A notice served by TEC to BSES on October 6 said that the "standby charges payable by BSES for 275 MVA stand-by facility at Borivili (a western suburb) at 220 KV would be Rs 15.125 crore per month." It has also revised the "demand charges for the 22/33 KV point of supply to Rs 200 per KV per month.

TEC has argued that it has to increase charges as the Maharashtra State Electricity Board (MSEB) has hiked the stand by charges for TEC to Rs 363 crore annually from Rs 297 crore. BSES, however, believes that the increase is not justified as it reached an agreement with TEC on these issues just eight months ago. Besides, as it buys 30 per cent of TEC's total generation, it also pays part of the demand charges whichare built in tariff, argue BSES officials. The agreement signed in February states that BSES shall pay TEC Rs 3.5 crore a month as stand-by charges for the 220 KV interconnection at Borivili. This is now being increased to Rs 15.125 crore.

The agreement, signed after a year of hectic discussions, adds that BSES' off-take of energy at 220 KV at Borivili interconnection will be billed at Rs 2.09 per KWh plus fuel charges adjustment (which was then 45 paise) as applicable from time to time at other points of supply. This average energy charge is based on an estimated annual flow of 250 million units of energy through the Borivili interconection. There has been no change in this segment.

The pact which was basically signed to facilitate BSES and TEC interconnection at Borivili said that as soon as this connection is made the link betwen BSES and MSEB at Boisar (in Mahrashtra) will be removed. BSES' transmission connection with TEC at Borivili has helped in bringing considerable supply to its consumers inMumbai.

Earlier, BSES was routing part of its electricity to the Western Region Electricity Board (WERB) through its MSEB link at Boisar as its own transmission system was not complete. However, the interconnection with the TEC system was one of the conditions of the BSES licence when it set up a generation plant.

Insight

Why not all customers?

It is difficult to understand why BSES is being singled out. Demand charges are paid by all bulk customers of TEC and not BSES alone. If imposed, BSES will have little option but to hike the tariff and more than half of its client base consists of residential clients who are being subsidised. Another point which needs to be considered is that in the event of TEC making clear profit (CP) in excess of reasonable return (RR) due to reduction in the bank rate and thereby the RR, it should not be allowed to make special appropriations but asked to refund the excess to its customers. BSES is TEC's single largest customer.