Open Access Electricity, Power Grid, Maharashtra

1. OPEN ACCESS

2. What is Open Access?
• As per definition of Open Access in the Electricity Act, 2003, Open
Access is “the non-discriminatory provision for the use of
transmission lines or distribution system or associated facilities with
such lines or system by any licensee or consumer or a person
engaged in generation in accordance with the regulations specified
by the Appropriate Commission”.
• Open Access allows consumers to choose among a large number of
sellers, instead of being forced to buy electricity from their existing
utility. Similarly, generators can choose their own buyers within or
outside their state, instead of selling power to their utility. This is
done by payment of transmission charges as decided by CERC for
use of CTU lines and as determined by SERC for using of state
transmission and distribution systems.

3. What are different technical and financial
requirements for availing Open Access?
• Minimum volume of power should be 1 MW
• Scheduling should be done on a 15 minute-block basis
• Installation of special Energy Meter, 0.2S Class CT-PT set,
commissioning of RTU, meter testing and CT/PT set
testing report, commissioning and testing report of
equipment by STU to be submitted to SLDC along with
forwarding letter addressed to the CE.
• No Objection Certificate from SLDCs

4. Who will control/regulate the power
flow?
• The power sector is regulated by Central Electricity
Regulatory Commission at central level and by the
various State Electricity Regulatory Commissions at state
level. The power system is operated and controlled by
various Load Dispatch Centres functioning at the State,
Regional and National levels respectively.

5. What is the process of Power trading?
• Powers is bought from an entity in a surplus location / surplus utilities / generating
stations and sold through the state or central transmission company into an entity
in deficit states/utilities

6. What are the different categories of
Trading Licensee?
• As per Central Electricity Regulatory Commission (Procedure, Terms and
Conditions for grant of trading licence and other related matters) Regulations,
2009, with subsequent amendments, there are four categories of Trading Licensee
with varying maximum permissible volume for transactions
Category Volume of electricity proposed to be traded in a year
Category I No Limit
Category II Not more than 1500 MUs
Category III Not more than 500 MUs
Category IV Not more than 100 MUs

7. What are the services provided by the power
traders?
• Facilitating to reduce geographical, seasonal & daily gap between
demand and supply
• Bilateral power trading contracts between generators, traders and
customers
• Co-ordination with various intervening agencies e.g. Central & State
Transmission Utility, Load Despatch Centres and regulators
• Payment security mechanisms as per contract
• Portfolio Management (Collective scheduling/sale of CPP power of
States)
• Contract Management
• Consultancy in above areas for optimisation of power sale/purchase
requirement and tender participation
• Market intelligence data support and sharing the latest trends in
power sector

8. What are different products offered by a
Trader?
• Transactions through Bilateral Arrangement-
 Long Term Arrangements including competitive bidding (consultancy
only including bid preparation)
 Medium Term Arrangement for upto 3 years
 Short term arrangements
 Over-The-Counter transactions, under negotiated pricing between
identified seller and buyer
• b. Transactions through Power Exchange platform as a trading cum
clearing member
 Day Ahead contracts
 Intra-Day contracts
 Weekly contracts
 Daily Contracts
 Day Ahead Contingency
 Renewable Energy Certificates

9. What different roles a Trader shall perform on behalf of its
client?
• Marketing
• Commercial
• Regulatory
• Financial
• Advisory

10. How Financial Settlement of a trade is
done?
• For Day Ahead Collective Transactions- Financial settlement is done by electronic
transfer of funds between the clearing members & the Exchange. The proceeds from
sale of power are transferred to members settlement account by 2 P.M of the day
following the day of delivery by power exchange. The fund transfer to clients account is
either through electronic money transfer system or by issuing cheque as preferred by
the client. The buyers have to pay the amount of power purchased at MCP by 14.30
Hours on the day of bidding.
• For Bilateral Transactions-Invoices for the energy charges shall be raised as per
billing cycle. The relevant bills will be raised based usually on the provisional
weekly energy data for the energy at delivery point based on RLDC/SLDC website
data. Financial Settlement will be done in accordance with any rebate/surcharge,
as and when applicable, and shall include SLDC Scheduling & Handling charges,
T&D charges, CSS and Open Access charges, if any.

