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SUMMER INTERNSHIP REPORT ON
ANALYSIS OF OPEN ACCESS FEASIBILITY & ITS
IMPACT IN MAHARASHTRA STATE
UNDER THE GUIDANCE OF
MR. N V KUMAR, DY. DIRECTOR (NPTI)
MR. RAVI DESHMUKH (MD) (PPS ENERGY SOLUTIONS PVT. LTD)
Submitted by
DHIR SINGH
ROLL NO: 27
MBA (POWER MANAGEMENT)
Sector-33,
Faridabad – 121003, Haryana
(Under the Ministry of Power, Govt. of India)
Affiliated to
MAHARSHI DAYANAND UNIVERSITY, ROTHAK
AUGUST 2013
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DECLARATION
I, Dhir Singh, Roll No 27, student of MBA-Power Management (2012-14) at National Power
Training Institute, Faridabad hereby declare that the Summer Training Report entitled
“ANALYSIS OF OPEN ACCESS FEASIBILITY AND ITS IMPACT IN
MAHARASHTRA STATE” 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 the Candidate
Counter signed
Director/Principal of the Institute
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ACKNOWLEDGEMENT
Apart from efforts of the person doing the project, the success of any project depends
largely 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
the project.
I thank to Mr. Ravi Deshmukh, Managing Director, PPS ENERGY SOLUTIONS PRIVATE
LIMITED for giving me the opportunity to execute my Summer Internship Project.
I would also like to thank my Project In-charge Mr. N V Kumar, Deputy. Director, NPTI who
always assisted me in every possible manner.
I feel deep sense of gratitude towards Mr. J. S. S. RAO, Principal Director Corporate Planning,
NPTI, Mr. S. K. Chaudhary, Principal Director, Dept. of Management Studies, Mrs. Manju
Mam, Director, NPTI and Mrs. Indu Maheshwari, Dy. Director, NPTI for arranging my
internship at PPS Energy Solutions Ltd. and being a constant source of motivation and
guidance throughout the course of my internship.
I also extend my thanks to all the faculties and my batch mates in Dept. of Management Studies
(NPTI), for their support and guidance throughout the course of internship.
Thank you all for being there for me always.
DHIR SINGH
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EXECUTIVE SUMMARY
The Electricity Act, 2003 defines the duty of a distribution licensee to develop and maintain an
efficient, coordinated and economical distribution system in his area to supply. It also provides
that where any person, whose premises are situated within the area of supply of a distribution
licensee, requires a supply of electricity from a generating company or any licensee other that
such distribution licensee, such person may by notice require the distribution licensee for
wheeling such electricity in accordance with the regulations made by the State commission and
the duties of such distribution licensee in respect of such supply shall be those of a common
carrier providing non-discriminatory open access to its distribution system.
Open access may also be allowed on payment of a surcharge in addition to wheeling charges, as
may be specified by the State Commission. Along with this charges it is important that to work
out on the followings:
i) Minimize / remove the losses which distribution licenses are facing due to inadequacy of
Cross Subsidy Surcharge as it is not equivalent to Subsidy,
ii) Need to define who will pay the Cross subsidy of Renewable? if its obligation has
removed from paying Cross Subsidy Surcharge for its promotion,
iii) Need to solve the problem of forecasting which distribution licensees are facing.
The electricity policy underlines the Government’s commitment to power sector reforms. The
Act advocates that open access is a goal and it lays down a plan to achieve open access. The
industry and the consumers have welcomed the new policy, and are upbeat on the policy of
‘Open Access’ and public – private partnerships.
As a student of MBA in Power Management from National Power Training Institute,
Faridabad, I got an opportunity to do my summer internship in PPS Energy Solutions Private
Ltd.
This report will help to understand the problem which are distribution licensee’s facing and also
what exactly the consumers are expecting from distribution licensee so that their loss can be
minimize.
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Contents
DECLARATION ....................................................................................................................... ii
ACKNOWLEDGEMENT ......................................................................................................... iii
EXECUTIVE SUMMARY ....................................................................................................... iv
LIST OF TABLE ...................................................................................................................... ix
LIST OF ABBREVIATION ...................................................................................................... xi
CHAPTER – 1: PROJECT INFORMATION .......................................................................... 1
1.1 INTRODUCTION .......................................................................................................... 1
1.2 PROBLEM STATEMENT ............................................................................................. 3
1.3 SOPE OF PROJECT ...................................................................................................... 3
1.4 OBJECTIVE OF THE PROJECT .................................................................................. 4
CHAPTER – 2: PROJECT NEED & COMPANY OVERVIEW ......................................... 5
2.1 IMPORTANCE OF PROJECT ...................................................................................... 5
2.2 ORGANIZATION PROFILE ......................................................................................... 6
About the organization ......................................................................................................... 6
2.3 ORGANIZATION SERVICES ...................................................................................... 8
Energy Management ............................................................................................................ 8
Consultancy ......................................................................................................................... 9
Infrastructure Development & Maintenance ......................................................................... 9
Project Management ............................................................................................................. 9
Critical Assessment of PPS Energy Solution Ltd................................................................. 9
2.4 SWOT ANALYSIS ...................................................................................................... 10
Strengths ............................................................................................................................ 10
Weakness ........................................................................................................................... 10
Opportunities ..................................................................................................................... 10
Threats ............................................................................................................................... 10
CHAPTER - 3: LITERATURE & REASEARCH METHOD ............................................... 11
LITERATURE SURVEY .................................................................................................. 11
Research methodology ....................................................................................................... 15
CHAPTER - 4: REGULATION & BACIS OF OPEN ACCESS ........................................... 16
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4.1 INTRODUCTION TO OPEN ACCESS ....................................................................... 16
4.2 ELIGIBILITY CRITERIA FOR OPEN ACCESS ........................................................ 17
4.3 SECTIONS OF EA-2003 GOVERNING OPEN ACCESS .......................................... 19
Captive Generation – Section 9 (2)..................................................................................... 19
Functions of CTU – Section 38 (2) (d) ............................................................................... 19
Functions of STU – Section 39 (2) (d) ................................................................................ 19
Wheeling Charges – Section 42 (2) .................................................................................... 20
Additional Surcharge – Section 42 (4) ................................................................................ 20
Functions of State Commission – Section 86 (1) ................................................................ 20
4.4 OPEN ACCESS TO DISTRIBUTION NETWORKS .................................................. 21
4.5 DUTIES OF DISTRIBUTION LICENSEE AND OPEN ACCESS.............................. 22
4.6 CATEGORIZATION OF OPEN ACCESS .................................................................. 23
4.7 PROCEDURE FOR ALLOTMENT OF OPEN ACCESS ............................................ 25
Long Term Open Access .................................................................................................... 25
Short Term Open Access .................................................................................................... 25
4.8 ROLE OF DIFFERENT AGENCIES IN OPEN ACCESS ........................................... 28
NLDC (National Load Dispatch Centre) ............................................................................ 28
RLDC (Regional Load Dispatch Centre) ............................................................................ 28
SLDC (State Load Dispatch Centre) .................................................................................. 29
CTU (Central Transmission Utility) ................................................................................... 29
STU (State Transmission Utility) ....................................................................................... 30
MEDA (Maharashtra Energy Development Association) ................................................... 30
4.9 COMPONENT OF OPEN ACCESS ............................................................................ 30
4.10 CAPACITY ASSESSMENT ...................................................................................... 31
Approach to Network Capacity Assessment ....................................................................... 31
Allocation of Network Capacity ......................................................................................... 33
Allotment Priority: ............................................................................................................. 34
Curtailment Priority ........................................................................................................... 35
Under-Utilization/Non-Utilization of Open Access capacity .............................................. 35
4.11 PRICING FOR OPEN ACCESS ................................................................................... 36
Objective of Pricing Policy as followed by MSEDCL ........................................................ 36
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Pricing for Network Usage ................................................................................................. 36
Elements of tariff ............................................................................................................... 36
Cost allocation Criteria: Tariff design ................................................................................ 36
Cost concepts ..................................................................................................................... 38
4.12 CHARGES FOR OPEN ACCESS CUSTOMERS ..................................................... 40
Transmission Charges ........................................................................................................ 40
Costs to be recovered ......................................................................................................... 41
Allocation of Costs ............................................................................................................. 42
Scheduling and System Operation Charges ........................................................................ 43
Wheeling Charges .............................................................................................................. 43
Cross-Subsidy Surcharge ................................................................................................... 44
Policy Provisions................................................................................................................ 44
Various methods of surcharge (as recommended by FOR) ................................................. 45
Additional Surcharge.......................................................................................................... 49
CHAPTER-5 OPEN ACCESS ANALYSIS .......................................................................... 52
5.1 OPEN ACCESS IN MAHARASHTRA ....................................................................... 52
5.2 BILLING PROCEDURE OF OPEN ACCESS IN MAHARASHTRA ......................... 56
5.3 BILLING COMPONENT OF OPEN ACCESS IN MSEDCL ...................................... 57
5.4 LIST OF OPEN ACCESS CONSUMER IN MAHARASHTRA ................................. 58
Open Access Consumers (May 2012)................................................................................. 58
5.5 ANALYSIS OF TARIFF STRUCTURE (LT AND HT CONSUMERS) ..................... 64
Cross subsidy at existing and approved tariff ..................................................................... 64
5.6 ANALYSIS OF DISCOM LOSS ................................................................................. 68
5.7 EXPECTED MIGRATION OF CONSUMER IN OPEN ACCESS.............................. 69
5.8 COMPARATIVE ANALYSIS OF OPEN ACCESS .................................................... 70
5.9 DIFFERENT CONSUMER OPINION ON OPEN ACCESS ....................................... 71
CHAPTER – 6: SUMMARY ................................................................................................ 76
6.1 CONCLUSION ............................................................................................................ 76
6.2 RECOMMONDATIONS ............................................................................................. 78
6.3 LIMITATION OF THE PROJECT .............................................................................. 79
6.4 RESULT & DISCUSSION .......................................................................................... 80
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6.5 FUTURE SCOPE OF THE PROJECT ......................................................................... 80
BIBLIOGRAPHY .................................................................................................................... 81
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LIST OF TABLE
Table 1- Comparison of Open Access Fees & Regulated Tariff ................................... 2
Table 2- Open Access Consumers (May 2012) ........................................................... 63
Table 3- Cross subsidy at existing and approved tariff ............................................... 65
Table 4- Comparative Chart of Open Access Charges at State Level .......................... 66
Table 5- Tariff Analysis for LT and HT Consumer .................................................... 67
Table 6- Calculation & Comparisons of ARR for consumer of 1 MW & Above ........ 69
Table 7- Comparisons of Interstate & Intrastate Open Access .................................... 70
Table 8- Consumer Opinion for Feasibility of Open Access ....................................... 75
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LIST OF FIGURES
Figure 1- Organization setup ...................................................................................................... 7
Figure 2- Organization Services ................................................................................................. 8
Figure 3- Categorization of Open Access ................................................................................. 23
Figure 4- Procedure for Scheduling of Short Term Open Access in Bilateral Transaction ........ 26
Figure 5- Procedure for Scheduling of Short Term Open Access in Collective Transaction ..... 27
Figure 6- Allotment Priority ..................................................................................................... 34
Figure 7- Billing Procedure ...................................................................................................... 56
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LIST OF ABBREVIATION
MSEDCL Maharashtra State Electricity Distribution Company Limited
MSEB Maharashtra State Electricity Board
MERC Maharashtra State Electricity Regulatory Commission
CSS Cross Subsidy Surcharge
LT Low Tension
HT High Tension
RGGVY Rajiv Gandhi Gramin Vidhutikarn Yojana
R-APDRP Restructured – Accelerated Power Development & Reforms Programme
SCADA Supervisory Control and Data Acquisition
SOP Standard of Performance
HVDC High Voltage Direct Control
MIS Management Information System
GIS Geographical Information System
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SLDC State Load Dispatch Centre
WRLDC Western Load Dispatch Centre
MEDA Maharashtra Electricity Development Association
NLDC National Load Dispatch Centre
RLDC Regional Load Dispatch Centre
CTU Central Transmission Unit
STU State Transmission Unit
ANC Available Network Capacity
ATSC Annual Transmission Service Charges
MUC Marginal Unit Cost
BEST Brihanmumbai Electric Supply & Transport
NTP National Tariff Policy
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CHAPTER – 1: PROJECT INFORMATION
1.1 INTRODUCTION
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 recognizes 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 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. Even as the central
government is pushing state for mandatory implementation of Open Access (OA) for bulk 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.
