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i
Summer Internship Report on
Study of Open Access and Cost Benefit Analysis of Open
Access over Grid Power
Under the guidance of
Dr. Rohit Verma, Deputy Director, CAMPS, NPTI
&
Mr.Dipanshu Gupta, Senior Manager, Global Energy Pvt.Ltd.
At
Submitted by:
Himanshu Arora
Roll No : 35
MBA – Power Management
(Under Ministry of Power , Govt. of India)
Affiliated to
August 2013
ii
Certificate
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Declaration
I, Himanshu Arora, Roll no:, student of MBA – Power Management (2012-14) at National Power
Training Institute, Faridabad hereby declare that the Summer Training Report entitled ―Study of
Open Access and Cost Benefit Analysis of Open Access over Grid Power‖ is an original work and
the same has not been submitted to any other institute for the award of any other degree.
A Seminar presentation of the Training Report was made on __________________________
And the suggestions as approved by the faculty were duly incorporated.
Presentation in-charge Signature of Candidate
Countersigned
Director / Principal of the Institute
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Acknowledgement
Apart from the efforts of the person doing the project, the success of any project largely depends on
the encouragements and guidelines of many others. I take this opportunity to express my gratitude to
the people who have been instrumental in the successful completion of this project.
I would like to thank Mr. Amit Kumar, Sr.Vice President, and Global Energy Pvt.Ltd for giving me
this opportunity to execute my Summer Internship project. I would like to extend my thanks to my
guide, Mr.Dipanshu Gupta, Sr.Manager, Global Energy for showing me the right path and approach
towards the project. I would also like to thank Mr.Niraj Kumar, VP, Global Energy and Mr.
Himanshu Chandrakar, VP, Global Energy for their support during my project.
I feel deep sense of gratitude towards Mr. J.S.S.Rao, Principal Director , Corporate Planning , NPTI ,
Mr.S.K. Chaudhary , Principal Director , CAMPS , Mrs.Manju Mam , Director , NPTI and Mrs.Indu
Maheshwari , Dy. Director , NPTI for arranging my internship at Global Energy Private Limited,
New Delhi and being a constant source of motivation and guidance throughout the course of my
internship.
A special thanks to my Project-in-charge, Dr. Rohit Verma, Dy.Director, NPTI for his support and
guidance throughout the summer internship.
I also record my sincere thanks to Mr. Rahul Sharma (Jay Pee Group) and Mr. Rohit Bhutani (TCS)
for their support during my project and showing me right path and approach towards the project.
I also extend my thanks to all my faculties and my batch mates in CAMPS, NPTI for their support
and guidance.
Himanshu Arora
(MBA – Power Management)
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Table of Contents Certificate ............................................................................................................................................. ii
Declaration ........................................................................................................................................... iii
Acknowledgement ............................................................................................................................... iv
Executive Summary .......................................................................................................................... viii
Abbreviations ....................................................................................................................................... x
List of Table ........................................................................................................................................ xii
List of Figures .................................................................................................................................... xiii
Chapter 1: Introduction ...................................................................................................................... 1
1.2 Problem Statement ...................................................................................................................................... 3
1.3 Scope of the project .................................................................................................................................... 3
1.4 Objective of the project .............................................................................................................................. 3
1.5 Significance of the project .......................................................................................................................... 4
1.6 Organizational Profile: ............................................................................................................................... 5
1.6.1 About the Organization ....................................................................................................................... 5
1.6.2 Services ................................................................................................................................................ 5
Chapter 2: Literature Review and Research Methodology ............................................................. 7
2.1 Literature Review ....................................................................................................................................... 7
2.2 Research Methodology ............................................................................................................................. 10
Chapter 3: Open Access ....................................................................................................................... 10
3.1 Introduction to Open Access .................................................................................................................... 11
3.2 Legal Framework ...................................................................................................................................... 12
3.3 Distribution Open Access ......................................................................................................................... 15
3.3.1Eligibility to seek Open Access: ......................................................................................................... 15
3.4 Category of Open Access consumers as per CERC regulations 2011 ...................................................... 16
3.5. Transmission Open Access ...................................................................................................................... 16
3.5.1.Eligibility to seek OA ........................................................................................................................ 16
3.5.2Grant of connectivity .......................................................................................................................... 17
3.5.3Grant of connectivity to STU ............................................................................................................. 17
3.6 PROCEDURE FOR ALLOTMENT OF OPEN ACCESS ....................................................................... 18
3.6.1 Long Term Open Access ................................................................................................................... 18
3.6.2 Short Term Open Access ................................................................................................................... 19
3.6.3 Allotment Priority .............................................................................................................................. 19
3.7 ROLE OF DIFFERENT AGENCIES IN OPEN ACCESS ...................................................................... 20
3.7.1 NLDC (National Load Dispatch Centre) ........................................................................................... 20
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3.7.2 RLDC (Regional Load Dispatch Centre) .......................................................................................... 20
3.7.3 SLDC (State Load Dispatch Centre) ................................................................................................. 20
3.7.4 CTU (Central Transmission Utility) .................................................................................................. 21
3.7.5 STU (State Transmission Utility) ...................................................................................................... 21
3.8 Understanding Open Access charges ....................................................................................................... 22
1.Wheeling Charges or Distribution Charges ................................................................................................. 22
2.Wheeling Loss or Distribution Loss ............................................................................................................ 22
3.Transmission Charges or STU Charges ....................................................................................................... 22
4.Transmission Loss or STU Loss .................................................................................................................. 23
5 PoC Charge & PoC Losses .......................................................................................................................... 23
6. Cross Subsidy Surcharge ............................................................................................................................ 23
7. Application Fees ......................................................................................................................................... 24
8. SLDC Charge ............................................................................................................................................. 24
9. RLDC Charge ............................................................................................................................................. 24
3.9 Unscheduled Interchange Charges (UI Charges) ..................................................................................... 25
Chapter 4: COST BENEFIT ANALYSIS for Intra State OA ............................................................. 26
4.1 Assumptions ............................................................................................................................................. 26
4.2 Selection of States for Intra State OA ...................................................................................................... 27
4.3 Punjab ....................................................................................................................................................... 27
4.3.1 Charges applicable ............................................................................................................................. 28
4.4 Gujarat ...................................................................................................................................................... 29
4.4.1 Charges Applicable............................................................................................................................ 30
4.5 Uttar Pradesh ............................................................................................................................................ 32
4.5.1 PuVVNL - Purvanchal Vidyut Vitran Nigam Limited ...................................................................... 33
4.5.2 MVVNL - Madhyanchal Vidyut Vitran Nigam Limited ................................................................... 33
4.5.3 PVVNL - Paschimanchal Vidyut Vitran Nigam Limited .................................................................. 34
4.5.4 DVVNL - Dakshinanchal Vidyut Vitran Nigam Limited ................................................................. 34
4.5.5 KESCoL - Kanpur Electricity Supply Company Limited ................................................................. 35
4.5.6 NPCL - Noida Power Company Limited........................................................................................... 35
4.6 Maharashtra .............................................................................................................................................. 36
4.6.1 MSEDCL ........................................................................................................................................... 36
4.6.2 R-Infra D ........................................................................................................................................... 37
4.6.3 Tata Power: TPC-D ........................................................................................................................... 37
4.7 Andhra Pradesh ........................................................................................................................................ 38
4.7.1 NPDCL .............................................................................................................................................. 38
4.7.2 SPDCL ............................................................................................................................................... 39
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4.7.3 EPDCL .............................................................................................................................................. 39
4.7.4 CPDCL .............................................................................................................................................. 40
4.8 Analysis for the States (Intra State OA) ................................................................................................... 41
4.8.1. Punjab ............................................................................................................................................... 41
4.8.2 Gujarat ............................................................................................................................................... 42
4.8.3 Uttar Pradesh ..................................................................................................................................... 43
4.8.4 Maharashtra ....................................................................................................................................... 44
4.8.5. Andhra Pradesh................................................................................................................................. 45
CHAPTER 5: ISSUES WITH OPEN ACCESS .................................................................................. 47
5.1 Implementation of Open Access ............................................................................................................... 47
5.1.1Determination of Cross Subsidy ......................................................................................................... 47
5.1.2 Phasing out of cross-subsidies ........................................................................................................... 48
5.1.3Transmission charges for short-term Open Access within the region (Inter-state Intra Regional) .... 49
5.1.4 Regulatory approach to Open Access ................................................................................................ 50
5.2 MANAGEMENT OF AGRICULTURE SUPPLY AND SUBSIDY ...................................................... 51
5.2.1Metering Agriculture Supply .............................................................................................................. 51
5.2.2 Separating Agriculture Supply .......................................................................................................... 53
5.3 OA in Andhra Pradesh - case ................................................................................................................... 55
5.4 Intra State Open access issues .................................................................................................................. 57
5.5 Open Access in Uttar Pradesh .................................................................................................................. 60
5.5.1 Open Access for industries key to UP‘s Economic growth ............................................................... 60
5.5.2. Lack of Implementation of OA regulations ...................................................................................... 61
5.5.3. Affordable and reliable power through the IEX ............................................................................... 62
5.5.4. OA as a panacea to power woes ....................................................................................................... 63
Chapter 6: SUMMARY ....................................................................................................................... 64
6.1 CONCLUSION ........................................................................................................................................ 64
6.2 RECOMMONDATION ........................................................................................................................... 66
6.3 LIMITATIONS OF THE PROJECT ........................................................................................................ 68
6.4 RESULT & DISCUSSION ...................................................................................................................... 68
6.5 FUTURE SCOPE OF THE PROJECT .................................................................................................... 69
6.6 BIBLIOGRAPHY .................................................................................................................................... 69
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Executive Summary
Power is a critical infrastructure component for the country‘s economic development. The Ministry
of Power has given a major thrust to speed up the development and reforms of the power sector. It
has set an agenda of providing power to all by 2012. The Ministry seeks to achieve this objective
through a comprehensive and holistic approach to power sector development at the national, state,
SEB, distribution, feeder and consumer levels.
The Electricity Act, 2003 provides for Open Access for private generators and bulk consumers. Open
Access is a mechanism that allows generator to sell power to the highest bidder while consumers can
source their needs from the most economic seller. One of the greatest achievements of this over haul
in the power industry can be considered – is the freedom to buy and the freedom to sell the
electricity
As mentioned above, the freedom to buy and sell the electricity thereby creating or tending towards a
perfect market in the sector , which was previously almost a monopoly market run and maintained by
SEBs , is now widely opened up for a greater private participation. Trading is now considered as a
distinct activity. Open Access thus finds its own niche in supporting this activity. . However, even
nine years of the Act coming into force, the issue still evokes strong reactions from all the stake
holders with some resisting the idea while others welcoming it.
Open access transactions of energy should be promoted. Some of the high potential states have been
reluctant to allow open access to consumers and third party sales by captive generators because of
concerns of losing large high-paying consumers and the resultant impact on utility finances. The
high incidence of cross-subsidy surcharges and wheeling charges imposed on the direct sale of
power to consumers, reduces the competitiveness of energy in an otherwise potentially high-demand
market. It would also put competitive pressure on utilities to improve the quality of supply. Central
Transmission Utility (CTU) and State Transmission Utility (STU) are obliged to allow their facilities
for the purpose. Thus the timing of allotment , charges to be taken from users , amount of capacity to
be allotted like cross subsidy, extent of subsidy, method of calculation of surcharge, etc. are to be
addressed by the quasi judiciary entities.
This report gives a clear insight about the concept of Open Access and regulations issued by CERC
and various SERCs. Also, the detailed procedure laid out for grant of connectivity, Long-term,
medium-term and short-term Open Access by the CTU is studied.
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This report highlights the cost benefit analysis of using Open Access against Grid power for
consumers with demand above 1MW for states such as, Andhra Pradesh, Gujarat, Maharashtra,
Punjab and Uttar Pradesh having high potential for Open Access. It would help in understanding the
benefit one can get by availing the facility of OA and explains various charges levied on Open
Access.
As a student of MBA in Power Management from National Power Training Institute (NPTI),
Faridabad, I had this opportunity to work as a summer intern with Global Energy Private Limited. It
lasted for 8 weeks and I was assigned a project to work on it.
This report includes study of existing CERC regulations for Inter State Open Access, 2008 for
eligible consumers. It also highlights the issues and recommendations highlighted by Forum of
Regulators (FOR) for successful implementation of Open Access. This report will help in
understanding the power market regulations. This project would help the eligible consumers
(demand above 1MW) in these states to decide upon their electricity provider and hence help them
in making substantial benefits out of the same. The vital information helps consumer to understand
the cost implications of OA in the state.
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Abbreviations
1. APCPDCL Central Power Distribution Company of Andhra Pradesh
Limited
2. APEPDCL Eastern Power Distribution Company of Andhra Pradesh
Limited
3. APERC Andhra Pradesh Electricity Regulatory Commission
4. APNPDCL Northern Power Distribution Company of Andhra Pradesh
Limited
5. APPC Average Power Purchase Cost
6. APSEB Andhra Pradesh State Electricity Board
7. APSPDCL Southern Power Distribution Company of Andhra Pradesh
Limited
8. APTRANSCO Transmission Company of Andhra Pradesh Limited
9. ARR Average Revenue Requirement
10. AT&C Aggregate Technical & Commercial Losses
12. CEA Central Electricity Authority
13. CERC Central Electricity Regulatory Commission
14. CSS Cross Subsidy Surcharge
15. CTU Central Transmission Utility
16. Discom Distribution Company
17. EA Electricity Act
18. EHT Extra High Tension
19. FOR Forum of Regulators
20. HT High Tension
21. IEX India Energy Exchange
22. kWh Kilo Watt Hour
23. LT Low Tension
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24. LTOA Long Term Open Access
25. MAHADISCOM Maharashtra State Electricity Distribution Company
26. MERC Maharashtra Electricity Regulatory Commission
27. MSEDCL Maharashtra State Electricity Distribution Company
Limited
28. MSETCL Maharashtra State Electricity Transmission Company
Limited
29. MTOA Medium Term Open Access
30. MU/MUs Million Units
31. MYT Multi Year tariff
32. NLDC National Load Despatch Centre
33. OA Open Access
34. PGCIL Power Grid Corporation on India Limited
35. PLF Plant Load Factor
36. PSEB Punjab State Electricity Board
37. PSERC Punjab State Electricity Regulatory Commission
38. PXIL Power Exchange India Limited
39. RLDC Regional Load Despatch Centre
40. SLDC State Load Despatch Centre
41. STOA Short Term Open Access
42. STU State Transmission Utility
43. ATC Available Transfer Capacity
44. TTC Total Transfer Capacity
45. TOA Transmission OA
46. DOA Distribution OA
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List of Table
Table 1- Open Access Provision ........................................................................................................................ 12
Table 2- Stages of Evolution of OA ................................................................................................................... 15
Table 3- UI Rates for Average Frequency of Time Block (Hz) ......................................................................... 25
Table 4- Assumptions for OA analysis ............................................................................................................... 26
Table 5- OA consumers in Punjab ...................................................................................................................... 28
Table 6- PSPCL analysis .................................................................................................................................... 28
Table 7- STOA in Gujarat .................................................................................................................................. 29
Table 8- STOA network in Gujarat .................................................................................................................... 29
Table 9- MTOA in Gujarat ................................................................................................................................. 29
Table 10: UGVCL Analysis ............................................................................................................................... 30
Table 11: PGVCL Analysis ................................................................................................................................ 30
Table 12: MGVCL Analysis .............................................................................................................................. 31
Table 13: DGVCL Analysis ............................................................................................................................... 31
Table 14: Torrent Power Analysis ...................................................................................................................... 32
Table 15: PuVVNL Analysis .............................................................................................................................. 33
Table 16: MVVNL Analysis .............................................................................................................................. 33
Table 17: PVVNL Analysis ................................................................................................................................ 34
Table 18: DVVNL Analysis ............................................................................................................................... 34
Table 19: KESCoL Analysis .............................................................................................................................. 35
Table 20: NPCL Analysis ................................................................................................................................... 35
Table 21: MSEDCL Analysis ............................................................................................................................. 36
Table 22: Rinfra Analysis ................................................................................................................................... 37
Table 23: TPC Analysis ...................................................................................................................................... 37
Table 24: NPDCL Analysis ................................................................................................................................ 38
Table 25: SPDCL Analysis ................................................................................................................................ 39
Table 26: EPDCL Analysis ................................................................................................................................ 39
Table 27: CPDCL Analysis ................................................................................................................................ 40
Table 28: Energy Shortage in UP ....................................................................................................................... 60
Table 29: Peak shortage in UP ........................................................................................................................... 61
Table 30: OA at IEX ........................................................................................................................................... 62
xiii
List of Figures
Figure 1-Services of Global Energy....................................................................................................... 5
Figure 2-Research Methodology .......................................................................................................... 10
Figure 3 : Category of OA ................................................................................................................... 16
Figure 4- Allotment Priority ................................................................................................................ 19
Figure 5- Volume traded at IEX .......................................................................................................... 56
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Chapter 1: Introduction
The Indian power sector has made significant progress over the years. The installed capacity of the
industry grew manifold from 1,361 MW in 1947 to 225 GW till July 2013. The sector has also
undergone substantial structural changes. Regulatory policies have played a predominant role in
changing the landscape of the Indian power sector. Though the sector has come a long way from its
humble beginnings, it is still lagging on several fronts, such as power shortages, T&D losses, and
Grid instability among others, and has a long way to go.
