Open access financial modelling feasibility

OPENACCESS-
FINANCIAL MODELING OF 1MW BAGASSE BASED CO-GEN
POWER PROJECT

Open Access: Issues, Provisions, Policies and Charges in Maharashtra and Financial Modeling of
1 MW bagasse based Co-gen power project in Maharashtra
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LIST OF ABBREVIATIONS
Abbreviation Meaning
APR Annual Performance Report
ARR Average Revenue Requirement
ATE Hon‟ble Appellate Tribunal of Electricity
CERC Central Electricity Regulatory Commission
CSS Cross Subsidy Surcharge
CTU Central Transmission Utility
DDG Decentralized Distribute Generation
DSCR Debt Service Coverage Ratio
EA- 2003 The Electricity Act 2003
GCV Gross Calorific Value
HT High Tension
IEGC Indian Electricity Grid Code
IRR Internal Rate of Return
KERC Karnataka Electricity Regulatory Commission
LT Low Tension
LTOA Long Term Open Access
MAT Minimum Alternate Tax
MERC Maharashtra Electricity Regulatory Commission
MSEDCL Maharashtra State Electricity Distribution Company Limited
MSLDC Maharashtra State Load Despatch Centre
MTOA Medium Term Open Access
MU Million Units
NAPCC National Action Plan for Climate Change
NEP National Electricity Policy
NLDC National Load Despatch Centre
NPV Net Present Value
NTP National Tariff Policy
O&M Operation and Maintenance
RE Renewable Energy
RInfra-D Reliance Infrastructure Company Limited- Distribution
RLDC Regional Load Despatch Centre
SERC State Electricity Regulatory Commission
SLDC State Load Despatch Centre
STOA Short Term Open Access
STU State Transmission Utility
TPC-D Tata power Company- Distribution
WACC Weighted Average Cost of Capital

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LIST OF TABLES
Table 1: Open Access charges: Wheeling charges and Wheeling Losses for MSEDCL............. 23
Table 2: Open Access charges: Wheeling charges and Wheeling Losses for TPC-D.................. 24
Table 3: Open Access charges: Wheeling charges and Wheeling Losses for RInfra-D............... 24
Table 4: Open Access charges: Transmission Charges ................................................................ 25
Table 5: Open Access charges: CSS for MSEDCL...................................................................... 27
Table 6: Open Access charges: CSS for TPC-D........................................................................... 30
Table 7: Open Access charges: CSS for RInfra-D........................................................................ 31
Table 8: Case 1: Power procurement via open access .................................................................. 33
Table 9: Case 2: Power Procurement via Discom ........................................................................ 33
Table 10: Renewable Energy Potential in India ........................................................................... 47
Table 11: State wise renewable energy potential in India ............................................................ 49
Table 12: Bagasse cogeneration in Maharashtra .......................................................................... 50
Table 13: Comparison of Low- with High-Temperature and -Pressure Boilers........................... 51
Table 14: Operating days for a cogeneration plant....................................................................... 52
Table 15: Financial Assumptions.................................................................................................. 53
Table 16: Tax related Financial Assumptions .............................................................................. 53
Table 17: Working Capital Assumptions...................................................................................... 53
Table 18: Fuel related assumptions............................................................................................... 53
Table 19: Operations and Maintenance assumptions ................................................................... 54
Table 20: Project Economics of a bagasse power plant................................................................ 54
Table 21: Debt Equity ratio v/s Levelised Tariff v/s Project IRR ................................................ 55
Table 22: Plant Load Factor v/s Levelised Tariff......................................................................... 56
Table 23: Project capital cost v/s Tariff........................................................................................ 57
Table 24: Fuel Price Variation v/s Levelised Tariff ..................................................................... 58
Table 25: Net generation................................................................................................................ A
Table 26: Variable cost ...................................................................................................................B
Table 27: Return on Equity.............................................................................................................C
Table 28: Interest on Loan Capital................................................................................................. D

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Table 29: Depreciation....................................................................................................................E
Table 30: O&M cost .......................................................................................................................F
Table 31: Net working capital........................................................................................................ G
Table 32: Fixed cost calculation ....................................................................................................H
Table 33: Income Tax ......................................................................................................................I
Table 34: Tariff determination.........................................................................................................J
Table 35: NPV and IRR calculations............................................................................................. K
Table 36: DSCR.............................................................................................................................. L
LIST OF FIGURES
Figure 1: Advantages of Open Access in Renewable Energy ...................................................... 35
Figure 2: Maharashtra State provisions for promotion of Open Access in RE............................. 38
Figure 3: State level Open Access provisions for Renewable Energy.......................................... 39
Figure 4: The Bagasse cogeneration process................................................................................ 50
LIST OF CHARTS
Chart 1: Renewable energy potential state wise ........................................................................... 49
Chart 2: Impact of Capital Mix on Tariff...................................................................................... 56
Chart 3: Impact of PLF on Tariff.................................................................................................. 57
Chart 4: Impact of project cost on Tariff ...................................................................................... 58
Chart 5: Impact of Fuel price variation on Tariff ......................................................................... 59
TABLE OF CONTENTS
Declaration.............................................................................................................................................ii
Executive Summary..............................................................................................................................iv
List of Abbreviations ............................................................................................................................vi
List of Tables .......................................................................................................................................vii
List of Figures.....................................................................................................................................viii

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Lis of Charts........................................................................................................................................viii
Table of Contents...................................................................................................................................1
CHAPTER 1: INTRODUCTION ..........................................................................................................6
1.1 Problem Statement..................................................................................................................6
1.2 Significance of the project......................................................................................................6
1.3 Scope of work.........................................................................................................................7
1.3.1 Provisions for Open Access ............................................................................................7
1.3.2 Calculation of Open Access charges...............................................................................7
1.3.3 Viability of Long Term distribution Open Access..........................................................7
1.3.4 Open Access and Renewable Energy..............................................................................7
1.3.5 Identification and removal of impediments ....................................................................7
1.3.6 Determination of Tariff for 1 MW bagasse based cogeneration power project ..............7
1.3.7 Sensitivity Analysis of Tariff ..........................................................................................8
1.4 Literature Review ...................................................................................................................8
1.5 Research Methodology...........................................................................................................8
CHAPTER 2: OPEN ACCESS IN INDIAN POWER SECTOR ........................................................10
2.1 Provisions for Open Access in The Electricity Act, 2003 ....................................................10
2.1.1 Section 2(47)-Definition of open access.......................................................................10
2.1.2 Open Access in Transmission:......................................................................................10
2.1.3 Open Access in Distribution .........................................................................................13
2.1.4 Section 49: Agreements with respect to supply or purchase of electricity....................14
2.1.5 Section 86: Functions of State Commission .................................................................14
2.2 Provision For Open Access In National Electricity Policy...................................................14
2.2.1 Section 5.4.5..................................................................................................................14
2.3 Provision For Open Access In National Tariff Policy..........................................................14
2.3.1 Section 8.5.1..................................................................................................................14
2.3.2 Section 6.3.....................................................................................................................15
2.3.3 Section 6.4.....................................................................................................................15
2.3.4 Section 8.5.....................................................................................................................15
CHAPTER 3: OPEN ACCESS CHARGES ........................................................................................16
3.1 Cross Subsidy Surcharge ......................................................................................................16
3.1.1 Policy provisions for Cross Subsidy Surcharge ............................................................16

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3.1.2 Alternative approaches for determining the Cross Subsidy Surcharge.........................17
3.2 Additional Surcharge............................................................................................................18
3.2.1 Policy provisions for Additional Surcharge..................................................................18
3.2.2 Objectives and Principles for Additional Surcharge.....................................................18
3.2.3 Approach Towards Calculation Of Additional Surcharge ............................................18
3.3 Transmisson Charges And Transmission Losses .................................................................19
3.3.1 Policy provisions for Transmission Charges and Transmission Losses........................19
3.3.2 Principles and Key Considerations ...............................................................................19
3.3.3 Approaches toward Transmission Charges and Transmission Loss determination ......19
3.4 Wheeling Charges And Distribution Losses.........................................................................20
3.4.1 Introduction...................................................................................................................20
3.4.2 Methodology for allocation of Wheeling charges.........................................................20
3.4.3 Applicability of Transmission and Wheeling Charges..................................................20
3.4.4 Case of Multiple Licensees ...........................................................................................21
3.5 Other Charges.......................................................................................................................22
3.5.1 Default Supply Charges ................................................................................................22
3.5.2 Balancing Market Charges............................................................................................22
CHAPTER 4: OPEN ACCESS CHARGES IN MAHARASHTRA...................................................23
4.1 Introduction ..........................................................................................................................23
4.2 Wheeling Charges.................................................................................................................23
4.2.1 Wheeling Charges for MSEDCL ..................................................................................23
4.2.2 Wheeling Charges for TPC-D.......................................................................................24
4.2.3 Wheeling Charges and Wheeling Losses for RInfra-D.................................................24
4.3 Transmission Charges and Transmission Losses..................................................................24
4.3.1 Transmission Charges...................................................................................................24
4.3.2 Transmission Losses .....................................................................................................25
4.4 Cross Subsidy Surcharge ......................................................................................................25
4.4.1 CSS for MSEDCL.........................................................................................................25
4.4.2 CSS for TPC-D .............................................................................................................28
4.4.3 CSS for RInfra-D ..........................................................................................................30
4.5 Viability of Intra-State Long Term Open Access.................................................................31
CHAPTER 5: RENEWABLE ENERGY AND OPEN ACCESS .......................................................34