Open Access at various levels is the hallmark of electricity reforms and the regime has been effective
in 20 states since January 2009 on an optional basis. Under the Open Access regime, bulk consumers
enter into bilateral deals with discoms and stay outside the ambit of the regulated tariff system.
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According to a study by the Forum of Regulators, which compares average cost of power for Open
Access and regulated tariff consumers of 20 states in the financial year 2009-10, the 12 states where
Open Access consumers paid prices tariffs include Tamil Nadu, Bihar, West Bengal, Orissa and
Jharkhand.
Analysts however reckon that higher prices under the Open Access regime are due to factors like steep
rise in input costs primarily coal since 2009 and don’t negate the principle that Open Access promotes
competition. Also, many large consumers must have chosen to pay higher prices for better quality
power from distant discoms.
States Net open access
charges (Rs./unit)
Net cost of power for OA consumers
(Rs./unit)
Regulated tariff
(Rs./unit)
Tamil Nadu 2.35 5.35 3.96
Bihar 2.45 5.45 4.35
west Bengal 2.68 2.68 3.95
Jharkhand 2.51 5.54 4.48
Assam 2.51 5.61 3.25
Orissa 1.69 4.69 2.91
Himachal Pradesh 1.7 4.2 3.04
Table 1- Comparison of Open Access Fees & Regulated Tariff
There are also other reasons for this phenomenon, which on the fact of it seems to belie the concept
that Open Access regime would promote competition and correct market distortions. Analysts feel that
helped by regulators, discoms have burdened Open Access consumers with numerous un-prescribed
charges and surcharges to increase cost of power for them. As per the regulators study net Open Access
were upwards of Rs. 2/- a unit in six states during the period. It worked out to Rs. 1- 2/- a unit in six
other states. But in state of Maharashtra the scenario of Open Access is totally different here consumers
are moving in Open Access for chipper power because in Maharashtra reliable power is already
available for bulk consumer.
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1.2 PROBLEM STATEMENT Due to continuous shifting of bulk consumer distribution licensee and losing their paying consumer
and if the process will remain continue then the time will reach when distribution licensee will remain
with only subsidised of non-paying consumer. Under the Electricity Act, Open Access consumers have
to pay Open Access charges including wheeling and standby charges and cross-subsidy surcharge,
besides the cost of electricity. But this charges are not upto the mark and to minimize the loss of
distribution licensee following things should also need to consider :
i) Ideally, the net effect of subsidy and cross subsidy should need to be zero but in reality it is not zero
because the AT & C losses and theft has not considered in cross subsidy surcharge formula.
ii) Need to define who will pay the Cross subsidy of Renewable? if its obligation has removed from
paying Cross Subsidy Surcharge for its promotion,
iii) Need to solve the problem of forecasting which distribution licensees are facing.
1.3 SOPE OF PROJECT
This project will help to highlight the problem, which distribution companies are facing & also help to
minimize their losses by their different initiative. Customer interaction and the analysis of consumer
view help the licensee to understand the ground realities in Open Access 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 bulk consumer.
Based on difficulties in distribution sector and considering present situation of power deficit market in
India, in this report my role is to do detailed study of billing issues/problem of Distribution Company
in Maharashtra and suggestion for its improvement based on consumer analysis and international
experience.
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1.4 OBJECTIVE OF THE PROJECT
To know the Open Access scenario in Maharashtra and find out the basic reasons / root cause
for resistance to implementation of Open Access.
To understand the billing procedure of Open Access in Maharashtra.
Understand the role of SLDC, WRLDC and MEDA in Open Access.
Find out that either consumers are really benefited through Open Access or they have more
benefit by retaining with existing licensee.
Study the loss due to improper implementation of Open Access and suggest the
recommendations to minimize the loss.
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CHAPTER – 2: PROJECT NEED & COMPANY OVERVIEW
2.1 IMPORTANCE OF PROJECT Enactment of the Electricity Act, 2003 has force for promotion of Open Access to develop
competition in the market but actual competition is possible only when there is perfect market is
available like number of seller and number of buyer and most important is surplus of
commodity. When we are deficit in power and if we talk about competition then it create
number of flause and heart the interest of consumer which is against the law.
Though open access regulations were already in place in Maharashtra since 2005 in three phases
for HT consumers with Contracted Demand of not less than 5 MW, 3MW and 1MW in
respective phases and MERC has also determined transmission charges, wheeling charges and
cross subsidy surcharge through subsequent orders to implement the open access, there are
5pprox.. 1965 open access customers till date.
While implementation of Open Access the loss of Distribution Company has not taken into
consideration though there may be number of surcharge are available like Cross Subsidy
Surcharge to compensate the loss of Distribution Company but it is not upto the mark to recover
the full loss. Due to improper implementation of Open Access under the name of “Promotion to
Competition” now almost all distribution company are in losses so now it is very important look
into this matter and take some revolutionary steps to recover the losses of Distribution
Company.
Due to Open Access, Distribution Company are losing their paying customer (Consuming more
than 1 MW of Industrial Consumer) and only non-paying or subsidised consumer are remain
with MSEDCL and as per Case No. 43 of MSEDCL the present Cross Subsidy Surcharge
Formula not are able to recover the subsidy which is loss to the MSEDCL and MSEDCL has
filed case against this and honourable high court has given judgement in favour of
implementation of Open Access saying the statement that MSEDCL is non-profit organisation
and present regulation for cross subsidy is to promote the competition. But the point is that upto
what extend it is correct because if this is the case then who will bear the loss of distribution
company. Either state government / central government should has to take initiative to bear this
loss because normally it is found that initiative for subsidy has taken for vote bank. In real term
if subsidy has given to prevent the agriculture consumer then there are other way to prevent it
like giving proper value to their crop production.
Also the theft of Power has not taken into consideration into Cross Subsidy Surcharge which
MSEDCL has to bear although MSEDCL has taken number of steps to stop theft of Electricity.
Following point also need to consider for proper implementation of Open Access :
i) Geographical area of agriculture while deciding subsidy because level of water is
different at different place hence required power for water evacuation is different as per
the location.
ii) Billing of Open Access should be slab wise based on consumption because transmission
loss will depend upon the distance or voltage drop.
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iii) The billing of Open Access are under the MSEDCL also it is providing assistance to the
Open Access Consumer and Customer hence it should be get some amount of service
charge for it.
2.2 ORGANIZATION PROFILE
About the organization
PPS is an ambitious company, established by enterprising engineering professionals in the year 2004.
The company offers services pertaining to Energy, Engineering and Architecture to clients across the
globe. PPS team is based in Pune, a city known for its Software and Engineering talent in India. PPS is
a rapidly growing company with a team of about 100 people which includes highly trained and
experienced Techno-Managers, Analysts, and Engineers & Detailers. In the PPS philosophy, the client
always comes first.
Understanding every clients‟ needs and requirements & to offer customized solutions is an endeavor
undertaken by each one of their employees. PPS prides itself as a technology driven company.
Company believes that use of cutting edge technology can greatly enhance output & quality, reduce
project life cycle & optimize costs in long run.
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Figure 1- Organization setup
PPS values the natural resources and is committed to preserve them. Company promotes all
environment friendly techniques to the maximum extent. As a natural corollary of their commitment to
the environment & energy efficient structures, the company entered the energy sector as a service
provider to the various arms of the power industry under the name of PPS Energy Solutions Pvt. Ltd.
PPS Energy Solutions is primarily formed to serve their clients to meet numerous challenges created by
a rapidly growing energy market. They are focused on pro- viding affordable energy solutions for our
clients in energy & power sector.
Energy Consulting
• Cost reduction /Process
• Reengineering/Organisation Design
Policy & Regulations
• Regulatory Economics/ PPP Model/Governance
Development Consulting
• Project Advisory/Bid Advisory/Financial Restructuring/Capacity Building/Energy Efficient Building Advisory
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2.3 ORGANIZATION SERVICES
Figure 2 - Organization Services
Figure 2- Organization Services
Energy Management
Energy Audits PPS Team offer Energy Audits for:
Process Industries Steel, cement, chemical, etc.
Power Distribution Sub stations, switching stations, distribution feeders, etc.
Commercial Buildings Malls, operating plants, offices, hospitals, colleges, etc.
Generation Units Mini / micro generation utilities
Energy Planning & Optimization
PPS Energy
Energy management
Project Management
Consultancy
Infrastructure Development
& Maintenance
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PPS do Energy Efficiency studies and provide solutions regarding green building & lighting
simulations.
Consultancy
Power Distribution End to end support in distribution loss reduction, asset management, formulation of
various schemes, DPR & claims for various power utilities Renewable Energy Complete support to
clients for establishing renewable power generation units Rural Electrification Formulation of DPR&
schemes for rural electrification. Also supporting clients for developing rural electrification
infrastructure. Power Regulation Offer regulatory support to power utility companies, transmission
companies, generation units, utility consumers, industries & power market etc for filing petitions &
sorting out the problems thereof. Power Generation Formulation of feasibility report, project report,
tariff proposals, power purchase agreements, fund arrangements for Mini and Micro projects.
Infrastructure Development & Maintenance
We offer Engineering, Procurement, Commissioning & Maintenance services in Power Sector Power
Distribution Provide end to end solutions in erection of distribution substations and allied works. Power
Transmission Provide end to end solutions in erection of EHV lines & allied works. Power Generation
Provide end to end solutions in Micro and Mini power generation units.
Project Management
Schedule and budget evaluations Value engineering Constructability reviews Accuracy checks on cost
estimates Monitoring and coordinating daily construction activities Technical Audits Contract
Negotiation and Administration Project Controls and Scheduling Regulatory Agency Coordination and
Negotiation Risk Management.
Critical Assessment of PPS Energy Solution Ltd.
Through the process of carrying out several assignments over the past many years, PPS Energy
Solution has accumulated considerable analytical and consulting expertise, backed by the following
organisational capabilities:
An extensive and organised database on power sectors.
Knowledge of key factors of success in different projects and program.
An ability to research emerging global trends, both in specific countries as well as in energy
sectors, based on primary and secondary data.
Performance benchmarking & Quantitative and financial modeling
Ability to identify the various types of risks in energy area and suggest appropriate strategies to
mitigate the same.
Ability to work in different geographies on its own and through affiliate partners
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2.4 SWOT ANALYSIS
Strengths
Core team of expert professionals & excellent work culture.
Targeting untapped markets with best management skills and corporate strategy
Time bound targeted goals & promotion of all environment friendly techniques to the
maximum extent.
PPS is certified energy auditing firm for carrying all types of energy audit.