The Electricity Act, 2003 aims at bringing about competitions with the ultimate objective of
ensuring efficiency gains from competition for the consumers. Competition with regulatory
oversight is the hallmark of the legislations and it recognises the important role of the regulatory
commissions in the wake of the challenges that opening of the sector poses for consumers and other
stake holders.
In the context of competition, Open Access is the corner-stone of the Act. OA has been conceived as
an important tool of introducing competition in the electricity industry and ensuring choice to buyers
and suppliers of electricity.
The Act envisages OA in Transmission and distribution network. OA in transmission has been
allowed from the very beginning and without any fetter, however in so far as OA in distribution is
concerned, the law envisages introduction of such OA in phases with due consideration of the
operational constraints and existence of cross subsidy between consumer categories . This
responsibility of phased introduction of OA in distribution has been bestowed on SERCs. Though an
amendment in the Act, it has, however been provided that the state commissions shall provide by
January, 2009 OA to all consumers with load exceeding 1MW.
The issue of OA for consumers with load exceeding 1 MW has been under discussion in recent past
in view of the various interpretations floated in the context. The Govt.of India( Ministry of Power
and Ministry of Law) in its latest interpretation on 31.11.2011 has been anticipated that section 42 of
the act makes it mandatory for all consumers with load exceeding 1 MW to be OA consumers and
that the tariffs for such consumers shall not be regulated by SERCs.
Even as the Central Government is pushing states for mandatory implementation of OA for bulk
2
power consumers, an analysis by a regulators body has revealed that contrary to expectations, the
consumers in 12 states have had to pay more for power under the new regime.
OA at various levels is the hallmark of electricity reforms and the regime has been effective in 20
states since Jan‘09 on an optional basis. Under the OA regime, bulk consumers enter into bilateral
deals with discoms and stay outside the ambit of the regulated tariff system.
The Electricity Act defines ―Open Access‖ as non-discriminatory provision for the use of
transmission lines or distriburion system or associated facilities with such lines or system by any
licensee or consumer or a person engaged in generation in accordance with the regulation specified
by the appropriate Commission. As compared to the earlier legal and regulatory regime, the strategic
intent of the act is to promote competition by freeing up possible avaenues of procurement and sale
of power. The provisions of the act relating to delicensing of generation, open access, elimination of
cross-subsidy, dedicated tranmsission lines and definition of captive generating stations are desinged
to allow the freedom to purchase and sell electricity. However, this freedom has little meaning
without the capabitlity to carry the energy from the generating plant to the point of consumption.
This makes the entire arrangements reliant on the transmission and the distribution companies to
transmit the energy, and on regulatory commissions to facilitata the process through adequate
regulations and mechanism to enable non-discriminatoy open access.
In general, cross-subsidies cannot be sustained in the presence of OA and competition, because of
the problems of ―cherry picking‖. Regulators will have to phase our cross-subsidies in order to
introduce competition. However, a phase out of cross-subsidies require an alternative mechanism to
provide for the minimum needs of those with inadequate capacity to pay and those living in areas
with high cost of network extension.
3
1.2 Problem Statement
Due to continuous shifting of bulk consumers, distribution licensee and losing their paying
consumers and if the process will continue, then the time will reach when distribution licensee will
remain only with subsidised of non-paying consumers. Under the Electricity Act, OA consumers
have to pay charges including wheeling and standby charges and CSS, besides the cost of electricity.
But these charges are not up to the mark and to minimise the loss of distribution licensee, following
things should be considered:
Ideally, the net effect of subsidy and cross subsidy should need to be zero but in reality, it is
not zero due to AT&C losses and theft has not been considered in case of CSS formula.
Need to define, who will pay the cross subsidy of renewable? If its obligation has been
removed from paying CSS for its promotion.
1.3 Scope of the project
The scope of the project is as follows:
1. The report aims at respecting the end consumer‘s interest because electricity gets associated
with a social aspect as well. It is a basic necessity and any development should aim at
providing more reliable and quality power at reasonable rates.
2. In accordance with the eligibility conditions that OA to consumers of loads greater than or
equal to 1MW. Till date, almost 22 SERCs have granted OA. Further reduction in eligibility
conditions in terms of load will enhance the development of retail market in India.
This project will help to highlight the problem which Discom are facing & also help in minimising
their losses by their different initiatives. Customer interaction and analysis of consumer view will
help the licensee to understand the ground realities in OA and also help to know the consumer
expectation and suggestion to improve the process. The reasons of shifting of bulk consumer when
there is already a reliable power available in the state for them.
To develop financial model to compute the OA charges and landed cost of electricity for various
states by assuming a typical 5MW capacity project.
1.4 Objective of the project
To study and analyse the present scenario of OA in the county.
To determine open access charges based on economic principles and methodologies adopted
4
by various SERCs.
To understand the billing procedure in OA.
Understand the role of RLDC, SLDC in OA.
Find out that whether the customers would really be benefitted through OA or they have
more benefit by retaining with existing licensees.
To understand OA provision outlined in EA 2003 for wheeling of electricity for captive use
and third-party sale.
1.5 Significance of the project
Enactment of the EA, 2003 has forced for promotion of OA to develop competition in the
market but actual competition is possible only when there is perfect market available like
number of buyers and sellers and most importantly surplus of commodity. When we are
deficit in power and talk about competition, then it creates number of flaws which affects the
interest of consumers.
While implementation of OA, the loss of Discom has not been taken into consideration
though there may be number of surcharge available like CSS to compensate the loss of
Discom but it is not up to the mark to recover the full loss. Due to improper implementation
of OA under the name of ―Promotion to Competition‖, now almost all discoms are in losses,
hence it is very important to look into this matter and take some revolutionary steps to
recover the losses of discoms.
Also the theft of Power has not been taken into consideration into CSS which Discom has to
bear although they have taken number of steps to stop theft of electricity.
Besides, DE licensing generation and removing controls on captive generation, the provision
regarding availability of non-discriminatory OA in transmission from the very beginning and
distribution in phased manner is the core of the act.
However, a full fledged competitive electricity structure at distribution side with the quality
and reliable supply at competitive price and choice to consumer to select his supplier is yet to
take off.
The project assumes greater significance to bridge the gap between existing vertically
centralized monopoly system in power sector to a more market oriented decentralized and
competitive system and beneficial to enter into a more globalized and market oriented
economy.
5
1.6 Organizational Profile: Global Energy Private Limited
1.6.1 About the Organization
Global Energy Pvt Ltd is an ISO 9001:2008 certified Energy Company like no other, which is
committed towards honouring the trust invested in it by its clients, by providing uninterrupted power
supply and commitments made to its employees by delivering them a steady growth path. They are
committed to achieving success in accordance with our company‘s high business ethics and values
with a focus on green and renewable energy. Every member of GEPL has imbibed this commitment
and purpose.
Global Energy Pvt Ltd focus is to efficiently operate our renewable facilities in order to provide our
customers with a reliable, low-cost source of power. GE is an ISO 9001:2008 Certified Company for
generation of Power from Agro waste.
As a power trader, Global Energy supports their esteemed clients with data driven power market
analysis to help them get best returns. Global Energy has till date, transacted almost 3 billion units of
Energy. Global Specializes in renewable energy trading, especially wind and Hydro.
They understand the dynamics of the various energy markets and maintains effective relationships
with stakeholders by using extensive knowledge to benefit clients through advisory services.
1.6.2 Services
Figure 1-Services of Global Energy
Power Trading
Power Generation
Power Advisory
Certificate Trading
Clean Energy
6
Power Trading: Power Trading powered by analytics directed towards equitable growth.
o Analytics driven methodology
o Renewable power transactions and Non Renewable power transactions
o Power supply via OA
Power Generation: Generating energy through renewable sources for a cleaner and greener
tomorrow.
Clean Energy Initiatives: Helping provide for India's burgeoning energy needs.
Energy Certificate trading: Contribution towards the above effort lies in helping clients build their
RE Certificates sales portfolio at the optimum price range through:
Renewable Energy Certificate
Verified Emission Reduction Certificates, and
Certified Emission Reduction Certificates.
Power Advisory: Share knowledge and expertise in the energy sector for a brighter future.
o Capacity Design for Public and Private Enterprises
o Infrastructure and Logistics Planning
o Turnkey Advisory Services
o Regulatory Advisory.
7
Chapter 2: Literature Review and Research Methodology
2.1 Literature Review
CERC Concept paper on [Open Access in Inter-state Transmission] [August 2003] highlights the
issues associated with OA and frame regulations as the outcome of the exercise. It also describes the
transmission pricing schemes designed to promote efficient day to day operation of bulk power
market including power trading. It gives economic signals for efficient use of transmission
resources, investment in transmission, location of new generation and loads, compensating owner of
transmission system. It also describes energy accounting, e.g. Active Energy, Reactive Energy, etc.
The paper concluded that:
The existing long-term transmission agreements should be honoured until modified; else the
issue of stranded assets would arise.
To begin with only spare transmission capacity can be made available for OA.
Since, RLDCs will have a key role to play in the OA related issues; neutrality in their
functioning is expected.
In the new scenario, original beneficiaries will also be treated as OA customers at par, for the
purpose of power trading and bilateral exchanges. However, the original beneficiaries shall
continue to pay transmission charges for transmission of allocated power from the ISGS.
Contract Path Method and Incremental Postage Stamp Method have been suggested for OA
pricing.
The Transmission Service Providers in the country (CTU, STU, Licensees, etc.) will have to
declare rates for various types of services within the ceiling price as described by the
Commission.
Special Energy Meters will be installed by the OA customers as and when required.
S.K.Chatterjee, Deputy Chief (RA), CERC [7th
July, 2009] [Open Access – Challenges & Way
Forward] describes application procedures and approval for consumers connected to distribution
system, Intra-state transmission system. It describes eligibility conditions and provisions under
‗FOR‘ model regulations. It also describes the provision for imbalance settlements and various
charges payable by OA Consumers.
Planning Commission, Government of India (2009) [Report of the Task Force on Measures for
Operationalizing Open Access in the Power Sector] confirmed that no consumer in any state has
availed OA under Section 42 of the act so far and in fact in many states the provisions of the Act
8
have not been operationalized so far. The facility has been availed of only by captive producers and
that too marginally. The Task Force noted that the surplus states were extracting undue rent from
their surplus supplies, some of which actually came from the Central Public Sector Units (CPSUs).
The Task Force concluded that it would be in public interest to amend Section 21(1)(a) to make it
explicit that supply of electricity by a generating company to as distribution licensee includes
through an electricity trader. The Task Force also recommended that since no case of OA under
Section 42 of the Act had been reported so far, the Regulators should meet with the stakeholders to
address their concerns with a view to operationalizing the scheme f the Act. It further recommended
that consumer education and pro-active action by the electricity regulators both at the centre and in
the states was vital for encouraging OA to consumers.
In 2005, Mr.Nayak, R.N. (PGCIL, Gurgaon) etal describes Indian Power system and the reforms
being undertaken to restructure it. Introduction of OA in transmission has been deliberated in detail.
Various issues arising due to liberalized electricity market and the need of change in power system
planning methods has been mentioned. Need of suitable mechanism for sharing of transmission
charges in the de regulated regime is also deliberated.
Shafqat Mughal [2010] in National Power Engineering Conference presented a paper on ―The
Changing Scenario of Electricity Trading and Power Market Mechanism in India‖ described
the significance of OA in the power market. He describes OA as the key to a free and fair electricity
market. Power producers (sellers) and dealers/customers (buyers) have to share a common
transmission network for wheeling the power from the point of generation to point of consumption.
The OA provided non-discriminatory use of the inter state and intra state transmission system,
facilitating the trading of power from one utility to other. It also facilitates setting up of Independent
Power Producers (IPPs), Captive Power Producers (CPPs) and merchant power plants. After
implementation of OA, the experience gained has been providing signals for identification of
congested corridors and expansion planning.
S.K. Soonee (C.E.O. POSCO) in his paper [Open Access in Inter-state Transmission] cites the
significance of OA in Trading Market Evolution. It describes various products of Trading, accounts
the short trade in various financial periods.
Tushar Giri Nath in his paper [―OPEN ACCESS: UNFINISHED AGENDA OF POWER SECTOR
REFORMS IN INDIA”] described Open Access Regulations in transmission and distribution as a
must for the development of private sector power generation and in the development of market for
9
distribution entities. The charges payable by the generator for using the network should be reasonable
and access should be non-discriminatory. This will not only ensure the power flow to the deficit areas
but also facilitate optimal use of the network and investment in the network by the distribution and
transmission utilities based on the actual demand of the region rather than on their capacity to procure
and distribute power. This paper attempts to find out the limiting factors in the success of open access
regulations in India.
N. Balavenkata Muni et al in journal [ADVANCED OPEN ACCESS PRICING
METHODOLOGIES IN ECONOMICALLY ADAPTED ELECTRIC POWER SYSTEM]
[IJART, Vol.2 Issue 2, 2012, 33– 42] describe Open Access as the key to free and fair electricity
market. Under Open Access, transmission acts as a Gate Keeper. It can be closed in defence of
regulated market place or opened to support a greater number of participants.
Ravinder, Talegaonkar Ajay in his journal [Developing Power Exchanges in India : Issues and
challenges] [2008, Vol. 65, Issue 3] discussed the introduction of open access for inter-state
transmission as per the new electricity legislation in India has facilitated bilateral trading resulting in
better resource optimization within an overall deficit scenario. While the volume of traded electricity
is tiny compared to the total consumption, nonetheless it has electrified an otherwise grim scenario.
As a result, the Indian power sector has started at tracing private investment in hydro and thermal
generation at an unprecedented scale.
K. Sarkar S. in his journal [Competition in the electricity sector: tracing recent developments]
[2006, Vol. 12, Issue: 23] described that the Electricity Act 2003 is bold enough to set its objectives
to promote competition in the electricity sector. It has obligated the distribution licensee to allow
non-discriminatory
‗Open access‘ to various consumers subject to technical requirements and payment of certain
charges. The National Electricity Policy 2005 and the NTP (National Tariff Policy) 2006 have
contained elaborate provisions to meet these objectives. The electricity regulators at the central level
and in more than 12 states have framed the ‗open access‘ regulations. These enabling frameworks are
supposed to bring in many players seeking open access to the distribution and transmission electricity
system. Unfortunately, this has not happened. The often quoted reason is that the ‗surcharge
formula‘, as stipulated under the NTP 2006 gives rise to an amount, which, in many cases, is more
than the cross subsidy amount. Even in the remaining cases, the number of players seeking for open
access is almost nil. This calls for a closer look at the ‗open access‘ regulation.
10
2.2 Research Methodology
Figure 2-Research Methodology
Chapter 3: Open Access
Study of CERC Open Access Regulations
Study of detailed procedures of CTU for Open
Access
Study of FOR Model Intra State OA
Regulations
Study of Issues related to OA
Study of Open Access charges applicable
Selection of states for Cost Benefit Analysis
Determination of Charges applicable through
Tariff Order
Comparison of Tariff through Open Access and
Grid Power (Discom)
Detailed Analysis of OA in states
11
3.1 Introduction to Open Access According to section 2 (47) of the “Electricity Act 2003” Open Access is defined as “A non-discriminatory provision for the use of transmission lines or distribution system or
associated facilities with such lines or system by any licensee or consumer or a person engaged in
generation in accordance with the regulations specified by the Appropriate Commission”
To interpret it in a more understandable way the above can be put as follows:
Enabling of non-discriminatory sale/ purchase of electric power/energy between two parties utilizing
the system of an in-between (third party), and not blocking it on unreasonable grounds.
Open access allows large users of power — typically having connected load of 1 megawatt (MW)
and above — to buy cheaper power from the open market. The idea is that the customers should be
able to choose among a large number of competing power companies–instead of being forced to buy
electricity from their existing electric utility monopoly. It helps large consumers particularly the sick
textile, cement and steel industrial units by ensuring regular supply of electricity at competitive rates
and boost business of power bourses.
Open Access on Transmission and Distribution on payment of charges to the Utility will enable
number of players utilizing these capacities and transmit power from generation to the load centre.
This will mean utilization of existing infrastructure and easing of power shortage. Trading, now a
licensed activity and regulated will also help in innovative pricing which will lead to competition
resulting in lowering of tariffs.
The Electricity Act, 2003 aims at bringing about competition with the ultimate objective of ensuring
efficiency gains resulting from competition for the consumers. Competition with regulatory oversight
is the hallmark of the legislation - and it recognises the important role of the regulatory commissions
in the wake of the challenges that opening of the sector poses for consumers and other stakeholders.
In the context of competition, open access is the corner-stone of the Act. Open Access has been
conceived as an important tool of introducing competition in the electricity industry and ensuring
choice to buyers and suppliers of electricity.
The Act envisages Open Access in transmission and distribution network. Open Access in
transmission has been allowed from the very beginning and without any fetter. However, in so far as
Open Access in distribution is concerned, the law envisages introduction of such Open Access in
12
phases with due consideration of the operational constraints and existence of cross subsidy between
consumer categories. This responsibility of phased introduction of open access in distribution has
been bestowed on State Electricity Regulatory Commissions. Through an amendment in the Act, it
has, however been provided that the State Commissions shall provide by January, 2009 open access
to all consumers with load exceeding 1 MW.
