MERC wants to know -- Does Enron make sense?

MERC wants to know -- Does Enron make sense?
VINU LAL

MUMBAI, FEBRUARY 22: The Maharashtra Electricity Regulatory Commission (MERC), a statutory body, has asked the Maharashtra State Electricity Board (MSEB) to file an affidavit justifying the purchase of power from Enron and if its rates were competitive.

This instruction was given to MSEB at a public hearing of a petition filed by an independent consultant, Pradyumna Kaul, demanding an injunction order on the MSEB's purchase of power from Enron. The petitioner has claimed the State will save up to Rs 1,200 crore every year if it decides not to lift power from Dhabol. The commission has asked the board to furnish data on purchases from Enron from December 1999 to February 15, 2000.

The petition had challenged the purchase quoting legal grounds that a state electricity board is bound to add capacity to the grid from private parties strictly on ``merit order basis'' under the Indian Electricity Supply Act, 1948. Merit order basis means that the board has to give preferential treatment to the cheapest power source available adhering to the demand requirements.

However, the commission has refused to admit the petition on grounds that an injunction order is not possible at this point of time since the Commission is yet to study the matter fully. MERC chief P Subrahmanyam said that the merit order basis will form the crux of the decision the commission is planning to announce in 15 days. MERC will pronounce its main order on tariff review announced by the board by the first week of March.

Following this development, the immediate task before the board will be to prove to the commission that the purchase of power from Enron is within the merit order basis and there is no other source of cheaper power.

This is significant because after the Dabhol plant was commissioned, the Tata Electric Companies had approached the PowerGrid Corporation of India Limited to sell extra power as the MSEB bought all its power from Enron and TEC units had to be backed down. Tatas' rates are cheaper compared to Enron. As per data given by MSEB, TEC power is bought at the rate of Rs 1.8 per unit as against Rs 3.00 charged by Enron.

This issue had evoked serious debates during the hearing, as to whether Maharashtra really requires the costly capacity addition from Enron, especially in the night hours, when the board is facing a surplus situation and has already started exporting power to other states.

Quoting MSEB data, the petition says that the grid has a peaking demand shortage of only two hours for around 15 days in a year for which a huge capacity addition from Enron is not justifiable. Instead, the petition notes, the board could save over Rs 1,200 crore annually if power is not purchased from Enron, which will not even breach the state's contract with Dabhol. As per the power purchase agreement, the State has an option to back down Dabhol plants by just paying the idle charges.