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