The issue of open access for consumers with load exceeding 1 MW has been under discussion in
recent past in view of the various interpretations floated in the context. The Government of India
(Ministry of Power and Ministry of Law) in its latest interpretation on 30.11.2011 has articulated that
Section 42 of the Act makes it mandatory for all consumers with load exceeding 1 MW to be open
access consumers and that the tariffs for such consumers shall not be regulated by SERCs.
Open access enables consumers to obtain their supply of electricity from a generating company or
any licensee, other than the distribution licensee for the area. The distribution licensee will be paid a
wheeling charge; a surcharge to meet the current level of cross-subsidy within the area of supply; and
an additional surcharge to meet the fixed costs of the distribution licensee arising out of his obligation
to supply. The regulator will determine only the wheeling charges and surcharge, not the tariff. The
surcharge is not payable by a captive generation plant.
3.2 Legal Framework Provisions on Open Access in the Electricity Act, 2003
Section 2(47) of the act defines ―Open Access‖ to mean
“Non-discriminatory provision for the use of transmission lines or distribution system or
associated facilities with such lines or system by any licensee or consumer or a person
engaged in generation in accordance with the regulations specified by the Appropriate
Commission”.
Table 1- Open Access Provision
SECTION 9 (2) CAPTIVE GENERATION
SECTION 38 (2) (D) FUNCTIONS OF CTU
SECTION 39 (2) (D) FUNCTIONS OF STU
SECTION 42 DISTRIBUTION LICENSEE & OPEN ACCESS
SECTION 43 SUPPLY ON REQUEST
SECTION 86 (1) (C) FUNCTIONS OF STATE COMMISSION
Source: ElectricityAct2003
13
SECTION 9(2) (CAPTIVE GENERATION)
Every person, who has constructed a captive generating plant and maintains and operates such plant,
shall have the right to Open Access for the purposes of carrying electricity from his captive
generating plant to the destination of his use. Provided that such Open Access shall be subject to the
Central Transmission Utility or the State Transmission shall determine availability of adequate
transmission facility and such availability of transmission facility.
Utility, as the case may be: Provided further that the Appropriate Commission shall adjudicate upon
any dispute regarding the availability o transmission facility.
SECTION 38(2)(D) FUNCTIONS OF CTU
To provide non-discriminatory Open Access to its transmission system for use by-
Any licensee or generating company on payment of the transmission charges can avail
open access.
Any consumer as and when such Open Access is provided by the State Commission
under sub-section (2) of section 42 on payment of the transmission charges and a surcharge
thereon. As may be specified by the Central Commission: Provided that such surcharge shall
be utilised for the purpose of meeting the requirement of current level cross-subsidy: Provided
further that such surcharge and cross subsidies shall be progressively reduced in the manner
as may be specified by the Central Commission.
Provided also that the manner of payment and utilisation of the surcharge shall be specified
by the Central Commission: Provided also that such surcharge shall not be leviable in case
Open Access is provided to a person who has established a captive generating plant for
carrying the electricity to the destination of his own use.
Section 39(2)(d)Functions of State Transmission Utility
(d) To provide non-discriminatory Open Access to its transmission system for use by:
(i) Any licensee or generating company on payment of the transmission charges.
(ii) Any consumer as and when such Open Access is provided by the State Commission under sub-
section (2) of section 42, on payment of the transmission charges and a surcharge thereon, as may be
specified by the State Commission. Provided that such surcharge shall be utilised for the purpose of
meeting the requirement of current level cross-subsidy. Provided further that such surcharge and
14
cross subsidies shall be progressively reduced in the manner as may be specified by the State
Commission.
Provided also that the manner of payment and utilisation of the surcharge shall be specified by the
State Commission. Provided also that such surcharge shall not be leviable in case Open Access is
provided to a person who has established a captive generating plant for carrying the electricity to the
destination of his own use.
SECTION 42(DUTIES OF DISTRIBUTION LICENSEE AND OPEN ACCESS)
(1) It shall be the duty of a distribution licensee to develop and maintain an efficient, co-ordinated
and economical distribution system in his area of supply and to supply electricity in accordance with
the provisions contained in this Act.
(2) The State Commission shall introduce Open Access in such phases and subject to such conditions,
(including the cross subsidies, and other operational constraints) as may be specified within one year
of the appointed date by it and in specifying the extent of Open Access in successive phases and in
determining the charges for wheeling. It shall have due regard to all relevant factors including such
cross subsidies and other operational constraints. Provided that such Open Access shall be allowed on
payment of a surcharge in addition to the charges for wheeling as may be determined by the State
Commission. Provided further that such surcharge shall be utilised to meet the requirements of
current level of cross subsidy within the area of supply of the distribution licensee. Provided also that
such surcharge and cross subsidies shall be progressively reduced in the manner as may be specified
by the State.
SECTION 43(DUTY TO SUPPLY ON REQUEST)
(1) 1[Save as otherwise provided in this Act, every distribution] licensee, shall, on an application by
the owner or occupier of any premises, give supply of electricity to such premises, within one month
after receipt of the application requiring such supply: Provided that where such supply requires
extension of distribution mains,
Or commissioning of new sub-stations, the distribution licensee shall supply the electricity to such
premises immediately after such extension or commissioning or within such period as may be
specified by the Appropriate Commission:
15
SECTION 49(AGREEMENT WITH RESPECT TO SUPPLY OR PURCHASE
OF ELECTRICITY)
Where the Appropriate Commission has allowed Open Access to certain consumers under
section 42, such consumers, notwithstanding the provisions contained in clause (d) of sub-
section (1) of section 62, may enter into an agreement with any person for supply or purchase of
electricity on such terms and conditions (including tariff) as may be agreed upon by them.
Table 2- Stages of Evolution of OA
Stage of evolution Description
Electricity Act 2003 Introduction of Competition in Power Sector and Open
Access in Inter-State transmission.
2004: First CERC Regulation (Issued Introduced LTOA (>25 yrs.) and STOA (<1 yr.) products.
on 30-1-04) Congestion Management through fax/e-mail.
Open Access 2005 (First Amendment Introduction of new products under STOA: Advance
issued on 21-2-05) Scheduling, First come First Serve Basis (FCFS), Day
Ahead, Same Day. E-bidding invited for STOA.
Open Access 2006-2007 (Second Developing a common platform for Electricity Trading,
Amendment) Grant of permission for setting up and operation of Power
Exchange.
Open Access Regulation 2008 (Issued Exit option provided with payment of up to 5 days open
on 25-1-08 Access charges.
Amendment 2009 (Issued on 20-5-09) Exit option provided with payment of up to 2 days open
Access charges.
CERC Power Market Regulation, Introduction of REC contracts.
2010 \
3.3 Distribution Open Access
3.3.1Eligibility to seek Open Access: Regulation 2011 allows a contract demand of more than
1 MVA from the date of notification of these regulations subjected to approval from commission.
3.3.2 Rules for grant of connectivity as per 2011 regulations:
1. A generating station having installed capacity less than 5 MW shall be eligible to obtain
connectivity to the distribution system.
2. A generating station having capacity more than 5 MW may also get connectivity provided
16
such connectivity is technically feasible
3. Application shall be accompanied by a non- refundable fees of 2 Lakh
4. On receipt of application, the Distribution Licensee should process application in
consultation with STU when required.
3.4 Category of Open Access consumers as per CERC regulations 2011
Figure 3 : Category of OA
Long Term Open Access Customers: Period exceeding 12 yrs. but less than 25 yrs.
Medium Term Open Access Customers: Period between 3 months and 3 yrs.
Short Term Open Access Customers: Period not exceeding 30 days
Day Ahead Open Access Customers: It is permitted on availability of surplus capacity in
distribution Licensee‘s system. The application will be received within 2 days prior to date of
scheduling but not later than 1500 hrs. Of day immediately proceeding the day of scheduling
for day ahead transaction.
Scheduling
Inter-State: Intra-State Open Access transactions shall be specified by CERC
Intra-State: Intra-State Open Access transactions in respect of load 5MW and above and all
generating stations irrespective of the capacity shall be scheduled by SLDC in accordance with the
provisions of State Grid Code. No scheduling required in respect of open access consumer having load of less than 5MW and
Captive Power Plants.
3.5. Transmission Open Access
3.5.1. Eligibility to seek OA
1. Generating company which own or operates or intends to operate a generating station in the
state.
17
2. Person who constructed, maintained, operates or intends to in the state for its own use
3. Distribution Licensee or a person who has applied for a licensee to distribute electricity
Trading Licensee or a person applied for trading in electricity shall be eligible for open access to
intra-state transmission system in accordance with these regulations.
3.5.2 Grant of connectivity:
A consumer having load of 5MW and above or a generating station having installed capacity of
5MW and above shall be eligible to obtain connectivity to Intra-State Transmission system.
Application shall be accompanied by a non-refundable fee of Rs. 2 lakh. The application shall
contain details such as proposed geographical location, quantum of power to be interchanged and
such other details as may be laid down by STU.
3.5.3 Grant of connectivity to STU
On receipt of application, the STU shall, in consultation and through coordination with other
agencies involved in Intra-State transmission system to be used, process the application and carry out
the necessary interconnection in compliance with CTU.
While granting connectivity, the STU shall specify the name of the sub-station or pooling station or
switchyard where connectivity is to be granted.
The applicant or inter-State transmission licensee shall sign a connection agreement with the CTU or
IST licensee owning the sub-station or pooling station or switchyard or the transmission line as
identified by the nodal agency where connectivity is being granted.
A generating station, including captive generating plant which has been granted connectivity to
the grid shall be allowed to undertake testing including full load testing by injecting its infirm
power into the grid before being put into commercial operation .Even before availing any type of
open access, after obtaining permission of the concerned Regional Load Despatch Centre, which
shall keep grid security in view while granting such permission.
This infirm power from a generating station or a unit thereof (except those based on non-
conventional energy sources) will be governed by the Central Electricity Regulatory Commission
(Terms and Conditions of Tariff) Regulations, 2009. The power injected into the grid from other
generating stations as a result of this testing shall also be charged at UI rates. An applicant may be
required by the Central Transmission Utility to construct a dedicated line to the point of connection
to enable connectivity to the grid except if it is:
18
A Thermal generating station of 500 MW and above.
A Hydro generating station of 250 MW and above.
Not a captive generating plant.
3.6 PROCEDURE FOR ALLOTMENT OF OPEN ACCESS
3.6.1 Long Term Open Access
i) An application for long-term access shall be submitted to the nodal agency;
ii) The application shall contain the details, such as capacity needed, point(s) of injection, point(s)
of drawl, duration of availing open access, peak load, average load and such other additional
information that may be specified by the nodal agency: Provided that the nodal agency shall
issue necessary guidelines, procedure and application forms within 30 days of commencement of
these regulations.
iii) The application shall be accompanied by a non-refundable application fee of Rs one lakh payable
in the name and in the manner to be decided by the nodal agency;
iv) Based on system studies conducted in consultation with other agencies involved including other
transmission licensees, the nodal agency shall, within 30 days of receipt of the application,
intimate to the applicant whether or not the long-term access can be allowed without further
system strengthening:
v) Provided that where the long-term access can be allowed without further system strengthening,
this shall be allowed immediately after entering into commercial agreements.
vi) If, in the opinion of the nodal agency, further system strengthening is essential before providing
the long-term access, the applicant may request the nodal agency to carry out the system studies
and preliminary investigation for the purpose of cost estimates and completion schedule for
system strengthening;
vii) The nodal agency shall carry out the studies immediately on receipt of request from the applicant
under clause (v) above and intimate results of the studies within 90 days of receipt of request
from the Central / State transmission Unit.
viii) The applicant shall reimburse the actual expenditure incurred by the nodal agency for system
strengthening studies:
19
Provided that the fee of ` 1 lakh paid by the applicant shall be adjusted against the actual expenditure
to be reimbursed.
3.6.2 Short Term Open Access
i) A short-term customer shall submit an application for transmission access to the nodal Regional
Load Despatch Centre.
ii) The application shall contain the details, such as capacity needed, point or points of injection,
point or points of drawl, duration for availing of open access, peak load, average load and such
other additional information that may be laid down by the Regional / State Load Dispatch
Centre.
iii) The application shall be accompanied by a non-refundable application fee of Rupees five
thousand only; Provided that in case of application for access on the date of the application or on
the following day, the application fee may be deposited within next three working days of
making of application.
iv) The reserved transmission capacity shall not be transferred by a short-term customer to any other
customer.
3.6.3 Allotment Priority
Figure 4- Allotment Priority
Distribution
Licensee
STOA
MTOA
LTOA
Existing OA Customer New OA Customer
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3.7 ROLE OF DIFFERENT AGENCIES IN OPEN ACCESS
3.7.1 NLDC (National Load Dispatch Centre)
Section 26. (National Load Dispatch Centre) of the Act stipulates that: (1) The Central Government may establish a centre at the national level, to be known as the National
Load Dispatch Centre for optimum scheduling and dispatch of electricity among the Regional
Load Dispatch Centres.
(2) The constitution and functions of the National Load Dispatch Centre shall be such as may be
prescribed by the Central Government.
Note: Provided that the National Load Dispatch Centre shall not engage in the business of
trading in electricity.
3.7.2 RLDC (Regional Load Dispatch Centre)
Section 27. (Constitution of Regional Load Dispatch Centre) of the Act stipulates that:
(1) The Central Government shall establish a centre for each region to be known as the Regional
Load Dispatch Centre having territorial jurisdiction as determined by the Central Government in
accordance with section 25 for the purposes of exercising the powers and discharging the functions
under this Part.
(2) The Regional Load Dispatch Centre shall be operated by a Government company or any
authority or corporation established or constituted by or under any Central Act, as may be
notified by the Central Government. Provided that until a Government company or authority or
corporation referred to in this sub-section is notified by the Central Government, the Central
Transmission Utility shall operate the Regional Load Dispatch Centre.
Note: Provided further that no Regional Load Dispatch Centre shall engage in the business of
generation of electricity or trading in electricity.
3.7.3 SLDC (State Load Dispatch Centre)
Section 31 (Constitution of State Load Dispatch Centre) of the Act stipulates that: --
(1) The State Government shall establish a Centre to be known as the State Load Dispatch Centre
21
for the purposes of exercising the powers and discharging the functions under this Part.
(2) The State Load Dispatch Centre shall be operated by a Government company or any authority
or corporation established or constituted by or under any State Act, as may be notified by the
State Government. Provided that until a Government company or any authority or corporation
is notified by the State Government, the State Transmission Utility shall operate the State
Load Dispatch Centre.
Note: Provided further that no State Load Dispatch Centre shall engage in the business of
trading in electricity.
3.7.4 CTU (Central Transmission Utility)
Section 38. (Central Transmission Utility and functions) of the Act stipulates that:
(1) The Central Government may notify any Government company as the Central Transmission
Utility.
Note: Provided that the Central Transmission Utility shall not engage in the business of
generation of electricity or trading in electricity.
One of the functions of Central Transmission Utility is to provide non-discriminatory Open Access
to its transmission system for use by –
(i) any licensee or generating company on payment of the transmission charges; or
(ii) any consumer as and when such open access is provided by the State Commission under sub-
section (2) of section 42, on payment of the transmission charges and a surcharge thereon, as
may be specified by the Central Commission.
3.7.5 STU (State Transmission Utility)
Section 39. (State Transmission Utility and functions) of the Act stipulates that:
(1) The State Government may notify the Board or a Government company as the State
Transmission Utility.
Note: Provided that the State Transmission Utility shall not engage in the business of trading in
electricity.
One of the functions of State Transmission Utility is to provide non-discriminatory open access to its
transmission system for use by
(i) any licensee or generating company on payment of the transmission charges ; or
(ii) any consumer as and when such open access is provided by the State Commission under sub-
22
section (2) of section 42, on payment of the transmission charges and a surcharge thereon, as
may be specified by the State Commission. The Load Dispatch Centres, transmission utilities are
barred from trading n power in order to ensure non-discriminatory open access to all the
generators/ consumers.
3.8 Understanding Open Access charges
There are major charges to be paid by open access consumers to distribution licensee, transmission
licensees and other related entities, other than the power purchase cost paid to the generator or
supplying entity. These charges include:
1. Wheeling Charges or Distribution Charges
Distribution charges are those charges which are paid to distribution licensee for the use of
distribution system and associated facilities by another person for the conveyance of electricity.
The licensees, generating stations, captive generating plants and consumers shall be eligible for open
access to distribution system of a distribution licensee on payment of the wheeling charges as may be
determined by the Commission
Applicability: These charges are applicable to generating stations, captive generating plants and
consumers who are connected to Discom network i.e., at 11 and 33 kV.
2. Wheeling Loss or Distribution Loss
Distribution losses are the technical losses for the distribution system. It is determined by the
Commission for various voltage levels for the applicable year, based on prudence check of the
submissions of the Distribution Licensee during their Tariff determination process and shall be
apportioned in proportion to the actual energy drawl by the Open Access consumers and shall be
payable in kind at relevant voltage level.