Weakness
Company is in the initial stage of growth.
Small team to handle multiple projects.
Opportunities
Vast and growing market for energy conservation and energy audits.
Company can grab lots of government projects.
Create awareness among industries regarding energy efficiency.
Threats
Number of players has started entering this section of power sector.
Growing competition.
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CHAPTER - 3: LITERATURE & REASEARCH METHOD
LITERATURE SURVEY
Open access has been introduced progressively in United Kingdom, United States of America, Europe,
Australia, New Zealand and parts of Latin America. It can be noted that in a number of these countries,
open access has been introduced right up to the level of household consumers. For example, household
consumers in London, New York, Texas, Amsterdam, Melbourne and Auckland can choose among
competing suppliers. In the case of London, such open access was introduced in 1999 and household
consumers can presently choose from 12 competing suppliers. Open Access regulations by FERC,
USA FERC Order No. 888, introduced in April 1996, directed all public utilities that own, operate or
Control interstate transmission to provide open access in transmission and file tariffs that offer others
the same transmission services they provide themselves, under comparable terms and conditions. The
second rule, Order No. 889, introduced in March 1997, is now known as the Open Access Same-time
Information System rule or OASIS rule. It also covers Standards of Conduct. It works to ensure that
transmission owners and their affiliates do not have an unfair competitive advantage in using
transmission to sell power. This rule requires public utilities to obtain information about their
transmission system for their own wholesale power transactions, such as available capacity, in the same
way their competitors do -via an OASIS on the Internet; and, completely separate their wholesale
power marketing and transmission operation functions.
Lot of Scientist and Professor continuously worked & presented number of papers for Open Access
development. Out of which the abstract of some important papers are given below :
In Feb 1998, Mr. David, A.K. analyzed that Managing dispatch in an open access environment is a new
challenge facing independent transmission system operators who are mandated to provide a level
playing field for all transmission users. Two issues are especially important viz; use-of-transmission-
system charges and congestion management. He has examines aspects of these issues with emphasis
on the bilateral and multilateral dispatch co-ordination are explored and mathematical models
developed for each case. The practical case when all three modes coexist is discussed with respect to
both forward and real time dispatch.
In Mr. Ilic, M.[ Feb 1999 ] said that in today's integrated electricity supply industry, transmission is
seen as an (economic) complement to generation. The generation of power and the service of moving it
from one node of the grid to another are bundled into a single product called electricity. Transmission
and generation resources are planned and operated by a same entity. As a result, transmission costs,
mainly consisting of investment costs, are considered common costs and are recovered under the
current cost-based regulatory structure through a single bundled price of electricity, which is based on
average costs. Transmission pricing is not used as an active signal to shape the generation and
consumption of electricity. Here, the author describes how, as the industry is moving toward full open
access, the role of transmission has to be redefined and he discusses the objectives of power
transmission pricing under open access.
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Mr. Wu, F .F. etal [2000] used graph theory to calculate the contributions of individual generators and
loads to line flows and the real power transfer between individual generators and loads that are
significant to transmission open access. Related lemmas are proved which present necessary conditions
required by themethod. Based on AC load flow solution a novel method is suggested which can decide
downstream and upstream power flow tracing paths very fast and can calculate the contribution factors
of generations and loads to the line flows efficiently. The power transfer between generators and loads
can also be determined. The suggested method is suitable for both active and reactive power tracings of
real power systems.
Mr. Ping Wei, etal [2000] used the graph theory to analyse real power transfer between individual
generators and loads, which is important to transmission open access. Related lemmas are proved first
to present necessary conditions required by the method. Based on an AC load flow solution a novel
method is suggested which can determine downstream and upstream power flow tracing paths and
calculate the contribution factors of generations and loads to the line flows efficiently in the system
without circulating power. When the existence of circulating power in the system is detected, by
revealing the reasons which cause circulating power, the optimal power flow (OPF) approach is
suggested to eliminate it and a new feasible AC load flow solution will be obtained for tracing. The
computer tests yield satisfactory results. The suggested method is suitable for both active and reactive
power flow tracings of real power systems.
Mr. Staschus, K. [2001] has written about an overview on the development of the German power
market since the 1998 liberalization, including some statistics on the switching rates of customers and
the number of wholesale transactions. So far, the pace of increasing competition continues unabated,
even though the California crisis is being watched with great interest. He has also written about power
balance analyses for Germany and especially the entire interconnected European market. Germany and
most parts of Europe are not facing a power balance crisis, but some peripheral regions of Europe do
have capacity shortfalls. With competition increasing in all parts of Europe, the power balance
developments need to be watched carefully.
Mr. DeMarco, C.[ 2002] said that one of the premises underlying the move toward competitive markets
has been the presumption that it requires "open access" to the transmission network, with widespread
availability of data on the capabilities of that network. The electrical circuit characteristics of the
transmission grid play an intimate role in determining the limits on transmission capability. Almost
inevitably, therefore, it would appear that widespread availability of data regarding transmission
capability will carry with it fairly detailed knowledge of the physical characteristics of the transmission
grid, and more notably, its "Achilles heels," in the form of major transmission bottleneck points whose
loss would render the system inoperable.
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Mr. Ilic, M. [2003]has suggests that many of Transmission Reliability and Security challenges are
direct result of the institutional dichotomy within the once vertically integrated industry. Namely, while
the generation portion of this industry has made major progress toward becoming for profit, value-
based industry, both the delivery (transmission) and the end user (distribution) remainders are left
without any clear institutional support to adjust and provide their value to the end users in the changing
industry. His work shows that in order to move forward and provide some more natural ways of
valuing generation, transmission, distribution and customers' willingness to respond to the changing
system constraints, several issues must be resolved. Some possible institutional and technological
approaches to solving the system reliability problems in the changing industry were introduced.
Mr. Ilic, [2007] has explained the modelling, monitoring, and control of electric power systems from
the point of view of large-scale dynamic systems. First a summary of current hierarchical operations
has given, together with an assessment of the underlying assumptions. Next, the challenge of operating
electric power systems over very broad ranges of system conditions is explained as an open sensing,
estimation, and control problem. The latter part is motivated by fundamental technological and
organizational changes. These are requiring a shift from hierarchical to multi-layered open access
modelling, monitoring, and control paradigms for large complex electric power systems. A vision of a
novel information-based multi-layered dynamic energy control protocols (DECPs) framework for
facilitating evolution into open access just-in-time (JIT) and just-in-place (JIP) electricity services of
the future is given.
Mr. Cheung, H. [July 2008] etal has said that recently increased use of network-enabled devices in
power systems, rapid development of distributed generations from renewable energy resources, and
government-imposed open access competition have resulted utilities in greater reliance on computer
networks for proper power grid operations. His work proposes a new two-level architecture for power-
grid computer networks and to strength the networks' security. A new network access control strategy
and a new role-based access model are presented for increasing the power-grid network security. The
new model extends general network access controls for a single security domain to multiple domains
in the interconnected microgrids. A security policy managing method using XML is proposed to
simplify the network security administration. His work shows the significance of the proposed two-
level architecture and role-based network access security for the protection, control and monitoring
operations in distribution systems supplied with centralized bulk electricity generations and dispersed
generations under open access environment.
Mr. Raoofat, M.[ 2009] etal has explained a new fast algorithm to calculate the loss quota of any
bilateral transaction in a deregulated environment. The method is based on the well known incremental
transmission loss allocation method. While the base method is very slow to allocate loss into bilateral
contracts, the proposed method uses artificial neural network to overcome this problem. The proposed
method is tested on IEEE RTS 24-bus network with satisfactory results.
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Although Open Access is a relatively new concept in India, internationally most countries that have
gone through the process of electricity reforms, initiated and implemented this concept and thereby
facilitated the introduction of competition in the electricity sector with varying degrees of success.
Typically there have been the following common factors across almost all countries that have gone
through the process of Open Access:
i) Twin objectives of promoting competition and open access have been efficiency improvements
and price reductions;
ii) A precursor to introduction of open access has typically been the setting up of independent
regulator;
iii) A phased approach to Open Access has been followed in most of the countries with
competition being introduced first to large users followed by retail competition. While various
parameters have been used to phase the open access, typical factors used have been
consumption, area and voltage connectivity;
iv) Most countries have begun with simple, easy to understand and implementǁ systems and have
gradually moved/ are moving towards more complicated and sophisticated systems;
v) More often than not, except in the state of New York, there has existed a common
methodology for the introduction and phasing of open access within a country;
vi) In most countries, the system operator has been identified as a separate and distinct entity;
even in cases where the transmission utility itself serves as the system operator, this particular
role of the transmission utility has been separately identified and defined as distinct from its
role as a transmission service provider;
vii) Most countries have in some form or the other tried to bring in restrictions on cross-
ownership between generation and transmission/ distribution so as to ensure competition and a
fair open access market;
viii) Transmission pricing has typically been subject to regulation and prices are mostly based
on a mix of marginal pricing and average pricing to ensure complete recovery of costs.
Some key issues for concern typically have been:
Independence of the regulator due to continued government involvement;
Availability of detailed cost and revenue related data from the sector entities;
Confusion on issues relating to funding of new transmission capacity investments and unclear
identification of the beneficiaries;
In some countries, while the aim has been to promote competition, the industry has evolved into
regionalized markets thereby limiting choices to the final consumers;
Shifting of consumers to inefficient producers due to short term inducements being offered;
Reliability of supply has also been an issue of concern due to additional generation not
materializing to the extent expected.
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Research methodology
Study of MSEDCL Open Access Cases filled in MERC.
Study of CERC Open Access Regulation
Study of MERC Open Access Regulation
Collection of secondary data and analyzing the open access tariff in different states and
analyzing the open access market in Maharashtra state.
Analyzed the tariff orders of MERC and the prospects of open access in these tariff orders.
Based on the study above determining whether open access is beneficial or not for consumers,
who are opting for it.
Accessed State Load Dispatch Centre (SLDC), for loss and gain due to Open Access and their
role.
Giving recommendations and suggestions based on the above study.
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CHAPTER - 4: REGULATION & BACIS OF OPEN ACCESS
4.1 INTRODUCTION TO OPEN ACCESS
The objective of this assignment is to develop a framework for understanding the Open Access
Mechanism in Maharashtra and recommendation to minimize the loss of distribution licensee by
providing non-discriminatory open access to the transmission and distribution system in
Maharashtra. In order to achieve the desired objective, there is a need to take views of consumer
using Open Access, view of consumer those who are eligible but not using Open Access, also
MSEDCL stand on Open Access, views of SLDC, RLDC on the subject, which should
encompass the legal framework, technical, commercial and financial aspects related to the same.
The condition of power sector in Maharashtra would also need to be considered in order to
develop an overall framework for the implementation of open access in the state.
This section reviews the legal framework existing in Maharashtra, along with the various provisions of
the EA 2003 to understand the legal boundaries within which the regulations would need to be developed.
“According to the Act….”
The Electricity Act 2003 brought in significant changes in the power sector by enabling
competition, mandating open access to transmission and distribution networks, recognizing
trading and supply as a licensed activity, and delicensing generation.
Open Access, as per EA 2003, is defined under Section 2 (47) as follows:
“Open Access means the 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.
Meaning of Non-discriminatory Open Access
Entitlement of the users to use transmission & distribution network of the
licensees.
Licensees maintaining these networks cannot refuse such usage merely because
such system belongs to him.
Universal service obligation.
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Differential treatment of unequals is not discrimination if such unequals are
clearly identifiable as a separate class and there are justifiable reasons for
separating them.
