8/6/2019 Impediments to Open Access

1/2

Impediments to open access Navneet SharmaPosted online: 2011-02-09 00:07:31+05:30The Electricity Act, 2003 (EA 2003) opened the power sector to multiple players byproviding for a power market replete with competition. A key objective of EA 2003

was to provide open access in electricity transmission and distribution. In otherwords, the Act mandates competition and choice, which were non -existent in the pre-EA 2003 era. Central to the emergence of a market is the provision of open access.Seven years have passed, but for a few instances of limited success (Mumbai,Karnataka etc), India's electricity consumer is yet to have the freedom to choose hiselectricity supplier. Why could not the open access provisions be activated so far?

Section 42, read along with other sections of EA 2003, is clear that the states shallintroduce open access to all consumers above one megawatt load. EA 2003mandated open access in electricity transmission and distribution. It envisaged thatall consumers above one megawatt will be free to source electricity from a supplierof their choice. So there remains no ambiguity whether or not to provide open

access. This was discussed in a recent brainstorming meeting at the PlanningCommission, where it emerged that a concerted effort is needed before all thestakeholders buy in and open access is activated. But l et me first deal with whatholds it back.

Is open access a win-win proposition? In theory, this would be a win -win scenario ifa distribution company (or discom) and the consumer both benefit from open access.But in reality, as in other sectors, there is much difficulty to persuade amonopolist/incumbent to give up its monopoly privileges. An oft -repeated concern bydiscoms has been that if large consumers shift, the discom (or utility) would sufferlosses. But experience of other countries, such as the UK, shows it is not so. Also, in

other sectors, for instance telecom, where consumers move freely to anothersupplier, competent players withstood such challenges.

That leads to another question relating to the political economy surrounding theelectricity sector. In the sector, the regulatory framework includes the ministry ofpower and the Central Electricity Regulatory Commission (CERC) at the centrallevel, and government departments and regulators at the state level i.e. multiplebodies dealing with electricity regulation. Amidst multiple agencies and short -termand conflicting interests, the decision makers tend to succumb to local pressures andfind ways to avoid open access. A plain answer is political will, which is necessaryto create a competitive electricity market.

Next comes the nitty-gritty or specific regulation of open access i.e. lendingregulatory clarity on the terms of open access. A basic principle of open access isthat carrier and content should be separate. Some regulators have w orked in thisdirection while others are yet to put in place the required regulatory clarity. For openaccess to be practicable, prices should be broken up in components like productioncost and transmission loss cost, and also specific applicable charges againstwheeling, stand by, cross subsidy etc should be determined. Consumers anddiscoms would be encouraged towards open access only when they have clarity onthe charges.

8/6/2019 Impediments to Open Access

2/2

A related aspect on charges is that if a category (of consumers) is competitive, thenthe discom should not charge it the regulated tariff but a negotiated tariff. Thus, inthe case of competitive consumers there should be two separate agreements, onewith the generator and the other with the distributor.

Though housing societies in urban centres, due to their bulk consumption above one

megawatt, would qualify for open access, discoms are reluctant to give them openaccess. Discoms claim that such housing societies distribute electricity withoutbeing licensees within the meaning o f EA 2003. Here, the intent of the law shouldprevail over the text, even though the text is adequately clear.

The definition of consumer provides that consumer means any person who issupplied with electricity for his own use. Also the person includ es any companyor body corporate or association or body of individuals, whether incorporated or not,or artificial juridical person. Thus, the law has adequately clear intent to let allconsumers freely buy their power on the most competitive terms. As lon g as there isno commercial or onward sale intent, housing societies should be empowered to buyelectricity freely.

Finally, the most important issue is the impact of open access on poor consumers.Statistics reveal that while electricity generation has i ncreased about 60%, thehousehold access to power has increased only 10% in the last ten years. A questionhere is whether open access will let low-cost electricity go to poor consumers? Hereagain the answer flows from political economy considerations. Un less, regulatoryintervention frees up the low-cost electricity that is tied up with discoms, the benefitto aamaadmi is still a distant dream.