11. What is the trading margin cap by
Hon’ble CERC?
• Depending on the contracted price for a
bilateral deal, CERC has capped the trading
margin that can be maximum charged as
follows:
Sale Price (Rs./KwH) Margin (Rs./kWh)
=< 3 Upto 0.04
>3 Upto 0.07

12. What are the risks involved in power
trading?
• Credit Risk The seller of power may encounter payment default risk -. The power traders play their
role as a shield to sellers by managing the credit risk involved in a power transaction. The power
traders primarily deal with the entities having credit concerns - through appropriate risk mitigation
techniques.
• Operational Risks
Risks include availability and reliability of transmission facility and power generation by the seller
without interruption. The power traders apply for open access well in advance with the identified
agencies for approval of open access required for an advance transaction.
• Price risk
A contract finalised in advance between a buyer and a seller through a power trader is always
subject to price risk. The price on the spot market during the delivery period of an advance contract
may be substantially different. Such situation may give an arbitrage advantage to a buyer or seller
to exit the contract executed in advance.
• Competition on account of direct trading between the surplus and deficit unit.
There may be a situation that the prospective buyer and seller, who had previously dealt through
the trader, develop commercial relationship. In this case they may bypass the trader to engage in a
direct commercial relationship
• Dependence on few buyers and sellers of power.
There are occasions where the restriction of buyers and sellers significantly reduce business
opportunities. Also during participation of tenders called by SEB, few sellers may be interested in
the same, because there may long gestation period to decide the final contract.

13. How will any deviations from
schedule be settled?
• All deviations shall be settled at central level
as per Deviation Settlement Mechanism, 2014
as amended from time to time and/or the
prevailing settlement mechanism at the state
level.

14. What are present CERC regulations applicable related to Open
access and Power Trading?
• The CERC Regulations applicable include
• Power Market regulation, 2010
• Open Access in Inter State Regulations, 2008
• Fixation of Trading Market Regulation, 2010
• Deviation Settlement Mechanism, 2014
• Indian Electricity Grid Code, 2010

15. What are major differences in transactions at Power
Exchange, and that through a Trading Licensee?
Power Exchange Transactions Transactions Through Traders
Transactions are of collective nature
Transactions can be bilateral as well as as a member client on
Power Exchange platform
Products restricted to those offered at the Exchange
Products include those offered at Exchange, as well as other
bilateral arrangements
Pricing of electricity is determined at power exchange end
based on demand supply condition on daily basis.
Pricing of electricity may be on negotiated basis, tender
discovered or market determined if transacting at the Exchange
platform
Power supply under day ahead market is subject to daily
varying demand supply condition, grid corridor availability.
Bilateral arrangements ensure firm supply with pricing and
advance booking of corridors result in lesser incidents of
congestion
Buyers to make payment in advance
Bilateral arrangement follows billing cycle and thus buyers can
avail credit.

16. What is the price discovery mechanism at power Exchange?
How is it different from that with Traders?
• Price discovery at Power Exchanges is done by an anonymous double sided closed
auction process, wherein all sale and purchase offers are collectively treated,
initially in an unconstrained scenario. The aggregate supply and demand curves
are drawn on Price-Quantity axes. The intersection point of the two curves gives
the Market Clearing Price (MCP) and Market Clearing Volume (MCV)
corresponding to price and quantity of the intersection point. Based on these
results the provisional obligation and provisional power flow is calculated. Funds
available in the settlement account of the Members are checked with the Clearing
Banks and also requisition for capacity allocation is sent to the National Load
Despatch Centre (NLDC). In case sufficient funds are not available in the
settlement account of the Member then his bid(s) is deleted from further
evaluation procedure. Based on the transmission capacity reserved for the
Exchange by the NLDC on day-ahead basis by 2.00 PM, fresh iteration is run at 2.30
PM and final Market Clearing Price and Volume as well as Area Clearing Price and
Volume are determined. These Area Clearing Prices are used for settlement of the
contracts
• Price Discovery over bilateral route, through a trader, is done as per requirements
of seller and the buyer, on negotiated basis or as discovered in a tender process

