Letter to CM to remove Wheeling Charges from Electricity Bills

                  Satark Nagrik Foundation ®

            (Formerly Alert Citizens Forum)

102, Ekvira Apartment, Uthalsar, Thane West 400601, Maharashtra #8879528575

December 31, 2020

The Hon. Chief Minister,

Govt of Maharashtra,

Mantralaya,

Mumbai

Sub: Removal of Wheeling Charges charged by Electricity Companies to Non Open Access Consumers.

Dear Sir,

Since June this year, we have been receiving complaints from hundreds of people from the state like Industrial, Commercial, Domestic as well as agriculture customers who meet their electricity requirements from MSEDCL, Adani, BEST, TATA and Torrent, about why their electricity bill amount has increased ominously over the period of last 6 months. 

People have even protested against the inflated Electricity Bills.

The Electricity Companies and the Government have brushed aside protests from these people.

Thousands of industrial and commercial consumers are also clueless about why such hefty increase in bill amount even if their power consumption pattern is in line with the previous historical data for past few months. 

The main victim in this entire saga is an agriculture sector wherein farmers are not aware why their bill amount is increasing.

We at Satark Nagrik Foundation conducted a thorough study about the moot issue of electricity billing and our findings were astounding.

1) From December 2016, MSEDCL had introduced a new charge called as “Wheeling Charge”. 

This was in addition to other line items like fixed charge, energy charges, fuel adjustment charge and the electricity duty/tax. 

2) MSEDCL has cunningly introduced it without having giving any such intimation to common man. 

Every year MSEDCL files its petition for tariff revision (mostly in upwards direction) and in 2016 too it filed for the same. 

MERC (Maharashtra Electricity Regulatory Commission) who plays a crucial role in keeping a tab on functioning of MSEDCL especially the tariff formulation; approved 2017 year’s tariff revision with certain pre-conditions. However, MSEDCL has never abided to these regulations seriously. 

As a result, a common citizen has to feel the heat in the form of increased tariff rates. 

3) Now, one would wonder what are these “Wheeling Charges” .

Let us explain it this way. It’s an amount charged by one electrical system to transmit the energy of, and for, another system. For example, in case one wants to use either transmission / distribution network of MSEDCL for transfer of power from Ahmedabad to Pune, then one is required to pay the charge as approved by the MERC to MSEDCL for use of Transmission network /Distribution network of MSEDCL for transfer of power from Ahmedabad to Pune.

Such transfer of power on the network of MSEDCL is called 'wheeling of power', and in general, terms the wheeling charge is the rent paid to the owner of the network for its use by a person. 

Now one would wonder why a person would take power from a generator based out in Ahmedabad if MSEDCL is able meet his electricity requirement. 

4) There is something called as open access system (similar to de-regulated power market scenario applicable for UK, Australia, New Zealand and many other countries) which was started in India since last few years. In that consumer who is having power requirement above 1 Megawatt (power load equivalent to any corporate office wherein more than 5000 employees are working or any other manufacturing industry who need daily electricity on large basis) can buy power from any corner of the country wherever it is available at cheaper rates. 

5) Since MSEDCL power is costly in such case; different organisations or manufacturing units make use of this open access system and go ahead with power procurement from outside Maharashtra. 

In turn, the consumer who is drawing power from outside sources by using MSEDCL’s network has to pay some fee in the form of wheeling charge. 

Until this point, it is fine as far as end user customer is getting cheaper power from outside Maharashtra. 

6) Nevertheless, over the period it happened that many high valued customers (mostly engineering/manufacturing and big corporate firms) started making use of this open access system. 

In turn, MSEDCL lost these consumers’ revenue and are now only receiving the wheeling charges, which is like peanuts to them.

7) These Large industrial and commercial consumers share 70% of revenue in total earnings for MSEDCL. 

In November 2016, MSEDCL started claiming that they have to be compensated more for this loss. 

They approached MERC and asked them if they can recover this loss in the form of wheeling charges from each of the individual customer like residential and agriculture too. 

MERC, after much of the discussions and thought process allowed to recover this cost from all type of customers irrespective of whether it’s an open access customer or not. 

8) That is the catch! 

Is it not cheating the residential and agricultural consumers by asking them to pay for such charges? 

Why the regular consumers of MSEDCL be asked to pay such charge? 

Starting December 2016, MSEDCL has levied Rs. 1.18 per unit consumed for domestic consumers and Rs. 122 per horsepower rating per month for agriculture consumers who use pumps to water their crops. 

