By way of an April 21 2017 order,(1) the Competition Commission of India (CCI) closed the case against Maharashtra State Electricity Distribution Company Limited (MSEDCL) and Maharashtra State Power Generation Company Limited (MSPGCL) for the alleged abuse of their dominant position in the generation and distribution of electricity in the state of Maharashtra.

Facts

The complaint was filed by Vidarbha Industries Association (Vidarbha), which alleged that MSEDCL and MSPGCL had entered into a long-term power purchase agreement through which MSEDCL would purchase MSPGCL's power at arbitrary and exorbitant rates. It alleged that MSEDCL had violated the merit order dispatch principles and purchased the power from MSPGCL at rates that resulted from the power being generated in an inefficient manner.

Further, Vidarbha alleged that by shutting down four units of the Koradi Thermal Power Plant in December 2010 and January 2011, MSEDCL had limited the electricity output in violation of Section 4(2)(b)(i) of the Competition Act. Satisfied prima facie by the complainant's arguments, the CCI referred the matter for investigation.

Decision

The director general held that in the market for the "provision of services for distribution of electricity in the state of Maharashtra except Mumbai", MSEDCL was the sole distribution licensee and therefore a dominant enterprise. It noted that the power purchase agreement entered into between MSPGCL and MSEDCL after January 5 2011 had been examined by the Maharashtra Electricity Regulatory Commission and detailed orders, including those upholding the interests of consumers, had been passed. Pursuant to the Electricity Act 2003, the tariff or price of electricity purchased by MSEDCL from power-generating companies should be determined each year by the relevant central or state electricity regulatory commission. The director general reported that the tariff charged to the consumer had been determined by the Maharashtra Electricity Regulatory Commission through the tariff orders issued at the time.

The director general also reported that there were genuine operational issues regarding the provisions for granting distribution of open access through the Indian Energy Exchange (IEX) in the Maharashtra Electricity Regulatory Commission Open Access Regulations 2005. It therefore concluded that MSEDCL's non-grant of open-access permission for sourcing power through the IEX could not be considered an abuse of dominance under Section 4 of the Competition Act.

The CCI agreed with the director general's findings with regard to the relevant market and MSEDCL's dominant position. In response to the allegation that by shutting down four units of the Koradi Thermal Power Plant MSEDCL had limited the electricity output, the CCI stated that the four units had rendered service for over 35 years and had become commercially unviable and harmful to the environment.

The CCI accepted MSEDCL's justification that the long-term power purchase agreement was entered into when the market for competitive bidding was at a nascent stage and ensuring a stable and continuous supply of electricity was the top priority. The CCI also noted that MSEDCL purchases only 41% of its requirement from MSPGCL and the remaining 59% is procured through other sources.

Finally, since the price of electricity is determined annually by the central or state electricity regulatory commission under the Electricity Act 2003, MSEDCL cannot arbitrarily impose a price on consumers in violation of Section 4(2)(a)(ii) of the Competition Act.

Regarding the denial of open access to consumers, the CCI observed that in the absence of an explicit provision in the Maharashtra Electricity Regulatory Commission Open Access Regulations 2005, MSEDCL could not grant permission for open access through the IEX. However, a number of open-access applicants had petitioned the commission on this issue and eight applicants had consequently been approved for open access during the period. In view of this, the CCI held that MSEDCL's conduct regarding open access through the IEX did not violate Section 4(2)(c) of the Competition Act.

The case has therefore been closed.

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For further information on this topic please contact MM Sharma at Vaish Associates by telephone (+91 11 4249 2525) or email (mmsharma@vaishlaw.com). The Vaish Associates website can be accessed at www.vaishlaw.com.

Endnotes

(1) CCI decision dated April 21 2017. For the full text see the CCI website.