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5.1 Introduction ..........................................................................................................................34
5.2 Need and Importance of Open Access in Renewable Energy ..............................................34
5.3 National Level Provision for Open Access in RE ................................................................35
5.3.1 Electricity Act, 2003 .....................................................................................................35
5.3.2 National Electricity Policy, 2005..................................................................................35
5.3.3 Rural Electrification Policy, 2006.................................................................................35
5.3.4 Rajiv Gandhi Grameen Vidyutikaran Yojana...............................................................36
5.3.4 IEGC provisions............................................................................................................36
5.3.5 Green corridor concept..................................................................................................37
5.4 State level Open Access provisions......................................................................................37
5.4.1 Transmission charges and Loss calculations.................................................................37
5.4.2 Cross Subsidy Surcharge (CSS)....................................................................................37
5.4.3 Wheeling Charges.........................................................................................................38
5.4.5 Banking Provisions .......................................................................................................38
CHAPTER 6: IMPEDIMENTS IN IMPLEMENATATION OF OPEN ACCESS............................40
6.1 Discom perspective...............................................................................................................40
6.1.1 Revenue Loss ................................................................................................................40
6.1.2 Forced Universal Service Obligation............................................................................40
6.1.3 Determination of Cross Subsidy Surcharge for Open Access consumers.....................40
6.1.4 Capacity building at SLDC ...........................................................................................40
6.1.5 Ring fencing of SLDC ..................................................................................................40
6.1.6 Shifting burden on Low end consumers........................................................................40
6.1.7 Partial Open Access ......................................................................................................40
6.2 Regulatory and Legal perspective.........................................................................................41
6.2.1 Regulatory Balance.......................................................................................................41
6.2.2 Deregulation of Industrial Tariff...................................................................................41
6.3 Consumer perspective...........................................................................................................42
6.3.1 Irrational Temporary Tariff...........................................................................................42
6.3.2 Power Purchase.............................................................................................................42
6.3.3 Eligibility Criteria .........................................................................................................42
6.3.4 Operational Issues.........................................................................................................42
6.3.5 Wheeling Capacity........................................................................................................43

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6.3.6 Segregation of Wires and Supply cost ..........................................................................43
6.3.7 Availability of spinning reserve/Non bonded power ....................................................43
6.3.8 Assurance of Supply .....................................................................................................43
6.3.9 Limit on the demand .....................................................................................................43
6.3.10 High Cross Subsidy Surcharge......................................................................................43
6.3.11 Congestion in the Transmission Link ...........................................................................44
6.3.12 Reduction in Contract Demand.....................................................................................44
6.3.13 Stand-by-charges for drawl of power by Open Access consumer from the grid ..........44
CHAPTER 7: FINANCIAL MODELING (1MW BAGASSE PLANT)............................................45
7.1 Introduction ..........................................................................................................................45
7.2 Renewable energy scenario in India .....................................................................................45
7.3 Renewable Energy Support Framework...............................................................................46
7.4 Renewable energy scenario in Maharashtra .........................................................................47
7.5 Bagasse .................................................................................................................................47
7.6 Bagasse as fuel......................................................................................................................47
7.7 Cogeneration in sugar mills using Bagasse as fuel...............................................................48
7.8 Bagasse cogeneration potential in India ...............................................................................48
7.9 Bagasse cogeneration scenario in Maharashtra ....................................................................50
7.10 Bagasse Cogeneration- A Technical Overview ................................................................50
7.11 Tariff determination for Bagasse cogeneration plant in Maharashtra...............................51
7.12 Assumptions for Tariff determination...............................................................................51
7.12.1 Capital costs..................................................................................................................51
7.12.2 Power Generation..........................................................................................................52
7.12.3 Financial Assumptions..................................................................................................52
7.13 Project Economics and Financial Indicators.....................................................................54
7.14 Sensitivity Analysis ..........................................................................................................55
7.14.1 Sensitivity Analysis of Capital mix:..............................................................................55
7.14.2 Sensitivity Analysis of Plant Load Factor:....................................................................56
7.14.3 Sensitivity Analysis of Plant Capital Cost ....................................................................57
7.14.4 Sensitivity analysis of Fuel Price variation...................................................................58
CHAPTER 8: CONCLUSIONS AND RECOMMENDATIONS.......................................................60
8.1 Open Access: Conclusions and Recommendations..............................................................60

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8.1.1 Conclusions...................................................................................................................60
8.1.2 Recommendations.........................................................................................................60
8.2 Financial Modelling: Conclusions and Recommendations ..................................................63
8.2.1 Conclusions...................................................................................................................63
8.2.2 Recommendations.........................................................................................................64
BIBLIOGRAPHY................................................................................................................................65
Annexure A: Units generated in Bagasse Cogen plant ................................................................A
Annexure B: Variable Cost for Bagasse Cogen plant.................................................................. B
Annexure C: Return on Equity .................................................................................................... C
Annexure D: Interest on Loan Capital .........................................................................................D
Annexure E: Depreciation calculation......................................................................................... E
Annexure F: Operation and Maintenance Expenses.....................................................................F
Annexure G: Net Working Capital ..............................................................................................G
Annexure H: Fixed Cost calculation............................................................................................H
Annexure I: Income Tax calculations...........................................................................................I
Annexure J: Levellised Tariff ......................................................................................................J
Annexure K: NPV and IRR calculations......................................................................................K
Annexure L: Debt Service Coverage Ratio ................................................................................. L

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CHAPTER 1: INTRODUCTION
1.1 Problem Statement
The Indian power sector is divided into the three main businesses of generation,
transmission and distribution. The generation sector is widely competitive with involvement of
the private sector into. The transmission sector is widely operated by Power Grid Corporation of
India Limited, which is a 100% government subsidiary, owing to the large amount of investment
needed in the infrastructure; the government holds the monopoly in this business segment.
However, the final leg in the electricity sector of the distribution can be privatized and can
promote competition in the industry in order to make consumer the ultimate beneficiary. With
the very same intent mechanism of Open Access was introduced in the EA-2003. The sad part of
the story is that the mechanism could not be as effective as desired by the policy makers due to
various hurdles.
I, as a young professional in this internship have tried to identify these road-blocks and
have given some recommendations which may prove to be helpful for effective implementation
of this revolutionary mechanism which makes the consumer the ultimate winner.
India has always relied on the conventional sources of energy and a result of which is
accelerated depletion of the natural resources such as coal, natural gas, etc. It is about time that
investments should be made in the renewable sector and thus I have done a financial modeling of
1 MW bagasse based cogeneration power plant. The only dilemma in the mind of any investor is
about the return of the investment he has made in any project.
Also, what all factors affect the tariff and by how much should be known to the power
producer for which sensitivity analysis has to be done.
1.2 Significance of theproject
Open Access has been widely recognized as the soul of the Electricity Act. This is so
because open access is the mechanism crafted to usher in competition and choice, and in turn
facilitate investments and protect interests of the consumers. However, this move hasn‟t attracted
many consumers to enroll them in this scheme. It is a double edged sword for the regulators in
the country, on one side the Act mandates them to introduce and promote competition in the
industry and on the other, the consumers form the default distribution company are burdened
with extra costs because big industrial consumers when opt for open access, the losses have to
borne by them small domestic consumer. The project is significant in identifying and
subsequently giving some radical solutions to the various impediments in the implementation of
Open Access.

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Further, the second part of the project deals with the financial modeling of a 1 MW
bagasse based cogeneration power plant. The main significance of this part of the project is in
attracting investments in this source of energy. Calculations have shown a high NPV and IRR
which should be attracting the investors in this business.
1.3 Scope of work
1.3.1 Provisions for OpenAccess
To promote Open Access at both national and state level, there are umpteen numbers of
provisions in the respective legislature; an analysis of different policies is done.
1.3.2 Calculation of Open Access charges
Open Access charges in accordance to various regulations and referring different tariff
orders is calculated. The charges specific to Maharashtra state have been calculated for different
distribution companies.
1.3.3 Viability of Long Term distribution Open Access
Viability of Long Term Open Access is studied on the basis of calculation made form a
consumer perspective and a decision is made whether a consumer should opt for the open access
mechanism or should rather continue to procure power from the local distribution company.
1.3.4 Open Access and Renewable Energy
State level and national level provisions for the integration of Open Access mechanism
and renewable energy are studied and a comprehensive compilation is made comparing the
policies of different states.
1.3.5 Identification and removal of impediments
Identification of various road blocks in the proper implementation of Open Access is
done and further recommendations are made for their removal.
1.3.6 DeterminationofTarifffor1MWbagassebasedcogenerationpowerproject
Adhering to the determination of tariff for renewable energy regulations by MERC, tariff
is determined for the above mentioned power project.