This is in addition to the base tariff hike they did in November 2016. 

9) Even if MSEDCL has claimed that, they have sought minimal tariff revision for domestic consumers i.e. only 5% for the year 2020-21,  but if it is to be accounted for wheeling charge in a consumers electricity bill, you will notice that the actual hike in rates of electricity is not 5% but it is 15%. 

10) To make it simple for you, we will give you the example from the year 2016 onwards.

A domestic consumer for MSEDCL was paying at Rs. 7.09 per unit prior to tariff revision in 2016. 

After November 2016, he was required to pay an average cost of Rs. 8.12 per unit. 

Now, this per units cost increased further since April 2017 as MSEDCL started charging consumers by Rs. 1.21 per unit as a 'Wheeling charge' and not Rs. 1.18. For agricultural it was more painful i.e. Rs. 125 per horsepower. 

This continued until November 2019 as MSEDCL had got it approved from MERC. Hence, for the domestic consumers the bill amount, which shot up from November 2016 to March 2017 by 15%, it  further then increased to 22% due to increased rate of wheeling charge. 

That means MSEDCL had once again revised the rates with effect from April 2017 without having the Consumers having noticed it.

11) Already we consumers are paying fixed charges in electricity bill as one of the component for using the transmission and distribution network of MSEDCL. 

These fixed charges are also levied for making provision of uninterrupted supply of the demanded or contractual load which is nothing but the connected load. 

12) It is unethical to recover these additional wheeling charges of using power cable network that too even if one is not a customer of open access.

We tried reaching out with MSEDCL customer care and talked with some of the officer bearers of MSEDCL who also couldn’t answer the query. 

It’s illegal and unethical to recover such charges from all type of customers. 

13) Why a common citizen is forced to pay for the loss of MSEDCL’s business? 

MSEDCL’s energy rates are the highest amongst all electricity companies in India.

Had they been keeping a tab on power theft, reduced the distribution losses, maintained the infrastructure properly by timely augmentation, they could have reduced the energy charges. 

On contrary to affirmative actions like reducing losses, stopping corrupt practices, focusing on power theft cases, curtailing the load shedding, power blackout problems and response to no supply complaints; what MSEDCL does is keep on increasing electricity charges.

14) This year, Maharashtra State Electricity Distribution Company Limited (MSEDCL) has said that consumers are buying a considerable amount of power under open access, and on the other hand, it has tied up a sufficient amount of power to meet the expected demand by considering the overall growth in the state. However large number of consumers are buying power under open access instead of availing supply from MSEDCL. 

As a result, the generation capacity tied up by MSEDCL remains idle.

For the applicability of cross-subsidy surcharge, MSEDCL said that it needs to be based on the current level. Accordingly, the consumers who opted for open access need to be charged for the compensation of current level approval of truing-up for FY 2017-18 and FY 2018-19, provisional truing-up for FY 2019-20 and the aggregate revenue requirement (ARR) for the fourth control period from FY 2020-21 and FY 2024-25 for MSEDCL. To true-up is to match, reconcile, tie-out two the balances with the help of an adjustment.

15) MERC has said that unless fixed costs due to stranded capacity are recovered from open access consumers, this burden would be unjustly passed onto other consumers of a distribution licensee. 

16) The Commission added that it would be unfair and unwarranted to pass such a burden of fixed cost recovery of stranded cost to other consumers through consequent tariff hike.

Prayer.

MERC has noted that under the circumstances, there is a case for the recovery of a part of fixed cost towards the stranded capacity arising from the power purchase obligation through the levy of additional surcharge from open access consumers, including the group captive consumers who have availed such arrangement. It further said that for the fourth control period, an additional surcharge would apply to captive users of group captive power projects, in addition to open access consumers.

MSEDC is only wrongly taking refuge of the Order on Case no. 48 of 2016 (attached) and applying Wheeling Charges to Non Open Access Consumers.

Therefore we request you to stop levying of Wheeling Charges ( which is Rs. 1.45 pu this year - to non open access Consumers and provide relief and succour the lakhs of people across the state.

Regards,

For Satark Nagrik Foundation ®,

Dayanand Nene    Amit Sawant  Sudesh Khatawkar 

Satark Nagrik Team: Rajan Chandok, Jitendra Satpute, Pramod Date, Prasad Bedekar, CS Sandhya Malhotra, Ulhas Patil, Ganesh Iyer

(Attached as above)