Applicability: This loss is applicable to generating stations, captive generating plants and consumers
who are connected to Discom network i.e., at 11 and 33 kV.
3. Transmission Charges or STU Charges
Transmission charges are those charges which are paid to transmission licensee for the use of
transmission system and associated facilities by another person for the conveyance of electricity.
23
Applicability: These charges are applicable to generating stations, captive generating plants and
consumers who are connected to state transmission network i.e., at 66 or 132 kV and Discom
network i.e., at 11 and 33 kV.
4. Transmission Loss or STU Loss
Transmission losses are those losses which are there in the transmission system. The buyers and
sellers shall absorb apportioned energy losses in the transmission system in accordance with the
provisions specified by the Central Commission.
Applicability: This loss is applicable to generating stations, captive generating plants and consumers
who are connected to state transmission network i.e., at 66 or 132 kV and Discom network i.e., at 11
and 33 kV.
5. PoC Charge & PoC Losses
It is a transmission charge pricing methodology introduced for sharing of Inter State Transmission
Systems (ISTS) charges and Losses among the Designated ISTS Customers (DICs) depending on
their location and sensitive to their distances from load centres (generators) and generation
(customers) and the direction of the node in the grid.
Applicability: This charges and losses are applicable to generating stations, captive generating plants
and consumers who are connected to central transmission network or to state transmission network
i.e., at 66 or 132 kV and Discom network i.e., at 11 and 33 kV.
6. Cross Subsidy Surcharge
If open access facility is availed of by a subsidising consumer of a distribution licensee of the State,
then such consumer, in addition to transmission and/or wheeling charges, shall pay cross subsidy
surcharge determined by the Commission. Cross subsidy surcharge determined on Per Unit basis
shall be payable, on monthly basis, by the open access customers based on the actual energy drawn
during the month through open access. The amount of surcharge shall be paid to the distribution
licensee of the area of supply from whom the consumer was availing supply before seeking open
access.
Applicability: This charge is paid by open access consumers irrespective of voltage or connectivity
level.
24
Cross Subsidy Mechanism as per NTP
S = T - [C (1+ L / 100) + D], Where,
O S is the surcharge
O T is the Tariff payable by the relevant category of consumers;
o C is the weighted average cost of power purchase of top 5% at the margin excluding
renewable power and liquid fuel based generation
O D is the Wheeling charge
o L is the system loss for the applicable voltage level, expressed as a %age
7. Application Fees
A person seeking Open Access shall make an application in the prescribed format to the Distribution
Licensee to which it is connected. The application fees in general for short term open access
consumer is ` 5000/application.
8. SLDC Charge
A composite operating charge @ ` 2, 000/- per day in general or part of the day shall be payable by a
short-term open access customer for each transaction to the SLDC or as determined by the
Commission from time to time. The operating charge includes fee for scheduling and system
operation, energy accounting, fee for affecting revisions in schedule on bonafide grounds and
collection and disbursement of charges.
Applicability: This charge is payable to both injecting and drawing SLDC.
9. RLDC Charge
A composite operating charge @ ` 2,000/day/RLDC is payable by a short-term open access customer
for each transaction to the RLDC or as determined by the Commission from time to time.
10. Other Charges
In addition to above mentioned charges there are some other charges which have a very small impact
on the final landed cost of electricity through open access, these charges are:
25
1. NLDC Application Fees: ` 5000/ (No. of Successful bidders), applicable for power
exchange transactions.
2. NLDC Scheduling and Operating Charges: ` 5,000.00 x (Regional Entity Buyers +
Regional Entity Sellers) / (No. of Successful Portfolios), applicable for power exchange
transactions.
3. Trading Margin: trading margin exceeding seven (7.0) paisa/kWh in case the sale price is
exceeding Rupees three (3.0)/kWh and four (4.0) paisa/kWh where the sale price is less than
or equal to Rupees three (3.0)/kWh.
4. Exchange Charges: Rs 20/Mwh, applicable for power exchange transactions.
5. Service Tax: 12.36% of Exchange Charges (`/Mwh), applicable for power exchange
transactions.
3.9 Unscheduled Interchange Charges (UI Charges)
The mismatch between the scheduled and the actual drawl/ scheduled and the actual injection
at the interface points may be met from the grid, which shall be governed by UI pricing
mechanism.
Unless specified otherwise by the State Commission concerned, the UI rate for intra-State
entity shall be 105% (for over-drawls or under generation) and 95% (for under-drawls or over
generation) of the UI rate at the periphery of regional entity.
Table 3- UI Rates for Average Frequency of Time Block (Hz)
Each 0.02 Hz step is equivalent to 16.50 Paisa/KWh in 50.2-50.00 Hz frequency range, 28.50
Paisa/KWh in 50 Hz to 49.80 Hz and 28.12 Paisa/KWh in frequency in the below 49.8 Hz to 49.5 Hz
range.
26
Chapter 4: COST BENEFIT ANALYSIS for Intra State OA
Open access allows large users of power — typically having connected load of 1 megawatt
(MW) and above — to buy cheaper power from the open market. The idea is that the
customers should be able to choose among a large number of competing power companies–
instead of being forced to buy electricity from their existing electric utility monopoly. It helps
large consumers particularly the sick textile, cement and steel industrial units by ensuring
regular supply of electricity at competitive rates and boost business of power bourses.
THE ELECTRICITY Act 2003 is a landmark legislation in that it opens the power sector to
a number of players by laying down provisions for a power market and competition. As per
Electricity Act 2003 Open Access is
“Non-discriminatory provision for the use of transmission lines or distribution system or
associated facilities with such lines or system by any licensee or consumer or a person
engaged in generation in accordance with the regulations specified by the Appropriate
Commission”.
4.1 Assumptions
Voltage at Generation End – Injection Point 132 kV
Voltage at Consumer End – Drawl Point 132 kV, 33 kV, 11kV and LT
Open Access load 5 MW
Load Factor 80% (CERC Guidelines)
Nature of Open Access Short Term (1 month)
Charges and Losses Considered as per respective SERC’s
tariff orders for the year 2013-14.
Cost of Generation APPC method
Usage (Time of Day) Uniform throughout the day
Type of Consumer Industrial Consumer
Table 4- Assumptions for OA analysis
27
The format used by MERC for calculation of OA charges has been considered for the ease of
analysis.
4.2 Selection of States for Intra State OA
The states were selected on the basis of their provisions for Open Access. OA has been
granted in these states in all formats viz LTOA , MTOA and STOA. The guidelines are
issued by their respective ERCs and SLDCs are responsible for congestion management in
case of Intra State OA. The detailed procedure for OA has been set by CERC which is
followed by every state.
The states with high potential for OA are being considered for Cost Benefit Analysis which
would clearly reflect benefits that an Industrial Consumer would get by getting electricity
through OA when compared with Grid Power i.e. through Discom. Various charges
applicable are considered for the analysis based on the tariff orders issued by the respective
SERCs for the particular state.
Punjab – Northern Region
Gujarat - Western Region
Uttar Pradesh – Northern Region
Maharashtra – Western Region
Andhra Pradesh – Southern Region
4.3 Punjab
PSPCL – Punjab State Power Corporation Limited
PSERC – Punjab State Electricity Regulatory Commission
PSTCL – Punjab State Transmission Corporation Limited
Open Access office under Chief Engineer/SLDC, PSTCL, and Patiala is a nodal agency in
state power utilities for grant of short term open access to all eligible customers & consumers
of PSPCL. Open Access is being granted in discriminatorily by PSTCL to all the eligible
open access customers embedded in Transmission and Distribution system of PSTCL &
PSPCL as per provisions of Electricity Act-2003 and Open Access Regulations issued by
Punjab State Electricity Regulatory Commission (PSERC) and Central Electricity Regulatory
28
Commission (CERC) from time to time. Presently Open Access for interstate sale of power
has been granted to three embedded power plants for third party sale of power through power
exchange/bi-lateral agreements. (Total 59.8 MW approx.)
Open Access has already been granted to 316 no. Large supply consumers of PSPCL
(Powercom) for purchase of power through power exchange. (Total 1360 MW approx.) 293
no. consumers are presently purchasing power through power exchange as per their
requirement against a total permission of purchase granted for 1287 MW. Open Access
office also deals with the energy accounting of UI based energy of Open Access customers
and reactive energy accounts and records are maintained for UI, reactive energy and
assessment of open access charges.
There are 373 OA consumers in Punjab with a combined load of 1569.26 MW.
No. of OA
customers
132 KV 66KV 33 KV 11 KV
5 104 3 261 373
No. of OA
customers
CBC Ludhiana CBC Jalandhar CBC Patiala CBC Bathinda
283 35 32 23 373
Table 5- OA consumers in Punjab
4.3.1 Charges applicable
The Tariff Order for the year 2013-14 is issued by PSERC based on the ARR petition filed by
PSPCL and PSTCL, in exercise of powers vested in it under EA‘03.
Injection Point – 132 kV
Table 6- PSPCL analysis
Parameter Case 1 Case 2 Case 3
Drawl Point 132 kV 33kV 11kV
Energy Injected (MUs) 2.88 2.88 2.88
Cost of Generation ` 3.67 ` 3.67 ` 3.67
Transmission Losses 2.50 % 2.50 % 2.50 %
Transmission Charge ` 0.27 / unit ` 0.27 / unit ` 0.27 / unit
Wheeling Losses N.A. 4.76% 8.53%
Wheeling Charges N.A. ` 1.19 / unit ` 1.19 / unit
Cross Subsidy Surcharge ` 1.14/unit ` 1.14/unit ` 1.14/unit
Additional Surcharge N.A. N.A. N.A.
Effective Rate ` 5.18 / unit ` 6.57 / unit ` 6.75 / unit Tariff through Discom ` 6.38/unit ` 6.38 / unit ` 6.38 / unit Cost Benefit ` 1.2/ unit ` - 0.19/ unit ` - 0.37/ unit
29
4.4 Gujarat
GERC– Gujarat Electricity Regulatory Commission
GETCO – Gujarat Energy Transmission Corporation Limited (Transco)
UGVCL – Uttar Gujarat Vij Company Ltd.
MGVCL–Madhya Gujarat Vij Company Ltd.
PGVCL – Paschim Gujarat Vij Company Ltd.
DGVCL – Dakshin Gujarat Vij Company Ltd.
Torrent Power - Ahmedabad
The GERC notified MYT Regulations 2011 on 22nd
March, 2011. All Discoms submitted the
True up of FY 2011-12 and calculation of revenue estimates for FY 2013-14.
STOA consumers in Gujarat for the month of August, 2013 are:
No.of
STOA
consumers
UGVCL PGVCL MGVCL DGVCL Torrent Total
63 92 40 97 29 321
Table 7- STOA in Gujarat
STOA consumers connection
network
STU Discom
118 203 Table 8- STOA network in Gujarat
MTOA consumers in Gujarat as in August, 2013 are:
MTOA consumers
connection network
STU Discom
14 1 (MGVCL) Table 9- MTOA in Gujarat
30
4.4.1 Charges Applicable
4.4.1.1 UGVCL – Uttar Gujarat Vij Corporation Limited
Injection Point – 132 kV
Table 10: UGVCL Analysis
Parameter Case 1 Case 2 Case 3
Drawl Point 132 kV 11 kV LT
Energy Injected (MUs) 2.88 2.88 2.88
Cost of Generation ` 4.49 ` 4.49 ` 4.49
Transmission Losses 4.81 % 4.81 % 4.81%
Transmission Charge ` 0.13 / unit ` 0.13 / unit ` 0.13 / unit
Wheeling Losses N.A. 10 % 10.82 %
Wheeling Charges N.A. ` 0.3 / unit ` 1.15 / unit
Cross Subsidy Surcharge ` 0.45 /unit ` 0.45 /unit ` 0.45 /unit
Additional Surcharge N.A. N.A. N.A.
Effective Rate ` 5.35 / unit ` 6.01 / unit ` 6.37 / unit
Tariff through Discom ` 5.27/unit ` 5.27 / unit ` 5.27 / unit Time of use Charges ` 0.25 / unit ` 0.25 / unit ` 0 / unit
Final Tariff ` 5.52 / unit ` 5.52 / unit ` 5.27 / unit
Cost Benefit ` 0.17/ unit ` - 0.49/ unit ` - 1.1/ unit
4.4.1.2 PGVCL – Paschim Gujarat Vij Corporation Limited
Injection Point – 132 kV
Table 11: PGVCL Analysis
Parameter Case 1 Case 2 Case 3
Drawl Point 132 kV 11 kV LT
Energy Injected (MUs) 2.88 2.88 2.88
Cost of Generation ` 4.54 ` 4.54 ` 4.54
Transmission Losses 4.81 % 4.81 % 4.81%
Transmission Charge ` 0.13 / unit ` 0.13 / unit ` 0.13 / unit
Wheeling Losses N.A. 10 % 10.82 %
Wheeling Charges N.A. ` 0.3 / unit ` 1.15 / unit
Cross Subsidy Surcharge ` 0.45 /unit ` 0.45 /unit ` 0.45 /unit
Additional Surcharge N.A. N.A. N.A.
Effective Rate ` 5.35 / unit ` 6.01 / unit ` 6.37 / unit Tariff through Discom ` 5.48/unit ` 5.48 / unit ` 5.48 / unit Time of use Charges ` 0.25 / unit ` 0.25 / unit ` 0 / unit
Final Tariff ` 5.73 / unit ` 5.73 / unit ` 5.48 / unit
Cost Benefit ` 0.38/ unit ` - 0.28/ unit ` - 0.89/ unit
31
4.4.1.3 MGVC L – Madhya Gujarat Vij Corporation Limited
Injection Point – 132 kV
Table 12: MGVCL Analysis
Parameter Case 1 Case 2 Case 3
Drawl Point 132 kV 11 kV LT
Energy Injected (MUs) 2.88 2.88 2.88
Cost of Generation ` 4.54 ` 4.54 ` 4.54
Transmission Losses 4.81 % 4.81 % 4.81%
Transmission Charge ` 0.13 / unit ` 0.13 / unit ` 0.13 / unit
Wheeling Losses N.A. 10 % 10.82 %
Wheeling Charges N.A. ` 0.3 / unit ` 1.15 / unit
Cross Subsidy Surcharge ` 0.45 /unit ` 0.45 /unit ` 0.45 /unit
Additional Surcharge N.A. N.A. N.A.
Effective Rate ` 5.35 / unit ` 6.01 / unit ` 6.37 / unit Tariff through Discom ` 5.67/unit ` 5.67/unit ` 5.67/unit
Time of use Charges ` 0.25 / unit ` 0.25 / unit ` 0 / unit
Final Tariff ` 5.92 / unit ` 5.92 / unit ` 5.67 / unit
Cost Benefit ` 0.57/ unit ` - 0.09/ unit ` - 0.7/ unit
4.4.1.4 DGVC L – Dakshin Gujarat Vij Corporation Limited
Injection Point – 132 kV
Table 13: DGVCL Analysis
Parameter Case 1 Case 2 Case 3
Drawl Point 132 kV 11 kV LT
Energy Injected (MUs) 2.88 2.88 2.88
Cost of Generation ` 4.54 ` 4.54 ` 4.54
Transmission Losses 4.81 % 4.81 % 4.81%
Transmission Charge ` 0.13 / unit ` 0.13 / unit ` 0.13 / unit
Wheeling Losses N.A. 10 % 10.82 %
Wheeling Charges N.A. ` 0.3 / unit ` 1.15 / unit
Cross Subsidy Surcharge ` 0.45 /unit ` 0.45 /unit ` 0.45 /unit
Additional Surcharge N.A. N.A. N.A.
Effective Rate ` 5.35 / unit ` 6.01 / unit ` 6.37 / unit
Tariff through Discom ` 5.86/unit ` 5.86/unit ` 5.86/unit
Time of use Charges ` 0.25 / unit ` 0.25 / unit ` 0 / unit
Final Tariff ` 6.11 / unit ` 6.11 / unit ` 5.86 / unit
Cost Benefit ` 0.76/ unit ` 0.10/ unit ` - 0.51/ unit
32
4.4.1.5 Torrent Power - Ahmedabad
Injection Point – 132 kV
Parameter Case 1 Case 2 Case 3
Drawl Point 132 kV 11 kV LT
Energy Injected (MUs) 2.88 2.88 2.88
Cost of Generation ` 4.49 ` 4.49 ` 4.49
Transmission Losses 4.81 % 4.81 % 4.81%
Transmission Charge ` 0.13 / unit ` 0.13 / unit ` 0.13 / unit
Wheeling Losses N.A. 3 % 3 %
Wheeling Charges N.A. ` 0.28 / unit ` 0.28 / unit
Cross Subsidy Surcharge ` 0.29 /unit ` 0.29 /unit ` 0.29 /unit
Additional Surcharge N.A. N.A. N.A.
Effective Rate ` 5.14 / unit ` 5.57 / unit ` 5.57 / unit Tariff through Discom ` 6.39 /unit ` 6.39 /unit ` 4.39 /unit
Time of use Charges ` 0.25 / unit ` 0.25 / unit ` 0 / unit
Final Tariff ` 6.64 /unit ` 6.64 /unit ` 4.39 /unit
Cost Benefit ` 1.50/ unit ` 1.07/ unit ` - 1.18 / unit
Table 14: Torrent Power Analysis
4.5 Uttar Pradesh
The Electricity structure in UP is governed by Regulatory commission along with Discoms.
