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Reliance Infrastructure, Tata Power clash over cross-subsidy surcharge

 MUMBAI: Tata Power CompanyBSE 0.00 % (TPC) and Reliance Infrastructure (RInfra), which compete fiercely for consumers of electricity in Mumbai, have clashed yet again. This time, the clash is over their assessment of the implications after the Supreme Court (SC) admitted a case over payment of cross-subsidy charges by high-end customers who migrate from one distribution firm to the other.

Hotels and Restaurants Association of Western India (HRAWI) had approached the SC seeking a stay on the state regulator's order to levy the cross-subsidy surcharge on customers, who have migrated from RInfra to TPC. The association claimed that the surcharge would have increased the burden of electricity bill on the hospitality industry.

"TPC wanted an ex parte stay of the Appellate Tribunal for Electricity (ATE ) judgment which upheld that cross-subsidy surcharge is applicable to protect the interest of large numbers of low-end residential consumers served by RInfra. However, the honourable Supreme Court did not grant such prayers," the Anil
Dhirubhai Ambani Group company said in a statement on Wednesday.

TPC responded angrily to this interpretation. "We strongly condemn and object to the incorrect news being spread by RInfra stating that the SC has dismissed TPC's plea for stay on Appellate Tribunal Order. This is completely erroneous and disregarding the majesty of Honourable Supreme Court," it said. "The facts are that SC has admitted TPC's appeal and has directed that notice be issued regarding interim relief for stay," the Tata group utility said. The two companies generate and distribute electricity in the Mumbai license area and compete with each other for customers.

Typically, commercial and industrial consumers in Mumbai pay a cross-subsidy charge to subsidise households. In 2011, the Maharashtra Electricity Regulatory Commission (MERC) allowed recovery of cross-subsidy surcharge from highend customers who have migrated to TPC's distribution services. The regulator's decision was in response to RInfra's allegations that TPC had been "cherry picking" customers in their common market and poaching on their high-end customers, thereby making it difficult for RInfra to subsidise power for poor customers.

The cross-subsidy surcharge would reduce the gap in tariff charged by the two power distributors to Mumbai consumers, which has led to migration of consumers to TPC, which so far charges lower tariff.