Central and state power regulators recently discussed what needs to be done to make competition in retail sale of power a reality for the citizen.
The Union power ministry had recently proposed amending the Electricity Act of 2003 to separate the supply and retail-wire businesses. The Forum of Regulators (FoR), representing the central and state electricity regulatory commissions, met to debate the hurdles in implementation.
Pramod Deo, chairman of the central body told Business Standard: “In the United Kingdom, consumers can choose their power supplier. On similar lines, if the wire and supply businesses are separated, such a choice could be given here, too. During the meeting, PricewaterhouseCoopers (PwC) made a presentation on the proposal. However, FoR members had raised certain issues and PwC has been asked to come up with a revised presentation. FoR proposes to submit its recommendations to the power ministry.”
PwC had said electricity distribution and supply were segregated in the UK, whereby no entity could have a licence for both. In Argentina, the energy market was first liberalised for customers with demands greater than 5 Mw and this had been successively reduced to 30 Kw. 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, 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 the wheeling and retail supply businesses would be essential to accurately allocate costs, fixed assets, debt servicing and losses to the two functions.
In India, competitive market consumers might be loaded with a cross-subsidy surcharge in the initial years, to make operations viable for incumbent distribution companies for the captive (non-competitive) retail market. The government could provide viability gap funding to compensate the incumbent distribution company for the loss of high-rate consumers, since charges cannot be increased substantially for the domestic category.
According to PwC, the roles and responsibilities of the distribution network business and retail supply business would be different after demarcation. The former would own the distribution network and the operator would do network planning, carry out capital expenditure on building and augmentation and operation and maintenance. While, the retail supply business would provide the ‘last mile connectivity’ to the consumer’s point of supply. The retail supplier would do the power procurement and management of existing contracts and power trading.
