Open Access – Not really an open and shut case
The Electricity Act of 2003, allows power consumers to purchase electricity from any power producer not limited to the distribution company (DISCOM) in that area. The term open access refers to the distribution and transmission lines being open to all somewhat similar to our highways where anybody can use it as long as they pay a toll. This regulation was meant to allow power consumers to choose who they want to buy power from. While this sounds great on paper, open access has hit three major bottlenecks.
1) Cross Subsidy Surcharge (CSS): The DISCOMs lose out on the cross-subsidy earned from industrial and commercial consumers – if these opt for open access. (In India, industrial and commercial consumers subsidize agricultural consumers). To compensate for this loss, DISCOMs levy a CSS on open access consumers. This charge is usually INR1 to INR2 per kWh. Combined with other charges such as wheeling and distribution charges, the cost of purchasing power through open access often becomes higher than the price at which the DISCOM offers power.
For example: In the state of Maharashtra, the wheeling (distribution) charge is fixed at INR 0.05 per unit and the wheeling losses are 6% (for 33kV). The transmission charges are fixed at INR 4,944/MW/month, which works out to roughly INR 0.04 per unit. Additionally the transmission losses are fixed at 4.85%. The average CSS is fixed at INR 2. The total charges, losses and subsidies total to nearly INR 2.30
2) Delay of Open Access Applications: The power to grant open access lies with the State Load Dispatch Centre (SLDC), which is closely associated with the DISCOM (previously these entities were bundled as the State Electricity Board (SEB)). This close association prevents SLDCs from granting applications for open access on grounds that open access would jeopardize the state DISCOMs. Applications are often needlessly delayed for documentation issues or other trivial issues.
3) Rollback of banking of power: Banking of power allows generators to feed into the grid in times of excess and conceptually draw from that banked power as and when the consumer requires it. This is crucial for intermittent renewable energy generators especially wind. Wind generators produce 90% of their power during the short period between July and October. Recently Maharashtra announced a rollback of the banking provision. This would virtually de-incentivize all renewable energy generators.
As renewable energy takes off in India, we would see many more independent installations and independent Power Purchase Agreements (PPA) being signed. India needs to immediately do the following:
- Discard the Cross Subsidy Surcharge (CSS) – In fact India needs to introduce fair power pricing, and discard subsidies in the power sector all together.
- Enforce the state utilities to grant open access in an unbiased manner.
- Enable banking of power Without banking, renewable energy is meaningless owing to its intermittent nature.
- Upgrade the power grid infrastructure to reduce wheeling and transmission losses – More thought has to be given on how India can finance such an expensive overhaul.
Progressive states like Maharashtra have already decided to scrap the CSS. Maharashtra recognizes that by encouraging open access, the availability of power from private independent producers would increase, thereby reducing the demand on state DISCOMS.
Open access is the way forward for the Indian power sector and a good pretext to start the ball rolling on the badly needed power sector reforms, support the proliferation of renewable energy and reduce the alarmingly high power deficit . It is time for the regulatory authorities to get their act together and clear the hurdles for a truly open access to power in India.