been disputing this.

Attempts to find a solution by the state government have failed. The battle took a legal turn and was fought on different fronts: at the MERC, the high court and the Supreme Court.

The scene of battle shifted to the MERC a few months ago after the apex court said the commission was the appropriate authority to decide on the issue. The MERC took the CEA's advice and gave its verdict about a fortnight back.

What the fuss is about

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• Tata Power has a standby arrangement with the MSEB under which it pays Rs 746 crore annually for agreeing to provide instant power in an emergency.
  
• Tata Power has a similar arrangement with Reliance Energy.
  
• It has been demanding that Reliance Energy pay it 50% of the charges that it is paying the MSEB.
  
• Reliance Energy has been disputing this.