White Paper on Franchisee Operation & Open Access

While open access as a phenomenon comes as a relief to many in the power market and
particularly Big Industrial Consumers who have been making a fortune, because of this
mechanism which has been facilitating them in getting access to the abysmally low prices
prevailing in the open market over the last 2-3 years. This has also helped them gain access
to much cheaper alternate source of power which otherwise used to come from Diesel
Generators at an average rate of Rs. 16-20/Unit.

Barring a few states, most states across the country have been finding out ways and means 

to curb outgo of these Big & Paying consumers to avoid revenue loss on one end and to 

avoid embarrassment of higher T&D loss on the other, which comes parallel to outgo of big 

consumers who normally account for much lesser T&D loss and virtually no commercial 

loss.

Impact assessment for Open Access to 1MW+ customers

DIRECTIVE:

The Ministry of Power Govt. of India issued a directives for implementation in the all States of India, after seeking consultation with Ministry of Law and Justice and said that,

“Section 42(ii) read with the first and fifth proviso is a self-contained code with regard to consumers who required the supply of electricity of 1 MW and above and accordingly the State Electricity Regulatory Commissions cannot continue to regulate the tariff for supply of electricity to any consumer of 1 MW and above”.

“The provisions of section 42 need to be analyzed in relation to the duties of the distribution licensees and open access.  While sub-section (2) requires the State Commission to introduce open access within one year of the appointed date the fifth proviso makes it mandatory for the State Commission to provide open access to all consumers who require supply of electricity where the maximum power to be made available at any time exceeds 1 MW.  The fifth proviso was introduced by Act 57 of 2003 with effect from 27th January 2004”.

“The first issue is if open access is made obligatory whether the distribution licensees will continue to have the responsibility of universal service obligations with regard to consumers whose requirements are in excess of 1 MW.  An analysis of the various provisions (particularly section 49 of the Act) shows that if certain consumers want to have the benefit of the option to buy power from competing sources, then it is logical that DISCOMS do not have an obligation to compulsorily supply power to such consumers.  If such consumers want power from the DISCOM then  the terms and conditions of the supply would be determined in terms of section 49 of DISCOM also”.

“There is no conflict between the aforesaid conclusion and the provisions of section 42(3) of the Act which provides that a person requiring supply of electricity has to give notice in respect thereof.  If the consumer intends to use the network of the DISCOMS, he has to give notice and upon such notice to DISCOM (it) is duty bound to provide non-discriminatory open access to its network.  Section 42(3) cannot be construed to mean that giving of a notice is a pre-condition for the implementation of open access”.

The directives issued by MoP shall have great impact on power sector particularly Electricity consumers, generators, traders and power market.  There are positive as well as negative sides which are to be looked into minutely.  The Commission will have a great responsibility to implement the suggestions of MoP by making suitable Regulation as well as to protect consumers against some negative points which are elaborated below.

POSITIVE POINTS:

1. Consumers of 1 MW and above are deemed OA consumers and shall have choice of purchase of power from cheaper sources including Discom. 
2. The tariff of such consumers shall not be regulated by Commission and the heavy burden of cross subsidies shall not be loaded to such consumers.