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1.3.7 Sensitivity Analysis ofTariff
The model so obtained in the previous step is used to find the variation in the cost of
generation for different values of capital costs, O&M expenses, plant load factors/ capacity
utilization factors and fuel prices.
1.4 Literature Review
Chatterjee and Kumar (2012) had studied the then prevalent scenario of the Indian power
sector and have comprehensively expressed their views in their book published by the Oxford
Publishing House. Both the authors have held a strong view in favour of implementing Open
Access mechanism in the Indian scenario. However, they have also identified impediments in its
implementation and have also addressed the issue of regulatory commissions‟ dilemma in
introducing the above mentioned mechanism.
Commission‟s Orders have been of major application in this project. Every case that is
admitted in the commission is given the due hearings and further the Commission passes an
order which is published on its website for any public reference. These orders apart from solving
the Case which they are associated with also serve as a learning medium for students and
professionals alike. Many orders have been carefully studied and analysed for the preparation of
this report.
Annual reports of various utilities, for example, Ministry of New and Renewable Energy,
Ministry of Power, Tata Power Company, etc are banks of useful information. Verified and
dependable data has been extracted from such reports and has been used in the preparation of this
report.
Commission regulations for determination of tariff and for distribution Open Access have
been referred in an exhaustive manner. These regulations serve as guiding light for tariff
determination and for studying the various provisions for Open Access in the state of
Maharashtra.
1.5 Research Methodology
The various steps involved in the process of carrying out the research are analysis of
previous reports, collection of secondary data, Validation of the collected data, analysis of
various tariff orders, establishment of tariff calculation models for different states and then
analysis of the gap.

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Collection of secondary data
As the data needed for the research was confidential to any power project, primary data
collection didn‟t elicit any response from the stakeholders. So, secondary data collection
was resorted to.
Validation of the collected data
The secondary data collected were analyzed for their validity and extreme values which
didn‟t fit in were discarded. Then the most appropriate values were selected after
analyzing the authenticity and relevance of the source.
Determination of Tariff and subsequent analysis
The tariff is determined according to the regulations issued by the Commission and a
subsequent sensitivity analysis is performed on the basis of previous experience in the
market.

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CHAPTER 2: OPEN ACCESS IN INDIAN POWER SECTOR
In the context of competition, open access is the corner-stone of the Act. Open Access has been
conceived as an important tool of introducing competition in the electricity industry and ensuring
choice to buyers and suppliers of electricity.
Open access has been envisaged in the Electricity Act, 2003 (EA 2003) as a framework for
encouraging competition in the electricity sector and for enabling consumers to choose their
suppliers. The Act provides for non-discriminatory open access in transmission from the outset.
In distribution, open access is to be introduced in phases by the State Commissions with due
consideration of operational constraints and payment if surcharges.
The National Electricity Policy and Tariff Policy framed under the Act lay emphasis on proper
implementation of this competitive framework which has the potential of:
(I) Desired market signal for investment;
(II) Inducing improved service from the existing utilities; and
(III) Enabling consumers to get power from any source of their choice.
The Central Electricity Regulatory Commission (CERC) has framed regulations on inter-State
open access. There have been large numbers of transactions involving the generating companies,
traders and distribution companies through open access in inter-State transmission. At the State
level, regulations have been framed by the State Commissions, phasing out open access for
consumers. Transmission charges, wheeling charges and surcharge have also been determined by
most SERCs.
2.1 PROVISIONS FOR OPEN ACCESSIN THEELECTRICITY ACT, 2003
2.1.1 Section 2(47)-Definition of open access:
“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”.
2.1.2 Open Access inTransmission:
Section 38 of the Act, which deals with the CTU and its functions, provides as follows:
“(1) The Central Government may notify any Government Company as the Central Transmission
Utility:

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(2) The functions of the Central Transmission Utility shall be –
(d) to provide non-discriminatory open access to its transmission system for use by-
(i) any licensee or generating company on payment of the transmission charges; or
(ii) any consumer as and when such open access is provided by the State Commission under sub-
section (2) of section 42, on payment of the transmission charges and a surcharge thereon, as
may be specified by the Central Commission:
Provided that such surcharge shall be utilised for the purpose of meeting the requirement of
current level cross-subsidy:
Provided further that such surcharge and cross subsidies shall be progressively reduced in the
manner as may be specified by the Central Commission:
Provided also that the manner of payment and utilisation of the surcharge shall be specified by
the Central Commission:
the Central Commission:
Provided also that such surcharge shall not be leviable in case open access is provided to a
person who has established a captive generating plant for carrying the electricity to the
destination of his own use.”
Section 39 of the Act deals with the STU and its functions and provides as follows:
“(1) The State Government may notify the Board or a Government Company as the State
Transmission Utility:
Provided that the State Transmission Utility shall not engage in the business of trading in
electricity:
(2) The functions of the State Transmission Utility shall be –
(d) to provide non-discriminatory open access to its transmission system for use by-
(i) any licensee or generating company on payment of the transmission charges; or (ii) any
consumer as and when such open access is provided by the State Commission under sub-section
(2) of section 42, on payment of the transmission charges and a surcharge thereon, as may be
specified by the Central Commission:

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manner as may be specified by the State Commission:
the State Commission:
destination of his own use.”
Section 40 of the Act reads as follows:
“It shall be the duty of a transmission licensee –
(a) to build, maintain and operate an efficient, co-ordinated and economical inter-State
transmission system or intra-State transmission system, as the case may be;
(b) to comply with the directions of the Regional Load Despatch Centre and the State Load
Despatch Centre as the case may be;
(c) to provide non-discriminatory open access to its transmission system for use by-
(i) any licensee or generating company on payment of the transmission charges; or
(ii) any consumer as and when such open access is provided by the State Commission under sub-
section (2) of section 42, on payment of the transmission charges and a surcharge thereon, as
may be specified by the State Commission:
manner as may be specified by the Appropriate Commission:
the Appropriate Commission:
destination of his own use.

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2.1.3 Open Access inDistribution
Section 42 of the Act deals with the provision of open access to distribution and reads as
follows:
“(2) The State Commission shall introduce open access in such phases and subject to such
conditions, (including the cross subsidies, and other operational constraints) as may be specified
within one year of the appointed date by it and in specifying the extent of open access in
successive phases and in determining the charges for wheeling, it shall have due regard to all
relevant factors including such cross subsidies, and other operational constraints:
Provided that such open access shall be allowed on payment of a surcharge in addition to the
charges for wheeling as may be determined by the State Commission:
Provided further that such surcharge shall be utilised to meet the requirements of current level of
cross subsidy within the area of supply of the distribution licensee:
Provided also that such surcharge and cross subsidies shall be progressively reduced in the
manner as may be specified by the State Commission:
destination of his own use:
Provided also that the State Commission shall, not later than five years from the date of
commencement of the Electricity (Amendment) Act, 2003, by regulations, provide such open
access to all consumers who require a supply of electricity where the maximum power to be
made available at any time exceeds one megawatt.
(3) Where any person, whose premises are situated within the area of supply of a distribution
licensee, (not being a local authority engaged in the business of distribution of electricity before
the appointed date) requires a supply of electricity from a generating company or any licensee
other than such distribution licensee, such person may, by notice, require the distribution licensee
for wheeling such electricity in accordance with regulations made by the State Commission and
the duties of the distribution licensee with respect to such supply shall be of a common carrier
providing non-discriminatory open access
(4) Where the State Commission permits a consumer or class of consumers to receive supply of
electricity from a person other than the distribution licensee of his area of supply, such consumer
shall be liable to pay an additional surcharge on the charges of wheeling, as may be specified by
the State Commission, to meet the fixed cost of such distribution licensee arising out of his
obligation to supply.”

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2.1.4 Section 49: Agreements with respect to supplyor purchase of electricity
" Where the Appropriate Commission has allowed open access to certain consumers under
section 42, such consumers notwithstanding the provisions contained in clause (d) of sub-section
(1) of section 62, may enter into an agreement with any person for supply or purchase of
electricity on such terms and conditions (including tariff) as may be agreed upon by them.”
2.1.5 Section 86: Functions of State Commission
"(1) The State Commission shall discharge the following functions, namely:
(a) determine the tariff for generation, supply, transmission and wheeling of electricity,
wholesale, bulk or retail, as the case may be, within the State:
Provided that where open access has been permitted to a category of consumers under section 42,
the State Commission shall determine only the wheeling charges and surcharge thereon, if any,
for the said category of consumers;"
2.2 PROVISIONFOROPENACCESSINNATIONALELECTRICITYPOLICY,2005
2.2.1 Section 5.4.5
The Electricity Act 2003 enables competing generating companies and trading licensees,
besides the area distribution licensees, to sell electricity to consumers when open access in
distribution is introduced by the State Electricity Regulatory Commissions. As required by the
Act, the SERCs shall notify regulations by June 2005 that would enable open access to
distribution networks in terms of sub-section 2 of section 42 which stipulates that such open
access would be allowed…
Section 49 of the Act provides that such consumers who have been allowed open access
under section 42 may enter into agreement with any person for supply of electricity on such
terms and conditions, including tariff, as may be agreed upon by them.
While making regulations for open access in distribution, the SERCs will also determine
wheeling charges and cross-subsidy surcharge as required under section 42 of the Act.
2.3 PROVISION FOR OPEN ACCESS IN NATIONAL TARIFF POLICY
2.3.1 Section 8.5.1
“A consumer who is permitted open access will have to make payment to the generator,
the transmission licensee whose transmission systems are used, distribution utility for the heeling
charges and in addition, the cross subsidy surcharge. The computation of cross subsidy
surcharge, therefore, needs to be done in a manner that while it compensates the distribution
licensee, it does not constrain introduction of competition through open access…….”

