RULING FROM COMPETITION COMMISSION MAY RESULT IN SIGNIFICANT CHANGES IN ELECTRICITY SECTOR
In a recent Judgement, the Competition Commission of India (CCI) considered the case of an electricity consumer that was repeatedly denied open access permission. In this case, the consumer approached the CCI alleging “abuse of dominant position” on part of the state utilities. The case was filed by HPCL-Mittal Pipelines Limited (‘HMPL’) against denial of open access. In this case, “upstream network constraints” were cited to disallow OA application multiple times.
The CCI found that prima facie denial of open access in the above case did result in violation of Sec 4(2)(c) of the Competition Act 2002. This clause refers to “abuse of dominant position by denial of market access”. The CCI has ordered a detailed investigation in the matter.
The CCI also made certain other interesting observations in the case:
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In the above case, it identified “conflict of interests situation” between the various constituents of the electricity utilities like the Discom, TransCo, SLDC, etc due to “structural linkages”, i.e. common holding structure. The order states the following:
“It appears that OP-2 has leveraged its dominant position in the relevant market to adversely affect the competition in the downstream market, where it is present through its group entity OP-3. The structural linkages between the OPs as depicted in the diagram illustrated earlier also points toward the conflict of interest that exists in the present case. Thus, given the conflict of interest situation that exists in the present case, anti-competitive motive behind such denial by OP-2 cannot be ruled out and may need to be tested in detailed investigation.”
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The case dwells in depth on the jurisdiction of the CCI to rule on such cases given that the EA2003 is also a special statute that deals with all matters of electricity. The CCI finds that there are enough grounds and supporting case laws to justify its jurisdiction as far as competition related matters are concerned across all sectors.
This judgement is certainly a very interesting development for the electricity sector, as denial of open access permissions is a problem across most states. The inherent conflict of interest is evident, as often the Discom itself has to approve OA applications, in what will effectively result in taking away of its own best paying consumers.
The regulatory regime of the sector itself, especially the State Regulatory Commissions (SERCs) have so far taken a view that has supported the Discom’s, at the cost of the overall market and sector. Examples include setting of Cross-subsidy surcharges without regards to the formula and limits defined in the National Tariff Policies, upholding denial of open access in many cases, etc.
It is hoped that an outsider, for example CCI, which does not bring with it the baggage of the SERCs, or the “conflict of interest” that results from the government appointing the electricity regulator and owning the entire value chain, will catalyse real change in the electricity sector.