Introduction of Open Access Mechanism

It is practically infeasible for the electricity generator and consumer to have their own transmission and distribution lines. They have to rely on state and centre own transmission and distribution network for the same. In India, there are four main segments in the power sector viz. generation, transmission, distribution and regulation. Out of these four, only generation has a share of the private sector. However, the transmission sector is widely operated by the Power Grid Corporation of India Limited- a 100% government subsidiary and distribution sector which is operated by the state owned electricity distribution companies. Therefore, the public sector has a monopoly in transmission and distribution network and the both generator and consumers have to rely on them for this particular operation.

Open access (OA) is the practice of providing unrestricted access in the electricity transmission and distribution system. Open access mechanism has been envisaged in the Electricity Act, 2003 (EA 2003) as a framework for encouraging competition in the electricity sector and for enabling consumers to choose their suppliers.

Definitions of open access as mentioned in Section 2 (47) of EA 2003: “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”.

Open Access has widely been recognized as the most important provision under the Electricity Act 2003. The National Electricity Policy and Tariff Policy framed under the EA suggested proper implementation of Open Access framework which has the potential to enable consumers to receive power from any source of their choice.

The Central Electricity Regulatory Commission (CERC) has framed regulations on inter-State open access. At the State level; regulations have been framed by the State Commissions, phasing out open access for consumers. Transmission charges, wheeling charges and surcharge have also been determined by most State Electricity Regulatory Commissions (SERCs).

Open Access in Transmission: Section 38 of the Act deals with the provision of open access to transmission and reads as follows: “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 subsection (2) of section 42, on payment of the transmission charges and a surcharge thereon, as may be specified by the Central Commission:

Open Access in Distribution: Section 42 of the Act deals with the provision of open access to distribution and reads as follows –  “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 (subsection (2))

Open Access Charges

If the consumer and generator mutually decide to come together for sourcing electricity, they can do it by using transmission and distribution network provided they have paid required charges to the respective entities. The key applicable open access charges are – Cross Subsidy Surcharge, Transmission Charges, Transmission Loss Compensation, Wheeling Charges, Wheeling Loss Compensation, Additional Surcharge,

Cross Subsidy Surcharge

Cross subsidization is the practice of charging higher prices to one group of consumers in order to subsidize lower prices for another group. In accordance with the National Electricity Policy, consumers below poverty line who consume below a specified level may receive a special support through cross subsidy. Tariffs for such designated group of consumers are at least 50% of the average cost of supply.

A consumer who is permitted open access will have to make payment to the generator, the transmission licensee whose transmission systems are used, distribution utility for the wheeling charges and, in addition, the Cross Subsidy Surcharge. The computation of cross subsidy surcharge, therefore, needs to be done in a manner that while it compensates the distribution licensee, it does not constrain introduction of competition through open access. A consumer would avail of open access only if the payment of all the charges leads to a benefit to him. While the interest of distribution licensee needs to be protected it would be essential that this provision of the Act, which requires the open access to be introduced in a time-bound manner, is used to bring about competition in the larger interest of consumers. (Tariff policy, 6^th Jan 2006)

Transmission charges and transmission losses

The Objective of transmission charges and transmission losses is to get the transmission system users to share the total transmission cost in proportion to their respective utilization of the transmission system. Most of the State Electricity Regulatory Commissions have determined transmission charges applicable for Open Access consumers in Rs./MW/month, except a few which have determined in Paisa/unit. Most of the Commissions have approved Transmission Charges for short term open access as 25% of the Transmission Charges applicable for Long Term Open Access.

Wheeling charges and distribution losses

These charges help the distribution company to recover the costs that it has incurred for distribution of electricity. State Electricity Regulatory Commission determines Wheeling charges and distribution losses compensation for each voltage level (e.g. 11KV, 33 KV, etc.). Transmission and wheeling charges depend upon the point of connection of the load and the point of injection where the generator feeds the power generated into the grid.

For example,

1. If the generator and consumer both are connected to the transmission network, then they will only have to pay transmission charges and will not have to pay wheeling charges and vice versa.
2. If the generator is connected to the transmission line and consumer is connected to the distribution line, then they will have to pay both transmission and wheeling charges
3. If the generator is connected to the distribution line and consumer is connected to the transmission line, then they will only have to pay transmission charges.

 Additional surcharge

Additional surcharge is an extra charge that an Open Access consumer has to pay the utility company to recover the fixed costs towards its stranded capacity. As per the National Electricity policy, additional surcharge should not be so onerous that it eliminates competition which is intended through Open Access. As per National Tariff Policy, (1) Additional Surcharge should be applicable only 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 (2) There is an unavoidable obligation and incidence to bear fixed costs consequent to a contract, (3) Fixed costs related to network assets would be recovered through Wheeling Charges.

In addition to this, there are other open access charges too. These are Default Supply Charge, Balancing Market Charge, Open Access Application Charges and State Load Dispatch Centre Charges. These charges vary across different states.