Essar Power is likely to be yet another private entity to enter the Mumbai electricity distribution business. The Essar group company has applied to the Maharashtra Electricity Regulatory Commission (MERC) for a licence to supply power in the suburbs, which already has two private players — Reliance Infrastructure and Tata Power.
V P Raja, the chairman of MERC, said they had allowed companies to apply for distribution licences beyond the application timelines, which closed a few months before “Essar has applied and we have already conducted a hearing.”
The regulator has asked the company to assess the amount of capital expenditure required to set up infrastructure to wheel power across Mumbai suburbs, which has around 2.8 million customers. “They can initially use the infrastructure which belongs to Reliance Infrastructure just like Tata Power, by paying wheeling charges and cross-subsidy surcharge,” said Raja.
However, the company will have to set-up its own infrastructure. The Mumbai suburbs are a competitive market where Reliance Infrastructure and Tata Power are already fighting for customers. As many as 160,000 consumers have crossed over to Tata Power since November 2009, when it started supplying power to the suburbs.
Wheeling charges are those paid by customers who have shifted to the Tata network, and use Rinfra's distribution. In addition, the state electricity regulator has levied a cross-subsidy surcharge on changeover customers, to provide cheaper electricity to low-end users, thereby intensifying the competition in the area.
This would be the maiden entry of the mining-to-shipping group into retail electricity distribution, if the application goes through. The company confirmed the move but since the process is at the initial stage, they refused to provide further details.
The power generation arm of the group has around 1,600 megawatts of capacity and has set a target to to build as much as 9,670 megawatts of power generation.