I. Introduction

The concept of Open Access was introduced with the 2003 Act. The first regulation upon electricity was brought in 1910, which laid down provisions for private partnerships and procedures for laying down wires and lines. Thereafter, the 1948 Act was passed by which State Electricity Boards (SEB) were formed. Over a period, however, SEBs became inefficient and arbitrary as tariff determination was under their discretion. With a view to distance this authority away from governments, the 1998 act was passed which mandated the creation of Central and State ERCs (Electricity Regulatory Commissions) which would be the body for determining tariffs. A compilation of all Acts is the Electricity Act of 2003 (The Act).  

One of the bigger objectives of the Act is to increase competition in the electricity sector. Open access is the backbone of the Act in terms of competition. Open Access has been envisioned as a crucial tool for fostering competition and providing purchasers and suppliers of electricity with options to choose from. Under this concept, an owner of a grid network (wired channels for transmission and supply of electricity) is obligated to allow other players involved in the electricity business to use its channel, upon payment of cross-subsidy charges and additional charges.[1]

Open Access can be both inter-state and intra-state. Under inter-state, the purchasing and selling parties are from different states and such open access is regulated by the CERC. Open Access requirements can be on a short-term (less than one month), medium-term (between 3 months and 3 years), or long-term (12 to 25 years) basis. Under intra-state, purchasing and selling parties are from the same state and are regulated by the State ERC. It can also be classified into short, medium, and long-term basis.

The Act allows for open access in ‘transmission’ as well as ‘distribution’ systems.

II. Open Access in Transmission and Distribution Systems

Transmission licensees are required to provide every licensee and generating company with non-discriminatory open access to its transmission network. Meaning, open access in transmission gives all licensees (including traders and distribution licensees) and generators the freedom to use the transmission system without hindrance. As a result, competition among generators and sellers is increased while progressively lowering the cost of production. 

Provision for open access in distribution guarantees consumers the right to obtain supplies from a source other than the distribution licensee of that region, by utilizing the existing licensee’s grid network. Contrary to transmission, open access has not been permitted in distribution from the beginning because of concerns regarding cross-subsidies. The law stipulates that State ERCs must permit open access to the distribution systems in phases. For this reason, State ERCs must outline the phases, steps, and criteria for the adoption of open access. However, open access is permitted in consideration for payment of a surcharge that will be decided by the SERCs. This payment is supposed to cover the present level of cross-subsidy and fixed costs associated with the licensee’s duty to supply u/s. 43. 

So, open access in distribution refers to the liberty of the consumer to obtain supply from any source of his liking, as opposed to open access in transmission, which entails liberty to the licensee or generating company to obtain power from any source of his choice.[2]

III. Cross Subsidy Surcharge (and Other Charges)

The matter of open access surcharge is extremely important and is dependent upon judicial determination. During transmission through grid networks, distribution licensees encounter a major loss of electricity. Further, it can be derived that most open-access consumers (buying at cross-subsidized or higher rates) are Commercial & Industrial consumers purchasing power in bulk from other sources. This eventually means a loss for the distribution licensee of that area (who also owns the network), who is losing up on high-paying clients. The Act provides for adequate compensation to such licensees. The idea of a surcharge that must be paid while using open access consists of two components which are highlighted below:

(1) Cross Subsidy Surcharge (CSS)

The Act provides for the facilitation of electricity to the financially weaker category of consumers at subsidized rates. This deficit is balanced by providing electricity at comparatively higher rates to C&I consumers and other high-paying consumers. The CSS is a surcharge designed to meet the needs of the present cross-subsidy level and is timely renewed.

(2) Additional Surcharge

Section 43 of the Act mandates the supply of power on a demand made by consumers. So, if a consumer wishes to purchase electricity from a body other than the distribution licensee of that area, the licensee remains obligated to supply to the consumer on demand. Additional surcharge is designed in a way to cover fixed costs incurred by the distribution licensee arising out of his commitment to supply on demand.

The surcharge mechanism is intended to provide licensees with compensation for both these factors. The law, thus, strikes a balance between customers’ rights to obtain power from the source of their choice and the genuine interests of the existing licensees. Increased competition among the suppliers could further encourage existing government utilities to enhance its efficiency to effectively operate in the business.[3]

IV. Green Open Access Rules, 2022

India has aspired to become a country with net zero emissions by the year 2070. Further, India also aspired to be a producer of 500MW of power by the year-end of 2030. To further India’s renewable energy program, the Ministry of Power (MoP) released the ‘Electricity (Promoting Renewable Energy Through Green Energy Open Access) Rules, 2022’ (GOA Rules) in June of 2022. The final GOA Regulations have finally been made public following stakeholder feedback on the draft rules published in August 2021.

The Act mandated that a minimum consumption of 1MW of power was needed to qualify for open access. Now, the contracted capacity requirement for applying for open access has been significantly reduced from 1 MW to 100 kW by the GOA Rules, while any minimum sanctioned load limit or requirement for captive generators (generation for self-consumption) has been removed. Meaning, any consumer with a consumption quantity of 100kw of power can now obtain supply through open access.[4]  

The players who will profit from GOA Rules, 2022 include both retail consumers, such as large households, who will now be able to access green energy, increasing the access to energy across various consumer segments, as well as industrial consumers with lower load capacities, such as small-scale businesses and MSMEs.

V. Conclusion

CSS is a payment to the distribution licensee regardless of whether its line is utilized, as the customer would otherwise be required to pay the corresponding supply tariff, which would include a cross-subsidy surcharge on other categories of consumers. If a consumer of a particular area qualifies as a subsidizing consumer, he or she is obligated to contribute to helping a low-income consumer. Even a licensee who purchases power for its own use via open access or through a dedicated transmission line would be required to pay CSS.

The object of bringing the 2003 Act was to involve private partnerships in the electricity sector to boom participation and competition. This will encourage government utilities to improve their facilities. Further, consumers will have more options to choose where they want to obtain electricity from. Provision for open access has been brought keeping in mind the broader objectives of the act. This provision remains one of the most crucial tools for the Act to achieve its intended objective.