Open Access (as defined under Section 2 (47) of the Electricity Act, 2003 (EA 2003) provides for non-discriminatory open access in transmission and distribution. It has been envisaged in the Act as a framework for encouraging competition in the electricity sector and for enabling consumers to choose their suppliers. Section 42 (2) of the Act provides that the state commission shall, by regulations, provide open access to all consumers having maximum power required at any time exceeding 1 MW. Central Electricity Regulatory Commission (CERC) has framed regulations on inter-State open access as CERC (Open Access in Inter-State Transmission) Regulations, 2008 and subsequently, have issued amendments from time to time. At the State level, the State Electricity Regulatory Commissions (SERCs) have framed intra-state open access regulations, except in the case of Sikkim. The Tariff Policy (2016) lays down that the cross-subsidy surcharge, additional surcharge, standby charges and the wheeling charges to be levied from the open access consumers shall be determined by the respective SERC.
There has been a substantial increase in the number and volume of open access transactions involving generating companies, traders and distribution companies through open access in inter-state transmission. As per CERC Report on Short-term Power Markets in India : 2017-18, the number of OA consumers transacting in power exchanges increased from 995 in 2010-11 to 4807 in 2017-18 with a total procurement of electricity through the power exchanges rising from 4,150 MU to 14,734 MU during the corresponding period. However, volume of short-term transactions has over the years not been more than 11%. Increase in the short-term transactions could be gauged as enhanced competition in the power market.
Issues for Distribution Companies
During the course of operationalization of open access, a number of issues impacting the open access consumers, power sellers, distribution licensee and non-open access retail consumers of the distribution licensee, have been reported. Ministry of Power (MoP) has, in a consultation paper, in August 2017, flagged the following issues:
I) Frequent Switching of Open Access Consumers
Discoms are unable to manage power procurement efficiently due to the high frequency of shifting of Open Access consumers between DISCOM and other source of power.
II) Cross Subsidy Surcharge
The CrossSubsidy Surcharge calculated by State Electricity Regulatory Commissions (SERCs) and recovered from Open Access consumers is often insufficient to recover the entire loss of cross subsidy on account of consumers procuring power through the Open Access route
III) Additional Surcharge
Additional surcharge to recover stranded cost on account of stranded Power Purchase Agreements (PPAs) and stranded assets due to consumers procuring power through Open Access have in most cases not been calculated appropriately. This has led to under recovery of power procurement expenses incurred by Discoms.
IV) Stand-by Charges
The methodology adopted by Discoms for calculation and structuring of Stand-By charges is inconsistent across States. Further, lack of periodic review of these charges can lead to revenue loss for Discoms.
V)Tariff Design and Rationalisation
The structuring of fixed and variable components of tariff is not reflective of the actual ratio of fixed and variable cost liability of the Discoms.
Forum of Regulators (FOR) had, in July 2016, constituted a working group to study the issues impacting implementation of open access. Taking note of the consultation paper issued by Ministry of Power, FOR had, in December 2017, made recommendations inter-alia in regard to the issues brought out in the MoP consultation paper.
i) To reduce the burden of Discoms due to frequent switching, open access customers should be required to schedule power for at least 24 hours in advance whenever they seek open access, and they should also schedule minimum continuous eight hours of supply through Open Access.
ii) Cross-subsidy surcharge must be calculated by the philosophy laid down by Tariff Policy 2016, i.e. based on average cost of supply.
iii) Additional Surcharge could be calculated using three components to cover for stranded power under long-terms PPAs, stranded physical assets and the cost of carrying regulatory assets or amortization of regulatory assets, as the case may be.
iv) Only 125% of variable charges for each category should be applicable as stand-by charges. The fixed charges are already recovered in the demand charges.
v) The tariff design should progressively reflect actual break-up between fixed charges and variable charges as per the Discoms prudent and efficient cost structure. SERCs may revise the fixed charges gradually.