OA Basics and Regulations-Maharashtra

8/12/2019 OA Basics and Regulations-Maharashtra

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Open Access: Issues, Provisions, Policies and Charges in Maharashtra and Financial Modeling of

1 MW bagasse based Co-gen power project in Maharashtra

Report of Summer Internship at Maharashtra Electricity Regulatory Commission Page iv

EXECUTIVE SUMMARY

Open Access has been widely recognized as the soul of the Electricity Act. This is so because

open access is the mechanism crafted to usher in competition and choice, and in turn facilitate

whole open access mechanism in the Indian power sector and identifies various provisions for

this competitive measure at both the national and state level. The report has been prepared in a

structure which will be easy to understand and comprehend even by a non power sector

associated reader.

Chapter 2gives a brief introduction to the concept of Open Access in power sector. The chapter

also discusses about the various provisions in national and state legislature. A careful reading of

this chapter will make the reader aware of all the provisions and regulations about Open Access.

Chapter 3moves on to discuss about the various charges that a consumer or a generator has topay to the state utility in order to avail the facility of Open Access. All the nine charges are

explained in detail and also various approaches have been discussed which are employed by

different SERCs in calculation of these charges.

Chapter 4put the state of Maharashtra in the driving seat and aims at calculation of all the open

access charges specifically for Maharashtra. The three discoms working in the state have

takes reference

from various Orders issued by MERC.

Chapter 5 is a conglomerate of two important topics in the Indian power sector today,Renewable and Open Access in the Power sector. Renewable energy escalation is of extreme

importance as the convention resources are depleting at very fast rate and Open Access is

essential for introduction of competition in the sector. The chapter has various state provisions

for the promotion of renewable energy and open access simultaneously.

Implementation of Open Access has not been an easy trek for all the shareholders of the power

industry. Chapter 6 is dedicated to identify the various block holes that are hampering proper

implementation of Open Access mechanism in India. The chapter discusses about the issue from

three perspectives viz. discoms, regulatory and legal, and consumer perspective.

Chapter 7 marks the beginning of the second part of the project which is Financial Modeling of a

1 MW bagasse based cogeneration power plant. Aim is to determine the tariff in accordance with

the MERC regulations and further calculate the project economics. The project economics tools,

such as IRR and NPV help investor to make a learned decision. Also, sensitivity analysis is done

on the basis o variation in a few parameters. Calculations are done with utmost care and to give

the perfect picture to the investor.


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Report of Summer Internship at Maharashtra Electricity Regulatory Commission Page v

Chapter 8 includes the conclusions on the basis of study done and a few recommendations are

proposed which aim at improving the present state of the sector.

The report is written in a very lucid and easy to comprehend language. Any student in the field

of power industry will find the contents intriguing and interesting. The finance community wouldbe looking forward to the second part of the project which discusses about the project economics

of a not so popular source of non-conventional energy.

Using this report as a medium, I have tried to convey a strong message to entrepreneurs of

tomorrow, to invest in non-conventional sources of power which are not only helping in the

sustainability of the sector but at the same time are equally rewarding, as it has been proven that

these projects give an IRR of 17.57% in this report.


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Report of Summer Internship at Maharashtra Electricity Regulatory Commission Page vi

LIST OF ABBREVIATIONS

Abbreviation Meaning

APR Annual Performance Report

ARR Average Revenue RequirementATE

CERC Central Electricity Regulatory Commission

CSS Cross Subsidy Surcharge

CTU Central Transmission Utility

DDG Decentralized Distribute Generation

DSCR Debt Service Coverage Ratio

EA- 2003 The Electricity Act 2003

GCV Gross Calorific Value

HT High Tension

IEGC Indian Electricity Grid Code

IRR Internal Rate of Return

KERC Karnataka Electricity Regulatory Commission

LT Low Tension

LTOA Long Term Open Access

MAT Minimum Alternate Tax

MERC Maharashtra Electricity Regulatory Commission

MSEDCL Maharashtra State Electricity Distribution Company Limited

MSLDC Maharashtra State Load Despatch Centre

MTOA Medium Term Open Access

MU Million Units

NAPCC National Action Plan for Climate ChangeNEP National Electricity Policy

NLDC National Load Despatch Centre

NPV Net Present Value

NTP National Tariff Policy

O&M Operation and Maintenance

RE Renewable Energy

RInfra-D Reliance Infrastructure Company Limited- Distribution

RLDC Regional Load Despatch Centre

SERC State Electricity Regulatory Commission

SLDC State Load Despatch Centre

STOA Short Term Open AccessSTU State Transmission Utility

TPC-D Tata power Company- Distribution

WACC Weighted Average Cost of Capital


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Report of Summer Internship at Maharashtra Electricity Regulatory Commission Page vii

LISTOF TABLES

Table 1: Open Access charges: Wheeling charges and Wheeling Losses for MSEDCL ............. 23Table 2: Open Access charges: Wheeling charges and Wheeling Losses for TPC-D .................. 24Table 3: Open Access charges: Wheeling charges and Wheeling Losses for RInfra-D ............... 24Table 4: Open Access charges: Transmission Charges ................................................................ 25Table 5: Open Access charges: CSS for MSEDCL ...................................................................... 27Table 6: Open Access charges: CSS for TPC-D ........................................................................... 30Table 7: Open Access charges: CSS for RInfra-D........................................................................ 31Table 8: Case 1: Power procurement via open access .................................................................. 33Table 9: Case 2: Power Procurement via Discom ........................................................................ 33Table 10: Renewable Energy Potential in India ........................................................................... 47Table 11: State wise renewable energy potential in India ............................................................ 49Table 12: Bagasse cogeneration in Maharashtra .......................................................................... 50Table 13: Comparison of Low- with High-Temperature and -Pressure Boilers ........................... 51Table 14: Operating days for a cogeneration plant ....................................................................... 52Table 15: Financial Assumptions.................................................................................................. 53Table 16: Tax related Financial Assumptions .............................................................................. 53Table 17: Working Capital Assumptions ...................................................................................... 53Table 18: Fuel related assumptions............................................................................................... 53Table 19: Operations and Maintenance assumptions.................................................................... 54Table 20: Project Economics of a bagasse power plant ................................................................ 54Table 21: Debt Equity ratio v/s Levelised Tariff v/s Project IRR ................................................ 55Table 22: Plant Load Factor v/s Levelised Tariff ......................................................................... 56Table 23: Project capital cost v/s Tariff ........................................................................................ 57Table 24: Fuel Price Variation v/s Levelised Tariff ..................................................................... 58Table 25: Net generation ................................................................................................................ ATable 26: Variable cost ................................................................................................................... BTable 27: Return on Equity ............................................................................................................. CTable 28: Interest on Loan Capital................................................................................................. D


