The Indian renewable energy industry has been witnessing rapid development driven by the government’s push to achieve the massive targets and forward-thinking policy and regulatory interventions, and significant drop in tariffs. So far, the growth has been led by utility-scale projects based on power purchase agreements signed with discoms, while the open-access market remains plagued with several challenges. Initiated as an instrument for promoting renewable energy consumption on a retail-level, the open-access has faced massive resistance from discoms. Recently, the Maharashtra Electricity Regulatory Commission (MERC) set the open-access charges applicable from September 1, 2018, in response to a petition filed by Maharashtra State Electricity Distribution Company Limited (MSEDCL). Maharashtra has high solar and wind potential and the increasing industrial tariffs have made renewable-based open access a viable option. Renewable Watch discusses some of the arguments made by the discom for higher tariff revisions and the regulatory commission’s response…
As per the MERC Distribution Open Access Regulations, 2016, consumers can avail of open access from multiple generators and sources. Due to this, MSEDCL has seen a surge in the number of applications. However, the major challenge does not lie in the number of applications, but the high frequency of shifting of open-access consumers between discoms and other sources of power. When these consumers frequently switch between discoms and other sources of power, discoms are unable to manage their power procurement efficiently. In its petition, MSEDCL has stated that many consumers thus misuse the provisions of open access. Moreover, the discom has argued that many of the independent power producers are converting to “group captive” to get an exemption from the levy of cross subsidy and additional surcharges. While this is a legal provision according to the regulations, the non-open access consumers have to make up for this by paying higher surcharges.
In another example, MSEDCL stated that it has seen many of its consumers seeking open access for a period of one month under short-term open access (STOA) for a consecutive period of more than three months, which actually should come under the medium-term open access. Reportedly, this is being done in order to avoid transmission charges on a monthly basis which has put additional financial burden on MSEDCL. Moreover, MSEDCL has to pay transmission charges to state transmission utilities on MW-basis, irrespective of the actual consumption. Therefore, the deficit amount, which should ideally be borne by open-access consumers, becomes a burden on the remaining consumers. As a solution, MSEDCL has proposed STOA charges to be calculated on Rs per kW per month-basis instead of the present Rs per kWh. However, a final amendment to the regulations can only be made by the MERC after due considerations.
MSEDCL has also stated that for handling the large amount of open-access applications, it has developed an online system. But to save the data from an unexpectedly high number of STOA consumers, MSEDCL has to purchase additional online storage space. In this case, MERC intervened and noted that while the challenges faced by MSEDCL were genuine, many of the highlighted activities came under the normal duties of the discom as a distribution licensee. However, the commission agreed that MSEDCL should not be liable to incur losses in its bid to improve consumer services. The MERC has thus notified open-access charges lower than that proposed by MSEDCL in its petition.
MSEDCL’s argument for the increase in charges is clear – that open-access consumers should pay appropriate charges as envisaged in the Electricity Act to avoid undue burdening of other consumers. As a result, MSEDCL has proposed amending some of the “grey areas” in the regulations, which allow open-access users to misuse the provisions or get undue benefit at the cost of other consumers. To strike a balance between the consumer and the discom needs, electricity commissions across all Indian states may soon need to redefine the regulations, taking into consideration the country’s clean energy targets.