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2.3.2 Section 6.3: Harnessing captive generation
Wheeling charges and other terms and conditions for implementation should be
determined in advance by the respective State Commission, duly ensuring that the charges are
reasonable and fair.
Grid connected captive plants could also supply power to non-captive users connected to
the grid through available transmission facilities based on negotiated tariffs. Such sale of
electricity would be subject to relevant regulations for open access.
2.3.3 Section 6.4:
Non- conventional energy sources, including co-generation.
2.3.4 Section 8.5:
calculation of cross subsidy surcharge and additional surcharge for open access.

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CHAPTER 3: OPEN ACCESS CHARGES
The various applicable open access charges are:
1. Cross Subsidy Surcharge
2. Additional Surcharge
3. Transmission Charges
4. Transmission Loss Compensation
5. Wheeling Charges
6. Wheeling Loss Compensation
7. Default Supply Charge
8. Balancing Market Charge
9. Open Access Application Charges
10. State Load Dispatch Centre Charges
3.1 CROSS SUBSIDY SURCHARGE
The purpose of Cross Subsidy Surcharge (CSS) has been clearly spelt out as a charge to be paid
by the Open Access Consumer to offset, the Cross Subsidy which he would have normally paid
to the Distribution Licensee had he continued to be the consumer of the said Distribution
Licensee.
3.1.1 Policy provisions for Cross Subsidy Surcharge
3.1.1.1 National Electricity Policy
Cross Submitted Surcharge should not be so onerous that it eliminates competition which
is intended through Open Access.
3.1.1.2 National Tariff Policy
Cross Subsidy Surcharge should adequately compensate the Distribution Licensee
i. It should not constraint introduction of competition
ii. Should be beneficial to consumers after adding all the charges
Cross subsidy surcharge mechanism as per NTP:
S=T-[C (1+L/100) + D],
Where,
S= Surcharge
T= Tariff payable by the relevant category of consumers
C= Weighted average of cost of power purchase of top 5% at the margin excluding
renewable power and liquid fuel based generation
D= Wheeling charges

Page 17
L= System loss for the applicable voltage level, expressed as a percentage.
3.1.1.3 Miscellaneous Provisions
 Surcharge should be brought down progressively and as far as possible at linear rate to a
maximum of 20% of opening level by FY-2010-11.
 Surcharge may be collected by the Distribution Licensee or Transmission Licensee or
CTU or STU depending upon whose facilities are used.
 Amount collected should be given to Distribution Licensee in the area of supply.
 In case of multiple licensees, amount should be given to Licensee from whom the
consumer was availing supply.
3.1.2 Alternativeapproaches for determining theCrossSubsidySurcharge
There are various approaches that may be adopted in determining the Cross Subsidy
Surcharge these are:
 Avoided Cost of Power (as suggested by the NTP)
 Average Cost of Supply
 Cost of Supply
 Embedded Cost
3.1.2.1 Avoided Cost of Power method
This approach has been adopted by various Electricity Regulatory Commissions such as
Maharashtra, Delhi, Madhya Pradesh, etc. The formula suggests that Weighted Average cost of
power purchase of top 5% at the margin excluding power from renewable power and liquid fuel
based generation. On computation of surcharge using this formula, the CSS comes out negative
for some of the states.
3.1.2.2 Average Cost ofSupply
This approach has been adopted by states of Chhattisgarh, Jharkhand. The Chhattisgarh State
Electricity Regulatory Commission has issued an order in this aspect stating that:
 Top 5% of the power purchased at the margin is from the traders. No difference between
the avoided cost and marginal cost methods.
 In a power shortage situation, power purchase is not avoided and the extent of load
shedding is reduced. The rationale for the load shedding reduction is that a reduction
leads to increase in consumption by subsided customers.
3.1.2.3 Cost of supplymethod
The Cost of supply approach has been adopted by the states of Karnataka and Assam. This
approach clearly suggests that the level of cross subsidy surcharge depends upon the voltage
level at which the consumer is supplied. The KERC has computed the CSS for various
distribution companies as illustrated below.

Page 18
Voltage level of the consumer
Cross Subsidy Surcharge (Paisa per unit)
BESCOM MESCOM CESC HESCOM GESCOM
Extra High Tension 93 62 52 66 86
High Tension 78 34 20 22 67
Table: KERC order for CSS of various discoms
3.2 ADDITIONAL SURCHARGE
The additional surcharge is an extra charge that an Open Access consumer has to pay the utility
to recover the fixed costs towards its stranded capacity.
3.2.1 Policy provisions for Additional Surcharge
3.2.1.1 National Electricity policy
Additional Surcharge should not be so onerous that it eliminates the competition which is
intended through Open Access.
The National Tariff Policy provides for following in regards to Additional Surcharge:
 Additional Surcharge should be applicable only if it is conclusively demonstrated that the
obligation of a licensee in terms of existing power purchase agreements has been and
continues to be stranded ; or
 There is an unavoidable obligation and incidence to bear fixed costs consequent to a
contract
 Fixed costs related to network assets would be recovered through Wheeling Charges.
3.2.2 Objectives and Principles for Additional Surcharge
 To compensate the licensee towards loss of purchasing power in case Licensee is unable
to sell that power
 It is intended to recover other fixed costs of Licensee
 In case of supply shortage situation, there will be no loss licensee and hence may be
specified as zero.
 The obligation is on the licensee to prove that its power purchase commitments have
become stranded.
3.2.3 Approach towards calculation of Additional Surcharge
The additional surcharge has to be calculated on case to case basis if licensee is able to
prove that its commitments have been stranded. Most of the State Electricity Regulatory
Commissions have specified in their regulations or orders that it will be determined on case to
case basis with few exceptions. The Uttrakhand Electricity regulatory Commission in its order

Page 19
has specified that the additional surcharge will be payable by all consumers availing open access,
at the rate equivalent to demand charges for the relevant consumer category.
3.3 TRANSMISSON CHARGES AND TRANSMISSION LOSSES
3.3.1 Policyprovisions for TransmissionCharges and Transmission Losses
Transmission charges can be determined on MW per circuit km basis, zonal postage
stamp basis or some other pragmatic variant. Objective is to get the transmission system users to
share the total transmission cost in proportion to their respective utilization of the transmission
system.
3.3.2 Principles and KeyConsiderations
 Most of the State Electricity Regulatory Commissions have determined transmission
charges applicable for Open Access consumers in Rs./MW/month, except a few which
have determined in Paisa/unit.
 Transmission charges are towards the recovery of network related fixed costs and hence
should be specified linked to the transmission capacity.
 Transmission charges should be applied on the basis of applicable voltage level.
 Most of the Commissions have approved Transmission Charges for short term open
access as 25% of the Transmission Charges applicable for Long Term Open Access.
3.3.3 Approaches toward Transmission Charges and Transmission Loss
determination
Commissions have two alternatives for determining the transmission charges and
transmission losses these are:
1. Composite Transmission charge
2. Licensee Transmission charge
Composite Transmission charge:
Composite transmission charge is a solution towards avoiding the „pan-caking‟ of
licensee specific transmission charges. This approach treats all Open Access transactions the
State Transmission Utility (STU) on par irrespective of their injection and drawl point. The
approach also evades the need of constant reviewing and/or tracking of physical transactions.
Licensee Transmission charge:
Tariff determination is a licensee specific exercise and conclusively this approach
considers the Transmission charge also different for all the different operational licensees. This
approach concludes the Transmission charge for a particular transaction to depend upon the
extent of utilisation transmission capacity of various transmission licensees.

Page 20
3.4 WHEELING CHARGES AND DISTRIBUTIONLOSSES
3.4.1 Introduction
i. Wheeling charges and loss compensation should be determined for each voltage level.
These charges help the distribution company to cover up the costs that it has incurred
for distribution of electricity. The key issue that discoms face is the non-segregation
of wire and supply business.
ii. In the absence of technical and commercial losses, technical losses based on sample
studies or estimated losses need to be specified. These losses are to be specified on
the basis of applicable voltage for delivery of power at 11kV or above. However, for
LT network, the losses at 11 kV may be considered.
3.4.2 Methodology for allocation of Wheeling charges
i. Wheeling charges can be allocated and subsequently can be collected once a proper
measure of network usage is determined for different users.
�� ℎ
�� ℎ
The above formula is used as a measure of network usage and further to allocate the cots.
ii. Different users connected at different voltage levels are charged with different
charges. The following table illustrates allocation of wheeling charges on the basis of
various voltage levels:
Voltage level Consumer base
33kV 33kV, 11kV and LT users
11kV 11kv and LT users
LT network Only by LT users
iii. Based on the allocation and considering the respective connected load/contract
demand at each voltage level, the wheeling charges in Rs./kVA/month can be worked
out or considering sales, wheeling charges in Rs. per Unit can be worked out.
3.4.3 Applicability of Transmission and Wheeling Charges
Transmission and wheeling charges depend upon the point of connection of the load and
the point of injection where the generator feeds the power generated into the grid. Various
scenarios are discussed as under and the applicability of transmission and wheeling charges is
analysed.