UPERC (Uttar Pradesh Electricity Regulatory Commission)
PVVNL ( Paschimanchal Vidyut Vitran Nigam Limited) – Meerut Discom
PuVVNL (Purvanchal Vidyut Vitran Nigam Limited) – Varanasi Discom
MVVNL ( Madhyanchal Vidyut Vitran Nigam Limited) – Lucknow Discom
DVVNL ( Dakshinanchal Vidyut Vitran Nigam Limited) – Agra Discom
KESCoL (Kanpur Electricity Supply Company Limited) – Kanpur Discom
NPCL ( Noida Power Company Limited) – Noida Discom
The Commission has issued UPERC Open Access Regulation, 2004 to operationalize long
term and short term OA in the state. The regulations also provide that effective from April 1,
2008 any consumer with demand above 1 MW can avail OA of T&D systems.
There was no authentic data available for OA consumers in the state. According to IEX
source there were no industrial participants for OA at IEX.
33
4.5.1. PuVVNL - Purvanchal Vidyut Vitran Nigam Limited
Injection Point – 132 kV
Parameter Case 1 Case 2 Case 3
Drawl Point 132 kV > 11 kV 11 kV
Energy Injected (MUs) 2.88 2.88 2.88
Cost of Generation ` 3.56 ` 3.56 ` 3.56
Transmission Losses 3.67 % 3.67 % 3.67 %
Transmission Charge ` 0.034 / unit ` 0.034 / unit ` 0.034 / unit
Wheeling Losses N.A. 7 % 8 %
Wheeling Charges N.A. ` 0.078 / unit ` 0.124 / unit
Cross Subsidy Surcharge Nil Nil Nil
Additional Surcharge N.A. N.A. N.A.
Effective Rate ` 3.73 / unit ` 4.09 / unit ` 4.18 / unit Tariff through Discom ` 6.05/unit ` 6.05/unit ` 6.16 unit Cost Benefit ` 2.32/ unit ` 1.96/ unit ` 1.98/ unit
Table 15: PuVVNL Analysis
4.5.2 MVVNL - Madhyanchal Vidyut Vitran Nigam Limited
Injection Point – 132 kV
Table 16: MVVNL Analysis
Parameter Case 1 Case 2 Case 3
Drawl Point 132 kV > 11 kV 11 kV
Energy Injected (MUs) 2.88 2.88 2.88
Cost of Generation ` 3.56 ` 3.56 ` 3.56
Transmission Losses 3.67 % 3.67 % 3.67 %
Transmission Charge ` 0.034 / unit ` 0.034 / unit ` 0.034 / unit
Wheeling Losses N.A. 7 % 8 %
Wheeling Charges N.A. ` 0.078 / unit ` 0.124 / unit
Cross Subsidy Surcharge Nil Nil Nil
Additional Surcharge N.A. N.A. N.A.
Effective Rate ` 3.73 / unit ` 4.09 / unit ` 4.18 / unit Tariff through Discom ` 6.05/unit ` 6.05/unit ` 6.16 unit Cost Benefit ` 2.32/ unit ` 1.96/ unit ` 1.98/ unit
34
4.5.3 PVVNL - Paschimanchal Vidyut Vitran Nigam Limited
Injection Point – 132 kV
Parameter Case 1 Case 2 Case 3
Drawl Point 132 kV > 11 kV 11 kV
Energy Injected (MUs) 2.88 2.88 2.88
Cost of Generation ` 3.56 ` 3.56 ` 3.56
Transmission Losses 3.67 % 3.67 % 3.67 %
Transmission Charge ` 0.034 / unit ` 0.034 / unit ` 0.034 / unit
Wheeling Losses N.A. 7 % 8 %
Wheeling Charges N.A. ` 0.078 / unit ` 0.124 / unit
Cross Subsidy Surcharge Nil Nil Nil
Additional Surcharge N.A. N.A. N.A.
Effective Rate ` 3.73 / unit ` 4.09 / unit ` 4.18 / unit
Tariff through Discom ` 6.05/unit ` 6.05/unit ` 6.16 unit Cost Benefit ` 2.32/ unit ` 1.96/ unit ` 1.98/ unit
Table 17: PVVNL Analysis
4.5.4 DVVNL - Dakshinanchal Vidyut Vitran Nigam Limited
Injection Point – 132 kV
Table 18: DVVNL Analysis
Parameter Case 1 Case 2 Case 3
Drawl Point 132 kV > 11 kV 11 kV
Energy Injected (MUs) 2.88 2.88 2.88
Cost of Generation ` 3.56 ` 3.56 ` 3.56
Transmission Losses 3.67 % 3.67 % 3.67 %
Transmission Charge ` 0.034 / unit ` 0.034 / unit ` 0.034 / unit
Wheeling Losses N.A. 7 % 8 %
Wheeling Charges N.A. ` 0.078 / unit ` 0.124 / unit
Cross Subsidy Surcharge Nil Nil Nil
Additional Surcharge N.A. N.A. N.A.
Effective Rate ` 3.73 / unit ` 4.09 / unit ` 4.18 / unit Tariff through Discom ` 6.05/unit ` 6.05/unit ` 6.16 unit
Cost Benefit ` 2.32/ unit ` 1.96/ unit ` 1.98/ unit
35
4.5.5 KESCoL - Kanpur Electricity Supply Company Limited
Injection Point – 132 kV
Parameter Case 1 Case 2 Case 3
Drawl Point 132 kV > 11 kV 11 kV
Energy Injected (MUs) 2.88 2.88 2.88
Cost of Generation ` 3.56 ` 3.56 ` 3.56
Transmission Losses 3.67 % 3.67 % 3.67 %
Transmission Charge ` 0.034 / unit ` 0.034 / unit ` 0.034 / unit
Wheeling Losses N.A. 7 % 8 %
Wheeling Charges N.A. ` 0.078 / unit ` 0.124 / unit
Cross Subsidy Surcharge Nil Nil Nil
Additional Surcharge N.A. N.A. N.A.
Effective Rate ` 3.73 / unit ` 4.09 / unit ` 4.18 / unit
Tariff through Discom ` 6.05/unit ` 6.05/unit ` 6.16 unit Cost Benefit ` 2.32/ unit ` 1.96/ unit ` 1.98/ unit
Table 19: KESCoL Analysis
4.5.6 NPCL - Noida Power Company Limited
Injection Point – 132 kV
Table 20: NPCL Analysis
Parameter Case 1 Case 2 Case 3
Drawl Point 132 kV > 11 kV 11 kV
Energy Injected (MUs) 2.88 2.88 2.88
Cost of Generation ` 3.56 ` 3.56 ` 3.56
Transmission Losses 3.67 % 3.67 % 3.67 %
Transmission Charge ` 0.034 / unit ` 0.034 / unit ` 0.034 / unit
Wheeling Losses N.A. 2 % 3 %
Wheeling Charges N.A. ` 0.08 / unit ` 0.13 / unit
Cross Subsidy Surcharge Nil Nil Nil
Additional Surcharge N.A. N.A. N.A.
Effective Rate ` 3.73 / unit ` 3.90 / unit ` 3.97 / unit
Tariff through Discom ` 6.05/unit ` 6.05/unit ` 6.16 unit
Cost Benefit ` 2.32/ unit ` 2.15/ unit ` 2.19/ unit
36
4.6 Maharashtra
In Maharashtra, OA started in 2005 with the guideline of MERC‘s regulations 2005. In
Maharashtra, there are four Discoms namely:
Maharashtra State Electricity Distribution Co. limited (MSEDCL) (Except for
Mumbai, Rest of Maharashtra)
Tata Power (Mumbai Region)
Reliance Power – RinfraD (Mumbai Region)
Brihanmumbai Electric Supply & Transport (BEST) (Mumbai Region)
There are 87 STOA consumers in the state as of Jul, 2013 with major consumers being
CPP/IPP consumers.
4.6.1 MSEDCL
Injection Point – 132 kV
Parameter Case 1 Case 2 Case 3 Case 4
Drawl Point 132 kV 33 kV 11 kV LT
Energy Injected
(MUs)
2.88 2.88 2.88 2.88
Cost of Generation ` 4.48 ` 4.48 ` 4.48 ` 4.48
Transmission Losses 4.19 % 4.19 % 4.19 % 4.19 %
Transmission
Charge
` 0.43 / unit ` 0.43 / unit ` 0.43 / unit ` 0.43 / unit
Wheeling Losses N.A. 6 % 9 % 12.50 %
Wheeling Charges N.A. ` 0.11 / unit ` 0.60 / unit ` 1.03 / unit
Cross Subsidy
Surcharge
` 1.20 / unit ` 0.76 / unit ` 0.10 / unit ` 0.73 / unit
Additional
Surcharge
N.A. N.A. N.A. N.A.
Effective Rate ` 6.31 / unit ` 6.31 / unit ` 6.32 / unit ` 7.60 / unit
Tariff through
Discom
` 7.43/unit ` 7.43/unit ` 7.43/unit ` 7.04 / unit
Time of use Charges ` -0.08 / unit ` -0.08 / unit ` -0.08 / unit ` -0.08 /unit Final Tariff ` 7.35 / unit ` 7.35/ unit ` 7.35 / unit ` 6.96 / unit Cost Benefit ` 1.04/ unit ` 1.04/ unit ` 1.03/ unit `-0.64/unit
Table 21: MSEDCL Analysis
37
4.6.2 R-Infra D
Injection Point – 132 kV
Parameter Case 1 Case 2 Case 3 Case 4
Drawl Point 132 kV 33 kV 11 kV LT
Energy Injected (MUs) 2.88 2.88 2.88 2.88
Cost of Generation ` 4.48 ` 4.48 ` 4.48 ` 4.48
Transmission Losses 4.19 % 4.19 % 4.19 % 4.19 %
Transmission Charge ` 0.43 / unit ` 0.43 / unit ` 0.43 / unit ` 0.43 / unit
Wheeling Losses N.A. 1.94 % 1.94 % 9%
Wheeling Charges N.A. ` 0.76 / unit ` 0.76 / unit ` 1.46 / unit
Cross Subsidy
Surcharge
` 2.36 / unit ` 1.80 / unit ` 1.80 / unit ` 1.00 / unit
Additional Surcharge N.A. N.A. N.A. N.A.
Effective Rate ` 7.47 / unit ` 7.77 / unit ` 7.77 / unit ` 8.08 / unit Tariff through Discom ` 7.60/unit ` 7.60/unit ` 7.60/unit ` 7.58 / unit Time of use Charges ` -0.50 / unit ` -0.50 / unit ` -0.50 / unit ` -0.50 /unit
Final Tariff ` 7.10 / unit ` 7.10 / unit ` 7.10 / unit ` 6.94 / unit Cost Benefit ` -0.37/ unit ` - 0.67/ unit ` -0.67/ unit `-1.14/unit
Table 22: Rinfra Analysis
4.6.3 Tata Power: TPC-D
Injection Point – 132 kV
Table 23: TPC Analysis
Parameter Case 1 Case 2 Case 3 Case 4
Drawl Point 132 kV 33 kV 11 kV LT
Energy Injected (MUs) 2.88 2.88 2.88 2.88
Cost of Generation ` 4.48 ` 4.48 ` 4.48 ` 4.48
Transmission Losses 4.19 % 4.19 % 4.19 % 4.19 %
Transmission Charge ` 0.43 / unit ` 0.43 / unit ` 0.43 / unit ` 0.43 / unit
Wheeling Losses N.A. 1.12 % 1.12 % 1.12%
Wheeling Charges N.A. ` 0.89 / unit ` 0.89/ unit ` 1.87 / unit
Cross Subsidy Surcharge Nil Nil Nil Nil
Additional Surcharge N.A. N.A. N.A. N.A.
Effective Rate ` 5.11 / unit ` 6.06 / unit ` 6.06 / unit ` 7.04 / unit Tariff through Discom ` 6.24/unit ` 6.24/unit ` 6.24/unit ` 5.56 / unit
Time of use Charges ` -0.50 / unit ` -0.50 / unit ` -0.50 / unit ` -0.50 /unit Final Tariff ` 5.74 / unit ` 5.74 / unit ` 5.74 / unit ` 5.06 / unit
Cost Benefit ` 0.63/ unit ` - 0.32/ unit ` -0.32/ unit `-1.98/unit
38
4.7 Andhra Pradesh
The APERC notified MYT Regulations 2009 and is following the same for the 5th
control
period, 2013-14. All Discoms submitted the True up of FY 2011-12 and calculation of
revenue estimates for FY 2013-14, there are four Discoms namely:
NPDCL - Northern Power Distribution Company of AP Limited
SPDCL - Southern Power Distribution Company of AP Limited
EPDCL - Eastern Power Distribution Company of AP Limited
SPDCL - Southern Power Distribution Company of AP Limited
There is no official data available on the number of OA consumers in the state.
4.7.1 NPDCL
Injection Point – 132 kV
Parameter Case 1 Case 2 Case 3 Case 4
Drawl Point 132 kV 33 kV 11 kV LT
Energy Injected
(MUs)
2.88 2.88 2.88 2.88
Cost of Generation ` 3.60 ` 3.60 ` 3.60 ` 3.60
Transmission Losses 4.02 % 4.02 % 4.02 % 4.02 %
Transmission
Charge
` 0.08 / unit ` 0.08 / unit ` 0.08 / unit ` 0.08 / unit
Wheeling Losses N.A. 3.90 % 8.08 % 13.14%
Wheeling Charges N.A. ` 0.046 / unit ` 0.50/ unit ` 1.15 / unit
Cross Subsidy
Surcharge
Nil Nil Nil Nil
Additional
Surcharge
N.A. N.A. N.A. N.A.
Effective Rate ` 3.84 / unit ` 4.01 / unit ` 4.37 / unit ` 4.90 / unit
Tariff through
Discom
` 5.04/unit ` 5.44/unit ` 5.87/unit ` 6.18 / unit
Cost Benefit ` 1.20/ unit ` 1.43/ unit ` 1.50/ unit ` 1.28/unit Table 24: NPDCL Analysis
39
4.7.2 SPDCL
Injection Point – 132 kV
Parameter Case 1 Case 2 Case 3 Case 4
Drawl Point 132 kV 33 kV 11 kV LT
Energy Injected (MUs) 2.88 2.88 2.88 2.88
Cost of Generation ` 3.79 ` 3.79 ` 3.79 ` 3.79
Transmission Losses 4.02 % 4.02 % 4.02 % 4.02 %
Transmission Charge ` 0.08 / unit ` 0.08 / unit ` 0.08 / unit ` 0.08 / unit
Wheeling Losses N.A. 3.40 % 7.51 % 12.22%
Wheeling Charges N.A. ` 0.10 / unit ` 0.64/ unit ` 1.22 / unit
Cross Subsidy
Surcharge
Nil Nil Nil Nil
Additional Surcharge N.A. N.A. N.A. N.A.
Effective Rate ` 4.04 / unit ` 4.22 / unit ` 4.62 / unit ` 5.11 / unit Tariff through Discom ` 5.04/unit ` 5.44/unit ` 5.87/unit ` 6.18 / unit Cost Benefit ` 1.00/ unit ` 1.22/ unit ` 1.25/ unit ` 1.07/unit
Table 25: SPDCL Analysis
4.7.3 EPDCL
Injection Point – 132 kV
Table 26: EPDCL Analysis
Parameter Case 1 Case 2 Case 3 Case 4
Drawl Point 132 kV 33 kV 11 kV LT
Energy Injected
(MUs)
2.88 2.88 2.88 2.88
Cost of Generation ` 3.75 ` 3.75 ` 3.75 ` 3.75
Transmission Losses 4.02 % 4.02 % 4.02 % 4.02 %
Transmission
Charge
` 0.08 / unit ` 0.08 / unit ` 0.08 / unit ` 0.08 / unit
Wheeling Losses N.A. 3.39 % 7.47 % 12.10%
Wheeling Charges N.A. ` 0.03 / unit ` 0.27/ unit ` 0.91 / unit
Cross Subsidy
Surcharge
Nil Nil Nil Nil
Additional
Surcharge
N.A. N.A. N.A. N.A.
Effective Rate ` 4.00 / unit ` 4.17 / unit ` 4.59 / unit ` 5.46 / unit Tariff through
Discom
` 5.04/unit ` 5.44/unit ` 5.87/unit ` 6.18 / unit
Cost Benefit ` 1.04/ unit ` 1.27/ unit ` 1.28/ unit ` 0.72/unit
40
4.7.4 CPDCL
Injection Point – 132 kV
Parameter Case 1 Case 2 Case 3 Case 4
Drawl Point 132 kV 33 kV 11 kV LT
Energy Injected
(MUs)
2.88 2.88 2.88 2.88
Cost of Generation ` 3.74 ` 3.74 ` 3.74 ` 3.74
Transmission Losses 4.02 % 4.02 % 4.02 % 4.02 %
Transmission
Charge
` 0.08 / unit ` 0.08 / unit ` 0.08 / unit ` 0.08 / unit
Wheeling Losses N.A. 3.96 % 7.80 % 12.50%
Wheeling Charges N.A. ` 0.04 / unit ` 0.28/ unit ` 0.90 / unit
Cross Subsidy
Surcharge
Nil Nil Nil Nil
Additional
Surcharge
N.A. N.A. N.A. N.A.
