Consumers Prospective

In
Open Access of power
P.S. Shekawat
Superintending Engineer(Power),
Rajasthan State Industrial Development & Investment Co. Ltd.

 Is consumers choice through open access an enforceable

right?
Impact of directive of PSERC on short term Open Access
Can Open Access and Competitive power generation
bring down power cost for discoms and consumers
Will there be standby charges and cross subsidy
surcharge if MoP directives on Open Access are
implemented (30-11-2011)
Operational constraints and roles of SLDCs and STUs

Open Access of Power

Powered Consumer to choose Power

Is consumers choice through open access an

enforceable right?
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.

Cont

Is consumers choice through open access an

enforceable right?
Section 42 of the Act deals with the provision of open access to distribution and
reads as follows:
((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 Commission:
Provided also that such surcharge shall not be liveable 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:
Provided also that the State Commission shall, not later than five years from the
date of commencement of the Electricity (Amendment) Act, 2003, by regulations,
provide such open access to all consumers who require a supply of electricity where
the maximum power to be made available at any time exceeds one megawatt.
Cont

Benefits to Consumer
Buy

power

cheaper

from

sources;

anywhereSpecially

could

useful

explore
for

high

demand industrial /commercial consumer.

Industrial houses could consolidate power supply

to plant at various locations and build captive

power plant to achieve economy.
Give choice to consumer option to switch.
Cheaper power.
Improved Efficiency .
Better Reliability.

Impact of directive of PSERC on short term Open

Access

Power requirement varying unpredictable; which jeopardizes

the system reliability.
No alternative for arranging excess power or surrendering the
power; thus PSPCL is financially affected.
The frequent shifting of OA consumers from PSPCL to Open
Access and again to PSPCL is affecting the quality of power to
other consumers.
The OA consumers being the cross subsidizing category for
other consumer groups, this reduction of power off-take by
them from PSPCL power pool has adverse impact on the tariff of
other categories.
Due to Open Access, the LS consumption is likely to reduce
which will hit the revenue and T&D losses of PSPCL adversely.
In order to prevent financial collapse of PSPCL, appropriate
safeguards e.g. cross subsidy surcharge and additional
surcharge as provided in the National Tariff Policy be levied on
OA consumers.
Cont..

Impact of directive of PSERC on short term Open

Access

With the high end consumers migrating to Open Access

without paying any surcharge, the burden on
distribution licensee increases which ultimately results
in increase in tariff of remaining about 70 lac
consumers. The PSPCL has intimated that due to 2513
MUs availed by the Open Access consumers during
2010-11, it has suffered a loss of Rs.371 crore and this
loss is likely to increase to around Rs.1000 crore during
2011-12. If this loss is passed on to the remaining
consumers it will result in an unjustified hike in the
tariff for these consumers.

Can Open Access and Competitive power generation

bring down power cost for Discom and consumers
Electricity Act 2003 has mandated that with immediate effect open access
should be implemented. While everyone accepts that it may serve the consumer
interests, there are two contradicting views regarding the implications of the
open access system on the electricity entities especially the DISCOMs. The first
view is that competitive power generation will bring down the ultimate costs to
the consumers. Cost reduction is possible only by reducing the T&D losses,
keeping under control the operating costs and keeping the additional power
purchase costs low. Given the facts that power purchase costs keep increasing
and the HT tariff has been mandated to be brought down closer to the average
costs (thereby reducing the cross-subsidy) according to a fixed time schedule to
be set by the regulator, the first group argues that taking up additional liabilty
by way of HT consumers at such high marginal costs of power purchase would
be financially imprudent for the electricity entities.
The other view is that electricity entities have heavy responsibility to meet the
needs of agricultural consumers and small domestic consumers at a lower rate
than the average cost. Consumers who are currently the HT consumers and
commercial consumers paying a higher tariff are providing the means to do this.
If such consumers walk away from Grid supply subsidy from Government will
have to increase. The correct position would depend on the statewise situation
regarding relative tariff of the different consumers, the possible rates of growth
of category wise consumption and the potential for purchasing additional power
at low rates in the future