Page 21
Applicability of
Charges
Point of Connection Applicable charges
Transmission
Network
Distribution
Network
Transmission
Charges
Wheeling Charges
Scenario 1
Generator Yes
Yes Yes
Consumer Yes
Scenario 2
Generator Yes
Yes No
Consumer Yes
Scenario 3
Generator Yes
Yes No
Consumer Yes
Scenario 4
Generator Yes
No Yes
Consumer Yes
3.4.4 Case of MultipleLicensees
Network costs for each distribution licensees are different depending upon the various
network and cost characteristics. Therefore, wheeling charges need to be specified for each
distribution licensee based upon its network cost.

Page 22
Other Charges
Default Supply
charges
Balancing Market
Charges
3.5 OTHER CHARGES
3.5.1 Default Supply Charges
It is necessary to have the facility of default supply from the distribution licensee, in case
the Open Access generator/licensee is unable to supply power for some reason. The National
Tariff Policy has recommended that charges for such supply under these „default conditions‟
may be equated to the tariff for temporary supply. However, most of the states do not have
temporary supply charges for HT category consumers. Default supply charges shall be
applicable only for open access consumers availing power at distribution network.
3.5.2 Balancing Market Charges
Balancing and Settlement is an important and integral part for any competitive market.
The risk profile for any transaction is greatly affected by the B&S mechanism and hence the
viability of project is directly affected by this arrangement. Balancing charges should be
applicable for Open Access consumers availing power at Transmission network. However,
distribution Open Access consumers are not liable to pay these charges as the mechanism will be
applicable for the Distribution Licensee to which the Open Access consumer is connected.

Page 23
CHAPTER 4: OPEN ACCESS CHARGES IN MAHARASHTRA
4.1 Introduction
In this chapter, we will to calculate the charges which we have discussed in the previous
chapter with the Maharashtra perspective.
The Commission, in exercise of the powers vested in it under Section 61 and Section 62
of the Electricity Act, 2003 and all other powers enabling it in this behalf, and after taking into
consideration submissions made by various discoms, suggestions and objections of the public,
and responses of the discoms thereto, issues raised during the Public Hearing, and all other
relevant material, determines various charges to be levied upon the Open Access consumers in
the state.
4.2 Wheeling Charges
The Commission has determined the wheeling charges and wheeling losses for the use of
various Distribution Licensees while giving the Tariff order for FY 2012-13. Following cases
were referred while compiling the data:
1. Case No. 19 of 2012: APR Order for MSEDCL for the FY 2012-2013.
2. Case No. 98 of 2009 of APR Order for TPC-D for the FY 2012-2013.
3. Case No. 180 of 2011: APR Order for RInfra-D for the FY 2012-2013.
4.2.1 Wheeling Charges for MSEDCL
The Commission in its Order in Case 19 of 2012 (dated: 16/08/2012) has determined the
wheeling charges in Rs. /kWh and wheeling losses for the FY 2012-2013 for the use of
MSEDCL network. The same have been summarized in the table below.
Particulars Wheeling Losses Wheeling Charges
(Rs./kW/month)
Wheeling Charges
(Rs./kWh)
33 kV 6.00% 52.00 0.11
11/22 kV 9.00% 287.00 0.60
LT Level 12.50% 490.00 1.03
Table 1: Open Access charges: Wheeling charges and Wheeling Losses for MSEDCL

Page 24
4.2.2 Wheeling Charges forTPC-D
The Commission in its Order in Case 98 of 2009 (dated: 12/09/2010) has determined the
wheeling charges in Rs. /kWh and wheeling losses for the FY 2012-2013 for the use of TPC-D
network. The same have been summarized in the table below.
Particulars Wheeling Charges (Rs. /kWh) Wheeling Losses (%)
HT level 0.19 0.65
LT level 0.38 0.65
Table 2: Open Access charges: Wheeling charges and Wheeling Losses for TPC-D
4.2.3 Wheeling Charges and Wheeling Losses for RInfra-D
The Commission in its Order in Case No. 180 of 2011 (dated: 15/06/2012) has
determined the Wheeling Charges in Rs. /kWh and Wheeling losses for the use of RInfra-D for
the FY 2012-2013 and the same has been summarized in the table below.
Particulars Wheeling Charges (Rs. /kWh) Wheeling Losses (%)
HT level 0.46 1.5
LT level 0.88 9.0
Table 3: Open Access charges: Wheeling charges and Wheeling Losses for RInfra-D
4.3 Transmission Charges and Transmission Losses
4.3.1 Transmission Charges
The Commission has separated determined the Transmission Tariff for the use of
transmission system for the FY 2013-2014 to FY 2015-2016. Moreover, the Commission has
given the ruling that there will be no distinction in the transmission charges among long term
/medium term usage and short term usage except for denomination of such charges. The relevant
regulation in this regard, Regulation 66.2 of MERC (Multi Year Tariff) Regulations, 2011 is
reproduced as under:
“66.2 No distinction in charges shall exist in terms of long term, medium
term or short term access to the intra-State Transmission System:
Provided that, the transactions for long term and medium term shall be denominated

Page 25
in Rs/kW/month or any suitable denomination as may be stipulated by the
Commission, derived from transmission tariff for long term/medium term access as
specified in Regulation 64.3.”
The Commission in its order for Case No. 56 of 2013 has determined the InSTS charges. The
same have been summarized in the following table.
Particulars Units FY 2013 -14 FY 2014-15 FY 2015-16
TTSC (including past
period recovery of FY
2013-14)
Rs. Cr 6819.97 6217.24 7220.28
Average Coincident Peak
Demand (CPD)
MW 17748 19533 21102
Transmission Tariff (Long
term/Medium Term )
Rs./kW/month 320.22 265.25 285.13
Transmission Tariff (Short
Term /collective/
renewable energy )
Rs./kWh 0.43 0.36 0.38
Table 4: Open Access charges: Transmission Charges
4.3.2 Transmission Losses
The intrastate transmission loss as recorded by MSLDC for FY 2012-13 is 4.19% which
is approved by the Commission for the FY 2013-2014 to FY 2015-2016. The Commission
approved the same in Order for Case No. 56 of 2013.
4.4 Cross Subsidy Surcharge
4.4.1 CSS for MSEDCL
MERC in the Order in Case No 138 of 2012 dated 21 February, 2013 decided Cross
Subsidy Surcharge to be levied on Open Access consumer.
Consumer Category CSS Computed
(Rs./Unit)
CSS Approved
(Rs./Unit)
Industry
Express Feeder 1.63 1.63

Page 26
Non Express Feeder 1.20 1.20
Seasonal Industry 2.84 2.84
Commercial
Express Feeder
Others 5.53 5.53
Non Express Feeder
Others 4.91 4.91
Railways 1.76 1.76
Public Water Works
Express Feeder (0.51) -
Non Express Feeder (0.33) -
Agriculture (2.95) -
Bulk Supply
Residential Complex (0.62) -
Commercial Complex (0.62) -
HT-IX Public services
Express feeders 3.29 3.29
Non-Express feeders 2.73 2.73
HT Consumers (33kV)
Industry
Commercial
Express Feeder
Others 5.09 5.09
Non Express Feeder
Others 4.47 4.47
Railways 1.32 1.32
Public Water Works
Bulk Supply
HT Consumers (22/11 kV)
Industry
Commercial
Express Feeder

Page 27
Others 4.43 4.43
Non Express Feeder
Others 3.81 3.81
Railways 0.66 0.66
Public Water Works
Bulk Supply
LT Consumers
Non Domestic
Up to 20 kW
0-200 Units (0.71) -
Above 200 units 3.11 3.11
'> 20 kW & < 50kW' 2.33 2.33
Above 50kW 4.84 4.84
Industrial
Below 20kW load (2.46) -
Above 20kW load 0.73 0.73
BPL (6.59) -
Domestic
0-100 Units (3.89) -
101-300 Units (1.23) -
301-500 Units 0.40 0.40
500 -1000Units 1.10 1.10
above 1000 units 1.10 1.10
Advertisements 15.58 15.58
Public Water Works (4.82) -
Street Lighting (3.11) -
Temporary Others
Other Purpose 7.79 7.79
Religious Purpose (3.75) -
LT Public services
0-200 Units (2.22) -
200-500 0.56 0.56
>500 units 0.56 0.56
>20-50 KW 1.67 1.67
>50 KW 2.18 2.18
Crematorium & Burial (LT-IX) (4.05) -
Table 5: Open Access charges: CSS for MSEDCL