Use of the transmission system can be classified and conditions of the open access
can be structured differently.
Thus, classification can be made between the existing and new users and, long
term, medium term and short term users, continuous and seasonal users, peak and
non-peak hour users and distribution licensees.
4.2 ELIGIBILITY CRITERIA FOR OPEN ACCESS
A consumer of a Distribution Licensee shall be eligible for open access to the distribution
system of such Distribution Licensee for obtaining supply of electricity from a Generating
Company or from a Licensee other than such Distribution Licensee, in accordance with the
following eligibility conditions:
Contract demand of consumer Date on which open access will be allowed under sub section (2) Of Section 42 of the Act
Not less than 5 MVA Publication of these regulations in official gazette
Not less than 2 MVA but less than 5 MVA 1-Apr-06
Not less than 1 MVA 1-Apr-07
Provided that such consumer shall be eligible for open access to the distribution system of such
Distribution Licensee from the date his Contract Demand is equal to or greater than the threshold levels
as specified above on or after the date on which open access is allowed under this Regulation.
Provided further that where a person, not being a consumer, whose premises are situated within the
area of supply of a Distribution Licensee requires supply of electricity from a Generating Company or
any Licensee other than such Distribution Licensee, such person shall be eligible for open access to the
distribution system of the Distribution Licensee if the load applied for by such person with such
Generating Company or Licensee exceeds the threshold levels as specified above on or after the date
on which open access is allowed under this Regulation.
Provided also that the Maximum Demand of such consumer or person in each financial year
subsequent to his being granted open access shall be equal to or greater than eighty (80) per cent of the
threshold level at which he has become eligible for open access failing which the Distribution Licensee
shall be entitled to withdraw the facility of open access granted to such consumer or person.
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Provided also that where the facility of open access of such consumer or person has been withdrawn
on account of failure to achieve a Maximum Demand equal to or greater than eighty (80) per cent of
the threshold level, then such consumer or person, as the case may be, shall be liable to pay, to the
Distribution Licensee, a penalty equal to two times the wheeling charges for the financial year or part
thereof for which he had failed to achieve such Maximum Demand.
The Commission shall allow open access to the distribution system of a Distribution Licensee to
a Generating Company or a Licensee, other than such Distribution Licensee, to give supply of
electricity to a consumer or person, whose premises are situated within the area of supply of the
Distribution Licensee, from the date on which such consumer or person, to whom such supply is
to be given, becomes eligible for open access in accordance with above Regulation.
Provided that the application for open access under this Regulation 3.2 shall be made by the eligible
consumer or person, whose premises are situated within the area of supply of the Distribution Licensee,
to whom supply is intended to be given by such Generating Company or Licensee.
The Commission may review, amend and modify, with or without conditions, the eligibility
conditions referred to in this Regulation 3 based on the experience gained through the
introduction of open access and/ or upon a consideration of all relevant factors, including
operational constraints, if any, in the implementation of open access.
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4.3 SECTIONS OF EA-2003 GOVERNING OPEN ACCESS
Captive Generation – Section 9 (2)
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 availability of adequate transmission facility and
such availability of transmission facility shall be determined by the Central Transmission Utility
or the State Transmission Utility, as the case may be:
Provided further that any dispute regarding the availability of transmission facility shall be adjudicated
upon by the Appropriate Commission.
Functions of CTU – Section 38 (2) (d)
The functions of the Central Transmission Utility shall be 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 and eliminated
in the manner as may be specified by the Central Commission:
Provided also that such surcharge may be levied till such time the cross subsidies are not eliminated:
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.
Functions of STU – Section 39 (2) (d)
The functions of the State Transmission Utility shall be 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:
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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 and eliminated
in the manner as may be specified by the State Commission:
Provided also that the manner of payment and utilization 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.
Wheeling Charges – Section 42 (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 may be allowed before the cross subsidies are eliminated 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 and
eliminated in the manner as may 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.
Additional Surcharge – Section 42 (4)
Where the State Commission permits a consumer or class of consumers to receive supply of electricity
from a person other than the distribution licensee of his area of supply, such consumer shall be liable to
pay an additional surcharge on the charges of wheeling, as may be specified by the State Commission,
to meet the fixed cost of such distribution licensee arising out of his obligation to supply.
Functions of State Commission – Section 86 (1)
The State Commission shall discharge facilitate intra-state transmission and wheeling of electricity;
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4.4 OPEN ACCESS TO DISTRIBUTION NETWORKS
The rights conferred upon consumers of electricity to source their supply from competing producers
and suppliers and the corresponding duties imposed upon transmission entities, distribution licensees
and RLDCs/SLDCs to transport electricity in an efficient and non-discriminatory manner aim at
creating a competitive market that would improve efficiencies and cut costs. Moreover, it would create
a market for supply by competing producers and thus encourage investments in creation of generating
capacities which need not rely on distribution licensees for payment security. Trading licensees have
been introduced, under the provisions of Section 52, to lend greater efficiency and competitiveness in
the sale and purchase of electricity. To ensure the ‘last mile’ access to consumer, Sections 42 (2)
through 42 (4) stipulate the duties of distribution licensees in providing open access to their networks.
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4.5 DUTIES OF DISTRIBUTION LICENSEE AND OPEN ACCESS a) 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 utilized 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 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:
Provided also that the State Commission shall, not later than five years from the date of
commencement of the Electricity 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.
b) Where any person, whose premises are situated within the area of supply of a distribution
licensee, (not being a local authority engaged in the business of distribution of electricity
before the appointed date) requires a supply of electricity from a generating company or any
licensee other than such distribution licensee, such person may, by notice, require the
distribution licensee for wheeling such electricity in accordance with regulations made by the
State Commission and the duties of the distribution licensee with respect to such supply shall
be of a common carrier providing non-discriminatory open access.
c) Where the State Commission permits a consumer or class of consumers to receive supply of
electricity from a person other than the distribution licensee of his area of supply, such
consumer shall be liable to pay an additional surcharge on the charges of wheeling, as may
be specified by the State Commission, to meet the fixed cost of such distribution licensee
arising out of his obligation to supply.
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4.6 CATEGORIZATION OF OPEN ACCESS
Figure 3- Categorization of Open Access
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Allotment priority of a long-term customer shall be higher than reservation priority of a short-
term customer.
Applications for grant of short-term access shall be processed only if short-term access is
commencing in the first month to the fourth month and is not ending beyond the fourth month,
taking the month in which application is made as the first month.
Application is made or received after the nineteenth day of a month for open access
commencing and terminating in the following month shall be treated on first-come-first served
basis, and short-term access shall be granted subject to availability of the transmission capacity.
Electronic-bids are invite for reservation of transmission capacity of the congested transmission
corridor in accordance with Regulation on the twenty-sixth day of the month.
Every transmission licensee shall declare the existing long-term customers using its
transmission system (including self-use and use by unbundled agencies which were previously
integrated) either on its website or on the website of the Regional Load Despatch Centre or the
State Load Dispatch Centre concerned latest by the thirtieth day of June 2005.”
A composite request for open access and scheduling shall be sent to the nodal Regional Load
Dispatch Centre through the State Load Despatch Centre concerned latest by 3.00 PM.
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4.7 PROCEDURE FOR ALLOTMENT OF OPEN ACCESS
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:
Provided that where the long-term access can be allowed without further system strengthening,
this shall be allowed immediately after entering into commercial agreements.
v) 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;
vi) 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.
The applicant shall reimburse the actual expenditure incurred by the nodal agency for system
strengthening studies:
Provided that the fee of rupees one lakh paid by the applicant shall be adjusted against the actual
expenditure to be reimbursed by the applicant.
Short Term Open Access i) A short-term customer shall submit an application for transmission access to the nodal Regional
Load Dispatch 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
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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.
Figure 4- Procedure for Scheduling of Short Term Open Access in Bilateral Transaction
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Figure 5- Procedure for Scheduling of Short Term Open Access in Collective Transaction
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4.8 ROLE OF DIFFERENT AGENCIES IN OPEN ACCESS
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.
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.
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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
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.
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.
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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-
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.
MEDA (Maharashtra Energy Development Association)
The role of MEDA in Open Access is only to see that weather the Open Access Consumer are meeting
is RPO (Renewable Purchase Obligation) or not, because criteria for both Open Access consumption
and RPO is same ie. 1 MW.
4.9 COMPONENT OF OPEN ACCESS
While framing the draft regulations a number of issues have been analysed prior to the formulation of
various options available in building up of the Open Access framework. The intent of the analysis is to
understand the various facets of open access and its impact on the various constituents of the power
sector in Maharashtra so as to develop a framework that is consistent with the legislation, state
environment and is implementable.
The key issues identified are:
- Capacity determination
- Allocation of Capacity
- Pricing of Open Access, including determination of charges, namely, transmission charges,
wheeling charges, cross subsidy surcharge and additional surcharge
- Other issues
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4.10 CAPACITY ASSESSMENT The aim of capacity assessment is to understand the extent of surplus capacity available on the network
that can be used to provide open access, without impacting the existing users, reserve capacities and
redundancy requirements to meet emergency conditions. In case there is limited network capacity
available, plan for timely augmentation in view of growth in demand and addition in generation
capacity of the network would need to be identified so that open access can be provided to those who
are seeking the same as per the EA 2003.
In this regard, the following aspects need to be addressed:
• Approach to Network Capacity Assessment and network capacity augmentation
• Operational Aspects
- Allocation of network capacity
- Curtailment
- Revocation and Transfer
Approach to Network Capacity Assessment
The existing system in the State has various generators (both public and private) and linked with the
grid to enable the transfer of power from generating plants to the end consumers. Given the complexity
of the open access, there is a clear need to understand what network capacity really reflects to. Does it
reflect
• Point-to-point capacity available in the network
• Capacity of the network as a whole
If capacity were defined as point-to-point, then specific points of injection and drawl would become
important for assessment of capacity available in the system. Internationally, both network service as
well as point-to-point service is provided by transmission service providers. Network service would be
preferred as it would provide more flexibility to the players and would in any case be required as the
systems move towards dynamic markets. Such a service would require the transmission and
distribution system to be robust with adequate reserve margins and systems and processes to provide it.
Based on the current situation of network capacity and constrained investments, in the interim, it would
be preferable that the system be tested based on limited flexibility on the injection and drawl, i.e. a
point-to-point approach. For the long-term, in view of encouraging the trading business, planning
would be required to ensure availability of network service.
For the present, it is felt that the optimum approach would be the assessment of Available Network
Capacity (ANC) based on point-to-point basis specified on point of injection and point of drawl. ANC
would provide the information about the available transfer capacity of the transmission / distribution
line in a certain direction without violating the security constraints. It would essentially measure the
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transfer capability remaining in the physical network for further commercial activity, over and above
already committed uses (less the ―existing loadǁ for the applicant if already a consumer). Any new
load of an existing open access customer would be treated at par for allocation of network capacity as a
new open access customer.
Computation of ANC would need to be assessed keeping the following issues in mind:
Existing users and therefore the capacity utilized over seasons, peak and off-peak periods.
Reserved capacity – that has been reserved but is currently unutilized on account of delays in
commissioning of end-user equipment’s, lack of funds, policy directives or otherwise etc.
Growth expected in the load.
Safety margins required for safety of the grid.
As every transaction affects the entire grid as well as interconnected lines, ANC is expected to be a
dynamic value and would be dependent on the status of the rest of the network. Accordingly, an
assessment of the ANC must allow for reasonable uncertainties in system conditions and afford
redundancies to address emergency situations.
