NTPC has entered into MOU for as much as 48,000-Mw capacity, just before the government decided to do away with the MoU route to set up projects in January this year. NTPC is the largest power producer. This is anti-competitive practice by NTPC could turn out to be a lost opportunity for private sector producers, and a clear case of market dominance.
At a time when the troubled power sector is going through a phase of unsustainable rates and high fuel costs, the sectoral regulator wants to get tough with anti-competitive practices. The Central Electricity Regulatory Commission (CERC) is planning to come up with “tools and metrics” to measure anti-competitive acts.
CERC chairman Pramod Deo says the commission is working on the regulations to keep a check on anti-competitive behaviour of power companies. CERC may come up with regulation changes in the next couple of months.
The tools, that would have legal and technical metrics would measure if a company had over-stepped the lines of competition for its own advantage. One such issue at hand is that of NTPC going ahead and signing power purchase agreements for as much as 48,000-Mw capacity, just before the government decided to do away with the MoU route to set up projects in January this year. CERC is currently hearing a petition filed by the Association of Power Producers, alleging anti-competitive practice by NTPC. In a recent hearing, NTPC was asked to send copies of all the power purchase agreements under dispute, though the company claims these are commercial agreements. The arguments in this case are under way. “NTPC is the largest power producer. This could turn out to be a lost opportunity for private sector producers, and a clear case of market dominance,” says a power sector expert.
Besides generation, experts say anti-competitive practices also occur in the distribution sector. For instance, the Electricity Act allows issue of parallel power distribution licences.
“A strong competition regulation can ensure a level playing field to all the participants in the sector and protecting customers,” says Kameswara Rao, executive director and India utilities head of PricewaterhouseCoopers. “This includes open-access customers, merchant plants and captive generators with facilities outside their consumption areas.”
In transmission, many states still restrict open access in inter-state electricity transmissions, and strong regulation can tackle such issues. The high court of Karnataka last year dismissed a petition by GMR Energy, upholding the state’s powers to prohibit power generators with a project in a state from selling to another state. “Open access and use of emergency provisions are serious areas that regulators need to study,” notes Rao. “They should also address practices which are not competitive.”
Officials at CERC say the commission being a quasi-judicial authority, it does not have the economic models and statistical tools to determine this. The recent exercise might help the authority.
This exercise, the authority believes, will help them interpret competition in the sector. Competition Commission of India has also requested the authority to share the results of the study with them. “Only if we frame a regulation defining the metric tools will we be able to arrive at decisions that are more rational and scientific,” says Sushanta Chatterjee, deputy chief-regulatory affairs, CERC.
Legal experts say this might cause regulatory overlap between CCI and CERC. “A sector regulator which is responsible for formulating technical parameters and standards should do so, in a way that fosters competition in the country,” notes Samir Gandhi, competition law partner at Economic Laws Practice. “But if anti-competitive practices are detected in the market, then it would be best if specific allegations are referred to the Competition Commission of India for investigation.”
Similarly in the area of mergers and acquisitions, the Banking Laws Amendment Bill, 2011 proposes to take away CCI’s monitoring powers over banks’ M&A. Regulatory overlap was also at the centre of a spat between Securities & Exchange Board of India and Insurance Regulatory and Development Authority last year.