Page 28
4.4.2 CSS for TPC-D
Consumer Category CSS Computed
(Rs./Unit)
CSS Approved
(Rs./Unit)
Industry
Commercial
Express Feeder
Others 5.53 5.53
Non Express Feeder
Others 4.91 4.91
Railways 1.76 1.76
Public Water Works
Bulk Supply
HT Consumers (33kV)
Industry
Commercial
Express Feeder
Others 5.09 5.09
Non Express Feeder
Others 4.47 4.47
Railways 1.32 1.32
Public Water Works
Bulk Supply

Page 29
HT Consumers (22/11 kV)
Industry
Commercial
Express Feeder
Others 4.43 4.43
Non Express Feeder
Others 3.81 3.81
Railways 0.66 0.66
Public Water Works
Bulk Supply
LT Consumers
Non Domestic
Up to 20 kW
0-200 Units (0.71) -
Above 200 units 3.11 3.11
'> 20 kW & < 50kW' 2.33 2.33
Above 50kW 4.84 4.84
Industrial
Above 20kW load 0.73 0.73
BPL (6.59) -
Domestic
0-100 Units (3.89) -
101-300 Units (1.23) -
301-500 Units 0.40 0.40
500 -1000Units 1.10 1.10
above 1000 units 1.10 1.10
Public Water Works (4.82) -
Temporary Others
Other Purpose 7.79 7.79
Religious Purpose (3.75) -

Page 30
LT Public services
0-200 Units (2.22) -
200-500 0.56 0.56
>500 units 0.56 0.56
>20-50 KW 1.67 1.67
>50 KW 2.18 2.18
Crematorium & Burial (LT-IX) (4.05) -
4.4.3 CSS for RInfra-D
Table 6: Open Access charges: CSS for TPC-D
The issue pertaining to the computation of CSS is subject matter of pending appeals
before the Hon‟ble ATE in the batch of Appeal No. 132 of 2011; 133 of 2011; 139 of 2011; 140
of 2011; 178 of 2011 and others. Since, these are subjudice; no view therefore can be taken on
the said issues in the Case No.180 of 2011. Therefore, the Commission retains CSS at the
existing level as approved in Case 43 of 2010.
Consumer Category
Computed CSS
(Rs./Unit)
Applicable CSS
(Rs./Unit)
Industry (1.33) -
Commercial 0.26 0.26
Group Housing (3.27) -
Temporary Supply 2.22 2.22
Industry (0.77) -
Commercial 0.83 0.83
Group Housing (2.71) -
Temporary Supply 2.79 2.79
Up to 20 kW (1.51) -
'> 20 kW & < 50kW' 0.84 0.84
Above 50kW 1.90 1.90
Industrial

Page 31
Above 20kW load (1.69) -
BPL (8.64) -
0-100 units (6.86) -
101-300 units (4.17) -
301- 500 units (1.24) -
500 and Above 0.03 0.03
0-100 units (6.98) -
101-300 units (3.65) -
301- 500 units (1.31) -
500 and Above (0.02) -
Temporary Religious (5.61) -
Temporary Others 5.51 5.51
Crematorium & Burial Grounds (5.59) -
Table 7: Open Access charges: CSS for RInfra-D
4.5 Viability of Intra-State Long Term Open Access
The following table illustrates the viability of Intra State Long Term Open Access from a
consumer perspective for a consumer procuring 5 MW power at 11 kV via Open Access vis-à-
vis discoms.
MSEDCL Tata Power RInfra
S.
No
Particulars Value Unit Value Unit Value Unit
1 Power Contracted through Open Access 5 MW 5 MW 5 MW
2 Load Factor 80 % 80% % 80 %
3 Power Factor 0.8 - 0.8 - 0.8 -
4 Energy Injected 2.88 MUs/
month
2.88 MUs/
month
2.88 MUs/
month

Page 32
5 Transmission Losses 4.85% % 4.85% % 4.85 %
6 Energy lost in Transmission 0.14 MUs/
month
0.14 MUs/
month
0.14 MUs/
month
7 Energy drawn at transmission end 2.74 MUs/
month
2.74 MUs/
month
2.74% MUs/
month
8 Wheeling losses 9.00% % 0.65 % 1.50% %
9 Energy lost in distribution 0.25 MUs/
month
0.02 MUs/
month
0.04 MUs/
month
10 Energy drawn at consumer end 2.49 MUs/
month
2.72 MUs/
month
2.7 MUs/
month
11 Renewable Purchase Obligation 8.00% % 8.00% % 8.00% %
12 Energy to be procured through
renewable energy sources
0.2 MUs/
month
0.22 MUs/
month
0.22 MUs/
month
13 Base Tariff at which power is procured
through Open Access
4 INR/k
Wh
4 INR/k
Wh
4 INR/k
Wh
14 Renewable Energy Tariff (assumed) 4.5 INR/k
Wh
4.5 INR/k
Wh
4.5 INR/k
Wh
15 Transmission charges (given) 213.39 INR/k
W/mo
nth
213.39 INR/k
W/mo
nth
213.39 INR/k
W/mo
nth
16 Wheeling charges (given) 0.6 INR/k
Wh
0.19 INR/k
Wh
0.46 INR/k
Wh
17 Cross Subsidy Surcharge (given) 0.31 INR/k
Wh
0 INR/k
Wh
0 INR/k
Wh
18 Additional surcharge (given) 0 INR/k
Wh
0 INR/k
Wh
0 INR/k
Wh
19 Amount paid to Open Access power
supplier -conventional- (calculated)
9.97 INR
mn/mo
nth
10.89 INR
mn/mo
nth
10.8 INR
mn/mo
nth
20 Amount paid to Open Access power
supplier -non conventional- (calculated)
0.9 INR
mn/mo
nth
0.98 INR
mn/mo
nth
0.97 INR
mn/mo
nth
21 Electricity charges to be paid by long
term Open Access consumer
10.87 INR
mn/mo
nth
11.87 INR
mn/mo
nth
11.77 INR
mn/mo
nth
22 Total Transmission charges 1.07 INR
mn/mo
nth
1.07 INR
mn/mo
nth
1.07 INR
mn/mo
nth
23 Total Wheeling charges 1.64 INR
mn/mo
nth
0.52 INR
mn/mo
nth
1.26 INR
mn/mo
nth
24 Total CSS 0.77 INR
mn/mo
nth
0 INR
mn/mo
nth
0 INR
mn/mo
nth
25 Total Additional Surcharge INR
mn/mo
nth
0 INR
mn/mo
nth
0 INR
mn/mo
nth
26 Total Open Access Charges 3.48 INR
mn/mo
1.59 INR
mn/mo
2.33 INR
mn/mo

Page 33
nth nth nth
27 Total Charges paid by consumer
availing long term Open Access
(Calculated)
14.36 INR
mn/mo
nth
13.46 INR
mn/mo
nth
14.1 INR
mn/mo
nth
28 Effective Bulk Supply tariff (calculated) 4.04 INR/k
Wh
4.04 INR/k
Wh
4.04 INR/k
Wh
29 Effective Open Access Charges
(Calculated)
1.29 INR/k
Wh
0.54 INR/k
Wh
0.8 INR/k
Wh
30 Effective Rate 5.33 INR/k
Wh
4.58 INR/k
Wh
4.84 INR/k
Wh
Table 8: Case 1: Power procurement via open access
MSEDCL Tata Power RInfra
S.
No. Particulars Value Units Value Unit Value Unit
1 Energy Charges 7.01 INR/kWh 5 INR/kWh 7.56 INR/kWh
2 Demand Charges 190 INR/kVA/
month
150 INR/kVA/
month
150 INR/kVA/
month
3 Any other charges 0 INR/kWh 0 INR/kWh 0 INR/kWh
4 Total Energy Charges 17.48 INR
mn/month
13.61 INR
mn/month
20.41 INR
mn/month
5 Total Demand Charges 1.19 INR
mn/month
0.94 INR
mn/month
0.94 INR
mn/month
6 Other charges-Total 0 INR
mn/month
0 INR
mn/month
0 INR
mn/month
7 Total charges paid 18.67 INR
mn/month
14.55 INR
mn/month
21.34 INR
mn/month
8 Effective Rate 7.49 INR/kWh 5.34 INR/kWh 7.91 INR/kWh
Table 9: Case 2: Power Procurement via Discom
On careful analysis of the above two tables it can be concluded that from a consumer perspective
purchasing power via Open Access is very much viable and should in fact be preferred over
purchasing power from the distribution company prevailing in the area.