The capacity assessment for the transmission and distribution system would need to be conducted
periodically by the Transmission Licensee, in Maharashtra and distribution licensees MSEDCL, TATA
Power, Reliance and BEST respectively with the help of SLDC. However, it is important that to ensure
fair open access, the regulators must be able to assess the situation put forth by the nodal agency and
take corrective measures/directives within limited time period. There may therefore be need for an
independent assessment, wherever required, with the support of external experts.
In the event that network capacity is not available at the time of assessment, STU and the concerned
Distribution Licensee would be required to make an assessment of the capacity addition required and
the timeframe for implementation of the same. As availability and reliability of the network forms the
core of the open access regime, investment planning would need to form a part of the license
requirements and planning process of the State Transmission Utility. As the system strengthening
would benefit other users also, the costs towards the system augmentation and strengthening required
would be borne by all the long-term users of the system. However, any costs towards any dedicated
system required would be borne by the open access customer alone, until the dedicated facility is
offered for use by other participants of the T&D system, in which case then the costs can be shared
between the users of the dedicated facility in proportion to their capacity reserved.
The increased reliability to be provided under Open access would require that integrated system
planning be undertaken by STU, concerned Distribution Licensees and SLDC with intimation to the
Commission so that smooth implementation and cost recovery can take place.
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Allocation of Network Capacity
Before providing Open Access it is essential to address the issue of what the capacity allocation is
required for, and whether such a determination should be undertaken after factoring for the
requirements and constraints of existing licensees or should it be based on a perusal treatment of all
open access customers. The reason why this issue is important is that if reservation of network capacity
is unilaterally adopted, this could result in effectively blocking open access till new capacities are
planned for and allocated to the new applicants seeking open access. Such blocking would not make
economic sense in view of unutilized capacity. It is therefore felt that there is need for an appreciation
of the conflicting viewpoints on this issue before a view is taken on the need or otherwise of
reservation. In the new draft regulations by MERC it is decided to give priority
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Allotment Priority:
Figure 6- Allotment Priority
The allocation of network capacity would be contingent on the categorization of open access
customers, which in itself can be based on a variety of factors as outlined below:
Nature of customer
Current Status- Existing and New (Open access customers)
Tenure – Long-term, Medium-term and Short-term
Nature of open access – Firm or non-firm;
Periodicity – Full year vs. seasonal;
Quantum reserved
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Curtailment Priority
When, because of constraints or otherwise, it becomes necessary to curtail the open access service of
the customers, subject to the requirements of Grid Code, the short term open access customers shall be
curtailed first, followed by the medium term open access customers and long term access customers.
The open access to a distribution licensee shall be the last to be curtailed.
Under-Utilization/Non-Utilization of Open Access capacity
In case, a Long-Term Access customer is unable to utilize the capacity allotted to him, he shall inform
the same to State Transmission Utility along with reasons for his inability to utilize the capacity and
may request for surrender of the capacity allotted to him by serving a notice of 1 year, after which the
relevant capacity would be deemed to have been surrendered. The State Transmission Utility may
reduce or cancel the allotted capacity of an open access customer on account of underutilization after
providing appropriate notice. The penalty payable for such reduction or cancellation or surrendering of
capacity shall be equivalent to 66% of the transmission charges paid by such customer for the period
falling short of notice period of 1 year and 66% of the transmission charges for the period falling short
of 12 years if long term access was not availed for at least 12 years based on average billing of
respective open access charges for the past three months.
In case, medium term open access customer is unable to utilize the reserved capacity allotted to him, he
shall inform the nodal agency along with the reasons for his inability to utilize the capacity and may
request for surrender of the capacity allotted to him by serving a notice of 30 days, after which the
relevant capacity would be deemed to have been surrendered. The Nodal Agency may reduce or cancel
the allotted capacity of an open access customer on account of underutilization after providing
appropriate notice. The medium-term open access customer relinquishing its rights shall pay applicable
transmission charges for the period of relinquishment or 30 days whichever is lesser.
In case, Short-term open access customer is unable to utilize the reserved capacity allotted to him, he
shall inform the Nodal Agency with a copy to distribution licensee along with reasons for his inability
to utilize the capacity and may surrender the reserved capacity. The State Load Despatch Centre may
reduce or cancel the reserved capacity of a short-term open access customer on account of
underutilization after providing appropriate notice under intimation to distribution licensee. A short
term Open Access customer, whose capacity has been reduced or cancelled or surrendered, shall bear
the open access charges and operation charges based on the original reserved capacity for a period of
two days from the date of receipt of request or the period of reservation surrendered or reduced or
cancelled, as the case may be, whichever period is shorter.
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4.11 PRICING FOR OPEN ACCESS
Objective of Pricing Policy as followed by MSEDCL The Pricing policy that has been followed by MERC, took following points into consideration:
Be Simple to understand and administer;
Promote efficient use of the system;
Provide adequate compensation to the system owner;
Give economic signals for new investments and for demand side management including
location of new generation capacities and loads;
Avoid misuse through gaming, speculative possibilities & blocking capacity.
Pricing for Network Usage
It is important to ensure that all the costs are recovered through the proposed method of charging the
transmission / wheeling charges and other components, even stranded costs, if any, resulting from open
access. All these costs need to be recovered so that the financial viability of the successor entities is
established in the transition period. The tariff revolves around the following three aspects:
i) Elements of tariff
ii) Cost allocation Criteria: Tariff design
iii) Cost concepts
Elements of tariff
It would be segregated based on the nature of the costs (Fixed / variable), different sources (Network /
Connection) or basis of allocation (Congestion). The various elements of the tariff are discussed in
detail below.
Cost allocation Criteria: Tariff design
The tariff design should encourage efficient usage of assets, optimum investments and location of
generating stations, loads, competition and power trading. The design accordingly aims at optimal use
of system through allocation of costs based on the impact on the system. A number of methods are
available for this purpose ranging from the simple Postage Stamp method to complex MW-mile
method. The principle would be to allocate the costs based on the usage by the user / beneficiary and
the related losses. In view of the nature of electricity, capturing these two aspects needs a large amount
of reliable data capturing infrastructure and complex systems. Some of the key methods used for
transmission systems have been discussed by CERC in formulating the regulations on open access for
Inter-state transactions and are briefly presented below:
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POSTAGE STAMP METHOD
Under this method, the total costs to be covered are distributed amongst the total energy or capacity
carried by the system, resulting in a fixed charge per unit of energy transmitted or capacity reserved
regardless of the distance that the energy travels. This charge can be calculated for defined areas or
zones. These rates can also be differentiated based on seasons and time of day. In the event when a
transaction requires energy to be transmitted across a number of zones, the transmission charges are
equal to the summation of such charges for each zones crossed – such a phenomenon is termed as
―Pan caking. Some of the variations on this method are given below:
(A-1) Regional postage stamp method – The annual transmission costs calculated for each identified
region are shared based on capacity handled by the region, which includes the allocated central
generating stations’ capacity to different states, bilateral exchanges as well as capacity brought in
through trading.
(A-2) Incremental postage stamp method – This method envisages reducing the area within a
postage stamp so as to make the charges sensitive to distances exceeding 100 kms. The proposal is to
demarcate the country into squares of 100km x 100 km and the charges payable by the open access
customer are determined by counting the squares vertically and horizontally from the source to sink of
the transaction. However, this method would not reflect the actual usage of the network by a
transaction especially in case of transmission by displacement.
(A-3) Zonal postage stamp matrix Method – This is an improvised version of incremental postage
stamp method being suggested, in which the country is demarcated into 14 zones, each represented by
one or more States. Stamps between various zones are counted not only by the physical distance but
also by taking into consideration the mode of transmission (i.e. actual flow or displacement). Based on
the existing network and flow patterns, a matrix of stamps between various zones based on notional
distances has been suggested. The notional distance aims to capture the existing flow pattern and
impact of incremental flow due to open access transaction. This method, thus, tries to replicate the
results obtainable from the MW-mile method, without going into complexities of the latter. This matrix
would need to be revised based on asset addition as well as energy flows.
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CONTRACT PATH METHOD
In this method, the charges payable by the user are related to the transmission path of the transaction.
For this purpose, contracted path is defined as the shortest route formed by a series of transmission
lines (as agreed between the participants) which are capable of carrying the contracted power between
point of drawal and the point of injection. This method however, requires clear identification of the
contracted path. While it is simple and sensitive to distance, it would not reflect the true picture unless
based on path as chosen by load flow studies that would capture aspects like transmission taking place
in displacement mode and probability of using parallel paths. While this method has been widely used
in the USA, it has been felt that it is not really cost reflective and is vulnerable to gaming.
MW-Mile method
In this method the transmission rates explicitly reflect the cost of transmission, based on both the
megawatts of power flow and the distance between the receipt and delivery points. The cost of
transmission per megawatt-mile is the total transmission costs averaged over megawatt miles of usage.
MW-mile is a sophisticated and scientifically analytical method. This method involves load flow
analysis to model power flows on the transmission network to determine charges and hence requires
complete network data to be captured.
The above methods are primarily used for transmission systems for limited players and require
extensive information. Application of the same principles would be difficult to implement across the
congested and concentrated distribution networks, which would need to be addressed through simpler
principle.
Cost concepts
These would be the cost being used for allocating. The two concepts in this regard are
(i) Average Costs and (ii) Marginal Costs.
i) Average Costs
Under this method, the costs incurred are shared amongst the various users on a specified basis (as
discussed above) and do not reflect the current costs. The users are treated equally – E.g., if the
transmission costs are shared based on capacity reserved, two users with a reservation of 100 MW
would be allocated the same costs. Similarly, two users drawing the same energy would be allocated
the same amount of losses;
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ii) Marginal costs
Under this method, each user is charged based on the impact that they make on the network, be it the
requirement of assets or the losses incurred. While the losses can be computed based on the
incremental losses on account of a new addition, for costs recovery, the concept used for assets are
determined based on replacement value / current costs of assets required. While marginal pricing
reflects the market based price, internationally, it has been experienced that this mode of pricing has
not been fully able to recover the costs and has forced the regulators to have a mix of marginal pricing
and fixed pricing so as to ensure investments into the sector. Under such an event, the unrecovered
costs (net of amount collected with marginal pricing) are shared between the users on a uniform basis
(Capacity / Energy).
The key charges that need to be determined by the Commission fall in the following categories,
subject to the National Tariff Policy and principles and methodologies used by MERC for Open Access
Customers:
• Transmission Charges
• Wheeling Charges
• System Operating Charges
• Surcharge for cross subsidy
• Additional Surcharge
• T&D Losses
Prior to the formulation of Intra State Open Access Regulations in Maharashtra, the Central
Commission (CERC) has provided its Order and Regulations on ―Open Access in Inter-state
Transmission used the following principles in pricing:
- Elements of Tariff:
The charges have been segregated into Transmission Charges (for long-term, medium-term and Short-
term), SLDC Charges, UI Charges, Bidding for Congestion, Reactive Energy Charges and Losses.
- Cost Allocation and Cost Concepts:
The allocation of costs has been based on an average principle rather than the marginal implying that
all the costs are uniformly shared between a set of users irrespective of the impact that each additional
user / transaction has on the system. Such a method is being proposed, as it is not currently practicable
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to measure the marginal impact of each transaction on the costs and the losses of the transmission
system.
Transmission Charges for the long-term and medium-term users are based on recovery of all approved
costs through a variation of Postage Stamp method, wherein the stamp is computed for each Region.
Under this method, the entire costs of the Transmission (after netting off of 75% of fund collected from
short-term users) are shared between the various users in proportion to the capacity reserved by them.
