Impact assessment for Open Access to 1MW+ customers

The Ministry of Power Govt. of India issued a directives for implementation in the all States of India, after seeking consultation with Ministry of Law and Justice and said that,

“Section 42(ii) read with the first and fifth proviso is a self-contained code with regard to consumers who required the supply of electricity of 1 MW and above and accordingly the State Electricity Regulatory Commissions cannot continue to regulate the tariff for supply of electricity to any consumer of 1 MW and above”.

“The provisions of section 42 need to be analyzed in relation to the duties of the distribution licensees and open access.  While sub-section (2) requires the State Commission to introduce open access within one year of the appointed date the fifth proviso makes it mandatory for the State Commission to provide open access to all consumers who require supply of electricity where the maximum power to be made available at any time exceeds 1 MW.  The fifth proviso was introduced by Act 57 of 2003 with effect from 27th January 2004”.

“The first issue is if open access is made obligatory whether the distribution licensees will continue to have the responsibility of universal service obligations with regard to consumers whose requirements are in excess of 1 MW.  An analysis of the various provisions (particularly section 49 of the Act) shows that if certain consumers want to have the benefit of the option to buy power from competing sources, then it is logical that DISCOMS do not have an obligation to compulsorily supply power to such consumers.  If such consumers want power from the DISCOM then  the terms and conditions of the supply would be determined in terms of section 49 of DISCOM also”.

“There is no conflict between the aforesaid conclusion and the provisions of section 42(3) of the Act which provides that a person requiring supply of electricity has to give notice in respect thereof.  If the consumer intends to use the network of the DISCOMS, he has to give notice and upon such notice to DISCOM (it) is duty bound to provide non-discriminatory open access to its network.  Section 42(3) cannot be construed to mean that giving of a notice is a pre-condition for the implementation of open access”.

The directives issued by MoP shall have great impact on power sector particularly Electricity consumers, generators, traders and power market.  There are positive as well as negative sides which are to be looked into minutely.  The Commission will have a great responsibility to implement the suggestions of MoP by making suitable Regulation as well as to protect consumers against some negative points which are elaborated below.

POSITIVE POINTS

1. Consumers of 1 MW and above are deemed OA consumers and shall have choice of purchase of power from cheaper sources including Discom.
2. The tariff of such consumers shall not be regulated by Commission and the heavy burden of cross subsidies shall not be loaded to such consumers.
3. Such open access consumers shall not be required to pay cross subsidy surcharge because the tariff of such consumer shall not be decided by the Commission, such consumer shall not be consumers of Discom, the power requirement of such consumers shall not be a part of ARR of Discom.
4. According to National Tariff Policy the cross subsidy surcharge is linked with tariff for the category of consumer,  decided by the Commission who are going out of net of Discom because of open access hence Discom is to be compensated by cross subsidy surcharge but there shall be no such requirement in the changed scenario hence such consumers will not have to pay CSS on the power wheeled through open access.
5. Discom / Transmission Licensee shall be benefited by collecting wheeling & transmission charges as an additional income over and above the income from retail sale of power to the consumers below 1 MW.
6. Power purchase quantum of Discom shall reduce and shall be limited only equivalent to supplying power to the consumers below 1 MW and Commission shall decide the tariff only for consumers below 1 MW hence ARR of Discom shall be substantially reduced.
7. Sufficient power shall be available to Discom from Genco plants at cheaper rate to supply power to consumers below 1 MW and total load shedding shall be withdrawn to such consumers.  Expenditure account of Discoms shall reduce because of reduced employees strength and reduced working capital requirements hence tariff for consumers below 1 MW shall reduce.
8. Power generators and traders, who are unable to supply power due to denial of open access and being put to financial loss,  will have increased demand for power to supply to consumers of above 1 MW and shall be benefited due to increased in rates of power.
9. Demand of power from power exchanges shall increase.

NEGATIVE POINTS

1. All the Consumers above 1 MW will have to find their own supplier for power.
2. Rates of power in market shall increase due to increased demand.
3. Power source to supply power to all consumers above 1 MW in the state may be limited since the large producers of power have already entered in to PPA with different bulk purchasers.  Hence the small consumers may not get power to their requirements from open market or power producers and will have to approach MSEDCL who may refuse to supply power due to non availability or may charged exorbitant rates since the tariff shall not be regulated.
4. All consumers above 1 MW will have to install ABT meters which will be an additional expenditure.  Further till now the specifications of ABT meter has not been framed.  The Discom & Transco have different specifications of ABT meter and open access consumers are suffering due to this discrimination in the specifications.
5. Availability of ABT meters is limited hence cost of meters shall shoot-up due to heavy demand.  There is only one supplier approved by Transco who is taking undue advantage of monopoly.
6. The consumers opting power from power market shall have to find another source also who can supply infirm power and such power can be supplied only by Discoms who may charge high price of power since it is not Regulated by Commission.
7. SLDC and NLDC are not equipped to handle such large O.A. consumers.

SUGGESTIONS FOR PROTECTING CONSUMERS FROM ABOVE REFERRED ODDS

Commission should frame Regulations for implementing the directives after due public opinion which should include following:

1. The provision of O.A. for all consumers above 1 MW is to be introduced in phased manner as below:
   • 1st phase – All EHV consumers and all the consumers above 5 MW of power including all  consumers above 1 MW who want to opt O.A
   • 2nd phase –  All consumers above 3 MW of power.
   • 3rd  phase –  All consumers of 1 MW and above.
2. Decide infirm power tariff / stand by demand for O.A. consumers who opt the same from Discom.
3. Separate retail sale and wire business of Discom and Transco.
4. Make amendments in pending Draft O.A. Regulation and call fresh comments from consumers and stake holders.
5. Decide common specifications of ABT meters for Discom & Transco.
6. Make provisions to strengthen SLDC and issue guidelines for working of SLDC.

Invited post from Mr. R.B.Goenka
(Mr. R.B.Goenka is Consumer Representative @ MSEDCL and associated with Vidarbha Industries Association)

Disclaimer: Above are independent opinion of external expert and should not be associated with pManifold or any of its team members. pManifold deem this new Open Access directive very important and will continue bringing different stakeholder’s perspectives. The issue deals with consumer choices, electricity infra sharing & management, tariff calculations, power trading, industrial economics etc.