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Report of Summer Internship at Maharashtra Electricity Regulatory Commission Page viii

Table 29: Depreciation .................................................................................................................... ETable 30: O&M cost ....................................................................................................................... FTable 31: Net working capital........................................................................................................ GTable 32: Fixed cost calculation .................................................................................................... HTable 33: Income Tax ...................................................................................................................... ITable 34: Tariff determination ......................................................................................................... JTable 35: NPV and IRR calculations ............................................................................................. KTable 36: DSCR .............................................................................................................................. L

LIST OF FIGURES

Figure 1: Advantages of Open Access in Renewable Energy ...................................................... 35Figure 2: Maharashtra State provisions for promotion of Open Access in RE ............................ 38Figure 3: State level Open Access provisions for Renewable Energy.......................................... 39Figure 4: The Bagasse cogeneration process ................................................................................ 50

LIST OF CHARTS

Chart 1: Renewable energy potential state wise ........................................................................... 49Chart 2: Impact of Capital Mix on Tariff...................................................................................... 56Chart 3: Impact of PLF on Tariff .................................................................................................. 57Chart 4: Impact of project cost on Tariff ...................................................................................... 58Chart 5: Impact of Fuel price variation on Tariff ......................................................................... 59


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Report of Summer Internship at Maharashtra Electricity Regulatory Commission Page 1

TABLE OF CONTENTS

Declaration ............................................................................................................................................. iiExecutive Summary .............................................................................................................................. ivList of Abbreviations ............................................................................................................................ viList of Tables ....................................................................................................................................... viiList of Figures .....................................................................................................................................viiiLis of Charts ........................................................................................................................................viiiTable of Contents ................................................................................................................................... 1CHAPTER 1: INTRODUCTION .......................................................................................................... 6

1.1 Problem Statement .................................................................................................................. 61.2 Significance of the project ...................................................................................................... 61.3 Scope of work ......................................................................................................................... 7

1.3.1 Provisions for Open Access ............................................................................................ 71.3.2 Calculation of Open Access charges ............................................................................... 71.3.3 Viability of Long Term distribution Open Access .......................................................... 71.3.4 Open Access and Renewable Energy .............................................................................. 71.3.5 Identification and removal of impediments .................................................................... 71.3.6 Determination of Tariff for 1 MW bagasse based cogeneration power project .............. 71.3.7 Sensitivity Analysis of Tariff .......................................................................................... 8

1.4 Literature Review ................................................................................................................... 81.5 Research Methodology ........................................................................................................... 8

CHAPTER 2: OPEN ACCESS IN INDIAN POWER SECTOR ........................................................ 102.1 Provisions for Open Access in The Electricity Act, 2003 .................................................... 10

2.1.1 Section 2(47)-Definition of open access: ...................................................................... 102.1.2 Open Access in Transmission: ...................................................................................... 102.1.3

Open Access in Distribution ......................................................................................... 13

2.1.4 Section 49: Agreements with respect to supply or purchase of electricity ................... 142.1.5 Section 86: Functions of State Commission ................................................................. 14

2.2 Provision For Open Access In National Electricity Policy................................................... 142.2.1 Section 5.4.5 .................................................................................................................. 14

2.3 Provision For Open Access In National Tariff Policy .......................................................... 14


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2.3.1 Section 8.5.1 .................................................................................................................. 142.3.2 Section 6.3 ..................................................................................................................... 152.3.3 Section 6.4 ..................................................................................................................... 152.3.4 Section 8.5 ..................................................................................................................... 15

CHAPTER 3: OPEN ACCESS CHARGES ........................................................................................ 163.1 Cross Subsidy Surcharge ...................................................................................................... 16

3.1.1 Policy provisions for Cross Subsidy Surcharge ............................................................ 163.1.2 Alternative approaches for determining the Cross Subsidy Surcharge ......................... 17

3.2 Additional Surcharge ............................................................................................................ 183.2.1 Policy provisions for Additional Surcharge .................................................................. 183.2.2 Objectives and Principles for Additional Surcharge ..................................................... 183.2.3 Approach Towards Calculation Of Additional Surcharge ............................................ 18

3.3 Transmisson Charges And Transmission Losses ................................................................. 193.3.1 Policy provisions for Transmission Charges and Transmission Losses ....................... 193.3.2 Principles and Key Considerations ............................................................................... 193.3.3 Approaches toward Transmission Charges and Transmission Loss determination ...... 19

3.4 Wheeling Charges And Distribution Losses ......................................................................... 203.4.1 Introduction ................................................................................................................... 203.4.2

Methodology for allocation of Wheeling charges ......................................................... 20

3.4.3 Applicability of Transmission and Wheeling Charges ................................................. 203.4.4 Case of Multiple Licensees ........................................................................................... 21

3.5 Other Charges ....................................................................................................................... 223.5.1 Default Supply Charges ................................................................................................ 223.5.2 Balancing Market Charges ............................................................................................ 22

CHAPTER 4: OPEN ACCESS CHARGES IN MAHARASHTRA ................................................... 234.1 Introduction .......................................................................................................................... 234.2 Wheeling Charges ................................................................................................................. 23

4.2.1 Wheeling Charges for MSEDCL .................................................................................. 234.2.2 Wheeling Charges for TPC-D ....................................................................................... 244.2.3 Wheeling Charges and Wheeling Losses for RInfra-D................................................. 24

4.3 Transmission Charges and Transmission Losses ................................................................. 24


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4.3.1 Transmission Charges ................................................................................................... 244.3.2 Transmission Losses ..................................................................................................... 25

4.4 Cross Subsidy Surcharge ...................................................................................................... 254.4.1 CSS for MSEDCL ......................................................................................................... 254.4.2 CSS for TPC-D ............................................................................................................. 284.4.3 CSS for RInfra-D .......................................................................................................... 30

4.5 Viability of Intra-State Long Term Open Access ................................................................. 31CHAPTER 5: RENEWABLE ENERGY AND OPEN ACCESS ....................................................... 34

5.1 Introduction .......................................................................................................................... 345.2 Need and Importance of Open Access in Renewable Energy .............................................. 345.3 National Level Provision for Open Access in RE ................................................................ 35

5.3.1 Electricity Act, 2003 ..................................................................................................... 355.3.2 National Electricity Policy, 2005 .................................................................................. 355.3.3 Rural Electrification Policy, 2006 ................................................................................. 355.3.4 Rajiv Gandhi Grameen Vidyutikaran Yojana ............................................................... 365.3.4 IEGC provisions ............................................................................................................ 365.3.5 Green corridor concept.................................................................................................. 37