Page 34
CHAPTER 5: RENEWABLE ENERGY AND OPEN ACCESS
5.1 Introduction
Out of the present total installed electricity generation capacity of about 225GW1
, about
12 percent comes from renewable energy sources, notably, wind, biomass, small hydro and solar.
Renewable energy (RE) is being aggressively promoted in the country, with about 41 GW
scheduled to come up by FY-17. It has demonstrated rapid growth in all segments.
In order to transmit clean energy from the renewable energy plants to pan-country consumers,
the need for greater Open Access covering renewable power is bound to be acutely felt.
5.2 Need and Importance of Open Access in Renewable Energy
Renewable Energy sources are very unevenly distributed throughout the country. While
solar energy and wind energy can be efficiently harvested in the western and southern part of the
country, small hydro potential is concentrated in the north-east. Optimum utilisation of these
resources requires catering to consumer demand all over the country. To avail the benefits of a
country wide market, Open Access is a crucial tool in the hands of RE generators.
In order to give a boot to renewable energy based power generation, all the state
regulatory commissions brought out Renewable Purchase Obligation (RPO) for state distribution
companies and large consumers which mandate procurement of a specific percentage of the total
energy requirement from renewable sources. States are on a drive to develop renewable source
based power plants to fulfill these RPOs and Open Access helps them do that.
However, since many states are naturally deficient in RE sources, they fulfill their RPO‟s by
purchasing Renewable Energy Certificates and from RE generators in the states. These
generators, in turn, sell the power produced to other consumers at lower tariffs. Open Access,
thus aids in REC market development as well.
Large scale deployment of renewable energy plants brings economies of scale which, in turn,
reduces the cost of power from renewable sources. This enables costly renewable power from
wind, solar and other sources to gain grid parity with conventional energy faster. Thus, Open
Access aides in swift attainment of grid parity.
A multiplicity of renewable power producers, who participate in various market processes such
as competitive bidding, bilateral and collective power trading etc., work towards overall
1
as on 31.05.2013

Page 35
Wide deployment of RE
RPO fulfilment REC
market development
RE grid parity
Power market development
development of the Indian power market, in line with demand and supply dynamics. Provision of
easier Open Access to these developers, therefore is advantageous to the entire power market.
Figure 1: Advantages of Open Access in Renewable Energy
5.3 National Level Provision for Open Access in RE
5.3.1 Electricity Act, 2003
The Electricity Act, 2003 provides that co-generation and generation of electricity from
non-conventional sources should be promoted by SERC‟s through suitable measures for
connectivity with grid and sale of electricity to any person.
5.3.2 National Electricity Policy,2005
The policy mentions promoting competition in renewable energy sector as one of the
objectives.
5.3.3 Rural Electrification Policy,2006
The policy promotes Decentralized Distributed Generation (DDG) in off grid areas.
DDG, through non-conventional sources of energy, is promoted even where grid connectivity
exists.

Page 36
5.3.4 Rajiv Gandhi Grameen Vidyutikaran Yojana
Cost-effective DDG projects can be financed with 90 percent capital subsidy.
Only RE plants of capacity 50 MW or above are entitled to avail connectivity to the inter-state
transmission system. This is in contrast to the minimum capacity threshold of 250 MW for
conventional power plants2
.
RE plants of lesser capacity (i.e. less than 50 MW) can also avail connectivity to the ISTS, but
they can do so collectively at a single point of connection. However, the aggregate capacity of
various plants at pooling substation has to be atleast 50 MW.
However, there are specific provisions in the Indian Electricity Grid Code (IEGC) which deal
with RE generation.
5.3.4 IEGC provisions
 The IEGC regulations mention “Facilitation of the development of renewable energy
sources by specifying the technical and commercial aspects for integration of these
resources into the grid”, as one of its prime objectives.
 It is further mentioned that, “In formulating perspective transmission plan the
transmission requirement for evacuating power from renewable energy sources shall also
be taken care of”.
 The code provides for treating renewable energy plants as „Must run‟ in order to
optimally utilize them.
 It gives the methodology for scheduling/rescheduling of wind and solar energy
(rescheduling on three hourly basis) and for compensating the wind and solar energy rich
states for dealing with the variable generation through Renewable Regulatory Charge.
 Wind farms with collective capacity of minimum of 10 MW, connected at 33 KV level or
above, are exempted from UI charges for deviations up to 30% from the scheduled
generation. For deviations within permissible limit, UI charges are borne by the host
state.
 Solar power developers are also exempted over deviations from schedule. The requisite
UI amount is borne by the state.
2
CERC Grant of connectivity, Long term and Medium-term Open Access in inter-state Transmission and related
matters (Amendment), 2005.

Page 37
5.3.5 Green corridor concept
Central and state electricity regulators envisage that by FY-17, the total installed RE
capacity would reach 66 GW. This capacity would be very unevenly distributed across states,
calling for huge demand of transmission infrastructure.
To meet the transmission needs of RE plants, augmentation and strengthening of the
existing transmission capacity is being planned. Power Grid Corporation has Rs. 42,000 crore
plans for setting up an exclusive countrywide green corridor for renewable energy transmission.
About Rs. 20,000 crore would be for intra-state strengthening and Rs. 22,000 crore for inter-state
transmission systems for grid integration. This would also include other work such as energy
storage, real time monitoring system and setting up of renewable energy management centre.
Under the green corridors concept, special focus would be given on system strengthening to deal
with operational challenges unique to RE power.
5.4 State level Open Access provisions
Most of the states have included special treatment to renewable energy in their intra-state
Open Access policies, in a bid to promote renewable power generation in their territories. Special
provisions with respect to transmission and wheeling charges, cross subsidy surcharge, etc, have
been provided in the respective state regulations favouring Renewable Energy, though there is
not much said on non-conventional energy in the state grid codes. Some of the provisions given
in the state regulations for intra-state Open Access are given below.
5.4.1 Transmission charges and Loss calculations
Several states have provided concessional transmission charges for Open Access users.
The states include, Chhattisgarh, Jharkhand, Tamil Nadu, Karnataka, Punjab and West Bengal.
5.4.2 Cross Subsidy Surcharge(CSS)
Many states have waived off cross-subsidy surcharge payable by Open Access users to
the state discoms. In general, two contrasting trends in CSS have been observed amongst states:
one in which CSS charges increase with increasing drawl voltage (such as in Bihar, Chhattisgarh,
Karnataka, and Odisha), and another in which CSS charges decrease with increase in the drawl
voltage (such as in Andhra Pradesh, Kerala and Meghalaya). The states that have favoured RE
power in respect of CSS are: Chhattisgarh, Delhi, Rajasthan, Tamil Nadu, Gujarat,
Maharashtra, Odisha and Tripura. Some other states such as Uttrakhand, Uttar Pradesh,
Jammu and Kashmir etc. have zero CSS.

Page 38
Application Fee Transmission Open Access-INR10,000
Transmission charges
and losses
Renewable- 0.29 INR/kWh
Transmission Loss: 4.24 percent
Cross Subsidy Surcharge
25% of the applicable CSS for OA consumer
purchasing power from renewable sources of
energy
Wheeling charges
LTnetwork: MSEDCL INR 0.36/kWh; TPC
INR 0.38 /kWh; RInfra INR0.88 /kWh
Banking Provisions
Banking available for self use and third party
wheeling for period of 1 year.
5.4.3 Wheeling Charges
Many states have offered concessional wheeling charges of RE power. Notable among
them include, West Bengal, Tamil Nadu, Punjab, Madhya Pradesh, Karnataka,
Jharkhand, Gujarat, Chhattisgarh and Andhra Pradesh.
5.4.5 Banking Provisions
States of Karnataka, Kerala, Madhya Pradesh, Maharashtra, Nagaland, Rajasthan,
Haryana, Tamil Nadu, Uttar Pradesh, and Uttrakhand provide facility for banking of energy
generated, for differing durations nevertheless.
Maharashtra provisions for promotion of OA in RE have been summarized in Figure 2 and
overall state comparison has been illustrated in Figure 3.
Figure 2: Maharashtra State provisions for promotion of Open Access in RE

Page 39
Solar projects exepmted from wheeling and transmission charges.
Unutilized wind energy fed to the grid paid for at 85% of the tariff by
discom.
Transmission and wheeling charges equal to 6% of the wheeling charges
Cross Subsidy Surcharge is 50% of the conventional Cross Subsidy
Surcharge
No CSS for solar, Wind projects (without REC)
CSS applicable for wind projects for obtaining REC
For small wind generators, transmission and wheeling loss equal to 7%
No wheeling charges for solar
2% banking charges for wind and small hydro. No banking charges for
solar.
Banking facility available for plants with infirm generation (not allowed
in case of third party sale).
Wheeling charges equal to 2% of the energy injected
Towards wheeling charges in terms of units.
100% banking allowed
CSS equals to 25% of conventional CSS
1 year Banking facility available for self use and third party
wheeling
Transmission and wheeling charges equal to 2% of the energy injected.
10% of the ARR by D/L from such additional injection shall be passed
on to the STU for compensating on the account of transmission losses.
No cross-subsidy surcharge
6 month banking facility for infirm generation
Transmission and wheeling charges equal to 40% of conventional charges for wind,
50% for biomass
CSS equal to 50% of conventional charges for wind power projects
1 year banking facility available
Transmission charges equal to two-third of conventional charges
Wheeling charges equal to one of (A) 1/3 of conventional charges or (B) Cost
of 7.5 of energy injected, whichever is higher.
Figure 3: State level Open Access provisions for Renewable Energy