Effective Rate ` 3.99 / unit ` 4.20 / unit ` 4.61 / unit ` 5.46 / unit Tariff through
Discom
` 5.04/unit ` 5.44/unit ` 5.87/unit ` 6.18 / unit
Cost Benefit ` 1.05/ unit ` 1.24/ unit ` 1.26/ unit ` 0.72/unit Table 27: CPDCL Analysis
41
4.8 Analysis for the States (Intra State OA)
4.8.1. Punjab
The Electricity Distribution system in Punjab vests with PSPCL. In the case with load of
5MW for STOA industrial consumers, with current power crisis in the state, it is highly
preferable for Industrial Consumers connected to Discom network to shift for Open Access in
Punjab at 132 kV network. For better and reliable power supply, Industrial Consumers
connected at 33kV and 11kV network can also shift for OA provided their willingness to
accommodate higher tariff rates compared with Discom.
The CSS component is levied on all consumers which help PSPCL in reducing losses caused
by consumers moving towards OA. Drawing power at 132kV at STU network helps the
consumers and making substantial gain through OA with savings of almost 18 % (` 1.2)
every unit purchased when compared with PSPCL network. While consumers connected to
33kV or 11kV has to use Discom network and thus liable to pay wheeling charges which
makes it costlier than Discom network.
Thus Industrial consumers can switch to OA from existing network considering the amount
they have to pay for the new service provider. With recent tariff hike of almost 13% for
industrial consumers and considering TOD tariff brought into effect for Large industrial
consumers @ ` 1/unit for usage during off peak hours i.e. 10p.m. to 6 a.m., this would help
them bring down their cost and thus assure reliable and continuous power supply.
PSERC’s Initiatives
With 373 OA consumers, Punjab is one of the leading states in terms of implementing the
OA mechanism. The volume of electricity transacted through OA increased considerably
between 2009-10 and 2011-12 from 131 MUs to 2,512 MUs. With introduction of CSS,
power traded through OA during 2012-13 declined significantly to 1,881 MUs. For 2013-14,
the CSS notified by the commission for various consumer categories are - ` 1.07 per unit for
large supply, ` 1 per unit for domestic supply and ` 1.14 per unit for non residential supply.
In October 2012, PSERC opposed the Ministry of Power‘s directive of mandating OA for
industrial consumers with a connected load of 1MW and above. The regulator stated that the
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directive does not conform with the provisions of the EA 2003 as it overlaps with the
universal obligation of a distribution licensee to supply power under Section 43 with the
rights of a consumer, licensees or generators under Section 42.
4.8.2 Gujarat
The Electricity network in Gujarat is managed by five Discom, 4 of them are owned by
Government (UGVCL, MGVCL, PGVCL and DGVCL) while 1 is a private entity (Torrent
Power). The Average Power Purchase Cost (APPC) method is considered for computation of
effective rate of power supply through OA. Owning to low losses in the states, consumers get
reliable power supply. Transmission charges for using STU network have been kept at
minimal amount. CSS for the 4 Govt. owned Discom is kept high above `1 per unit owning
to increase in tariff rate for OA consumers. While for Torrent Power, Commission has fixed
combined component of Wheeling charge and CSS at ` 0.57 per unit, thus making CSS at `
0.29 per unit in the area.
Considering different voltage level at drawl point, getting supply through STU network at
132 kV proves out to be most economical with saving of varying per unit for the 4 discoms
while this has substantial gain in region of Torrent power with ` 1.50 per unit, thus
favouring usage of OA at this network. While for lower voltage network involving Discom
network, OA proves to be a costly affair owning to wheeling losses and charges in the
network. In case of Torrent Power, it still helps the industrial consumers at 11 kV network
with advantage of ` 1 per unit through OA when compared with Discom. At LT network,
OA for industrial consumers is not beneficial due to high difference in tariff when compared
with Discom tariff.
GERC initiatives
GERC notified OA regulations in 2005. State has implemented intra-state ABT w.e.f.
05.04.2010 which is pre-requisite for implementation of OA. Subsequently GERC OA
Regulation 2011 notified as per model regulation of FOR. Gujarat has also been providing
adequate infrastructure support to OA consumers in the state.
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4.8.3 Uttar Pradesh
Uttar Pradesh electricity network has 6 discoms which supplies power to the every corner of
the state. 5 of them are govt. owned, NPCL is a privately managed Discom. With no CSS
being introduced in the tariff order for 2013-14, the effective rate for OA has reduced
considerably. All the charges and losses have been kept same for all the govt. owned
discoms, it varies for NPCL. Considering Point of withdrawal to be 132kV, OA consumers
can save as much as ` 2.32 per unit which would help them in reducing their overall cost for
the purpose. While OA consumers using Discom network and operating at voltage greater
then 11 kV can also benefit from OA by saving almost equivalent amount of ` 1.96 per unit.
In case of OA at 11 kV, consumers are still benefitted with ` 1.98 per unit when compared
with local Discom network. The situation is advantageous in case of NPCL where an
industrial consumer saves ` 2.32 per unit at 132kV STU network, ` 2.15 per unit at Discom
network with voltage above 11kV and ` 2.19 per unit with 11kV network. These owes to low
transmission and wheeling charges & losses and also high tariff with discoms that help OA
consumers in getting better and reliable energy.
UPERC initiatives
UPERC was one of the first state regulators to notify them under the terms and conditions of
OA regulations in June 2005. Moreover, amendments to these regulations were released in
June 2009. As per the regulations, any consumer with a load of 1 MW and above with a
minimum connectivity level of 11kV can avail OA. The SLDC is designated as the nodal
agency for STOA. Despite the enabling legislative and regulatory provisions, applications for
OA are yet to be approved. In fact, the UPSLDC was established in January 2011, almost six
years after the notification of OA regulations. It is under resourced and therefore, carrying out
operations to a limited extent.
44
4.8.4 Maharashtra
Maharashtra electricity distribution network is managed by four discoms, with MSEDCL
covering the major portion of the state. With Tata Power, Reliance Infra and BEST covering
the Mumbai region. All charges levied on the discoms are based on their ARR petition and
thus approval from MERC. Time of Day (TOD) usage is effectively implemented in the state
with provision for incentives for usage during the day. MERC implemented MYT regulations
and thus are followed in the second control period as well in 2013-14.
Considering the area under MSEDCL, OA consumers have significant advantage of using
OA over Discom power due to charges levied on the consumers in form of Wheeling and
CSS in the area and also high energy charges in Discom network. This helps OA consumers
using STU network at 132kV can save almost ` 1 per unit and also in case of network at
33kV and 11kV. While drawing power at LT is not favourable due to high cost through OA.
In case of Tata Power, there is No CSS being levied on the users which immensely helps the
OA consumers in reducing their tariff to be charged. While Energy charge in the region is
low, thus advantage of OA over Discom power is reduced. Connectivity at STU network
helps with a gain of ` 0.63 per unit for OA consumers, it is not advantageous at other voltage
levels. At LT level, Discom power is preferable as OA proves costly by almost ` 2 per unit.
In region of Reliance Infra, OA is not at all preferable due to high CSS and thus makes OA
power expensive with loss ranging from ` 0.37 per unit to ` 1.14 per unit w.r.t 132kV to LT
network. Thus, OA doesn‘t hold significant advantage in this region.
MERC initiatives
The Maharashtra state energy department‘s principal secretary Mr. Mehta has in a letter dated
31.07.2013, written to MERC (Maharashtra Electricity Regulatory Commission) asking the
regulator to review relevant policies/regulations in context of granting open-access, which
supposedly is impacting the tariff for low-end consumers of the state.
The govt. expressed its concern over the methodology and operationalization of open-access
regulations which as per the govt. is going to jeopardize the financial conditions of low-end
45
consumers in state. The govt. has explicitly mentioned that it wants the chief regulator to
check the grants of OA through exchanges and that to renewable energy generators.
Power guzzlers may now be allowed to buy power directly from any other source, but they
cannot force their previous distribution utility to bail them out in case of non-availability of
power from the new supplier. This has been ruled by the Supreme Court in the special leave
petition moved by the state-owned power distribution company, Mahavitaran.
The utility had moved the Supreme Court after the Bombay high court refused to grant
interim relief to it against the Maharashtra Electricity Regulatory Commission‘s (MERC)
directive to allow open access — a procedure in which a consumer can buy power directly
from other supplier across the country by paying carrying charges to distribution and
transmission companies. At present, open access proposals of 500MW are pending for
approval before the MERC. Of this, Ispat Industries alone wants 300MW from a source other
than the state-owned power distribution company.
4.8.5. Andhra Pradesh
AP state Electricity distribution network vests with four Govt. owned Discom namely,
NPDCL, SPDCL, CPDCL and EPDCL responsible for northern, southern, central and eastern
region of the state respectively. The Commission issued Regulation 4 of 2005 on 14-11-2005
laying down terms and conditions for determination of tariff for Wheeling and Retail supply
of electricity. This regulation introduced Multi year Tariff (MYT) framework and
accordingly, each distribution licensee has to make the filings for ARR along with its
Proposals for Tariff (PFT) with the commission for determination of tariffs for (a) Wheeling
and (b) Retail supply of electricity for a period of 5 years (called Control Period). The second
control period covers the year 2009-10 to 2013-14. The Wheeling tariffs were determined for
the control period of 5 years, namely 2009 to 2014.
A big relief for OA consumers came through exemption from paying CSS till the next order
for the year 2013-14. In case of NPDCL, owning to CSS being waived off , the effective rate
at 132kV, directly through STU network costs ` 3.84 and saves ` 1.2 per unit at this voltage
level. While at 33kV, due to high energy charges, Discom power is costlier and thus with a
rate of ` 5.43, it gives clear advantage to OA consumers of ` 1.43 per unit. At 11kV network,
46
this difference is widened and saves ` 1.50 per unit to OA consumers at this voltage. Even at
LT network, Discom power comes up at ` 6.18 per unit when compared OA power at ` 4.90,
thus giving away benefit of ` 1.28 per unit to OA consumers.
For OA consumers in SPDCL region, getting power at 132kV network directly helps them
save ` 1.00 per unit over grid power. At 33kV network, owning to energy charge, ` 1.22 per
unit advantage of OA can be seen over Discom. While at 11kV network, OA is still beneficial
with ` 1.25 per unit saving and at LT network, ` 1.07 per unit can be saved using OA.
In case of EPDCL, similar trend can be observed and in all four networks, OA is
advantageous over Discom power with savings of ` 1.04, ` 1.27, ` 1.28 and ` 0.72 per unit
at 132kV, 33kV, and 11kV and LT network respectively.
CPDCL is now far behind and this also supports OA over Discom. While getting power at
132kV network helps in saving ` 1.05 per unit, ` 1.24 per unit can be saved at 33kV
network. At 11kV network, OA power is cheaper as compared to Discom power by ` 1.26
per unit and at LT network, it is advantageous by ` 0.72 per unit over Discom.
APERC initiatives
CSS has been waived on OA transactions by the commission vide R&C order issued 01-11-
12. This has been done in view of R&C measures taken by the commission. All the Discom
are directed to take into account 90% of scheduled energy and corresponding demand ,
procured by the consumers through inter-state OA (bi-lateral or through exchange), for the
purpose of provisional monthly settlement for the sake of billed energy/demand from the
discoms ‘side. Even by the erratic power supply standards that Indian industry has had to bear
with for years, factories in Andhra Pradesh have had an unusually tough 2012. Power
shortages in the state had been acute for well over a year and a half, but in August last year,
the state government began implementing a "power holiday" for industrial consumers three
days a week. This has triggered demand for OA in the state thus providing them round the
clock power supply at an affordable cost.
47
CHAPTER 5: ISSUES WITH OPEN ACCESS
5.1 Implementation of Open Access
The main issue in implementing the open access provision is the determination and phasing
out of the cross subsidy surcharge for open access. A related issue is the determination of the
license area for new distribution licensees.
5.1.1Determination of Cross Subsidy
All regulatory commissions provide for a cross-subsidy in tariffs. Cross-subsidy is usually
defined as ―The difference between the cost to serve and the tariff charged‖. Given the lack of adequate
data, even after several years of reform in many states, regulators have adopted relatively
unsophisticated methodologies for estimating cost of service. Most regulators use a uniform
average cost of supply and distribution for all categories of consumers.
The Andhra Pradesh regulator uses one of the most sophisticated methodologies to estimate
cost of service. Consumers are differentiated on the basis of different critical aspects of
electricity consumption such as voltage levels, time of consumption, patterns of usage,
number of consumers, etc. all costs are classified under three expense heads: energy, demand
and consumer.
Energy Consumption: This denotes the amount of energy consumed at a specified voltage
level. Voltage level determines the extent of T & D losses and the cost of equipment etc. to
provide power at a particular voltage level. The only element of cost under this category is
the variable cost of generation or power purchase
Demand: This represents the contribution of a consumer category towards the peak demand
on the system. In Andhra Pradesh, the system peak occurs between 6 pm and 9 pm. The two
categories that contribute most to this evening peak are domestic and commercial.
Customer: The servicing costs, such as the costs of the meter reading, billing and collection,
are influenced by the number of consumers in a category. Most other state regulators have used the average cost of supply to calculate cross-subsidies.
Cross-subsidy calculated in this manner will be lower than that obtained by using the cost of
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service model. For example, in the case of AP, using the average Fully Allocated Costs
(FAC) will the increase the gap from `1434 crores to ` 2718 crores.
The main problem with the cost of service estimation is the non-availability of reliable
consumer category wise consumption data. All agriculture consumption is unmetered. Some
proportion of other consumption is assessed because of non-existent or faulty meters. In some
states, rural domestic consumption is also charged at a flat rate with no incentive for accurate
metering. In Andhra Pradesh, where about 3.5 million new meters have been installed and
about 4 million defective meters replaced during the four years 2000-04, in one of the
DISCOMS almost 20% of the billed units were on assessed basis.
5.1.2 Phasing out of cross-subsidies
The Electricity Act requires the phasing out of cross-subsidy and the associated surcharge for
open access. So far regulators have taken an ad hoc approach to reduction in cross-subsidy,
with no specified time frame. Reduction in cross-subsidies can be achieved by increasing
subsidized tariffs, increasing efficiency and reducing distribution losses. Increasing tariffs for
subsidized categories is likely to be politically difficult. Increasing government subsidy is
constrained by the poor financial situation of most state governments. The only alternative
for regulators is to seek improvements in efficiency, especially by reduction of thefts and
losses. In the case of Andhra Pradesh T & D loss reduction seems to have become harder to
achieve. T & D losses have stagnated at about 28-30 %.
Similarly, the cross-subsidy has remained around ` 2000 crores and government subsidy at
` 1500 crores over the last four years.
The AP regulator expressed concerns in their tariff order (2004-05). Allowing captive generation and multiple licensees, without cross subsidization surcharge
will have an adverse effect on the existing distribution licensees who have a universal service
obligation for the entire area of supply. If the captive generation and the second licensee take
away the subsidizing consumers and the paying areas, the finances of the existing licensees
will get affected without any fault of the existing licensees. This is particularly so during the
transition period envisaged under Section 61(g) of the Electricity Act, for progressive
reduction and elimination of cross-subsidy prevalent in the system. In the transition period,
the subsidizing consumers will move out of the existing distribution licensees making the
above reduction and elimination of cross-subsidy more difficult.
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5.1.3Transmission charges for short-term Open Access within the region
(Inter-state Intra Regional)
At present, the transmission charges for the network belonging to CTU/POWERGRID in a
region are shared by the beneficiaries/long-term customers pro rata to their share in central
generation and contracted power evacuated by CTU/POWERGRID network. The revenue
realized from short-term customers is adjusted in accordance with the regulations against the
total transmission charges payable by the beneficiaries/long-term customers. The short-term
customers are charged a minimum rate corresponding to 25% of the regional transmission
charges for the previous year calculated in terms of `/MW/day. This is because of the reasons
that the short-term customers are served only to the extent of available surplus capacity on
the existing transmission network built for the beneficiaries who have the obligation to pay
full transmission charges and the short-term customers are to be curtailed first in case of
transmission constraints. The economic rationale was to have some charges corresponding to
usage to avoid conflict of interest between those using the network frequently for short term
transactions and others. The transmission charges for short-term customers come to a few
paisa per kWh for each region. The charges applicable to the short term customers are also
applicable for the long-term customers, if they enter into transactions of short-term nature. In
the event of congestion, RLDCs conduct electronic-bidding to decide who should be given
the short-term reservation. As far as POWERGRID is concerned, it is in any case assured of
recovery of full transmission charges even if no charges are levied for short-term open
access.