Can Open Access and Competitive power generation

bring down power cost for Discom and consumers
In open access consumers of 1 MW and above are deemed OA consumer and
shall have choice of purchase power cheaper sources including Discom.
Discom/Transmission licensee shall be benefited by collecting wheeling and
transmission charges as additional income over and above the income from
retails sale of power to the consumers below 1 MW.
Power purchase quantum of discom shall reduce and shall be limited only
equivalent to supplying power to consumers below 1 mw and commission
shall decide the tariff only for consumers below 1 MW hence ARR of Discoms
shall be substantially reduce.
Sufficient power shall be available to discom from Genco plants at chaper
rate to supply power consumers below 1 MW and total load shedding shall be
withdrawn to such consumres.
Expenditure account of discoms shall reduce because of reduced employees
strength and reduced working capital requirment hence tariff for consumers
below 1 MW shall reduce.
Tariff will change slowly to reflect the cost to serve and cross subsidy will get
reduced and may finally disappear. State government may give subsidy in
advance if it wants to lower the tariff for some consumers.
Large consumers: They would be allowed to access new generation or put up
their own captive plants. These consumers would see a major reduction in
their tariff and be allowed to shrug off or reduce burden of the historical
costs (stranded costs).

Will there be standby charges and cross subsidy

surcharge if MoP directives on Open Access are
implemented (30-11-2011)
The Ministry of Power in its letter dated
30.11.2011 say that:
once a consumer becomes an Open Access consumer, the
State Commission shall no longer fix the energy charges
to be paid by him but will continue to fix the wheeling
charges and surcharges in accordance with the
provisions of the Act.

Will there be standby charges and cross subsidy

surcharge if MoP directives on Open Access are
implemented (30-11-2011)

Electricity entities have heavy responsibility to meet the

needs of agricultural consumers and small domestic
consumers at a lower rate than the average cost.
Consumers who are currently the HT consumers and
commercial

consumers

paying

higher

tariff

are

providing the means to do this. If such consumers walk

away from Grid supply subsidy from Government will
have to increase

Will there be standby charges and cross subsidy

surcharge if MoP directives on Open Access are
implemented (30-11-2011)

The tariff of OA consumers shall not be regulated by state

commission and the heavy burden of cross subsidies shall
not be loaded to such consumers.

The OA consumers shall not be consumers of discoms the

power requirement shall not be the part of ARR of discom.

According to national tariff policies the cross subsidy is

linked with tariff for the category of consumers decided by
the commission who are going out of net of Discom because
of open access hence discom to be compensated by cross
subsidy surcharge but there shall no such requirement in the
change scenario hence such consumers will have not to pay
CSS on the power wheeled through Open access.

Operational constraints of SLDC and STUs

The operations of the STU and SLDC are closely linked,

and the organisational separation of these two
functions should be undertaken only after robust
systems and processes are established for interaction
between the two.
Transition Risk
Settlement of imbalances in power injected and drawls.
Effective Metering.
Efficient pricing of transmission.
Management of congestion .

Roles of SLDC and STUs

ensure integrated operation of the power system in a State.
optimum scheduling and despatch of electricity within a State in
accordance with the contracts entered into with the licensees or the
generating Companies operating in that State
monitor grid operation.
keep accounts of the quantity of electricity transmitted
supervision and control over the inter-State transmission system.
be responsible for carrying out real time operation for grid control
and despatch of electricity within the State through secure and
economic operation of the State Grid in accordance with the Grid
standards and State Grid Code.
Creating a system of monitoring the grant of open access by SLDC
in an expeditious and non-discriminator manner.
Cont

Roles of SLDC and STUs

To build, maintain and operate an efficient, co-ordinated and economical

inter-State transmission system or intra-State transmission system, as the
case may be;
(b) to comply with the directions of the Regional Load Despatch Centre and
the State Load Despatch Centre as the case may be;.
(c) 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
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 cross subsidies shall be
progressively reduced in the manner as may be specified by the Appropriate
Commission:
Provided also that the manner of payment and utilisation of the surcharge
shall be specified by the Appropriate 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.

Roles of SLDC and STUs

to undertake transmission of electricity through intra-State

transmission system .

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:
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 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.

Conclusions

Open access of power is in its ground stage and has

high potential for growth

It is a step towards commercialization of power

market with high growth potential.

Removal of cross subsidy and surcharge need to be

done with a time bound program.

Open Access charges / losses based on commercial

principles to optimize use of existing assets and to
encourage investment.

Open access process, charges and priorities need to be

non-discriminatory