5.4 State level Open Access provisions ...................................................................................... 375.4.1

Transmission charges and Loss calculations................................................................. 37

5.4.2 Cross Subsidy Surcharge (CSS) .................................................................................... 375.4.3 Wheeling Charges ......................................................................................................... 385.4.5 Banking Provisions ....................................................................................................... 38

CHAPTER 6: IMPEDIMENTS IN IMPLEMENATATION OF OPEN ACCESS............................ 406.1 Discom perspective ............................................................................................................... 40

6.1.1 Revenue Loss ................................................................................................................ 406.1.2 Forced Universal Service Obligation ............................................................................ 406.1.3 Determination of Cross Subsidy Surcharge for Open Access consumers .................... 406.1.4 Capacity building at SLDC ........................................................................................... 406.1.5 Ring fencing of SLDC .................................................................................................. 406.1.6 Shifting burden on Low end consumers ....................................................................... 406.1.7 Partial Open Access ...................................................................................................... 40


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6.2 Regulatory and Legal perspective ........................................................................................ 416.2.1 Regulatory Balance ....................................................................................................... 416.2.2 Deregulation of Industrial Tariff ................................................................................... 41

6.3 Consumer perspective ........................................................................................................... 426.3.1 Irrational Temporary Tariff ........................................................................................... 426.3.2 Power Purchase ............................................................................................................. 426.3.3 Eligibility Criteria ......................................................................................................... 426.3.4 Operational Issues ......................................................................................................... 426.3.5 Wheeling Capacity ........................................................................................................ 436.3.6 Segregation of Wires and Supply cost .......................................................................... 436.3.7 Availability of spinning reserve/Non bonded power .................................................... 436.3.8 Assurance of Supply ..................................................................................................... 436.3.9 Limit on the demand ..................................................................................................... 436.3.10 High Cross Subsidy Surcharge ..................................................................................... 436.3.11 Congestion in the Transmission Link ........................................................................... 446.3.12 Reduction in Contract Demand ..................................................................................... 446.3.13 Stand-by-charges for drawl of power by Open Access consumer from the grid .......... 44

CHAPTER 7: FINANCIAL MODELING (1MW BAGASSE PLANT) ........................................... 457.1

Introduction .......................................................................................................................... 45

7.2 Renewable energy scenario in India ..................................................................................... 457.3 Renewable Energy Support Framework ............................................................................... 467.4 Renewable energy scenario in Maharashtra ......................................................................... 477.5 Bagasse ................................................................................................................................. 477.6 Bagasse as fuel ...................................................................................................................... 477.7 Cogeneration in sugar mills using Bagasse as fuel ............................................................... 487.8 Bagasse cogeneration potential in India ............................................................................... 487.9 Bagasse cogeneration scenario in Maharashtra .................................................................... 507.10 Bagasse Cogeneration- A Technical Overview ................................................................ 507.11 Tariff determination for Bagasse cogeneration plant in Maharashtra............................... 517.12 Assumptions for Tariff determination .............................................................................. 51

7.12.1 Capital costs .................................................................................................................. 51


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7.12.2 Power Generation .......................................................................................................... 527.12.3 Financial Assumptions .................................................................................................. 52

7.13 Project Economics and Financial Indicators ..................................................................... 547.14 Sensitivity Analysis .......................................................................................................... 55

7.14.1 Sensitivity Analysis of Capital mix: ............................................................................. 557.14.2 Sensitivity Analysis of Plant Load Factor: ................................................................... 567.14.3 Sensitivity Analysis of Plant Capital Cost: ................................................................... 577.14.4 Sensitivity analysis of Fuel Price variation ................................................................... 58

CHAPTER 8: CONCLUSIONS AND RECOMMENDATIONS ....................................................... 608.1 Open Access: Conclusions and Recommendations .............................................................. 60

8.1.1 Conclusions ................................................................................................................... 608.1.2 Recommendations ......................................................................................................... 60

8.2 Financial Modelling: Conclusions and Recommendations .................................................. 638.2.1 Conclusions ................................................................................................................... 638.2.2 Recommendations ......................................................................................................... 64

BIBLIOGRAPHY ................................................................................................................................ 65Annexure A: Units generated in Bagasse Cogen plant ................................................................ AAnnexure B: Variable Cost for Bagasse Cogen plant .................................................................. BAnnexure C:

Return on Equity .................................................................................................... C

Annexure D: Interest on Loan Capital ......................................................................................... DAnnexure E: Depreciation calculation ......................................................................................... EAnnexure F: Operation and Maintenance Expenses..................................................................... FAnnexure G: Net Working Capital .............................................................................................. GAnnexure H: Fixed Cost calculation ............................................................................................ HAnnexure I: Income Tax calculations ...........................................................................................IAnnexure J: Levellised Tariff ...................................................................................................... JAnnexure K: NPV and IRR calculations...................................................................................... KAnnexure L: Debt Service Coverage Ratio ................................................................................. L


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CHAPTER 1: INTRODUCTION

1.1 Problem Statement

The Indian power sector is divided into the three main businesses of generation,transmission and distribution. The generation sector is widely competitive with involvement of

the private sector into. The transmission sector is widely operated by Power Grid Corporation of

India Limited, which is a 100% government subsidiary, owing to the large amount of investment

needed in the infrastructure; the government holds the monopoly in this business segment.

However, the final leg in the electricity sector of the distribution can be privatized and can

promote competition in the industry in order to make consumer the ultimate beneficiary. With

the very same intent mechanism of Open Access was introduced in the EA-2003. The sad part of

the story is that the mechanism could not be as effective as desired by the policy makers due to

various hurdles.

I, as a young professional in this internship have tried to identify these road-blocks and

have given some recommendations which may prove to be helpful for effective implementation

of this revolutionary mechanism which makes the consumer the ultimate winner.

India has always relied on the conventional sources of energy and a result of which is

accelerated depletion of the natural resources such as coal, natural gas, etc. It is about time that

investments should be made in the renewable sector and thus I have done a financial modeling of

1 MW bagasse based cogeneration power plant. The only dilemma in the mind of any investor is

about the return of the investment he has made in any project.

Also, what all factors affect the tariff and by how much should be known to the power

producer for which sensitivity analysis has to be done.

1.2 Significance of the project

Open Access has been widely recognized as the soul of the Electricity Act. This is so

because open access is the mechanism crafted to usher in competition and choice, and in turn

facilitate investments and protect interests of the consumers. How

many consumers to enroll them in this scheme. It is a double edged sword for the regulators in

the country, on one side the Act mandates them to introduce and promote competition in the

industry and on the other, the consumers form the default distribution company are burdened

with extra costs because big industrial consumers when opt for open access, the losses have to

borne by them small domestic consumer. The project is significant in identifying and

subsequently giving some radical solutions to the various impediments in the implementation of

Open Access.