The charges for the short-term users are 25% of the average transmission charge, as computed at the
beginning of a year. These charges shall be payable to each transmission licensee whose system is used
for the transaction.
These charges are calculated for each Region separately. Further these charges would be
calculated for each inter-regional link, other inter-state transmission licensees separately.
In the event of congestion, short-term users are to bid for the capacity based on a Transmission
Charge Price, wherein the average Transmission Charge computed for the year would be the
floor price for such bidding.
SLDC Charges are also based on the same principle as the Transmission Charges, i.e. the long-
term and medium-term users share the total costs, except that they have been allowed to retain
the charges imposed on the short-term users (on a per day basis) over and above the costs as
approved by the Central / State Commission.
UI Charges are to be payable as governed by the UI pricing mechanism applicable to the inter-
state transactions. However, any UI on account of embedded customers shall form a part of the
State Bill, to whose system the embedded customer is connected.
Reactive Energy Charges shall be as applicable to inter-state transactions. However, as with UI
charges, embedded customers shall be governed by the regulations applicable to the State to
which they are connected.
Losses would be averaged across all users and would be paid in kind by additional injection.
4.12 CHARGES FOR OPEN ACCESS CUSTOMERS
Transmission Charges
Under the EA 2003, open access to the transmission shall be provided on payment of transmission
charges and other charges like surcharge etc. depending on the category of customers seeking open
access. There are two kinds of costs that are incurred by the transmission licensees, viz. costs for
creating, operating and maintaining the network and costs on account of losses. The charges have been
designed in a manner so as to allow the recovery of these costs from the various users of the system.
Under the existing regime, the transmission charge is designed so as to recover all the costs of the
CTU, in proportion of the reserved capacity of the long-term users. At the State level, the State
Commission allows for recovery of the costs from the Consumers.
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Costs to be recovered
These charges are for the actual usage of the transmission and the distribution system for transferring
the contracted power from the generator to the user. Accordingly all costs associated with the
transmission or sub-transmission and distribution system may be recovered from the
licensees/consumers availing network service. These charges are expected to cover all the costs for
creating and operating the network including O&M, interest expenses, depreciation and equity returns.
The different costs can be segregated into:
• Connection Charges
For recovery of costs for assets used for interconnection to the grid. As these costs are fixed in nature,
the charges are generally fixed, typically allocated based on capacity reserved. However, the quantum
of these charges can differ, depending on the funding of these assets. In case these assets have been
funded by the users themselves through a capital contribution, these charges would cover only the
expenses for operation and maintenance of these assets, else they would cover all the usual fixed
expenses towards O&M, interest expenses, depreciation, return on equity, etc.
• Use of System Charges
For recovery of costs for using the transmission and distribution network for reaching the power to the
recipient unit.
• Congestion Price
Pricing to reflect the overloading of the network and the costs related with it. Congestion pricing /
peak pricing is used to encourage the efficient usage of the assets as well as to foster investment in new
lines. Congestion results in some of the customers not being able to access the contracted power and
therefore forced to purchase more expensive power through a non-congested link. The increased cost
is the cost of congestion and therefore needs to be charged to those who are causing it. Some of the
methods used for congestion pricing include (i) Nodal pricing, wherein the congestion price reflects the
difference between generation price at the two ends of the congestion, thereby pricing the congestion at
the cost of the replacement power requirement and (ii) sharing the additional costs on account of
buying more expensive power that have to be borne (in proportion of energy drawl) by participants on
account of the congestion. Such computation would need to define ―Congestion and segregate costs
associated with the same. Another surrogate to be used could be that the loss incurred by users is priced
at the ―marginal cost of power and divided among the users causing the congestion.
In case of multiple transmission licensees, the costs of each licensee would be taken into account to
compute the various charges applicable for using the licensee’s system.
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Allocation of Costs The costs computed above can be allocated to the various users based on the following:
• Connection Costs
As these costs are related only to the specific users connected to this equipment, these are typically
allocated based on the capacity reserved by each user and are fixed in nature
• Use of System Charges
Various methods are available for allocating these costs
• Congestion Price
As these costs are incurred on account of the users of the congested leg, these are allocated to the users
causing the congestion. The allocation is typically not fixed and is charged only for the periods of
congestion and can be based on capacity reserved or energy drawl.
As per MERC regulation, the open access consumer has to pay Transmission charges payable to State
Transmission Utility/ transmission licensee for usage of their system, and shall be as determined as
under:
i) By Long-term and Medium-term Open Access customers:
The long-term and medium-term open access customers shall share the annual transmission service
charge of the STU or transmission licensee on a monthly basis in accordance with the following
formula:
Transmission Charges = ATSC/ (Acs X 12) (in Rs./MW-Month)
Where,
ATSC – Annual Transmission Service Charges determined by the Commission for the State
Transmission System for the year
Acs – Sum of the capacities allocated to all long-term and medium-term open access customers in
MW.
The transmission charges payable by the long-term and medium-term open access customers for the
use of transmission system for a part of the month shall be determined as under:
Transmission Charges = ATSC/ (Acs X 365) (in Rs. /MW-Day)
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Where,
ATSC - Annual Transmission Service Charges determined by the Commission for the State
Transmission System for the year
Acs - Sum of the capacities allocated to all long-term and medium-term open access customers in
MW.
ii) By Short-term Open Access Customers:
The short-term open access customers shall pay one-fourth of the transmission charges applicable to
the Long-term / Medium-term Customers. 25% of the charges collected from the Short Term Open
Access customer shall be retained by the Transmission Licensee and the balance 75% shall be adjusted
towards reduction in the transmission service charges payable by the Beneficiaries.
Scheduling and System Operation Charges
Scheduling and Operation charges include fees for scheduling and system operation, fees for
affecting revision in the schedule on bonafide grounds, and collection and disbursement
charges.
Short-term customers shall pay scheduling and system operation charges to be notified by the
commission after determination of ARR. In Maharashtra, a composite operating charge @
Rs.2,000/- per day 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.
Scheduling and system operation charges shall also be payable by a generating company or a
licensee when allowed accesses under these Regulations.
Wheeling Charges
Under the EA 2003, charges for the use of the distribution system are to be recovered through
the wheeling charges. The wheeling charges is sought to cover not just the network cost but
also need to factor for administration charges and operation & maintenance charges as well.
The basic elements remain similar to the transmission charges.
Wheeling means the operation whereby the distribution system and associated facilities of a
transmission licensee or distribution licensee, as the case may be, are used by another person
for the conveyance of electricity on payment of charges to be determined under section 62.
Distribution system means system of wires and associated facilities between the delivery
points on the transmission lines or the generating station connection and the point of connection
to the installation of consumers.
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The wheeling charges should reflect the costs incurred by the distribution licensee to supply
electricity to consumers including the cost of infrastructure.
When distribution system is associated, it is wheeling and wheeling charges is applicable
- Distribution system is where the consumer is connected
- Hence, when open access is used by a consumer, he is liable to pay wheeling charges (may
include transmission charges bundled in it.)
Wheeling charges payable by the open access customers for the usage of distribution system
shall be as determined by the Commission in the tariff order of the distribution licensee.
Transmission and wheeling charges as determined shall be payable, on monthly basis, by the
open access customers based on the capacity booked or actually utilized maximum capacity
whichever is higher. The regulation also specifies where a dedicated transmission system
and/or a distribution system used for open access has been constructed for exclusive use of an
open access customer, the transmission charges or wheeling charges for such dedicated system
shall be worked out by transmission and/or distribution licensee for their respective systems
and got approved by the Commission and shall be borne entirely by such open access customer
till such time the surplus capacity is allotted and used for by other persons or purposes.
In case intra-state transmission system and/or distribution system is used by an open access
customer in addition to inter-state transmission system, transmission charges and wheeling
charges as fixed and approved by the Commission shall be payable for use of intra-state system
in addition to payment of transmission charges for inter-state transmission.
Cross-Subsidy Surcharge Surcharge is to be in addition to charges for wheeling. This surcharge is meant to be utilized to meet
the cross-subsidy that is provided by the distribution licensees. At present, most of the state distribution
utilities provide subsidies to rural, agricultural and domestic consumption by imposing higher charges
on industrial consumption of electricity. If open access is provided, the utilities may no longer be able
to afford this cross-subsidy. Therefore, the Act provides for the gradual dismantling of the cross-
subsidy, and meanwhile, for it to be met through the imposition of a surcharge on the wheeling charge
when open access is allowed.
Policy Provisions
a) National Electricity Policy
Cross Subsidy Surcharge should not be so onerous that it eliminates competition which is intended
through Open Access
b) National Tariff Policy
Cross Subsidy Surcharge should adequately compensate the Distribution Licensee
It should not constraint introduction of competition
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Should be beneficial to consumers after adding all the charges
Cross Subsidy Surcharge to be computed as difference between the tariff applicable to the
relevant category of consumers and the cost of distribution licensee to supply electricity to the
consumers of the applicable class.
Cross Subsidy Mechanism as per NTP
S = T – [C (1+ L / 100) + D],
Where,
S – Surcharge
T – Tariff payable by the relevant category of consumers;
C – Weighted average cost of power purchase of top 5% at the margin
excluding renewable power and liquid fuel based generation
D – Wheeling charge
L – System loss for the applicable voltage level, expressed as a percentage
Various methods of surcharge (as recommended by FOR)
a) Average cost method
Surcharge = average realization from a consumer category – average cost
The simplest method to calculate surcharge for the base year is by taking the difference between the
average realization from a consumer category and the average cost. The method is simple and
computation is easy to make, but since the method assumes that losses and costs are same for LT and
HT and EHT consumers, it does not capture reality. Also the extent of cross subsidy will be
understated under this methodology. Also this approach does not provide correct economic signals to
the licensee or the consumer likely to move out. The group observed that it would discourage open
access since generation will not be available at such a low price at which it can be implemented.
Advantages:
Simplest method
Easy to understand
Easy to calculate
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Does not involve complicated data
Disadvantages:
Assumes that losses and costs are same all categories
Cross subsidy is understated
Discourages open access since generation is not available at such low price at which it can be
implemented. Issues with the Use of the Average Cost of Supply
Surcharge = HT tariff – Cost to Serve HT consumers
If the average cost of supply is used to calculate the surcharge, then Surcharge using average cost of
supply is
Surcharge = HT tariff – Average Cost of Supply
Therefore, the revenue deficit due to the use of average cost of supply is given by the following
equation:
Cross-subsidizing revenue deficit = Average cost of supply – Costs to Serve HT Consumers
b) Embedded cost method
The second method that was discussed was taking the difference between the average realization and
the consumer category-wise/voltage-wise cost of supply (embedded cost). Even though this method is
an improvement over the average cost method, it results in high level of surcharge. This would imply
that competitive rates of generation at which open access can be implemented have to be very low,
which again does not seem to be a reality. The net result would be that the method would not
encourage open access.
Surcharge = average realization from a consumer category – consumer category wise / voltage
wise cost of supply
Advantages:
Improvement over average cost method as it recognizes the fact that losses and costs are
different for L.T, H.T and E.H.T customer
Easy to calculate.
Disadvantages:
High level of surcharge
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To make this method feasible, competitive rates of generation at which open access is
implemented have to be very low and this is very difficult.
c) Marginal cost method
An alternative method of computing the quantum of surcharge is by taking the difference between the
average realization for the respective customer and the marginal cost of supply by the discom. The
different assumptions involved and the methodology adopted are:
i) The marginal cost of supply by a discom is equivalent to the sum of-
- Marginal cost of purchase of electricity by the distribution company
- Applicable transmission and wheeling charge
- Applicable system losses
ii) The marginal cost of purchase of electricity is to be equal to the highest power purchase cost of the
utility including fixed and variable cost It was agreed that surcharge calculated by this method is not
revenue neutral and will adversely impact the licensee financials. The group observed that surcharge in
this method could be negative also.