Some of the stakeholders feel that existing beneficiaries/long-term customers should not be
required to pay transmission charges within the region for short term open access. It has been
contended by them that beneficiaries/long-term customers have obligation to pay full
transmission charges applicable for the region and, therefore, should have the flexibility to
make use of spare capacity for short-term open access, without paying any extra charges.
a) The implications of making short-term open access free for beneficiaries/long-term
customers are:
b) The Independent Power Producers (IPPs), Captive Power Plants (CPPs) may raise
demand for free open access on the POWERGRID network in the region so that they
can trade their power on equal footing, since otherwise IPPs and CPPs would be
forced to sell their surplus generation to the state utilities, who in turn would be able
50
to trade it with other state utilities by availing of open access without payment of the
transmission charges. In this manner, the market for short-term trading in power
would get monopolized by the state utilities.
c) 'Early birds' would take advantage and others would not get open access due to
congestion. Thus, it may result in heart-burning among the long-term open access
customers due to disproportionate usage of the network.
d) Free usage might result in what is referred to as 'tragedy of the commons'. No one
values and cares for a service available free of charge, and this may ultimately result
in slackening of investment in transmission sector.
e) On the same reasoning, any embedded customer while availing of such inter-state
open access would also not be required to pay for using the network of the state utility
in which it is embedded.
f) Similar treatment would be expected for intra-state transactions, more so because the
procedure and methodology adopted by the Central Commission, serves as a guide for
the State Commissions.
The existing methodology for treatment of transmission losses will also call for a review
simultaneously. At present, average losses are being apportioned in kind to the short-term
open access customers, irrespective of the fact whether they are causing or relieving
congestion. It will be fair that short-term customers are levied incremental transmission
losses if they are causing congestion and are not apportioned any transmission losses in
case they are relieving congestion. Such a differential treatment of transmission losses
will also help in optimal utilization of the transmission network by creating incentive for
relieving congestion.
5.1.4 Regulatory approach to Open Access
Only a few regulators have notified the terms and conditions of open access. Even these
regulators have not clarified their position on the cross-subsidy surcharge and phasing out of
cross-subsidies. Most of them appear to be waiting for the National Tariff Policy which the
central government is required to issue under the Electricity Act 2003. However, a few
regulators have taken open access decisions which provide some indication of their approach
in future.
The National Electricity Policy lays special emphasis on time bound reduction of
51
transmission and distribution losses and advocates promotion of competition aimed at
consumer benefits.
Open access in transmission will promote competition and in turn lead to availability
of cheaper power. The policy emphasizes that the Regulatory Commissions need to
provide facilitative framework for non-discriminatory open access at the earliest
including technological up gradation of the State Load Dispatch Centres to ensure
data acquisition capability on a real time basis.
Open access in distribution networks, initially for bulk consumers, would increase the
availability of cheaper and reliable power supply. State Regulatory Commissions have
been mandated to notify regulations by June 2005 for laying down the road map for
introducing open access in distribution. It has also been envisaged that amount of
cross-subsidy surcharge and additional surcharge to be levied from consumers who
are permitted open access should not become so onerous that it eliminates
competition.
5.2 MANAGEMENT OF AGRICULTURE SUPPLY AND SUBSIDY
In India, agriculture accounts for the bulk of the power subsidy and cross-subsidy. In the
absence of agricultural metering there is significant disagreement over the exact amount of
subsidy. Any attempt at subsidy reform must address the issue of power supply to agriculture.
So far power subsidy has been a general input subsidy, not targeted at any particular group of
farmers. Given the limitations on pump ownership by small and marginal farmers a
disproportionate amount of the subsidies has gone to the wealthier farmers. Current levels of
power subsidy are not only unsustainable, given the condition of state government finances,
but also undesirable, given its impact on groundwater extraction. In future, subsidies will
have to reduced and targeted.
5.2.1Metering Agriculture Supply
Appropriate metering is an essential prerequisite for controlling and targeting the subsidy and
cross-subsidy. However, there is likely to be serious resistance by farmers to the transition to
metered tariffs and progressive reduction in subsidies. In the case of Haryana, according to a
World Bank study ―about 69% of the farmers surveyed favoured metered supply‖.
52
According to Haryana Vidyut Parishad Nigam (HVPN), these statements by farmers are not
confirmed by the reality on the ground. In spite of significant increase in unmetered tariff and
attractive metered tariffs, farmers still prefer to take unmetered connection. According to
them there are several difficulties encountered in the installation of meters.
i. It is necessary to house the meter in a safe weather proof place, and farmers are not
ready to construct the room or shed for the meters.
ii. Farmers apprehend that once the meter is installed they would be questioned for the
extra-consumption for other purpose for the pumping load and their unauthorized load
would be detected; iii. Farmers do not own the responsibility of the safe custody of the meters, as these are
not covered under their power supply contract for unmetered connections; iv. The utility is neither able to recover the cost of the meter nor charge any meter rental
or maintenance charges;
v. The cost of reading the meters would be an extra financial burden to the utility; vi. There are reports of the meters having been removed by the farmers and damage to
the meters. According to the HVPN the metering program will be successful only if the unmetered tariff
is totally withdrawn and there is no option for farmers other than to have a metered
connection.
Most farmers‘ organizations have justified resistance to metering and tariff increases given
the poor quality of power supply. Several studies have concluded that farmers are willing to
pay more for power if the supply is reliable and of better quality. Of course, there is no
guarantee that farmers will actually pay more once the supply has improved. Studies have
also found that farmers are unwilling to pay more if the quality of supply is already good. In
any case, it will be easier for politicians to justify and utilities to implement installation of
meters and increase in tariffs if it is accompanied by improvements in quality and reliability.
Elimination of power subsidies for agriculture appears infeasible in the short term given the
critical role of groundwater irrigation in agriculture. The poor condition of canal irrigation
along with flat rate subsidized power tariffs has led to increasing reliance on pumped ground
water. Ground water provides a more flexible and reliable source of irrigation than surface
53
water, in spite of the poor quality of power supply. The increasing reliance on ground water
for irrigation is reflected in the fact that during the period 1990-99 the area under canal
irrigation remained virtually constant at 17-18 million hectares. The share of land under canal
irrigation dropped from 37% to 31% while the share irrigated by wells increased from 51 to
58%. More specifically, the share irrigated by tube wells increased from 30 to 36%.
Given these factors regulators have been largely unsuccessful in dealing with the problems of
power supply to agriculture. Attempts at metering of pump-sets and quantitative restrictions
on the overall supply of power to agriculture have not worked. Farmers have been ignored
attractive metered tariffs and continue to prefer flat rate supply. Hence there is need to work
out structural solutions to the problem.
5.2.2 Separating Agriculture Supply
Given the specific characteristics of power supply to agriculture, it is not surprising that there
is broad consensus on the need for a separate organization for delivering power to agriculture.
This is necessary not only from the perspective of meeting the agriculture demand more
efficiently but also to separate the problems of rationing and subsidy in the case of power
supply to agriculture, from other parts of the organization. This will make reforms, including
privatization, of other parts feasible.
As early as 1980, the Rajadhyaksha Committee considered the question of the appropriate
organization structure for the rural electrification programme and concluded that, ― SEBs
should progressively extricate themselves from operating and servicing the RE (Rural
Electrification) system‖, and consider, ―other alternatives to the SEB staff undertaking
maintenance, repair, servicing, billing and collection‖. According to the committee, operating the RE system solely through expanding the staff of
SEBs, on account of their high costs and lack of close involvement with the village
community, will make the programme increasing unviable and retard its progress. Many of
these recommendations have appeared in modified forms in recent reports of the Ministry of
Power.
The March 2002 report of the Distribution Policy Committee recommends, ―The insulation of
the main stream operations from rural operations and adopting a specific plan of action for
rural operations is an approach, which has some merit‖. Even after separation of rural supply,
54
a social charge to be levied upon non-rural consumers for subsidizing the rural supplies,
whether serviced by a private or a state entity is an option that could be considered along with
budgetary support from the government.
The Expert Committee on State-specific reforms (MoP September2002) recommends a
carving out of the states into concentrated and other zones. The main rationale for
concentrated zoning is to eliminate or at least minimize the problem of misreporting T & D
losses as subsidized agriculture consumption. It is also expected to make the remaining
distribution business attractive for private investors. Considering the distinct characteristics
of electricity supply to rural areas and the international experience the committee
recommends that,
The government would ring-fence the subsidy that is targeted towards the rural zones and
deploys it diligently through a combination of innovative solutions such as minimum subsidy
bidding and involving user cooperatives and local franchisees, and fostering of institutions to
provide quality advice to these franchisees on financial, technical and managerial matters.
Several issues will need to be sorted out in creating a separate organization for supplying
power to agriculture:
i. Organization form:
This is likely to be a government organization, carved out of the existing SEBs. However, it
would need to use appropriate local organization form such as co-operatives, village
committees and franchisees to perform most of its tasks of routine maintenance and billing
and collection. There is some experience with village committees in Orissa.
ii. Physical separation of the agriculture/rural network:
Agriculture metering is likely to be a long drawn out process for rural areas in general, and
agriculture in particular, in the face of resistance of farmers. Therefore, the only way to
determine the exact amount of supply to agriculture is to physically separate the network and
measure the input into the system. Separation of the network is also necessary for controlling
the quality and timing of power supply to agriculture.
iii. Delivery of subsidies: Mechanisms for delivering subsidies are possible only with
55
comprehensive metering. Moreover, non-pump-owning farmers would not be able to
directly benefit from power. Therefore, without comprehensive metering the current
system of untargeted subsidies is likely to continue.
Maharashtra appears to be the first state to actively consider a separation of rural agriculture
power supply. According to the Maharashtra Electricity Regulatory Commission (MERC) the
Maharashtra state government has outlined three options on distribution company formation
and requested the Commission to indicate its preference. The options are:
I. Extension of existing structure through a single distribution company being vested
with the distribution business of MSEB.
II. A traditional or balanced distribution company structure featuring three distribution
companies having comparable urban and rural consumer mix. III. Urban-rural structure featuring two urban and four rural distribution
companies
5.3 OA in Andhra Pradesh - case
Power purchases by consumers directly from the open market - instead of relying on local
power utilities - now account for well over 40% of total power traded on India's biggest
energy exchange. But serious issues remain in providing such 'open access' to industries.
Even by the erratic power supply standards that Indian industry has had to bear with for
years, factories in Andhra Pradesh have had an unusually tough 2012. Power shortages in the
state had been acute for well over a year and a half, but in August last year, the state
government began implementing a "power holiday" for industrial consumers three days a
week.
According to K Karunakara Rao, Executive Director of the Kurnool-based Sree Rayalaseema
Alkalies and Allied Chemicals, there are now peak hour restrictions in place, between 6 pm
and 10 pm, during which power supply is heavily rationed. According to news reports, small
and medium industry in the state, reeling from the cuts, has resorted to heavy layoffs to stay
afloat. "Power supply has been difficult for the last year, but in September it started becoming
severe," says Rao.
56
So at that time, Rao's company decided to obtain clearances from its power distribution
company (Discom), which allowed the company to buy power through "open access". Simply
put, the company could now buy power from any power plant in the country either directly,
or by placing bids on a power exchange, rather than relying on its local Discom. The power
would be routed to the factory through the existing network of lines and feeders. "We buy up
to 2 lakh units a day," says Rao.
In the wake of Andhra's power crisis, scores of other industries have gone down the open
access path. "We have seen many customers from Andhra Pradesh join us over the last year
or so," says Rajesh Mediratta, director of business development at Indian Energy Exchange
(IEX), India's largest power exchange, which has a 27% share of the market for "short-term"
power.
Figure 5- Volume traded at IEX
In Rajasthan, it is a similar story. "Open access provides a transparent system of price
discovery," says NK Bahedia, senior general manager (commercial) at RSWM, a textile
company. "Companies can save as much as 50 paisa per unit of power, sometimes more,
through it."
Open access, a cornerstone of power reforms for almost 10 years, has also remained a largely
unfulfilled aspiration across the country. The state electricity boards (SEBs) have for long
been painted as the villains of the piece, unwilling to let their most lucrative customers
bypass them and buy power from elsewhere, thus condemning factories to endless power
cuts, and lost output. The reality, however, is more complex.
57
NAVIGATING THE MIDDLEMEN While the short-term power market is officially used
to describe transactions where power is supplied for periods of less than a year, in actual
practice the bulk of deals on the IEX is for literally the next day. A power consumer in
Andhra will, for instance, bid to buy power for 11 am to 5 pm the following day. That power
could be supplied by a plant in Chhattisgarh, and routed through a series of lines in the
national grid, and the Andhra state grid, to the consumer's doorstep. But it's along that path
that all the problems and intermediaries lie.
The biggest of them is, of course, the SEBs. Towards the end of last year, the government
proposed yet another package of reforms to bail out SEBs, reeling under hundreds of
thousands of crores of losses accumulated over the years from selling power below cost, or
even free, to domestic consumers and farmers. For an SEB, charging high rates of power to
industries is a quick, politically easy way to offset low rates charged to farmers. Allowing
those consumers to buy power from elsewhere seems tantamount to economic suicide; even if
the SEB gets compensated by charges paid to it, and mandated by the government, to
essentially soften the blow.
"Only if the problem of losses of SEBs, and of cross subsidies (whereby farmers and retail
consumers are effectively subsidised by higher rates charged to industrial consumers) are
removed, will open access become a reality," says SK Chatterjee, deputy chief, regulatory
affairs, Central Electricity Regulatory Commission (CERC), the apex regulator for the sector.
The issue facing most industries (all consumers with a load of more than 1 megawatt are
eligible for open access) was not that they were being charged high rates by their Discom, but
that the power supply was erratic. "To me the issue is not of price but availability," says Rao.
"The price we pay on power exchanges, when adjusted for all the other charges are about the
same as we pay to the Discom."
5.4 Intra State Open access issues Open access transaction has been primarily used by SEBs / distribution licensees to sell
surpluses or to meet the short – term power requirements in their respective regions. The
industrial customers still face problems pertaining to accessing their choice of suppliers due
to the restrictions (such as invoking Section 11/108 of Electricity Act 2003) imposed by
58
several state governments / SLDCs citing shortages or non – availability of transmission
infrastructure. According to Central Electricity Regulatory Commission (CERC), up to May
2010, applications seeking open for over 18000 MW have been submitted, but
implementation has been quite low at about 2,000 MW (mainly for captive power).
While the inter State open access market has progressed due to regulatory initiatives taken by
CERC, (on going development of national grid by Power Grid (although congestion is
currently taking place during peak times) and support from NLDC / RLDCs), the intra state
open access is facing constraints on account of delays in implementation of Intra – State ABT
by several states. The sources of concern for implementation of Intra State ABT are
assessment / augmentation of intra – state transfer capability, advanced infrastructure at State
Load Despatch Centre (SLDC), real time communication and special metering at consumer
level. The progress of reforms at state level, with less intervention by respective State
government, will continue to remain crucial for penetration of such transactions across the
States, to facilitate the development of full – fledged short term market.
Open access to the distribution network owned by Discom, however, was to be implemented
in phases on payment of open access charges and charges for cross-subsidy and additional
subsidy if any, which were to be progressively reduced to within 20 per cent of the average
cost of power by 2010-11. Open access is available for power purchase or sale by utilities or
distribution licensees.
However, when it relates to generators and consumers, only some of the States have
permitted limited open access. Some are permitting open access to generators if they are
connected to central transmission network.
Lack of open access in intra-State transmission has affected the development of the power
market, jeopardizing competition. The competition is only feasible if players in the power
market are per-mitted access to both intra and inter-state transmission networks on payment
of reasonable charges. While inter-state open access within the limitation of adequate
‗available transfer capability‘ (ATC) has been operational, intra-State open access has not
progressed because of slow implementation of certain pre-requisites. Lack of open access has
also restricted transfer of power from surplus to deficit regions and failed to optimize
59
procurement costs.
The irony is that open access has not been allowed to succeed for various reasons, such as
apprehension of the State utilities about flight of industrial consumers from their net; non-
availability of surplus power at reasonable rates; irrational open access charges; non-
availability of open access infrastructure of metering; and segregation of consumers‘ lines,
among other factors.
Even though the cross-subsidy surcharge on open access transactions is mandated under
Section 39 and 42 of the Act, erecting a high tariff barrier deters customers from purchasing
supplies from outside the jurisdiction of Discoms and runs counter to the tariff envisaged in
the National Electricity Policy and Tariff Policy. For meeting the demand during acute power
shortage, it is observed that some States have misused their powers to block the sale of
surplus capacity of captive generators to other States, by inappropriately invoking Section 11
of the Act. This de-motivates the generators to sell power through the power trading
mechanism, and forces some of them to sell power be-low market rates. It defeats the very
spirit of the Act. It has forced the Union Minis-try of Power to issue direction to Central /
State Regulatory Commissions to allow industrial consumers to buy cheaper power from the
open market under Section 107 of the Electricity Act.
A standard, consumer-friendly open access regulation with balanced cross-subsidy
computation should be formulated through a forum of regulators and adopted uniformly by
all states regulators. Taking the holistic view of the various pro-visions of the Act, open
access cannot be legally denied, if requested by consumers. Open access, industries are either
forced to opt for captive generation or depend on unreliable power supply from Discoms.
Some States like Punjab, Rajasthan and Gujarat, on a non-sustainable basis, have started
allowing open access to the consumers for procuring power for meeting their requirements.
Some States like Tamil Nadu are not allowing captive generators to sell power through open
access, even though it allows importation of power during peak hours.
With increasing size and depth of the market, new products are bound to hedge the risks for
the buyers and suppliers, and these could be in the form of options and futures. Also, for
making transparent open access regulations, there is a need for segregating the wires and
60
content business in the distribution segment too. To help facilitate a successful open-access
regime, Discom has to create infrastructure and last mile connectivity.