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Further, the second part of the project deals with the financial modeling of a 1 MW

bagasse based cogeneration power plant. The main significance of this part of the project is in

attracting investments in this source of energy. Calculations have shown a high NPV and IRR

which should be attracting the investors in this business.

1.3 Scope of work

1.3.1 Provisions for Open Access

To promote Open Access at both national and state level, there are umpteen numbers of

provisions in the respective legislature; an analysis of different policies is done.

1.3.2 Calculation of Open Access charges

Open Access charges in accordance to various regulations and referring different tariff

orders is calculated. The charges specific to Maharashtra state have been calculated for differentdistribution companies.

1.3.3 Viability of Long Term distribution Open Access

Viability of Long Term Open Access is studied on the basis of calculation made form a

consumer perspective and a decision is made whether a consumer should opt for the open access

mechanism or should rather continue to procure power from the local distribution company.

1.3.4 Open Access and Renewable Energy

State level and national level provisions for the integration of Open Access mechanismand renewable energy are studied and a comprehensive compilation is made comparing the

policies of different states.

1.3.5 Identification and removal of impediments

Identification of various road blocks in the proper implementation of Open Access is

done and further recommendations are made for their removal.

1.3.6 Determination of Tariff for 1 MW bagasse based cogeneration power project

Adhering to the determination of tariff for renewable energy regulations by MERC, tariff

is determined for the above mentioned power project.


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1.3.7 Sensitivity Analysis of Tariff

The model so obtained in the previous step is used to find the variation in the cost of

generation for different values of capital costs, O&M expenses, plant load factors/ capacity

utilization factors and fuel prices.

1.4 Literature Review

Chatterjee and Kumar (2012) had studied the then prevalent scenario of the Indian power

sector and have comprehensively expressed their views in their book published by the Oxford

Publishing House. Both the authors have held a strong view in favour of implementing Open

Access mechanism in the Indian scenario. However, they have also identified impediments in its

introducing the above mentioned mechanism.

ase that is

admitted in the commission is given the due hearings and further the Commission passes an

order which is published on its website for any public reference. These orders apart from solving

the Case which they are associated with also serve as a learning medium for students and

professionals alike. Many orders have been carefully studied and analysed for the preparation of

this report.

Annual reports of various utilities, for example, Ministry of New and Renewable Energy,

Ministry of Power, Tata Power Company, etc are banks of useful information. Verified and

dependable data has been extracted from such reports and has been used in the preparation of this

report.

Commission regulations for determination of tariff and for distribution Open Access have

been referred in an exhaustive manner. These regulations serve as guiding light for tariff

determination and for studying the various provisions for Open Access in the state of

Maharashtra.

1.5 Research Methodology

The various steps involved in the process of carrying out the research are analysis of

previous reports, collection of secondary data, Validation of the collected data, analysis of

various tariff orders, establishment of tariff calculation models for different states and then

analysis of the gap.

Collection of secondary data


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As the data needed for the research was confidential to any power project, primary data

was resorted to.

Validation of the collected dataThe secondary data collected were analyzed for their validity and extreme values which

analyzing the authenticity and relevance of the source.

Determination of Tariff and subsequent analysis

The tariff is determined according to the regulations issued by the Commission and a

subsequent sensitivity analysis is performed on the basis of previous experience in the

market.


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CHAPTER 2: OPENACCESSIN INDIAN POWER SECTOR

In the context of competition, open access is the corner-stone of the Act. Open Access has been

conceived as an important tool of introducing competition in the electricity industry and ensuring

choice to buyers and suppliers of electricity.

Open access 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. The Act provides for non-discriminatory open access in transmission from the outset.

In distribution, open access is to be introduced in phases by the State Commissions with due

consideration of operational constraints and payment if surcharges.

The National Electricity Policy and Tariff Policy framed under the Act lay emphasis on proper

implementation of this competitive framework which has the potential of:

(I) Desired market signal for investment;(II) Inducing improved service from the existing utilities; and(III) Enabling consumers to get power from any source of their choice.

The Central Electricity Regulatory Commission (CERC) has framed regulations on inter-State

open access. There have been large numbers of transactions involving the generating companies,

traders and distribution companies through open access in inter-State transmission. 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 SERCs.

2.1 PROVISIONS FOR OPEN ACCESS IN THE ELECTRICITY ACT, 2003

2.1.1 Section 2(47)-Definition of open access:

-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

2.1.2 Open Access in Transmission:

Section 38of the Act, which deals with the CTU and its functions, provides as follows:

Government may notify any Government Company as the Central Transmission

Utility:


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(2) The functions of the Central Transmission Utility shall be

(d) 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 sub-

section (2) of section 42, on payment of the transmission charges and a surcharge thereon, as

may be specified by the Central Commission:

Provided that such surcharge shall be utilised for the purpose of meeting the requirement of

current level cross-subsidy:

Provided further that such surcharge and cross subsidies shall be progressively reduced in the

manner as may be specified by the Central Commission:

Provided also that the manner of payment and utilisation of the surcharge shall be specified by

the Central Commission:


the Central Commission:

Provided also that such surcharge shall not be leviable in case open access is provided to a

person who has established a captive generating plant for carrying the electricity to the

Section 39of the Act deals with the STU and its functions and provides as follows:

Transmission Utility:

Provided that the State Transmission Utility shall not engage in the business of trading in

electricity:

(2) The functions of the State Transmission Utility shall be

(d) 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 sub-section

(2) of section 42, on payment of the transmission charges and a surcharge thereon, as may be

specified by the Central Commission:


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manner as may be specified by the State Commission:


the State Commission:



Section 40of the Act reads as follows:

(a) to build, maintain and operate an efficient, co-ordinated and economical inter-State

transmission system or intra-State transmission system, as the case may be;

(b) to comply with the directions of the Regional Load Despatch Centre and the State Load

Despatch Centre as the case may be;

(c) 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 sub-section (2) of section 42, on payment of the transmission charges and a surcharge thereon, as

may be specified by the State Commission:




manner as may be specified by the Appropriate Commission:


the Appropriate Commission:



destination of his own use.


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2.1.3 Open Access in Distribution

Section 42 of the Act deals with the provision of open access to distribution and reads as

follows:

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:

Provided that such open access shall be allowed on payment of a surcharge in addition to the

charges for wheeling as may be determined by the State Commission:

Provided further that such surcharge shall be utilised to meet the requirements of current level of

cross subsidy within the area of supply of the distribution licensee:

Provided also that such surcharge and cross subsidies shall be progressively reduced in the

manner as may be specified by the State Commission:



destination of his own use:

Provided also that the State Commission shall, not later than five years from the date of

commencement of the Electricity (Amendment) Act, 2003, by regulations, provide such openaccess to all consumers who require a supply of electricity where the maximum power to be

made available at any time exceeds one megawatt.