Surcharge = average realization from a consumer category – Marginal cost of supply
Disadvantages
Has an adverse impact on financial health of licensee
Surcharge by this method is very less sometimes it is also negative
Issues with the Use of Marginal Unit Cost (MUC)
i) We have several concerns with the use of MUC to calculate the surcharge. First, MUC do not
represent avoidable costs. Generally, the fixed costs of the marginal unit are not avoidable. If
the licensee’s load is reduced because of the departure of some customers, at best the licensee
will avoid the highest variable cost of either its own plants or the plants from which it
purchases power. In those cases where the marginal unit for a utility may be an unplanned
purchase from a surplus area or the unallocated portion of a Central Generating Station (CGS),
the utility may be able to avoid both the fixed and variable costs of the contract.
ii) The second reason why it is inappropriate to use MUC to calculate the surcharge is that this
assumes that for any utility, there is a single generating unit that is on the margin at all times,
and that is not so. The generating unit on the margin changes with the time of day and season.
During peak periods, peaking units with very high variable costs are on the margin while
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during off-peak periods, base load units with very low variable costs may be on the margin,
etc.. Thus generally the most expensive unit would be the one that operates only at the times of
the system peak (and hence would have a low PLF) and applying that cost to all the 8760 hours
3 of the year would lead to a gross overstatement of the avoidable costs.
iii) The third problem with the use of MUC to calculate the surcharge is that the highest cost unit is
not applicable to the entire decrement of load. The use of a single unit (the highest cost unit) to
represent avoidable costs for the entire load that would go out due to open access is likely to be
incorrect. As an example, consider that 1000MW of industrial load is expected to leave the
licensee and get electricity from alternative suppliers. If the capacity of the highest cost
generating resource is only 200 MW, then clearly it would be incorrect to assume that the costs
per kWh of the 200 MW unit would be applicable to the entire 1000 MW load block. The
avoidable costs for the remaining 800 MW would be lower. Therefore, the size of the
decrement of load for calculating the avoidable costs must match the expected decrement in
load due to open access. The avoidable cost would then be the weighted average of the costs of
the generating units that would no longer be required.
d) Avoided cost method
The methodology for computing the avoided cost is as follows:
i) As a first step, the projected capacity that is likely to move away due to open access will be
estimated.
ii) Since, it will avoid purchase of power from marginal source of supply, the weighted marginal
cost of power purchase (variable cost) from such sources would be considered as avoided cost
for variable components of power purchase.
iii) To that avoided cost, other charges viz. applicable fixed charges of power purchase, and
applicable transmission and wheeling charge will be added to arrive at cost of supply.
iv) The difference between the average realization of a category and the avoided cost of supply,
discussed above, shall provide the cross subsidy surcharge amount.
Surcharge = avg. realization from a consumer category – avoided cost of supply
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Additional Surcharge
Additional Surcharge – Policy Provisions
a) National Electricity Policy
Additional Surcharge should not be so onerous that it eliminates competition which is
intended through Open Access
b) National Tariff Policy
Additional Surcharge should be applicable if it is conclusively demonstrated that the
obligation of a licensee in terms of existing power purchase agreements has been and
continues to be stranded ; or
There is an unavoidable obligation and incidence to bear fixed costs consequent to a
Contract
Fixed Costs related to network assets would be recovered through Wheeling Charges
Objectives and Principles
a) To compensate the Licensee towards loss of purchasing power in case Licensee is unable to sell
that power
b) It is not intended to recover other fixed cost of Licensee
c) In case of supply shortage situation, there will be no loss to licensee and hence may be
specified as zero
d) The obligation is on the Licensee to prove that its power purchase commitments have become
stranded
In the draft there is a provision that an open access customer, receiving supply of electricity from a
person other than the distribution Licensee of his area of supply, shall pay to the distribution Licensee
an additional surcharge on the charges of wheeling, in addition to wheeling charges and cross-subsidy
surcharge, to meet out the fixed cost of such distribution Licensee arising out of his obligation to
supply. The Commission shall scrutinize the statement of calculation of fixed cost submitted by the
distribution licensee and obtain objections, if any, from the open access customer and determine the
amount of additional surcharge.
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Imbalance 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. However the tariff payable by the open access customers to the licensee may
contain a component of incentive to be decided by the Commission.
A composite UI bill for the State as a whole shall be issued by the RLDC, the segregation of
which shall be done at the state level by the SLDC for the UI charges payable by the open
access customers.
Reactive Energy Charges
The payment for the reactive energy charges by open access customers shall be in accordance with
provisions stipulated in the Grid Code. If the voltage at the point of drawl is below 97% of the normal
voltage, the open access customer shall pay reactive energy charges to the concerned utility /licensee
for drawl of reactive energy at the drawal point. If at the injection point the voltage is higher than 103%
of normal voltage, the open access customer shall pay reactive energy charges to the concern utility/
licensee for injection of reactive energy at the point of injection. Both drawl and injection of reactive
energy shall be measured at 15 minutes time block along with voltage in the SEM meters.
Reactive energy rates applicable for intra-State entity shall be based on inter-State reactive energy rates
notified by NRPC after suitably adjusting for intra-State transmission and distribution losses
determined by the Commission in the applicable Tariff Orders and also by the applicable losses in the
inter-State transmission estimated by NRLDC from time to time.
Transmission Losses
The losses payable here relate to the electricity lost in the system on account of transmission across the
network. These losses are computed based on the difference in reading between the generation bus bar /
receiving station and the meter at the Grid Substation for delivery to all open access customers. Ideally
user should bear it not the market as a whole. Losses are function of the distance travelled, voltage
level and loading of the system (included in system use charge).
Appropriate improvements like metering of electricity flows based on time of day (ToD) could also
capture the impact of differential load/grid conditions on losses. In any case, metering of flows at
various interface points and voltage levels would be the critical activity in the efficient allocation of
losses. The existing approach could gradually shift towards allocation of losses at different voltages as
metering and systems get upgraded in the future.
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Distribution Losses
The losses in the distribution system would cover the electricity lost in the system on account of
technical losses and non-technical losses such as theft, pilferage, improper metering, wrong meter
reading, etc. in the network. At the aggregate level, these losses are computed based on the difference
between the energy injected into the distribution system and the total billing (metered plus assessed
consumption) to the consumers.
Unlike the transmission losses, the determination and allocation of distribution losses is far more
complex as the network is far more integrated. While the desired objective is to allocate losses, it is
much more difficult to segregate the losses based on usage as a sizeable portion of the consumption is
not being metered. Since it is not known whether the commercial losses are due to a specific class of
customers, it may be necessary to allocate the commercial losses across all consumers. Under the
arrangement relating to open access where an existing customer has sought an open access, given that
the extent of losses cannot be determined towards any specific customer, there is one argument to state
that it may be necessary to allocate these losses to such customers as well.
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CHAPTER-5 OPEN ACCESS ANALYSIS
5.1 OPEN ACCESS IN MAHARASHTRA
1.1 Introduction
In Maharashtra Open Access has started in 2005 with the guideline of Maharashtra Electricity
Regulatory Commission’s (MERC) regulation 2005. In Maharashtra there are total four distribution
licensee namely :
a) Maharashtra State Electricity Distribution Co. Ltd. (MSEDCL) (Except Mumbai rest of Maharashta)
b) Tata Power (Mumbai Region)
c) Reliance Power (Mumbai Region)
d) Brihanmumbai Electric Supply & Transport (BEST) (Mumbai Region)
1.2 Case No. 43 of 2010 filled by MSEDCL in MERC
a) As per this petition there is error occurred in calculation of cross subsidy with the help of
conventional formula which is given below due to this error the formula evolved in the said Order does
not result in recovery of cross subsidy inbuilt in the current tariff of MSEDCL.
S = T – [C (1+ L / 100) + D]
Where,
S – Surcharge
T – Tariff payable by the relevant category of consumers
C – Weighted average cost of power purchase of top 5% at the margin excluding
liquid fuel based generation and renewable power
D – Wheeling charge
L – System Losses for the applicable voltage level, expressed as a percentage, and inclusive of
transmission loss. For intra-state transactions, transmission loss prescribed by the Commission for the
STU should be considered, while for inter-state transactions, additional loss compensation as provided
by CERC in its Open Access Regulations should be considered.
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b) With the help of this formula CSS works out to be zero, primarily because the weighted average
power purchase cost of top 5% at the margin, after adding the intra-state transmission tariff and
voltage-wise losses is less than the average realization from High Tension category.
c) As per MSEDCL in the present demand supply situation, when there is shortage of power and a
consumer opting for Open Access will not result in the reduction of power procurement, to the extent
of the requirement of the said consumer who has opted for Open Access. The formula as stipulated in
the Tariff Policy assumes an ideal situation, where demand of power and availability of power does not
mismatch. Hence determination of CSS will sustain only when such an ideal situation exists, may be in
future.
d) The Commission ruled that component ‘L’ pertaining to system losses in the formula for CSS
specified in Tariff Policy should include transmission losses. For intra-state transactions, transmission
loss prescribed by the Commission for the STU should be considered, while for inter-state
transactions, additional loss compensation as provided by CERC in its Open Access Regulations
should be considered.
e) Consumers availing Open Access will have to pay the above CSS except in the following cases:-
• For the quantum of power which is not being supplied by the Utility as per the Orders issued by the
Commission from time to time. Currently, load restriction of 10% and 20% is applicable to continuous
and non-continuous industry. Therefore, consumers in these categories will be permitted to purchase
this quantum of energy without payment of CSS.
• Open Access consumer’s purchasing power from renewable sources of energy.
• Open Access transactions as on the date of enactment of the EA 2003.
f) New consumers should not be exempted from paying of CSS.
g) Open Access transactions undertaken using liquid fuel based thermal generation will also have to
pay the CSS.
h) Recommendation was made for collection of surcharge, it may be collected either by the
distribution licensee, the transmission licensee, the STU or the CTU, depending on whose facilities are
used by the consumer for availing electricity supplies. In all cases the amounts collected from a
particular consumer should be given to the distribution licensee in whose area the consumer is located.
In case of two licensees supplying in the same area the licensee from whom the consumer was availing
supply shall be paid the amounts collected.
i) The fixed costs related to network assets would be recovered through wheeling charges.
j) Wheeling charges should be determined on the basis of same principles as laid down for intra-state
transmission charges and in addition would include average loss compensation of the relevant voltage
level.
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k) The point was made that due to the scenario of Tariffs (ABR) and weighted average Power
Purchase cost of top 5% at the margin for the licensees has changed and the same would have an
impact on the CSS. Therefore there is need to rework the CSS computation.
l) When commission had stated that MSEDCL has make immense delay of more than four years in
filing the review petition for CSS and the time given was 45 days in 2006, hence it is not considerable.
In reply MSEDCL has stated that in 2006 due to power crisis there is huge load shedding in
comparison to the present scenario, at that time along with agriculture and domestic there is load
restrictions of 10% and 20% for continuous and non-continuous process industries respectively in
MSEDCL area.
m) So external power sourcing during that time was encouraged to enable to meet the requirement of
the industries in the State and any impediment through CSS would have led to slow down in the
development of the State economy. Therefore, the Commission considering the need of the hour had
determined and continued with zero CSS for any additional power brought into the State.
n) Presently, there is no load shedding in the State of Maharashtra except few cases were
Transmission bottlenecks are existing and Load Management schemes of agriculture consumers.