5.5 Open Access in Uttar Pradesh
5.5.1 Open Access for industries key to UP’s Economic growth
The Industrial sector in UP, one of the largest states in northern India, has been facing several
challenges due to unreliable and expensive power supply. Once considered the hub of Small
and Medium Enterprises (SMEs), the state is now witnessing a slowdown with many such
players either shutting down operations or shifting to other states with better infrastructural
facilities, primarily electricity. This is acting as an impediment to the state‘s industrial and
economic growth. The industries are bearing the brunt of load shedding for several hours a
day. Even though industrial tariffs for electricity have increased over the years, industries
continue to be deprived of reliable power.
Meanwhile, the state‘s electricity demand is increasing with rising temperatures. The Central
Electricity Authority (CEA) data for January-March 2013 shows that the peak demand rose to
12,696 MW in March 2013. However, only 9,949 MW of this demand was met through self-
generation and allocation from central generation plants. In 2012-13, the energy shorted stood
at 16.6%, among the highest in the country.
Table 28: Energy Shortage in UP
January February March
Requirement 7709 6441 8087
Availability 6388 5366 6387
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
En
ergy (
MU
s)
Energy Requirement in Uttar Pradesh (2013) Source : CEA
61
With the state being unable to meet the energy demand, several industries – many with a
contracted demand of 1 MW and above- have sought OA in distribution to procure power
from the open market, primarily energy exchanges such as IEX . However, this has not been
allowed, and, as a consequence, the industries continue to face load shedding. The
fundamental right to avail OA has not been implemented even 10 years after the enactment of
the EA 2003.
Table 29: Peak shortage in UP
Other northern states like Punjab, Haryana Rajasthan and Uttarakhand have allowed
consumers with a demand of 1 MW and above to leverage the IEX platform to purchase
power through OA. This has not only facilitated the development of industries in these states,
but has also helped them to reduce energy costs significantly, thereby improving their
profitability and overall competitiveness.
5.5.2. Lack of Implementation of OA regulations
The regulations for OA are already in place in UP. In fact, the UPERC was one of the first
state regulators to notify them under the terms and conditions of OA regulations in June
2005. Moreover, amendments to these regulations were released in June 2009. As per the
regulations, any consumer with a load of 1MW and above a minimum connectivity level of
11kV can avail OA. The SLDC is designated as the nodal agency for STOA.
The regulations also specify the procedure for availing of OA. Any consumer wanting to
avail of OA should submit an application to the SLDC with a copy each to the STU and the
Discom in its area. The application should provide details such as the capacity requirement,
January February March
Demand 12665 12278 12696
Peak met 10745 9363 9949
0
2000
4000
6000
8000
10000
12000
14000
Cap
aci
ty (
MW
)
Peak demand in UP (2013) Source :CEA
62
the point of injection/drawl, duration of availing of OA and any additional information as
specified by the SLDC. Based on consultations with the STU and the Discom, the SLDC will
take a decision on the application.
Despite the enabling legislative and regulatory provisions, applications for OA are yet to be
approved. In fact, the UPSLDC was established in January, 2011 almost six years after the
notification of OA regulations.
In its order dated January 7, 2013, the CERC directed UPSLDC to consider the applications
for OA filed by Noida Power Company Limited (NPCL), the Discom responsible for
supplying electricity in Noida and Greater Noida, or any other individual in the future for
issuing No-objection certificate (NOC), a mandatory requirement for purchasing power
through the energy exchanges. NPCL had filed a petition with the CERC as UPSLDC did not
respond to its NOC application after several attempts over three years (2008, 2009 and 2010).
Prior to the CERC‘s directive, UPERC had also asked UPSLDC to grant OA to NPCL.
However, the state has yet to respond to OA applications submitted by NPCL.
5.5.3. Affordable and reliable power through the IEX
At the IEX, the average price for 2012-13 for the N2 region (the bid area for UP at the IEX)
was ` 3.13 per unit. This means that an industry connected at 11kV will have to pay around
` 4.05 per unit including the applicable losses and charges and the IEX fees. The energy
charge for an industry connected at 11kV in UP, including the recently imposed regulatory
surcharge is ` 6.16 per unit. This implies that the industries could save more than ` 2 per unit
by procuring electricity through the IEX.
State Chhattisgarh Himachal
Pradesh
Punjab Haryana Delhi Uttar
Pradesh
Uttarakhand Rajasthan
OA for
industries
Industrial
Participants
at IEX
Nil (not
many
industries)
Nil( tariffs
are low and
no
shortage)
287
125
Nil (No
shortage)
Nil( high
tariffs and
industrial
loads)
41
121
Source: IEX Table 30: OA at IEX
63
Similarly, the average peak hour price at the IEX for 2013-13 for the N2 region was ` 3.50
per unit. This implies a cost of ` 4.47 per unit (including the applicable losses and charges)
for an industry. Therefore, an industry can save more than ` 2.50 per unit during peak hours
by sourcing electricity from the IEX through OA. According to UPERC‘s latest tariff order,
the discom‘s tariff for industries at the 11kV level during peak hours including the regulatory
surcharge is ` 7.03 per unit.
5.5.4. OA as a panacea to power woes
OA has been a key enabler in introducing competition in the power sector. Consumers across
the country are benefitting from this provision under the Electricity Act. The IEX has over
1,800 OA consumers who are using the exchange platform to meet their electricity needs in a
cost-effective and reliable manner.
Since electricity costs account for a significant part of the expenditure for industries, any
reduction in this cost component adds to an industry‘s profitability and enhances its overall
competitiveness.
The CERC‘s recent directive allowing NPCL to purchase power through OA is expected to
expedite the implementation of OA in the state. The state‘s reluctance to allow OA to
industries comes at the cost of limiting its own industrial and economic growth, and
therefore, it will be prudent to provide OA to these units.
With industrial growth in the state staggering due to worsening power supply, OA is indeed a
panacea for the industry to procure power from the energy exchanges and for the state
government to drive its economic growth.
Source: Power Line June, 2013.
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Chapter 6: SUMMARY
6.1 CONCLUSION
Making the distribution segment of the power industry efficient and solvent is the key to
success of power sector reforms. Implementation of open access in distribution with
proper market condition by studying its feasibility is the only solution. Though it has
been widely says that Open access in distribution will create a competitive environment
but its improper introduction may create huge losses to distribution and also to consumer.
Subsidy to different segment of consumer is the most challenging part of Open Access
hence it needs to tackle in proper manner because this is the only reason because of
which most of the distribution company are resisting for implementation of Open Access.
However, there are some roadblocks in the successful implementation of open access in
distribution in India.
There are some of positive point which encourage for implementation of Open Access
Some of the benefit of Open Access are :
i) As mentioned above the freedom to buy and sell electricity thereby creating or
tending towards a perfect market in this sector.
ii) It allows the generator with an excess capacity to sell and take part in the trading of
electricity.
As there are some benefit of Open Access, but its improper implementation may lead to
huge hotchpotch so it need to be handle properly.
o Cross Subsidy Surcharge is not adequate to compensate subsidy :-
Present Cross Subsidy surcharge formula is not compatible to balance the subsidy
with cross subsidy because it will not considered AT & C loss and theft. So finally it
has negative impact but as per the concept of cross subsidy it should neutralize the
effect of subsidy but in actual practice it is not happening. So in present case licensee
65
is bearing all this loss and state government has given assurance of payment.
o Distribution of subsidy is also not proportionate because location has not considered
due to which those who are economically strong are getting same subsidy as that of
economically weak consumer.
o In Open Access there is no surety for all time power availability or backup because
if Open Access seller power plant has gone for shut down then ideally consumer has
also shut down its activity but in actual practice as they are connected with grid they
are consuming power from grid and create power shortage for licensee. In that case
either licensee has to make load shedding or else they have to purchase costlier
power if available. This also one of the major reasons because of which consumer
doesn’t want to move in Open Access.
o Renewable generator has exempted from cross subsidy and wheeling charge under
the name of renewable promotion but then who will pay on behalf of renewable is
not clear. Also if renewable energy producer sells powers in Open Access and as we
already know that renewable is not firm power so only because of their grid
connectivity they start consuming power from grid and create power shortage for
licensee. In that case either licensee has to make load shedding or else they have to
purchase costlier power.
o Lot of consumer are also resisting for implementation of Open Access because of
unreliability of generating unit because due to Open Access it has become their
headache for getting continuous power from generating unit.
o Charges for the open access levied by different SERCs are variable in nature.
o Apart from few states, many states are still incorporating and facing problem of
cross subsidy surcharge which finally increases the net cost of power from open
access.
o Net cost of power from open access is more as compared to the tariff which
discourages the buyers and sellers.
o SERC’s has to use different methodologies for the calculation of surcharge because
of complexity of consumer even though there is common formula for calculation of
surcharge given by National Tariff Policy 2005.
o Distribution companies in India are not financially very sound and Distribution
network in India is not strong.
66
6.2 RECOMMONDATION a) In present scenario of Indian Electricity Sector which is power deficit the
implementation of Open Access are creating huge problems which are given below :
Forecasting of Distribution Company for future requirement of power is adversely
affected because of consumer uncertainty in Open Access.
Gaming in Electricity Market which is altogether is not acceptable as per Electricity
Act 2003.
Sudden drawl of power from grid by Open Access consumer when there are
shutdown at seller side those who are selling power to consumer through Open
Access.
So for proper implementation of Open Access electricity market should be power
Surplus.
b) Central and State ERCs should be advised by the appropriate governments to comply
with the statutory requirements relating to open access in a time bound manner. There is
challenge for calculation of open access surcharge because of complexity of consumer
even though there is provision in Tariff Policy notified by the Central Government under
Sec. 3 of the Act but states are using their own method to calculate which need to be
standardized. c) Subsidy are not reaching to right consumer hence it is advisable to have consideration of
location during calculation of subsidy because the needy consumer like consumer from
Vidharbh region of Maharashtra which actually required the subsidy are getting same
subsidy as that of other region which is economically reach. But when load shedding has
to do then first consideration has given to Vidharbh region saying the reason that they
are not paying consumer though this region has less availability of water and has to go
more deep into the soil to get the water hence requirement of electricity is most
important. Interesting part is that most of powers generating units are there in this region
only but still they are not getting enough power for agriculture and industrial sector
because of this there is instability in the state. Cross subsidy is levied equal in all regions
hence it is important for all state holders to consider this issues.
67
d) Promotion of renewable energy altogether is considerable but it needs to be taken care
that no one should get its undue advantage by using Open Access. Because many
companies have formed their subsidiary and generated renewable power and showed that
company as loss making company. By doing this they are taking all type of benefits like
Tax Exemption for renewable power generation & loss making company, meeting RPO e) The question of “Who will pay the remaining part (comes under AT & C Loss and Theft)
of subsidy?” is still unanswered because present Cross Subsidy pattern is not able to
balance the subsidy with cross subsidy and distribution companies are bearing this loss
and continuously coming in loss making company. f) The theft loss is still present even though Distribution has taken lot of measure to reduce
it like metering and it is counted in subsidised section and all other paying consumer like
domestic and industrial consumer are bearing it. If paying or reach consume are moved
in Open Access then rest of the consumer which is not economically strong has to bear
this loss because there is no provision for this in Cross subsidy surcharge (Even though
State Government has given assurance to pay it but it is uncertain). g) State Governments and States’ ERCs should be suitably advised to enable
operationalization of open access to promote a healthy development of the market where
private investment can be attracted. Where the State Governments or the respective
SERCs do not conform to the Act or the Tariff Policy there under, the State Governments
should be advised and the matter be discussed in the appropriate inter- and intra-State
forum of Power Secretaries/Ministers. h) IPPs, captive and small generators shall be educated for their responsibility and future
condition if they are bringing power into the market. i) Need to take regular customer feedback to understand their difficulties so that consumer
satisfaction can be achieved. j) Regulators should meet with the bulk consumers and other stakeholders to address their
concerns with a view to operationalizing the scheme of open access as provided in the
Act. k) Consumer education and pro-active action by Regulators, both at the Centre and in the
States, is considered vital for encouraging open access to consumers.
68
6.3 LIMITATIONS OF THE PROJECT
a) First of all the time duration of 8 weeks was a major constraint in going through the
project completely.
b) Getting tariff orders for year 2013-14 of some of the states was not possible as they were
not notified on respective SERC’s website.
c) Tried to reach various SLDCs and SERCs but no one actually replied.
d) States like UP did not share much of information about their OA consumers (if any), thus
accurate analysis could not be made.
e) Assumptions, such as uniform usage of electricity through out day for TOD metering
may not be applicable to every consumer.
f) Data collection for all the calculations has been done from regulations and orders of
respective states. There is always a risk of update of tariff during preparation of report.
g) No interaction with the open access consumers. The interaction could have helped to
understand the real time problems faced by them.
6.4 RESULT & DISCUSSION In present scenario of Indian Electricity Sector which is power deficit market the improper
implementation of Open Access are creating huge problems which are listed below:
Forecasting of Distribution Company for future requirement of power is adversely
affected because of consumer uncertainty in Open Access. Sudden drawl of power from grid by Open Access consumer when there are shutdown at
seller side those who are selling power to consumer through Open Access. SERCs to calculate Cross-Subsidy Surcharge based on the assumptions that the power
available as a result of exit of open access consumer will be sold at the average revenue
realization rate. This is the most practical scenario in a situation of shortage of power
supply. The SERCs may assume certain percentage (say, 10%) of the total consumption
by eligible open access consumers for the purpose of estimation of power available for
sale at average realization rate. The wheeling charge (grossed up by the system loss at
appropriate level) to be recovered from the open access consumers should also be
factored into computation of surcharge.
For a situation where there is no power cut, SERCs may calculate Cross-Subsidy
69
Surcharge based on the estimation that the DISCOM will avoid purchase of the quantum
of power for which open access has been sought.
6.5 FUTURE SCOPE OF THE PROJECT To bring the competition in the electricity market it very important to implement Open
Access and Indian Power Sector has already taken shining steps towards it. But its proper
implementation is also equally important to avoid gaming and mismatch. This report will
help to take proper step toward implementation of Open Access also help to put the
difficulties of Distribution Companies.
This report gives eligible OA consumers to choose their supply through it at desired voltage
level and thus can save substantial cost of electricity. This would also help industries to
choose their transaction method so that they can get reliable and efficient supply.
Everyone is expecting retail competition in Electricity Market and this report highlight the
points of its improper implementation which guide during its implementation.
6.6 BIBLIOGRAPHY
List of Documents
– Central Electricity Regulatory Commission (Grant of Connectivity, Long-term
Access and Medium-term Open Access in inter-State Transmission and related
matters) Regulations, 2009
– Central Electricity Regulatory Commission (Open Access in inter-State
Transmission) Regulations, 2008.
– Central Electricity Regulatory Commission (Grant of Connectivity, Long-Term
Access and Medium-Term Open Access in Inter-State Transmission and related
matters) (Second Amendment) Regulations, 2012.
–– Forum of Regulators‘ Model Regulations on Terms and Conditions of intra-State
Open Access.
– Paper on ―Open Access-Challenges and way forward‖ by SK Chatterji Deputy
Chief CERC, 2009.
– Task Force Report on ―Measures of operationalizing Open Access in Power
Sector‖, by Planning Commission.
70
– Paper on ―Issues on Distribution Open Access and Retail competition‖ by SK
Chatterji.
– Paper on ―Open Access in Inter State Transmission‖ by SK Soonee.
– Forum of Regulators’ Model Regulations on Terms and Conditions of intra-State
Open Access.
– Tariff Order for States – Maharashtra, Gujarat, Andhra Pradesh, Punjab and Uttar
Pradesh.
– Position Paper on Open Access by FOR.
– FOR Report on Open Access-Theory and Practices-08-04-2009.
– Open Access case by MERC.
Websites
http://www.cea.nic.in/
http://www.cercind.gov.in/
http://www.powermin.nic.in/
http://www.forumofregulators.gov.in/
http://www.iexindia.com/
https://www.sldcguj.com/
http://www.gercin.org/
http://www.gseb.com/guvnl/index.aspx
http://getco.co.in/getco_new/
http://www.mgvcl.com/
http://www.ugvcl.com/
http://www.pgvcl.com/
http://www.dgvcl.com/dgvclweb/index.php
http://www.pspcl.in/
http://www.pserc.nic.in/
http://www.pstcl.org/
http://www.punjabsldc.org/
http://www.uperc.org/Default2.aspx
http://www.aptransco.gov.in/
http://mahasldc.in/
http://www.mahadiscom.in/
http://www.tatapower.com/
http://www.rinfra.com/
http://www.mahasldc.in/
http://www.mercindia.org.in/
http://www.nldc.in/
http://www.thehindubusinessline.com/
http://www.mahatransco.in/
71
Annexure
1. Charges for Maharashtra
1) Charges for MSEDCL
72
2) Charges for R-InfraD
3) Charges for TPC
2. Charges for Gujarat
I. MGVCL, PGVCL, UGVCL, DGVCL
73
II. Torrent Power
3. Charges for Uttar Pradesh
74
PuVVNL, MVVNL, PVVNL, DVVNL
KESCoL
NPCL
75
4. Charges for Punjab