In yet another push for granting open access to all electricity consumers with power requirement of 1 Mw and above, the power ministry, exercising its power under section 107 of the Electricity Act, 2003, has issued directives to the Central Electricity Regulatory Commission (CERC) stating that regulators have no jurisdiction to decide energy charges for such consumers.
The ministry resorted to this move after it observed that regulators had not taken seriously its letter of November 30, 2011, in this regard, and instead have either determined the energy charges or are in the process of determining the charges.
The ministry’s move comes at a time when there has been a growing resistance from distribution companies to the open access system, as they fear they might lose consumers who cross-subsidise the agriculture and low-income power consumers.
Pramod Deo, chairman, CERC, told Business Standard, “CERC has already complied with the provisions of the Electricity Act, 2003. It has put in place regulations whereby any consumer is free to purchase power from any source - which may be for short term, medium term or long term.”
Deo said CERC had powers to regulate inter-state connectivity while under section 42 of the Electricity Act, 2003, the state electricity regulatory commissions (SERCs) had powers over open access. Therefore, state governments could issue policy directives to SERCs to implement the law ministry’s interpretation on open access.
The law and judiciary department had last year, in its opinion, said, “If certain consumers want to get the benefit of the option of buying power from competing sources, it is logical that distribution companies do not have an obligation to compulsorily supply power to such consumers. If such consumers want power from the distribution company then the terms and conditions of the supply would be determined in terms of section 49 of distribution company.”
The power ministry, in its directive, said at present, of the 1,86,000 MW power the country produces, 38% was consumed by industries, and after adding consumers like the Railways and defence, the figure was around 45%. So, such consumers should be allowed source power according to their choice. About 40,000 Mw of power were in private hands, and the number of private players had not entered into any power sale agreement.
“This process will bring relief to existing distribution companies, and it is estimated that with the amount of cross-subsidy charges and wheeling charges they will be compensated. In fact, state government will also get electricity duty for the additional quantities,” the ministry said.
The ministry, however, notes that the problem of high transmission and distribution losses looms large. It is further analysed that if industry buys energy at Rs 4 a unit, and the total cost at delivery point, in case of interstate supply, is around Re 1, and add the wheeling and scheduling charges and cross-subsidy charges, the final cost of power would be very high. The best course of industries is to set up their own power plants, either individually or in a group, where they can absolve in paying cross-subsidy charges as per the Electricity Act 2003, the ministry said.
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Tariffs are determined primarily on cost-plus method and reviewed by the electricity regulatory commissions