Given that the Maharashtra Electricity Regulatory Commission (MERC) has not passed any strictures against the state’s power distribution company or its load dispatch centre, it appears it is not convinced by the allegations made by Mahagenco, the state-owned power generator whose chief even resigned in a huff last week. Briefly, the 1986-batch IAS official who headed Mahagenco argued that, between April 2010 and February 2011, the load dispatch centre frequently asked Mahagenco to produce less power (‘back down’, in electricity jargon). and instead of buying Mahagenco’s lower-cost power (R2.72 a unit) the state was buying more expensive power (R4.10 a unit) from a clutch of private power producers. Mahagenco, for the record, has said it plans to contest the MERC order. The reason why MERC appears to have bought the argument that there was no mala fide in asking Mahagenco to back down its power is that the state had take-or-pay clauses that would have made asking the private producers to back down an expensive issue.
While the losses that Mahagenco claims to have suffered are relatively small, given Maharashtra’s plans to become a no-load-shedding state soon and a surplus-power state in another 12-18 months as large private and public sector power capacity comes on line—Mahagenco will add another 2,500 MW in a year, and India Bulls and Adani will add almost 5,000 MW over the next 18 months—the issue can snowball into a major controversy if not resolved in time. Which is why when the state’s power distribution company wanted to extend its contract with private power suppliers for another year—the decision was to be taken the day the state’s power minister Ajit Pawar announced his decision to quit the government—the Maharashtra CM decided the contract would be extended by just another 3 months, during which he would try and figure out a solution. Since the merit-order-dispatch guidelines very clearly state that the lowest-cost supplier must supply first, take-or-pay clauses run counter to the law—that’s what Prithviraj Chavan needs to address.