Therefore, the changed situation has necessitated the Commission to revisit the issue of CSS.
o) The Commission is of the view that the CSS formula decided in the September 5, 2006 Order
cannot be reviewed with retrospective effect as that it will result in an anomalous situation of past Open
Access consumers paying a surcharge which was not determined at the relevant time.
p) Commission in its Order of 2011 ruled on the issue of applicability of CSS for change over
consumers from Rinfra – D to TPC – D in line with the Judgment of the Honourable Supreme Court of
India in 2008 in Civil Appeal of 2006. The Commission in the referred Order ruled that the CSS would
be applicable for Group of consumers since these consumers continue to be consumers of Rinra – D
for wires and the CSS has to be levied, to meet the requirements of the current level of cross subsidy.
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q) Cross Subsidy status in different state:
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5.2 BILLING PROCEDURE OF OPEN ACCESS IN MAHARASHTRA
Figure 7- Billing Procedure
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5.3 BILLING COMPONENT OF OPEN ACCESS IN MSEDCL a) Energy Charge
b) FAC Charges
c) Demand Charges
d) Additional Energy Charges
e) Additional Charge (Based on Final Tariff & Approval of ARR – Order No. 69/2011)
f) Additional Charge (Based on Final True Up & Performance Review – Order No. 100/2011)
g) Generation Company Charges
h) Electricity Duty
i) Tax on Sale
j) Demand Penalty
k) PF Penalty / Incentive
l) Cross Subsidy Surcharge
m) Wheeling Charge
n) Debit Adjustment
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5.4 LIST OF OPEN ACCESS CONSUMER IN MAHARASHTRA
Open Access Consumers (May 2012)
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Table 2- Open Access Consumers (May 2012)
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5.5 ANALYSIS OF TARIFF STRUCTURE (LT AND HT CONSUMERS)
Cross subsidy at existing and approved tariff
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Table 3- Cross subsidy at existing and approved tariff
In the above Tables,
(a) Existing Tariff refers to the Tariff currently payable by consumers including the
present FAC being paid.
(b) Revised Tariff refers to the Tariff approved by the Commission in the present
Tariff Order
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(c) Ratio of Average Billing Rate (ABR) to Average Cost of Supply (ACOS)
i) Existing Tariff to current ACOS refers to the ratio of ABR currently being paid including FAC to
the ACOS approved in the present Tariff Order, i.e., Rs. 5.56 per kWh
ii) Revised Tariff to current ACOS refers to the ratio of ABR approved in this Tariff Order for FY
2012-13 to the ACOS approved in the present Tariff Order, i.e., Rs. 5.56 per kWh.
From the above tariff table we can see that the tariff for industrial (HT consumers) and LT consumers
are higher than the Average cost of supply, determined by the MERC. This leads to the high
expenditure on electricity by these consumers. The rate of cross subsidy is higher for these consumers
as compared to the other states.
State Open Access Charges
(Rs./Kwh) Tariff (Discom)
Assam 2.94 3.25
Chhattisgarh 0.98 3.11
Haryana 0.81 4.55
Himachal Pradesh 1.39 3.04
Karnataka 1.9 4.15
Maharashtra 0.7 4.53
Orissa 1.6 2.91
Punjab 0.57 5.2
Rajasthan 0.97 3.98
Uttar Pradesh 0.76 4.29
Madhya Pradesh 1 4.57
Uttarakhand 0.69 3.27
Gujarat 1.34 7.39
West Bengal 3.77 4.68
Tamil Nadu 2.47 3.96
Table 4- Comparative Chart of Open Access Charges at State Level
*OA charges for a consumer of 5MW at 11 KV (33 KV in some cases) seeking OA for a month.
This includes transmission & wheeling losses (Rs/kWh) calculated assuming power purchase cost as
Rs 3/kWh.
**Tariff for an embedded consumer of 5MW at 11 KV (33 KV in some cases).
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Sr. No. Assumptions Value
1 Base Energy Consumption (X) 3600000
2 Power Purchase Cost Assumed (Y) (Rs./Kwh) 3
3 Duration (Month) 1
4 Load (MW) 5
Sr. No. Analysis Value
1 Voltage Level (KV) 11
2 Wheeling Loss (%) 9%
3 Energy Injected into system at T>D (Kwh) 3956043.956
4 Transmission Loss (%) 4.24%
5 Energy Injected into system at G>T (Kwh) 4131207.139
6 Loss (Kwh) 531207.1387
7 Loss (in Rs.) 1593621.416
8 Loss (Rs./Kwh) 0.44
9 Effective open access charges (Rs./Kwh) 0.24
10 Net OA Charges (Rs./Kwh) 0.68
11 Net cost of power from Open access (Rs./Kwh) 3.68
12 Tariff (Discom) (Rs./Kwh) 4.53
13 Difference (11-12) -0.85
Table 5- Tariff Analysis for LT and HT Consumer
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a) From the above table it is clear that, a consumer (whether HT or LT) it will gain about Rs.
0.84/Kwh (for the analysis done on the assumptions for a month). Therefore it will be advisable
to get the electricity supply through open access rather than from the discom. This will lead to
the reduction in the revenue for the Discom in the state.
b) Although this will be a gain for HT or LT consumer but the cross subsidy charges are higher in
the state compared to the other state, there are various reason for the higher cross subsidy
charges in the state, some of them are:
1) Subsidy given to the Domestic and Agriculture consumers, this leads to the higher cross
subsidy rates which is overburdened on the industrial and commercial (LT) consumers.
2) Higher rates of the fuel, which results in the higher cost of supply of electricity, which
further leads to the switching of these consumers for other options like open access.
All these factors are responsible for these consumers to switch to other cheaper options.
5.6 ANALYSIS OF DISCOM LOSS
Assumptions for expected migration of consumer to Open Access
• It is assumed that only 30 % HT & LT Industrial and 50 % HT & LT Commercial consumption will
migrate because MSEDCL has started giving other incentives like PF benefits, excise duty benefits and
also in Maharashtra MSEDCL power is more reliable as compare to Open Access.
• Agricultural consumers may not be in a beneficial position to avail power supply from other sources
as the subsidized tariff from MSEDCL. Also, it will be difficult to carry out the activities related to
Open Access by agricultural consumers due to lack of such expertise. Though MSEDCL will have a
separate tariff arrangement, it is expected that MSEDCL may have a tariff below cost of supply which
may not be provided by any other consumers. Therefore, it is assumed that 100% agricultural
consumers above 1 MW will be Open Access consumers availing supply from MSEDCL only.
• It is assumed that Railway consumption will migrate 100% to other sources considering their
practices in past whereby they have a tie-up with NTPC under Open Access to get competitive power
which was cheaper than the tariff they were paying to the utilities.
• In cast of HT Commercial and Industrial consumers, it is assumed that around 30% of industrial
consumers and 50% of commercial consumers may opt for sources other than MSEDCL for availing
supply of power.
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5.7 EXPECTED MIGRATION OF CONSUMER IN OPEN ACCESS Considering the above assumption, the expected migration of deemed Open Access consumers opting
power supply from source other than MSEDCL are as follows:
Table 6- Calculation & Comparisons of ARR for consumer of 1 MW & Above
Analysis Based On Above Data
As can be analysed from the above table, it is expected that around 10% of the consumption and 14%
of the revenue of MSEDCL will be impacted due to migration of consumers from MSEDCL to other
sources. Also, of the total deemed Open Access consumers of MSEDCL, it is expected that around
34% of consumption and 35% of revenue will be adversely impacted due to such migration.
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5.8 COMPARATIVE ANALYSIS OF OPEN ACCESS Considered the case of 5 MW, 11 kV consumer for comparative analysis of Short Term and Long Term
Open Access
Table 7- Comparisons of Interstate & Intrastate Open Access
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From the above comparison we can conclude the followings :
• Intra State Open Access in more profitable than Inter State Open Access
• When large amount of power has to purchase in that case Long Term Open Access is more profitable
than Short Term and vise-versa.
5.9 DIFFERENT CONSUMER OPINION ON OPEN ACCESS
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Table 8- Consumer Opinion for Feasibility of Open Access
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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. Some of the difficulties in Open Access
are given below:
Difficulties in forecasting :-
a) Licensee are facing difficulties for future forecast of power required, let say that if
licensee has forecast that it will required 20,000 MW of power in next 5 years but it loses
its 5000 MW of consumer in Open Access. But it has invested / sign PPA or agreement
for 20,000 MW then it has to pay for 20,000MW and transfer invested amount to
remaining consumer to compensate the loss which is against the consumer interest and
our Electricity Act 2003 which is consumer oriented. This is quite contradictory that
Act2003 recommend for implementation of Open Access but actually its implementation
is unfair to consumer benefit. So its implementation is in favor only when we are power
surplus country.
b) Another situation is that if licensee has forecasted to 20,000 MW considering that
5,000 MW consumer will move to Open Access, based on application received for Open
Access and arrange / sign PPA or agreement for only 15,000 MW. But only 2,000 MW
consumer has gone to Open Access and balance 3,000 will remain with licensee so now
licensee has to arrange for 18,000 MW of power but it has make provision for 15,000
MW only then for balance 3,000 MW it has to purchase through open market which is
costliest power and again burden will pass onto consumer which is unfair for consumer.
ii) Cross Subsidy Surcharge is not adequate to compensate subsidy:-
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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 is bearing all
this loss and state government has given assurance of payment.
iii) 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. Consideration of location is important because it
differentiate the power consumption depending on soil fertility (Region like Vidharbh in
Maharashtra where water is available at deeper in soil).
iv) 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.
v) 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.
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.
Charges for the open access levied by different SERCs are variable in nature.
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.
Net cost of power from open access is more as compared to the tariff which discourages
the buyers and sellers.
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.
Distribution companies in India are not financially very sound and Distribution network
in India is not strong.
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6.2 RECOMMONDATIONS 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.
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
obligation.
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.
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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.
6.3 LIMITATION OF THE PROJECT
a) First of all the time duration of 8 weeks was a major constraint in going through the project
completely.
b) The assumption taken to define different scenario in Maharashtra may not be exact so
may lead to calculation error.
c) Owing to geographical constraints and altogether different prevailing climatic, political, social,
economic, legal and cultural scenarios, the comparison of Open access of various
countries on same parameters was not possible.
d) Some of data collected is through direct contact with different official of different organisation
since there is no written document may lead to communication error.
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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 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 Surcharge
based on the estimation that the DISCOM will avoid purchase of the quantum of power for
which open access has been sought. This principle of avoided cost method
should be adopted in areas where there are no power shortages.
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.
Analysis part of this report helps to understand the consumer expectation. It also bring into
notice the loss of Distribution Company and need of requirement of steps to minimize its loss.
Everyone are expecting retail competition in Electricity Market and this report highlight the
points of its improper implementation which guide during its implementation.
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BIBLIOGRAPHY
[1] Maharashtra Electricity Regulatory Commission (Terms and Conditions for Open Access)
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[3] Central Electricity Regulatory Commission (Grant of Connectivity, Long-term Access and
Medium-term Open Access in inter-State Transmission and related matters) Regulations, 2009.
[4] Central Electricity Regulatory Commission (Open Access in inter-State Transmission) Regulations,
2008.
[5] Detailed Procedure issued by CTU for Grant of Connectivity, Long-term Access and Medium-term
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[6] Regulations on Open Access to Inter-state transmission system published by Central Electricity
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