(3) Where any person, whose premises are situated within the area of supply of a distribution

licensee, (not being a local authority engaged in the business of distribution of electricity before

the appointed date) requires a supply of electricity from a generating company or any licensee

other than such distribution licensee, such person may, by notice, require the distribution licensee

for wheeling such electricity in accordance with regulations made by the State Commission and

the duties of the distribution licensee with respect to such supply shall be of a common carrier

providing non-discriminatory open access

(4) Where the State Commission permits a consumer or class of consumers to receive supply of

electricity from a person other than the distribution licensee of his area of supply, such consumer

shall be liable to pay an additional surcharge on the charges of wheeling, as may be specified by

the State Commission, to meet the fixed cost of such distribution licensee arising out of his


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2.1.4 Section 49:Agreements with respect to supply or purchase ofelectricity

" Where the Appropriate Commission has allowed open access to certain consumers under

section 42, such consumers notwithstanding the provisions contained in clause (d) of sub-section

(1) of section 62, may enter into an agreement with any person for supply or purchase ofelectricity on such terms and conditions (including tariff) as may be agreed upon

2.1.5 Section 86:Functions of State Commission

"(1) The State Commission shall discharge the following functions, namely:

(a) determine the tariff for generation, supply, transmission and wheeling of electricity,

wholesale, bulk or retail, as the case may be, within the State:

Provided that where open access has been permitted to a category of consumers under section 42,

the State Commission shall determine only the wheeling charges and surcharge thereon, if any,for the said category of consumers;"

2.2 PROVISION FOR OPEN ACCESS IN NATIONAL ELECTRICITY POLICY, 2005

2.2.1 Section 5.4.5

The Electricity Act 2003 enables competing generating companies and trading licensees,

besides the area distribution licensees, to sell electricity to consumers when open access in

distribution is introduced by the State Electricity Regulatory Commissions. As required by the

Act, the SERCs shall notify regulations by June 2005 that would enable open access todistribution networks in terms of sub-section 2 of section 42 which stipulates that such open

Section 49 of the Act provides that such consumers who have been allowed open access

under section 42 may enter into agreement with any person for supply of electricity on such

terms and conditions, including tariff, as may be agreed upon by them.

While making regulations for open access in distribution, the SERCs will also determine

wheeling charges and cross-subsidy surcharge as required under section 42 of the Act.

2.3 PROVISION FOR OPEN ACCESS IN NATIONAL TARIFF POLICY

2.3.1 Section 8.5.1

is permitted open access will have to make payment to the generator,

the transmission licensee whose transmission systems are used, distribution utility for the heeling

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


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2.3.2 Section 6.3: Harnessing captive generation

Wheeling charges and other terms and conditions for implementation should be

determined in advance by the respective State Commission, duly ensuring that the charges are

reasonable and fair.

Grid connected captive plants could also supply power to non-captive users connected to

the grid through available transmission facilities based on negotiated tariffs. Such sale of

electricity would be subject to relevant regulations for open access.

2.3.3 Section 6.4:

Non- conventional energy sources, including co-generation.

2.3.4 Section 8.5:

calculation of cross subsidy surcharge and additional surcharge for open access.


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CHAPTER 3: OPEN ACCESS CHARGES

The various applicable open access charges are:

1. Cross Subsidy Surcharge2. Additional Surcharge3. Transmission Charges4. Transmission Loss Compensation5. Wheeling Charges6. Wheeling Loss Compensation7. Default Supply Charge8. Balancing Market Charge9. Open Access Application Charges10.State Load Dispatch Centre Charges

3.1 CROSS SUBSIDY SURCHARGE

The purpose of Cross Subsidy Surcharge (CSS) has been clearly spelt out as a charge to be paid

by the Open Access Consumer to offset, the Cross Subsidy which he would have normally paid

to the Distribution Licensee had he continued to be the consumer of the said Distribution

Licensee.

3.1.1 Policy provisions for Cross Subsidy Surcharge

3.1.1.1National Electricity Policy

Cross Submitted Surcharge should not be so onerous that it eliminates competition whichis intended through Open Access.

3.1.1.2 National Tariff Policy

Cross Subsidy Surcharge should adequately compensate the Distribution Licensee

i. It should not constraint introduction of competitionii. Should be beneficial to consumers after adding all the charges

Cross subsidy surcharge mechanism as per NTP:

S=T-[C (1+L/100) + D],

Where,

S= Surcharge

T= Tariff payable by the relevant category of consumersC= Weighted average of cost of power purchase of top 5% at the margin excluding

renewable power and liquid fuel based generationD= Wheeling charges


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L= System loss for the applicable voltage level, expressed as a percentage.

3.1.1.3 Miscellaneous Provisions

Surcharge should be brought down progressively and as far as possible at linear rate to a

maximum of 20% of opening level by FY-2010-11.Surcharge may be collected by the Distribution Licensee or Transmission Licensee or

CTU or STU depending upon whose facilities are used.

Amount collected should be given to Distribution Licensee in the area of supply.

In case of multiple licensees, amount should be given to Licensee from whom the

consumer was availing supply.

3.1.2 Alternative approaches for determining the Cross Subsidy Surcharge

There are various approaches that may be adopted in determining the Cross Subsidy

Surcharge these are:

Avoided Cost of Power (as suggested by the NTP)

Average Cost of Supply

Cost of Supply

Embedded Cost

3.1.2.1Avoided Cost of Power method

This approach has been adopted by various Electricity Regulatory Commissions such as

Maharashtra, Delhi, Madhya Pradesh, etc. The formula suggests that Weighted Average cost of

power purchase of top 5% at the margin excluding power from renewable power and liquid fuel

based generation. On computation of surcharge using this formula, the CSS comes out negativefor some of the states.

3.1.2.2 Average Cost of Supply

This approach has been adopted by states of Chhattisgarh, Jharkhand. The Chhattisgarh State

Electricity Regulatory Commission has issued an order in this aspect stating that:

Top 5% of the power purchased at the margin is from the traders. No difference between

the avoided cost and marginal cost methods.

In a power shortage situation, power purchase is not avoided and the extent of load

shedding is reduced. The rationale for the load shedding reduction is that a reduction

leads to increase in consumption by subsided customers.

3.1.2.3 Cost of supply method

The Cost of supply approach has been adopted by the states of Karnataka and Assam. This

approach clearly suggests that the level of cross subsidy surcharge depends upon the voltage

level at which the consumer is supplied. The KERC has computed the CSS for various

distribution companies as illustrated below.


