Regulatory hurdles like high cross subsidy charges and resistance from utilities are affecting the growth of open access market for energy consumers, domestic ratings agency Icra said.
“…regulatory challenges, especially levy of high cross-subsidy surcharge (CSS) and other charges, and resistance from utilities is adversely impacting power generating companies (gencos) and high tension (HT) customers and thus affecting the growth of the open access market,” Icra said in a release.
“ICRA notes that the high level of open access charges to avail energy supply by HT consumers, primarily owing to the increase in CSS coupled with the levy of additional surcharge by regulators in a few states like Andhra Pradesh, Gujarat and Rajasthan, has constrained procurement from the open market for such consumers.
“This apart, the open access market has also faced discouragement from utilities and state governments in some states, which has restricted growth,” Icra Ratings Senior Vice President Sabyasachi Majumdar said.
Under the provisions of the Electricity Act, 2003, open access is permitted and involves the non-discriminatory use of transmission and distribution infrastructure of the licencees by any consumer with demand greater than or equal to 1 MW to procure electricity from the source of their choice.
This is subject to the regulations and charges as approved by the respective State Electricity Regulatory Commissions (SERCs), which are to be paid by the consumers for using the transmission and distribution infrastructure.
Among the states studied by Icra, namely Andhra Pradesh, Gujarat, Karnataka, Maharashtra, Rajasthan and Tamil Nadu, the CSS level remains high in Tamil Nadu and Maharashtra, while there has been a significant y-o-y increase in other states like Andhra Pradesh, Karnataka and Gujarat.
In the absence of the phase out/reduction of cross-subsidisation of domestic and agriculture tariffs by industrial and commercial tariffs, the upward pressure on open access charges is likely to continue, Icra said.
In addition to CSS, SERCs in states like Rajasthan, Gujarat and Andhra Pradesh have approved an additional surcharge in the last two-year period. The additional surcharge is levied to meet the fixed cost obligation of the distribution utilities arising out of their obligation to supply.
The open access charges, therefore, remain high across the states under study, varying between Rs 2.8 – 4.5 per unit, except in Karnataka, where the open access charges are relatively lower i.e. at Rs 1.9 per unit, it said.
With this, procurement under open access remains viable for industrial consumers if the power is available at a tariff ranging between Rs 4-5 per unit across a majority of the states, except in Andhra Pradesh, it said.