Monday, October 13, 2014

Open Access – Basics & Beyond


As per Electricity Act, 2003 Open Access has been defined under Section 2 (47) as follows:

“The 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.”

To put simply, Open Access implies enabling of non-discriminatory sale/purchase of electric power/energy between two parties utilizing the system of an in-between (third party), and not blocking it on unreasonable grounds. Open Access, is mandated to allow freedom for consumers to choose suppliers. It basically means that the buyer has the freedom of selecting the seller, and vice-versa.

Open access, is a framework for development of power market and for promoting competition.

What was the need?

Key to growth and development in power sector lies in some radical changes and these changes are not limited to business model only, but in operational model as well. Countries round the globe had already treaded that path leaving us far behind. A lagging power sector can prove a major hindrance to a country’s growth. All these factors propelled the Indian Power sector to bring in some transformations and open access is one major tool for that.
Reasons why Open Access has been introduced in the Indian Power Sector is based on following benefits that is expected to accrue:

1.       Promoting competition
2.       Changing and developing market structure
3.       Optimum resource utilization
4.       Consumer friendly

How is it going – Effects & After-effects:

Open Access is available for power purchase or sale by utilities or distribution licensees. However, when it relates to generators and consumers, only some of the states have permitted limited open access. Some are permitting open access to generators if they are connected to Central Transmission Network.

Lack of Open Access in Inter-state transmission has stifled the development of power market, jeopardising competition. The competition is only feasible if players in the power market are permitted access to both intra and inter-state transmission networks on payment of reasonable charges.

While inter-state Open Access within the limitation of adequate ‘available transfer capability’ (ATC) has been operational, intra-state open access has not progressed because of tardy implementation of certain pre-requisites.

Lack of open access has also restricted transfer of power from surplus to deficit regions and failed to optimise procurement costs.

Reasons behind the lag and the way forward:

Regulatory hurdle:
1.     The Act calls for gradual reduction of open access charges but no such reduction trajectory is being found in any of the states resulting in consistent high and irrational open access charges acting as deterrent to this whole mechanism.

2.     Also states like Karnataka, Maharashtra and Tamil Nadu have invoked section 11 of the act to prevent generators to sell their power outside the state. As per this section, states have the right to issue directions to generators in case of extra ordinary circumstances. States use this ambiguity in Act to hamper open access. Clarification of section 11 is necessary through an amendment of the Act.

3.     States like Delhi, sheer lack of willingness on the part of the state commission is evident from the fact that even after pressing requirements for availing open access, the procedure for availing OA from SLDC has not been notified yet. There is an urgent need to look into such issues.

Infrastructural hurdle: There is an urgent need to separate the supply and wire business of the distribution licensees. This becomes essential because licensees have a natural monopoly on the infrastructure i.e ‘wires’. In order to avail full open access if the consumer wishes to switch from the Discom to a third party, he is uncertain about the network availability which is under the control of the discom. This seriously deters the ability of the consumer to avail the supply. This can be curbed by separating the accounting of supply and wire business followed by its financial separation.

Inconsistencies across states: The provisions in the current inter-state regulations do not encourage open access transitions. Inter-State Open Access is granted on monthly basis and maximum upto 3 months.

Transmission Corridor Availability: Transmission congestion is one of the major deterrents in availing Open Access. The evacuation systems are planned mainly based on the transmission capacities required to meet long-term PPAs but the present transmission system has to meet the firm transmission needs as well as Open Access requirements arising in the short term. Therefore transmission planning should inherently include margins for medium and short term open access.

          InfralineEnergy Power Knowledgebase Team


The views expressed here are solely those of the author in his private capacity and do not in any way represent the views of the Infraline Technologies (India) Pvt. Ltd. (organization). The organization is not liable for any use that may be made of the information contained therein and any direct/indirect consequences resulting therefrom.

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