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Voltage level of the consumerCross Subsidy Surcharge (Paisa per unit)

BESCOM MESCOM CESC HESCOM GESCOM

Extra High Tension 93 62 52 66 86

High Tension 78 34 20 22 67Table: KERC order for CSS of various discoms

3.2 ADDITIONAL SURCHARGE

The additional surcharge is an extra charge that an Open Access consumer has to pay the utility

to recover the fixed costs towards its stranded capacity.

3.2.1 Policy provisions for Additional Surcharge

3.2.1.1National Electricity policy

Additional Surcharge should not be so onerous that it eliminates the competition which is

intended through Open Access.

3.2.1.2National Tariff Policy

The National Tariff Policy provides for following in regards to Additional Surcharge:

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

There is an unavoidable obligation and incidence to bear fixed costs consequent to a

contractFixed costs related to network assets would be recovered through Wheeling Charges.

3.2.2 Objectives and Principles for Additional Surcharge

To compensate the licensee towards loss of purchasing power in case Licensee is unable

to sell that power

It is intended to recover other fixed costs of Licensee

In case of supply shortage situation, there will be no loss licensee and hence may be

specified as zero.

The obligation is on the licensee to prove that its power purchase commitments have

become stranded.

3.2.3 Approach towards calculation of Additional Surcharge

The additional surcharge has to be calculated on case to case basis if licensee is able to

prove that its commitments have been stranded. Most of the State Electricity Regulatory

Commissions have specified in their regulations or orders that it will be determined on case to

case basis with few exceptions. The Uttrakhand Electricity regulatory Commission in its order


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3.4 WHEELING CHARGES AND DISTRIBUTION LOSSES

3.4.1 Introduction

i. Wheeling charges and loss compensation should be determined for each voltage level.These charges help the distribution company to cover up the costs that it has incurred

for distribution of electricity. The key issue that discoms face is the non-segregation

of wire and supply business.

ii. In the absence of technical and commercial losses, technical losses based on samplestudies or estimated losses need to be specified. These losses are to be specified on

the basis of applicable voltage for delivery of power at 11kV or above. However, for

LT network, the losses at 11 kV may be considered.

3.4.2 Methodology for allocation of Wheeling charges

i. Wheeling charges can be allocated and subsequently can be collected once a propermeasure of network usage is determined for different users.

The above formula is used as a measure of network usage and further to allocate the cots.

ii. Different users connected at different voltage levels are charged with differentcharges. The following table illustrates allocation of wheeling charges on the basis of

various voltage levels:

Voltage level Consumer base

33kV 33kV, 11kV and LT users

11kV 11kv and LT users

LT network Only by LT users

iii. Based on the allocation and considering the respective connected load/contractdemand at each voltage level, the wheeling charges in Rs./kVA/month can be worked

out or considering sales, wheeling charges in Rs. per Unit can be worked out.

3.4.3 Applicability of Transmission and Wheeling Charges

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. Various

scenarios are discussed as under and the applicability of transmission and wheeling charges is

analysed.


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Applicability of

Charges

Point of Connection Applicable charges

TransmissionNetwork

DistributionNetwork

TransmissionCharges

Wheeling Charges

Scenario 1

Generator Yes

Yes YesConsumer Yes

Scenario 2

Generator Yes

Yes NoConsumer Yes

Scenario 3

Generator Yes

Yes No

Consumer Yes

Scenario 4

Generator Yes

No YesConsumer Yes

3.4.4 Case of Multiple Licensees

Network costs for each distribution licensees are different depending upon the various

network and cost characteristics. Therefore, wheeling charges need to be specified for each

distribution licensee based upon its network cost.


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3.5 OTHER CHARGES

3.5.1 Default Supply Charges

It is necessary to have the facility of default supply from the distribution licensee, in case

the Open Access generator/licensee is unable to supply power for some reason. The National

may be equated to the tariff for temporary supply. However, most of the states do not have

temporary supply charges for HT category consumers. Default supply charges shall be

applicable only for open access consumers availing power at distribution network.

3.5.2 Balancing Market Charges

Balancing and Settlement is an important and integral part for any competitive market.

The risk profile for any transaction is greatly affected by the B&S mechanism and hence the

viability of project is directly affected by this arrangement. Balancing charges should be

applicable for Open Access consumers availing power at Transmission network. However,

distribution Open Access consumers are not liable to pay these charges as the mechanism will be

applicable for the Distribution Licensee to which the Open Access consumer is connected.

Other Charges

Default Supplycharges

Balancing MarketCharges


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CHAPTER 4: OPEN ACCESS CHARGES IN MAHARASHTRA

4.1 Introduction

In this chapter, we will to calculate the charges which we have discussed in the previouschapter with the Maharashtra perspective.

The Commission, in exercise of the powers vested in it under Section 61 and Section 62

of the Electricity Act, 2003 and all other powers enabling it in this behalf, and after taking into

consideration submissions made by various discoms, suggestions and objections of the public,

and responses of the discoms thereto, issues raised during the Public Hearing, and all other

relevant material, determines various charges to be levied upon the Open Access consumers in

the state.

4.2 Wheeling Charges

The Commission has determined the wheeling charges and wheeling losses for the use of

various Distribution Licensees while giving the Tariff order for FY 2012-13. Following cases

were referred while compiling the data:

1. Case No. 19 of 2012: APR Order for MSEDCL for the FY 2012-2013.2. Case No. 98 of 2009 of APR Order for TPC-D for the FY 2012-2013.3. Case No. 180 of 2011: APR Order for RInfra-D for the FY 2012-2013.

4.2.1 Wheeling Charges for MSEDCL

The Commission in its Order in Case 19 of 2012 (dated: 16/08/2012) has determined the

wheeling charges in Rs. /kWh and wheeling losses for the FY 2012-2013 for the use of

MSEDCL network. The same have been summarized in the table below.

Particulars Wheeling Losses Wheeling Charges(Rs./kW/month)

Wheeling Charges(Rs./kWh)

33 kV 6.00% 52.00 0.11

11/22 kV 9.00% 287.00 0.60

LT Level 12.50% 490.00 1.03

Table 1: Open Access charges: Wheeling charges and Wheeling Losses for MSEDCL


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4.2.2 Wheeling Charges for TPC-D

The Commission in its Order in Case 98 of 2009 (dated: 12/09/2010) has determined the

wheeling charges in Rs. /kWh and wheeling losses for the FY 2012-2013 for the use of TPC-D

network. The same have been summarized in the table below.

