Bridge India

Open access market in Telangana slows down

Telangana is the third largest open access (OA) state in the country with an installed capacity 322 MW. The state has an attractive OA policy and added 145 MW capacity in 2015. But since then, activity has slowed down significantly. Last two years saw new capacity addition of only 22 MW and 64 MW respectively.

Sangeetha1

There are two key reasons for this slow down.

DISCOM reluctance to lose high paying consumers: NOCs for OA approvals have become increasingly difficult to obtain. We understand that NOCs are being declined on tenuous grounds including upstream/operational constraints, non-feasibility of OA on mixed feeders etc. Delays in installation of ABT (availability-based tariff) compliant meters and inadequacy of transmission/ distribution networks are also seen as major problems.

Regulatory uncertainty: While the state’s solar power policy exempts cross subsidy surcharge (CSS), Telangana State Electricity Regulatory Commission has dictated that exemption shall be permitted only if the state government reimburses DISCOMs for lost revenue. This has led to DISCOMs arbitrarily charging CSS even in instances of delay in disbursement by the state government (example – Sep-Nov 2017). Even though this amount has since been refunded back to the customers, the move creates a huge risk for both project developers and customers.

We believe that resistance from DISCOMs and regulatory uncertainty is likely to keep the state OA market subdued for the foreseeable future.

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