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Attempt to lower tariffs set off Mumbai outage

On August 29, BEST wrote back to Tata Power saying it did not wish to bear the costs.

BEST didn’t want expensive Tata power. BEST didn’t want expensive Tata power.

While the Maharashtra government’s inquiry into Tuesday’s massive outage in Mumbai will point to the choking of the transmission grid into the city as a major cause after Unit 5 at the Tata Trombay facility tripped, the attempt to protect customers from a tariff shock was a big reason for the blackout.

Anticipating more festival demand, the Maharashtra State Load Despatch Centre (MSLDC) had on August 26 asked Tata Power to start producing power from its 500 MW Unit 6 in Trombay that runs on oil. Had Unit 6 been functioning on Tuesday, even after Tata Power’s 500 MW Unit 5 had tripped, the city wouldn’t have had an outage.

But Tata Power did not commission Unit 6 as it was not clear who would pay for the extra cost — at current oil prices, a unit of electricity would cost R11-12 — and wrote to Brihanmumbai Electric Supply & Transport and Reliance Infrastructure, to which it supplied power.

On August 29, BEST wrote back to Tata Power saying it did not wish to bear the costs, indeed it wished “to amend the PPA for exclusion of Unit-6 being costly generation and till all the formalities are completed for taking Unit-6 out from the PPA, it is to be presumed that Unit-6 is excluded from the PPA”.

BEST said the methodology being proposed to share the costs of the more expensive Unit 6 had been agreed to in the past, but that was only to tide over the alarming power situation during the summer months.

BEST’s calculations, in all probability, were that if there was a power shortage — and it wasn’t to know Unit-5 would trip — this could easily be met through less costly imports. After all, there could be questions asked later as to why costly Unit 6 power had been bought at R11-12 per unit when this could just as easily have been imported at R3-4. The problem, however, is that Mumbai’s transmission system is too overloaded to take more imports.

In the event, on August 29, Tata Power wrote to MSLDC saying that it could not bring Unit 6 into operation until R-Infra and BEST agreed to share costs with it — it attached the BEST letter that said “we request you to give necessary instructions to your officers for not scheduling any power from Unit-6 to BEST (if it is operated for any reason) and you are also hereby informed not to raise any bills against power generated from Unit-6 as the same will not be paid by us”.

Tata Power then suggested a meeting be convened with the principal secretary (energy) chairing it and coming to a cost-sharing formula of the type agreed to just a few months ago when Unit 6 was last run.

That meeting, ironically, has been scheduled for later on Thursday.

While Thursday’s meeting will probably lay out a firm cost-sharing principle that all distribution companies will have to adhere to, as well as a schedule for converting Unit 6 to a coal-based one — that’s when the country’s coal shortage will kick in — there will then be the issue of how the cost of that conversion, reckoned at R800 crore, is to be borne.

The issue has, meanwhile, triggered bad blood between the Tatas and the state-owned utility. “As BEST had made adequate arrangement of power procurement… procuring costly power of Unit-6, that is, R13 per unit, would further burden the BEST consumers,” BEST said in a statement. “It had informed (Tata Power) of non-requirement of Unit-6 costly power. As such Tata Power’s statement (regarding cold standby of Unit-6 with consent of procurer) is totally false and misleading since the power to operate the grid elements including Unit-6 is not strictly under the purview of BEST.”

A statement issued by the state-owned utility late on September 2, said, “Tata Power has not provided sufficient redundancy for generation and transmission which has led to the present situation of forced load shedding.”

The statement added, “Lackadaisical approach of Tata Power added with ulterior motives of poaching BEST’s consumers could be the scheme underneath the current fiasco.”

BEST has a standby power supply agreement with Maharashtra State Electricity Distribution Company (MSEDCL). In the event of a power outage similar to what occurred in the city on Wednesday, MSEDCL has to supply up to 500 MW of electricity between the three distribution companies operating in Mumbai: Tata Power, Reliance Infrastructure and BEST.

“We pay R109 crore annually to MSEDCL as standby charges. On Tuesday, MSEDCL told us they had power to meet our shortfall, but it could not supply the power due to congestion on transmission lines,” a senior BEST official said.

Mumbai has a daily power demand of about 3,000 MW — this is around 2,500 MW at the moment — according to a senior official in Maharashtra State Electricity Transmission Company. The transmission lines connecting the city to outside sources of power can handle a maximum of 1,500 MW.

Pallavi Ail | The Financial Express

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