Particulars Wheeling Charges (Rs. /kWh) Wheeling Losses (%)

HT level 0.19 0.65

LT level 0.38 0.65

Table 2: Open Access charges: Wheeling charges and Wheeling Losses for TPC-D

4.2.3 Wheeling Charges and Wheeling Losses for RInfra-D

The Commission in its Order in Case No. 180 of 2011 (dated: 15/06/2012) has

determined the Wheeling Charges in Rs. /kWh and Wheeling losses for the use of RInfra-D for

the FY 2012-2013 and the same has been summarized in the table below.

Particulars Wheeling Charges (Rs. /kWh) Wheeling Losses (%)

HT level 0.46 1.5

LT level 0.88 9.0

Table 3: Open Access charges: Wheeling charges and Wheeling Losses for RInfra-D

4.3 Transmission Charges and Transmission Losses

4.3.1 Transmission Charges

The Commission has separated determined the Transmission Tariff for the use of

transmission system for the FY 2013-2014 to FY 2015-2016. Moreover, the Commission has

given the ruling that there will be no distinction in the transmission charges among long term

/medium term usage and short term usage except for denomination of such charges. The relevant

regulation in this regard, Regulation 66.2 of MERC (Multi Year Tariff) Regulations, 2011 isreproduced as under:

term, medium

term or short term access to the intra-State Transmission System:

Provided that, the transactions for long term and medium term shall be denominated


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in Rs/kW/month or any suitable denomination as may be stipulated by the

Commission, derived from transmission tariff for long term/medium term access as

The Commission in its order for Case No. 56 of 2013 has determined the InSTS charges. Thesame have been summarized in the following table.

Particulars Units FY 2013 -14 FY 2014-15 FY 2015-16

TTSC (including past

period recovery of FY2013-14)

Rs. Cr 6819.97 6217.24 7220.28

Average Coincident PeakDemand (CPD)

MW 17748 19533 21102

Transmission Tariff (Long

term/Medium Term )Rs./kW/month 320.22 265.25 285.13

Transmission Tariff (Short

Term /collective/renewable energy )

Rs./kWh 0.43 0.36 0.38

Table 4: Open Access charges: Transmission Charges

4.3.2 Transmission Losses

The intrastate transmission loss as recorded by MSLDC for FY 2012-13 is 4.19%whichis approved by the Commission for the FY 2013-2014 to FY 2015-2016. The Commission

approved the same in Order for Case No. 56 of 2013.

4.4 Cross Subsidy Surcharge

4.4.1 CSSfor MSEDCL

MERC in the Order in Case No 138 of 2012 dated 21 February, 2013 decided Cross

Subsidy Surcharge to be levied on Open Access consumer.

Consumer Category CSS Computed

(Rs./Unit)

CSS Approved

(Rs./Unit)

Industry

Express Feeder 1.63 1.63


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Others 4.43 4.43Non Express Feeder

Others 3.81 3.81Railways 0.66 0.66

Public Water Works

Express Feeder (1.61) -Non Express Feeder (1.43) -

Agriculture (4.05) -

Bulk Supply

Residential Complex (1.72) -Commercial Complex (1.72) -

HT-IX Public services

Express feeders 2.19 2.19Non-Express feeders 1.63 1.63

LT Consumers

Non DomesticUp to 20 kW

0-200 Units (0.71) -

Above 200 units 3.11 3.11

'> 20 kW & < 50kW' 2.33 2.33

Above 50kW 4.84 4.84

Industrial

Below 20kW load (2.46) -

Above 20kW load 0.73 0.73

BPL (6.59) -

Domestic

0-100 Units (3.89) -

101-300 Units (1.23) -301-500 Units 0.40 0.40

500 -1000Units 1.10 1.10

above 1000 units 1.10 1.10


Advertisements 15.58 15.58

Public Water Works (4.82) -

Street Lighting (3.11) -

Temporary Others

Other Purpose 7.79 7.79

Religious Purpose (3.75) -

LT Public services

0-200 Units (2.22) -

200-500 0.56 0.56

>500 units 0.56 0.56

>20-50 KW 1.67 1.67

>50 KW 2.18 2.18

Crematorium & Burial (LT-IX) (4.05) -

Table 5: Open Access charges: CSS for MSEDCL


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4.4.2 CSS for TPC-D

Consumer Category CSS Computed(Rs./Unit)

CSS Approved(Rs./Unit)

Industry

Express Feeder 1.63 1.63Non Express Feeder 1.20 1.20Seasonal Industry 2.84 2.84

Commercial

Express FeederOthers 5.53 5.53

Non Express FeederOthers 4.91 4.91

Railways 1.76 1.76Public Water Works



Bulk Supply




HT Consumers (33kV)Industry


Commercial



Railways 1.32 1.32

Public Water Works



Bulk Supply



Express feeders 2.85 2.85


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Non-Express feeders 2.29 2.29HT Consumers (22/11 kV)

Industry


Commercial



Railways 0.66 0.66

Public Water Works


Agriculture (4.05) -Bulk Supply




LT Consumers

Non Domestic

Up to 20 kW

0-200 Units (0.71) -

Above 200 units 3.11 3.11'> 20 kW & < 50kW' 2.33 2.33

Above 50kW 4.84 4.84

Industrial


Above 20kW load 0.73 0.73

BPL (6.59) -

Domestic

0-100 Units (3.89) -

101-300 Units (1.23) -

301-500 Units 0.40 0.40

500 -1000Units 1.10 1.10

above 1000 units 1.10 1.10


Advertisements 15.58 15.58

Public Water Works (4.82) -

Street Lighting (3.11) -

Temporary Others

Other Purpose 7.79 7.79

Religious Purpose (3.75) -


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LT Public services

0-200 Units (2.22) -

200-500 0.56 0.56

>500 units 0.56 0.56

>20-50 KW 1.67 1.67

>50 KW 2.18 2.18Crematorium & Burial (LT-IX) (4.05) -

Table 6: Open Access charges: CSS for TPC-D

4.4.3 CSS for RInfra-D

The issue pertaining to the computation of CSS is subject matter of pending appeals

of 2011; 178 of 2011 and others. Since, these are subjudice; no view therefore can be taken on

the said issues in the Case No.180 of 2011. Therefore, the Commission retains CSS at the

existing level as approved in Case 43 of 2010.

