Abuse of Dominance in Electricity Sector

SUBMITTED BY RADHE SHYAM BEHRA (2012225) RADHIKA AGARWAL RAHUL DEV SINGH RAHUL GHOSE RAHUL MISHRA (2012226) (2012227) (2012228) (2012229)

Introduction

A world bank report has stated that the biggest problem of doing business in India is the lack of infrastructure.

During the reforms of 1990s, the electricity sector witnessed major policy changes and regulatory initiatives.

The electricity sector is composed of 4 major processes- generation ,transmission , distribution and retailing

Open Access
The basic objectives of providing open access were the following:

To invite private investment in the power sector. To promote competition among the generating companies. To facilitate consumers to buy power directly from the generators. To lead to the availability of cheaper and reliable power supply.

Abuse of Dominance
Abuse is stated to occur when an enterprise or a group of enterprises uses its dominant

position in the relevant market in an exclusionary or/and an exploitative manner.

The Doctrine underlying Open Access

The benefits of open access policy follow from enhancing competition in the upstream market, generation segment in case of electricity.

Essential Facilities doctrine

The facility must be controlled by a dominant firm in the relevant market

Competing enterprises/persons should lack a realistic ability to reproduce the facility

Access to the facility is necessary in order to compete in the relevant market

It must be feasible to provide access to the facility.

Need for sector regulation

Dilemma of regulating potentially competitive elements

Economies of scale differs across firms

Poor performance of sebs

Setting up of CERC & SERC

Independent body at central & state level Market surveillance was needed to perform by regulatory authority Ambiguity between CCI and sector regulators

LEGISLATIVE GAPS:

Section 49
Section 64 Section 174

SUGGESTIONS:

The Competition Commission of India should proactively participate in discussions on the competition related issues before the electricity regulators. There should be better coordination between them, to ensure that competition concerns are addressed properly. In future, the Competition Act, 2002, may be amended with an enabling provision for cooperation Between the Competition Commission and the Electricity Regulatory Commissions so as to prevent arbitrariness. As long as there are competition authorities and sector regulators present, they need to work together and understand each other to minimize conflicts.

PRESENT ELECTRICTY SECTOR SCENARIO

De licensed generation of power. Open access of transmission lines. Independence to choose distribution. Demand supply gap. Conflicts between SLDCs over transmission lines.

REGULATORY ISSUES:

Political influence over allocation of power. Industry biasness. Works for governments interest.

Competition Issues in Electricity Sector

Unique attributes of electricity market pose problem for effective regulation of competition:

Electricity cannot be stored economically (Just-in-time). Lack of open access- lack of access to transmission networks and issues with pricing of transmission capacity. Collective dominance rather than single firm dominance.

Product homogeneity. Anticipate one anothers behaviour. Aligning their conduct in the market to maximise profits.

Relevant cases

Karnataka (2010): JSW Power was stopped from proceeding with sale of power to a Tamil Nadu state buyer. CCI is issuing a notice to three state-owned oil marketing companies (OMCs) on a probe on whether they use there collective dominance to fix petrol prices. CCI also imposed a penalty of Rs 630 crore on real estate giant DLF for abusing its dominant position.

CCI had probed the aviation sector but said it could find no evidence for the charge.

Thank you