Business Standard

Electricity consumers can now select their supplier

Forum of Regulators to make its recommendations to Power Ministry

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can now select the of reliable and competitive power if retail sale competition becomes a reality in India. The power ministry has proposed an amendment to Elecricity Act, 2003 whereby wire and supply business would be separated. The Forum of Regulators, a representative body of power regulators, at its recent meeting held deliberations on the implementability of retail sale competition in the country.

Central Electricity Regulatory Commission chairman Pramod Deo told Business Standard, "In United Kingdom, the consumer has a to select his supplier. On similar lines, if wire and supply businesses are separated in India then the consumers will be in a position to select his supplier. During FoR's meeting the PricewaterhouseCoopers (PwC) has made a presentation. FoR members have raised certain issues and PwC has been asked to come out with a revised presentation. FoR proposes to submit its recommendations to the power ministry."

PwC in its presentation informed that in UK the electricity distribution and supply were segregated whereby the same person may not be the holder of both a distribution licence and a supply licence. Hence two different types of supply licences replaced with one type of supply licence, and the distribution company may not hold a supply licence at all. In Victoria, Australia under the Electricity Act of 1993, three new government companies were formed out of the State Electricity Commission of Victoria comprising Generation Victoria (Generation), National Electricity (Transmission) & Electricity Services Victoria ( Distribution and Retail).

In Argentina, the energy market was liberalized for customers with demands greater than 5MW, this has been successively reduced to 30KW. These customers are free to contract directly with generators and can participate directly in the generation market.

PwC  has suggested a hybrid retail competition model for India wherein only one segment of consumers (1 MW & above load) would be initially open to competition. Gradually the market would be made competitive for all consumers. Separation of wheeling and retail supply businesses would be essential in order to accurately allocate costs, fixed assets, debt servicing, losses to the two functions.

In India, competitive market consumers may be loaded with a cross subsidy surcharge in initial years, to make operations viable for incumbent distribution companies with regard to its captive (non competitive) retail market. The government may provide some sort of a viability gap funding in order to compensate incumbent Discom for the loss of high-tariff consumers, in view of the fact that tariffs cannot be increased substantially for Domestic category.

According to PwC,  the role and responsibilities of distribution network business and retail supply business would be different after demarcation.  The distribution network business would own the distribution network and the operator would do network planning, carry out capital expenditure on building and augmentation and operation and maintenance. On the other hand, the retail supply business would provide the last mile connectivity to consumer’s point of supply.  The retail supplier would do the power procurement and management of existing contracts and power trading.

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