Consumer CategoryComputed CSS

(Rs./Unit)

Applicable CSS

(Rs./Unit)

Industry (1.33) -

Commercial 0.26 0.26

Group Housing (3.27) -

Temporary Supply 2.22 2.22

Industry (0.77) -

Commercial 0.83 0.83

Group Housing (2.71) -

Temporary Supply 2.79 2.79

Up to 20 kW (1.51) -

'> 20 kW & < 50kW' 0.84 0.84

Above 50kW 1.90 1.90

Industrial



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nth nth nth

27 Total Charges paid by consumeravailing long term Open Access

(Calculated)

14.36 INRmn/mo

nth

13.46 INRmn/mo

nth

14.1 INRmn/mo

nth28 Effective Bulk Supply tariff (calculated) 4.04 INR/k

Wh

4.04 INR/k

Wh

4.04 INR/k

Wh29 Effective Open Access Charges

(Calculated)

1.29 INR/k

Wh

0.54 INR/k

Wh

0.8 INR/k

Wh

30 Effective Rate 5.33 INR/kWh

4.58 INR/kWh

4.84 INR/kWh

Table 8: Case 1: Power procurement via open access

MSEDCL Tata Power RInfra

S.

No.Particulars Value Units Value Unit Value Unit

1 Energy Charges 7.01 INR/kWh 5 INR/kWh 7.56 INR/kWh

2 Demand Charges 190 INR/kVA/month

150 INR/kVA/month

150 INR/kVA/month

3 Any other charges 0 INR/kWh 0 INR/kWh 0 INR/kWh

4 Total Energy Charges 17.48 INR

mn/month

13.61 INR

mn/month

20.41 INR

mn/month5 Total Demand Charges 1.19 INR

mn/month0.94 INR

mn/month0.94 INR

mn/month

6 Other charges-Total 0 INR

mn/month

0 INR

mn/month

0 INR

mn/month7 Total charges paid 18.67 INR

mn/month

14.55 INR

mn/month

21.34 INR

mn/month

8 Effective Rate 7.49 INR/kWh 5.34 INR/kWh 7.91 INR/kWh

Table 9: Case 2: Power Procurement via Discom

On careful analysis of the above two tables it can be concluded that from a consumer perspective

purchasing power via Open Access is very much viable and should in fact be preferred over

purchasing power from the distribution company prevailing in the area.


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CHAPTER 5: RENEWABLE ENERGY AND OPEN ACCESS

5.1 Introduction

Out of the present total installed electricity generation capacity of about 225GW

1

, about12 percent comes from renewable energy sources, notably, wind, biomass, small hydro and solar.

Renewable energy (RE) is being aggressively promoted in the country, with about 41 GW

scheduled to come up by FY-17. It has demonstrated rapid growth in all segments.

In order to transmit clean energy from the renewable energy plants to pan-country consumers,

the need for greater Open Access covering renewable power is bound to be acutely felt.

5.2 Need and Importance of Open Access in Renewable Energy

Renewable Energy sources are very unevenly distributed throughout the country. Whilesolar energy and wind energy can be efficiently harvested in the western and southern part of the

country, small hydro potential is concentrated in the north-east. Optimum utilisation of these

resources requires catering to consumer demand all over the country. To avail the benefits of a

country wide market, Open Access is a crucial tool in the hands of RE generators.

In order to give a boot to renewable energy based power generation, all the state

regulatory commissions brought out Renewable Purchase Obligation (RPO) for state distribution

companies and large consumers which mandate procurement of a specific percentage of the total

energy requirement from renewable sources. States are on a drive to develop renewable source

based power plants to fulfill these RPOs and Open Access helps them do that.

by

purchasing Renewable Energy Certificates and from RE generators in the states. These

generators, in turn, sell the power produced to other consumers at lower tariffs. Open Access,

thus aids in REC market development as well.

Large scale deployment of renewable energy plants brings economies of scale which, in turn,

reduces the cost of power from renewable sources. This enables costly renewable power from

wind, solar and other sources to gain grid parity with conventional energy faster. Thus, Open

Access aides in swift attainment of grid parity.

A multiplicity of renewable power producers, who participate in various market processes such

as competitive bidding, bilateral and collective power trading etc., work towards overall

1as on 31.05.2013


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development of the Indian power market, in line with demand and supply dynamics. Provision of

easier Open Access to these developers, therefore is advantageous to the entire power market.

Figure 1: Advantages of Open Access in Renewable Energy

5.3 National Level Provision for Open Access in RE

5.3.1 Electricity Act, 2003

The Electricity Act, 2003 provides that co-generation and generation of electricity from

non-

connectivity with grid and sale of electricity to any person.

5.3.2 National Electricity Policy, 2005

The policy mentions promoting competition in renewable energy sector as one of the

objectives.

5.3.3 Rural Electrification Policy, 2006

The policy promotes Decentralized Distributed Generation (DDG) in off grid areas.

DDG, through non-conventional sources of energy, is promoted even where grid connectivity

exists.

Wide deployment of RE

RPO fulfilment

REC market development

RE grid parity

Power market development


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5.3.4 Rajiv Gandhi Grameen Vidyutikaran Yojana

Cost-effective DDG projects can be financed with 90 percent capital subsidy.

Only RE plants of capacity 50 MW or above are entitled to avail connectivity to the inter-state

transmission system. This is in contrast to the minimum capacity threshold of 250 MW for

conventional power plants2.

RE plants of lesser capacity (i.e. less than 50 MW) can also avail connectivity to the ISTS, but

they can do so collectively at a single point of connection. However, the aggregate capacity of

various plants at pooling substation has to be atleast 50 MW.

However, there are specific provisions in the Indian Electricity Grid Code (IEGC) which deal

with RE generation.

5.3.4 IEGC provisions

sources by specifying the technical and commercial aspects for integration of these

transmission requirement for evacuating power from renewable energy sources shall also

be taken care of

optimally utilize them.

It gives the methodology for scheduling/rescheduling of wind and solar energy

(rescheduling on three hourly basis) and for compensating the wind and solar energy rich

states for dealing with the variable generation through Renewable Regulatory Charge.

Wind farms with collective capacity of minimum of 10 MW, connected at 33 KV level or

above, are exempted from UI charges for deviations up to 30% from the scheduled

generation. For deviations within permissible limit, UI charges are borne by the host

state.

Solar power developers are also exempted over deviations from schedule. The requisite

UI amount is borne by the state.

2CERC Grant of connectivity, Long term and Medium-term Open Access in inter-state Transmission and related

matters (Amendment), 2005.


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5.3.5 Green corridor concept

Central and state electricity regulators envisage that by FY-17, the total installed RE

capacity would reach 66 GW. This capacity would be very unevenly distributed across states,

calling for huge demand of transmission infrastructure.

To meet the transmission needs of RE plants, augmentation and strengthening of the

existing transmission capacity is being planned. Power Grid Corporation has Rs. 42,000 crore

plans for setting up an exclusive countrywide green corridor for renewable energy transmission.

About Rs. 20,000 crore would be for intra-state strengthening and Rs. 22,000 crore for inter-state

transmission systems for grid integration. This would also include oth

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