Page 40
CHAPTER 6: IMPEDIMENTS IN IMPLEMENATATION OF OPEN ACCESS
6.1 Discom perspective
6.1.1 Revenue Loss
Open Access has enabled the heavy and bulk consumers to discontinue
their contract with the distribution companies operational in their areas. This has not only
reduced the quantum of energy supplied by the company but has also dented on the revenue
collection. Collection efficiency in this segment has been observed to be around 95-100%
contrary to very less values of the agricultural and domestic consumers.
6.1.2 Forced Universal ServiceObligation
Open Access consumers usually have firm sources of power, however in
case of a fault; the licensee under the Universal Service Obligation has to supply power to the
consumer. Thus, the distribution companies are not able to schedule their loads which further
leads to load shedding and instability of the grid.
6.1.3 DeterminationofCrossSubsidySurchargeforOpenAccessconsumers
Majority of the distribution companies in our country are government
agencies and are “State” within the definition of Article 12 of the Constitution of India. In
accordance to Article 14, therefore, they cannot discriminate between two similarly placed
consumers. Therefore, determination of CSS becomes an intricate and delicate issue.
6.1.4 Capacity building atSLDC
SLDC needs to have the necessary technology, expertise, manpower
to handle such large number of Open Access approval requests. (Source: Case 50 of 2012,
MERC)
6.1.5 Ring fencing of SLDC
SLDC would have to be independent while executing its authority of
scheduling Open Access requests. (Source: Case 50 of 2012, MERC)
6.1.6 Shifting burden on Low end consumers
The LT consumers have to bear the burden of the increased tariff so as to
compensate for the discontinued Open Access consumers.
6.1.7 Partial Open Access
The consumer who opts for partial Open Access tends to opt for Discom
supplied power during peak hours at the regulated tariff and during off peak hours they tend to
fulfill their base load demand through Open Access. As a result local the Discom has to procure
most expensive power which in terns leads to increase their power purchase cost, raises the

Page 41
overall tariff and in the end the burden of the increased tariff shifts to the non Open Access
consumers.
6.2 Regulatory and Legalperspective
6.2.1 Regulatory Balance
Regulatory Commissions have a tough job at hand while balancing the Open
Access charges. The policies need to make sure that the charges are not so high that nobody
avails the open access and the sole intention of competition with which it as introduced in the
Act and not so low that the low end consumers have to pay a very high tariff so as to compensate
for the loss incurred by the discoms in case many industries switch over to the Open Access
regime.
6.2.2 Deregulation of IndustrialTariff
The MoP letter and by the directions of Ministry of Law and Justice, it is clearly
evident to deregulate the tariff for consumers having demand of 1 MW or above as these are
deemed open access consumers. However, the move will have both Pros and Cons associated
with it. These are numerated as below:
Advantages
i. Removal of Cross Subsidy: The move will help the bulk consumers as they no longer
will be liable to pay CSS for SERCs would not determine their tariff.
ii. Additional Transmission and Wheeling Charges: Transmission and Wheeling
Charges will prove to be sources of extra income to the Discoms other than usual
income earned by distributing power to consumers having capacity less than 1 MW.
iii. Lower Average Revenue Requirement: Since the quantum of purchased power will
reduce for the various discoms, the move will result in lower ARR.
Disadvantages
i. Low availability of power to bulk consumers: The generators are already serving long
term PPAs with the various state utilities, the bulk consumers would find it difficult
to procure power for consumption.
ii. Surge in Short term power market rate: Bulk consumers when devoid of PPAs with
generators will have to resort to short term power procurement through various
exchanges and similar instrument. The direct impact of such a step will be a steep
increase in the short term power rate.
iii. Less preparedness of SLDCs and RLDCs: On ground zero basis, on critical
assessment of our various Load Despatch Centres, it is evident that at this point of
time; these centres are not adequately equipped for such a move.

Page 42
6.3 Consumer perspective
6.3.1 Irrational TemporaryTariff
The consumer is always overcharged due to the UI and ABT mechanism.
Consider an example when an industrial consumer has filed for a contract demand of 10 MW
from Open Access, considering his load fluctuations are 8 MW to 10 MW. The power scheduled
from the regional grid is 10 MW; however the load only goes up to 8 MW. The Licensee will
have an under drawl of 2 MW and will get a credit for it under the State Balancing and
Settlement Scheme and under Clause 28.2.2 of the MERC DOA regulations the Consumer will
not get any credit and will continue to pay for 10MW to the generator and entire credit for 2 MW
at a substantial rate –UI or SMP will be retained by the Licensee.
Consider the case of over drawl; say for example, the industry load has gone up to
12 MW. The industry will have to pay a hefty amount as per clause 28.2.1 and the rate would be
highest of:
i. The regional UI rate with congestion charges
ii. The SPM rate of intra-state ABT
iii. Temporary tariff
This rate is much higher than what the state has to pay to the State Settlement account and what
the state has to pay to the regional UI account.
6.3.2 Power Purchase
In the absence of long term surplus power many Open Access consumers have to
source power through short term contracts which may be expensive power surrendered by the
distribution licensees. Expensive power coupled with Transmission charges & losses, Wheeling
Charges & losses, Cross subsidy surcharge, standby charges, additional surcharge and other
charges may be the death knell for medium sized industrial & commercial consumers.
6.3.3 Eligibility Criteria
Presently, consumers having a demand of 1 MW or above are eligible to
avail Open Access. However, the move is inhibitive for all the other consumers who wish to pay
the open access charges but yet have no choice but to avail power from the local Discom.
6.3.4 Operational Issues
There are many operational issues faced by the consumers who opt for
Open Access such as day ahead scheduling, real time dispatch, carrying of weekly MRI,
preparation of UI account and monthly account etc. There is less competence of RLDC/SLDC in
facilitating various aforementioned processes.

Page 43
6.3.5 Wheeling Capacity
For the purpose of Open Access only spare capacity by inherent
design margin and variation in power flow is available for Open Access. This does not assure
Open Access consumer for continuous supply. (Source: Case 50 of 2012, MERC)
6.3.6 Segregation of Wires and Supply cost
Cost for wire business and power supply business should be properly
segregated so as to arrive at a consistent wheeling charge. Wheeling losses should also
be limited to technical losses and must exclude commercial losses as most of the bulk
consumers are connected at 11 kV and above, whereas most of the commercial losses occur at
below 11 kV level. (Source: Case 50 of 2012, MERC)
6.3.7 Availability of spinning reserve/Non bonded power
There should be availability of power which has not been committed for
long term PPA or some peaking Power Plants as a Spinning Reserve. Since most of the
generators have tied up their power on long term basis with the Distribution Companies, a
very limited capacity is available for merchant transactions. If availability of non bonded
power does not materialize it would completely distort demand supply equation in favor of
power producer and will put undue pressure on Open Access consumers. If Discoms are not
obligated to supply power to bulk consumers, they will have huge amount of excess capacity and
thus will monopolies the market as major sellers of power. (Source: Case 50 of 2012, MERC)
6.3.8 Assurance of Supply
The OA consumers are only assured of the supply in case of the separate
feeder lines only, in other cases until they do firm agreement with generator they will have to
pay the temporary tariff for drawing power from licensee, which is very high in case the
generator fails to inject power in the grid. These days there are mainly meshed network along
with embedded consumers (non-Open Access consumers). In the event of load shedding by
distribution licensee for a feeder where both Open Access consumers and embedded
consumers (non-Open Access consumers) are connected, Open Access will be rendered in
fructuous.
6.3.9 Limit on thedemand
The consumer can only avail open access to the extent of its contracted
demand with the Discom.
6.3.10 High Cross Subsidy Surcharge
Progressively the Cross Subsidy Surcharge is to be reduced, as mentioned
in the EA, 2003. However, most of the states are NOT reducing the CSS.

Page 44
6.3.11 Congestion in the Transmission Link
This happens due to the non availability of Transmission Capability. In
recent months, due to less Available Transfer Capability (ATC), some of the STOA buyers faced
congestion especially while importing power from Southern Region generators.
6.3.12 Reduction in ContractDemand
In the clause of the reduction of contract demand in Clause 4.2.1 of the
Draft Distribution OA Regulation in Maharashtra, the industry recurring power from the Power
Exchanges has to commit in writing to withdraw power uniformly throughout the day, which can
be a little difficult so it can be replaced by uniformity during the whole NOC period.
Clarification regarding the Minimum demand charges be levied on the remaining contract
demand or the entire contact demand has to be clearly indicated within the regulation. Clarity
should be there that whether the levied demand charges will be on the remaining contract
demand, after reduction for the Open Access quantum.
6.3.13 Stand-by-chargesfordrawlofpowerbyOpenAccessconsumerfromthegrid
In case of Planned Shutdown by the Supplier, the Demand Charges & the
tariff shall be billed as per the prevailing Open Access Consumer category if it is conveyed to the
Discom prior. In case of Unplanned Shutdown, the Standby supply shall be provided to the Open
Access Consumers against payment of temporary tariff as determined by the Commission as
high as Rs.12/kWh.

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