MoP consultation paper on Open Access

Ministry of Power (MoP) recently invited comments on a consultation paper on issues related to Open Access (OA). Electricity Act (2003) which provides non-discriminatory Open Access (OA) to all consumers for use of evacuation infrastructure has been caught up with regulatory hurdles at every stage of implementation.  State utilities who are on the losing side as consumers migrate through OA have ensured the market mechanism fails to take-off.

The MoP committee which has come up with this consultation paper has categorized the issue along the tariff structure and consumer behaviour

Frequent shifting of Open Access consumers

The argument of frequent consumer shifting is accepted to an extent considering the fact, short term Open Access clients are unable to project their load demand to utilities. The proposal calls for OA clients to schedule for power requirement 24 hrs prior to seeking OA clearance to ensure state utilities are prepared to meet the demand.

Cross Subsidy Surcharge

Cross Subsidy Surcharge (CSS) has always been a major point of debate and there have been multiple revisions to the formula that calculates this charge. Owing to an increase in OA transactions CSS charges are already high. The proposal is to limit the CSS to 20% of consumer tariff and introduce category wise CSS. The proposal also calls for CSS based on time of day, peak, normal and off-peak which is quite interesting.

Additional Surcharge

Additional Surcharges are increasing across states after every tariff revisions owing to an increased capacity of stranded assets bound by long term Power Purchase Agreements (PPA). A calculation method based on a revised definition of stranded asset (based on capacity stranded on account of OA) and amortization of assets has been proposed to remove the potential double accounting of charges to consumers.

Stand-By charges

In recent times BESCOM has charged OA clients with a high temporary tariff on account of classifying the power sold to them under stand-by charges. Although the existing regulations at the state level forbid such charges, BESCOM has incurred the wrath of OA consumers for the past few months. The proposal calls for definition of stand-by charges based on a two part tariff with the upper limit set at 125% of the consumer tariff under the category.

Tariff design and rationalisation

In the end the paper clearly acknowledges the fact, the failed two-part tariff structure has lead to the overall collapse of the market mechanism and OA. A better structured tariff structure would have limited the damage of OA shift on the state utilities. (Read more about the inefficient electricity tariff structure from an earlier post)

Overall, the paper calls for a major revamp of the OA regulations and it brings out a need to align with the recommendations in the National Tariff Policy (NTP,2016). The consultation paper has been dubbed as anti Open Access by multiple stakeholders but I see this as a frank assessment of our tariff structures and gives an opportunity to rectify the basic flaws in the existing inefficient tariff structure.

Read more: MoP Consultation Paper

 

The end of Open Access in Karnataka?

While only last year the solar power developers in Karnataka were rejoicing over the KERC regulation that exempted Wheeling, Banking and Cross subsidy charges for solar power projects for a period of 10 years from the date of commissioning. BESCOM (Bengaluru Electricity Supply Company) have now requested the Karnataka Electricity Regulatory Commission (KERC) to introduce a new tariff slab applicable to HT consumers who opt for captive/third party energy sources. If KERC heeds to the request in the upcoming tariff revision, renewable energy supply via open access will cease to end. It would spell disaster for renewable energy developers specially solar power developers who are pinning on the new tariff hike which could see solar power reach grid parity compared to the Industrial tariff or even be cheaper than the BESCOM tariff.

BESCOMBESCOM claim to suffer a loss of INR 184 Crore because of HT consumers opting for alternate sources which has so far been wind and a little of hydro and solar in Bengaluru. Sensing that a new tariff revision would increase their revenue and at the same time pave way for HT consumers to opt for Renewable Energy, BESCOM have now sought a new tariff slab.

Solar power developers can just hope KERC which has a track record of enabling renewable energy penetration doesn’t introduce a new slab and stick to its annual tariff revision.

(For more info check this page)