Open access is envisaged as one of the corner-stones of the Electricity Act, 2003 (Electricity Act). Open access means non-discriminatory access to the electricity transmission and distribution system provided to eligible consumers, generators and state distribution companies (DISCOMS).
So far, DISCOMs have imposed heavy non-tariff barriers in the form of operational constraints and state Electricity Regulatory Commissions (ERCs) have approved tariff barriers in the form of cross-subsidy surcharge, additional surcharge, wheeling charge, standby charge, etc. on consumers seeking to avail open access. This makes availing open access uneconomical.
The National Tariff Policy for Electricity, 2016 and the National Electricity Policy, 2005 (NEP) have emphasized the importance of finding a balance between bringing open access to consumers and maintaining the financial viability of DISCOMs. The NEP also states that state ERCs need to provide a facilitative framework for non-discriminatory open access as this would provide efficient choices in locating generation capacity and encourage trading of electricity for optimum utilization of generation resources, thus reducing the cost of electricity supply.
In consonance with this aim, the Ministry of Power on August 16, 2021, released the Draft Electricity (Promoting Renewable Energy through Green Energy Open Access) Rules, 2021 (Open Access Rules). These rules have the potential to get state DISCOMs and state ERCs to change their outlook about granting open access. While the Draft Open Access Rules attempt to address the concerns of the DISCOMs in granting open access, they also have implementation challenges. Some of these aspects are highlighted below:
Eligibility: The Electricity Act currently states that State ERCs shall make open access available to consumers whose power demand at any time exceeds 1 mega-watt (1,000 kilo-watt). A report by the Forum of Regulators titled 'Review of Status of Open Access in Distribution' issued in September 2019 notes that only the Haryana ERC had permitted consumers with less than 1 mega-watt consumption to avail open access. The Draft Open Access Rules makes an entity having a sanctioned load of more than 100 kilo-watt eligible for open access. This ten-fold reduction is certainly a bold move and has the potential of creating a large constituency that would benefit from this proposed reform.
Application Process: The Draft Open Access Rules also seeks to bring in uniformity in the application procedure for grant of open access to consumers. Under this process, a central nodal agency will be notified by the Central Government that will operate a single-window system via an online portal. All applications for green energy open access will then be routed to the nodal agency notified by the state ERC, which will be required to dispose of the application within 15 days. This reform can bring in transparency in the entire application process. The Forum of Regulators report also stated that in some states, the applicable open access regulations stipulate that the application procedure can take up to 180 days – thus making it a cumbersome and burdensome process.
Additional surcharge and subsidies: Currently, commercial and industrial consumers, are charged a higher tariff to enable cross-subsidization of electricity to residential consumers. If open access is granted to commercial and industrial consumers, without charging the appropriate charges, DISCOMs fear a severe strain on their finances. As there is no uniform process under which state ERCs approve additional surcharges and cross-subsidy surcharges on open access consumers, the sector is beset by confusion. With respect to additional surcharge and cross-subsidies, the Draft Open Access Rules mark a radical step by eliminating such surcharge on green energy open access consumers.
Demand variation. When open access consumers keep switching on and off from open access, DISCOMs face challenges in estimating demand forecast thus leading to potential security challenges for the electricity grid. To ensure that there is no high variation of demand in the energy to be purchased by the DISCOM, the Draft Open Access Rules state that reasonable conditions such as requirement of a minimum number of time blocks during which the open access consumer will not change the quantum of power consumed can be imposed.
The Draft Open Access Rules have the potential to change how electricity consumption and distribution is imagined. Yet for their implementation, amendments would be required to the Electricity Act. The current rules run in conflict with many of the Electricity Act's existing provisions. For example: the imposition of additional surcharge is permitted under the Electricity Act; permission to give open access is given to state ERCs and the jurisdiction to frame open access regulations lies with CERC or the state ERC and not the Ministry of Power.
To ensure enforceability, making such amendments to the Electricity Act prior to the notification of the Draft Open Access Rules is essential.
This article has been published in Business World Legal.
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