MSEB, which buys power from TEC as and when the latter has surplus, maintains that if it has to commit itself to a long-term purchase, it will negotiate the price in line with other PPAs which the board has signed with independent power producers (IPPs).

"If TEC wants to sell power to MSEB on a long-term basis, it should approach the board as an IPP," said sources. This means that all aspects, such as the amount of power, the condition of plant and the fuel used for generation should be considered in the negotiations.

TEC's plants are old and the power generated from them should be comparatively cheap, sources said. MSEB will need to examine the demand factor before fixing the price and making any commitment, sources said. The board has to buy power from several private power plants being set up in the state while it is also upgrading itsown generation, they added.

MSEB may absorb additional power during peak hours but it is not sure how much additional power can be absorbed during non-peak sessions, sources add. For the present, the board has agreed to a short-term arrangement for buying power from TEC.

TEC, which has a license to distribute power to bulk consumers in Mumbai, sells a large quantity of power to BSES and BEST. As BSES has its own 500mw power plant at Dahanu and brings the entire generation to its consumers in Mumbai, its demand from TEC has been falling every year. This has compelled TEC to scout for other consumers. It has been selling power to MSEB but there has not been any consolidated agreement yet.

MSEB pays around Rs 1.80 per unit when it buys surplus power from TEC. If the latter wants a long-term PPA, the price needs to be suitably negotiated, said sources. MSEB has a set of norms for purchase of surplus power and it would not like to pay extra.

Due to erratic demand in the power industry, TEC also buys powerfrom MSEB but this requirement has been on the wane. During 1997-98, TEC, comprising Tata Power, Andhra Valley and Tata Hydro Electric, sold 8,966 million units of electricity down from 9,152 million units in the previous year. The company bought only 43 million units compared with 460 million units last year. TEC has recently started approaching new clients, a move opposed by BSES which considers it as poaching its own areas.

INSIGHT -- benefits of twin status unlikely

If the existing facilities of TEC were to enjoy the twin status of IPP and licensee, how would "equity" be calculated? Unlike MSEB, TEC is in no position to impose arbitrary demand charges to counter the shortfall in revenue. It is impossible that it will be able to supply to the existing clients of BSES as otherwise tariffs for residentials would have to be hiked. Another problem would be that if it supplies in BSES's license area, how long will it be permitted to create special reserves? The option of licensed area offered by MSEBfor Jojobera also means that the project will not materialise.