17. What would be the tentative landed cost at the consumers’
periphery while purchasing power from the Power Exchange?
• Key factors that influence the landed cost per unit of
electricity include
• Point of Connection (PoC) Charges & Losses, as applicable
for utilisation of CTU network, and as approved by
CERC/NLDC
• State Transmission Charges & Losses, as applicable for
utilising STU network, and as approved by SERC/SLDC
• Distribution Charges & Losses, as applicable
• Cross Subsidy Surcharge, if any, as approved by SERC
• Electricity Duty, if any, as approved by SERC
• Scheduling & Handling Charges
• Trading Margin charged by Trader

18. The Landed Cost per unit of electricity would vary from consumer to consumer
depending on the various charges and losses applicable within his state/region. A
sample Landed Cost is shown below. The values assumed for calculation are only
indicative and would vary accordingly.
Particular Unit
Rate at Regional Periphery 4 Rs./kWh
PoC Charge (Drawl) 0.1489 Rs./kWh
PoC Loss (Drawl) 1.43 %
State Transmission Charge 0.08 Rs./kWh
State Transmission Loss 3.10 %
Distribution Charges 0.1 Rs./kWh
Distribution Loss 9 %
IEX Transaction Charges 0.02 Rs./kWh
Cross Subsidy Surcharge 0.2 Rs./kWh
Scheduling & Handling charges 0.13 Rs./kWh
Landed Cost 5.383 Rs./kWh

19. What is Renewable Purchase Obligation? Who are obligated to
fulfil RPO?
• RPOs, put simply, are the minimum percentages of the total
power that electricity distribution companies and some
large power consumers need to purchase from renewable
energy (RE) sources. RPO makes it mandatory for the
obligated entities to meet part of their energy needs
through green energy. The state-wise RPO targets are fixed
by the respective State Electricity Regulatory Commissions,
who may set separate targets for solar and non-solar
energy.
Entities obliged to fulfil RPO include
• Distribution Licensee
• Open Access Customer
• Captive Power consumer

20. What is REC?
RPOs, put simply, are the REC is a tradable certificate of proof that one MWh of electricity
has been injected (or deemed to have been injected) to grid by an RE generator.
The Electricity Act, 2003, the policies framed under the Act, as also the National Action Plan
on Climate Change (NAPCC) provide for a roadmap for increasing the share of renewable in
the total generation capacity in the country. However, Renewable Energy (RE) sources are
not evenly spread across different parts of the country. This inhibits SERCs in states with
poor RE generation source from specifying higher Renewable Purchase Obligation (RPO). On
the other hand states with high potential of RE sources harness the RE potential beyond the
RPO level fixed by the SERCs.
The REC mechanism seeks to address this mismatch between availability of RE sources and
the requirement of the obligated entities to meet their RPO.
There are two categories of RECs, viz., solar RECs and non-solar RECs. Solar RECs are issued
to eligible entities for generation of electricity based on solar as renewable energy source,
and non-solar RECs are issued to eligible entities for generation of electricity based on
renewable energy sources other than solar. Obligated entities can purchase these RECs in
order to fulfil their RPO.

21. How are RECs issued to a RE generator?
• The RE generators who fulfil the eligibility criteria can
apply for the accreditation to concerned State Agency.
After successful accreditation the eligible entity (RE
generator) may apply for registration to the Central
Agency. After successful registration the eligible entity
may obtain REC through the 'process of issuance of
REC' by Central Agency. The detailed procedures for
Accreditation, Registration, Issuance and Redemption
of REC can be downloaded from various websites.
www.cercind.gov.in
www.nldc.in
www.recregistryindia.nic.in

22. Where and how are RECs traded?
• RECs are tradable only at the Power Exchanges at the market determined
price. REC trade at IEX is done on the last Wednesday of every month. The
present applicable floor and forbearance price for REC trading are as
REC Floor Price (Rs.) Forbearance Price (Rs.)
Solar 3500 5800
Non-Solar 1500 3300