What is Open Access in the power sector?

Open Access (OA) in the power sector allows consumers unrestricted access to power transmission and distribution. In India, out of the four main components of power supply i.e, generation, transmission, distribution and regulation, only generation has private sector participation. Transmission is largely controlled by Power Grid Corporation of India (a 100% government subsidiary). Distribution sector is operated by state-owned electricity distribution companies (discoms).

To explain it further, OA allows a heavy usage customer with a connected load of 1MW or more, to buy power at cheaper prices. OA basically allows competitive pricing from power suppliers so that customers are not forced to buy from a monopolized local utility. The mechanism of OA is defined in the Section 2 (47) of the Electricity Act 2003 as: “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”. 

Understanding the OA framework

OA was only an attempt at envisioning a framework that encourages competition in the power sector. It was to enable consumers to receive power from a source of their choice. However, OA never really became a sustainable and economically viable option for power generators including solar power plants and small industries to adapt to. In addition to the warily lengthy permission process, there are high charges incurred in transmission along with cross-subsidy charges imposed by the states. Restriction on open access transactions, wheeling losses and charges and losses in transmission and distribution of power has plagued the initiative from the beginning.

Draft Electricity Rules

In August 2021, the Ministry of Power presented the Draft Electricity (Promoting renewable energy through Green Energy Open Access) Rules, 2021. Currently, under the open-access route with a total installed capacity of 11 GW as on March 31, 2021, renewable power producers sell electricity directly to commercial and industrial (C&I) consumers. The proposed new rules will allow cheaper and easier access to green, renewable energy for the long term to customers, and incentivize the industry to attract investments. 

Based on the location of the purchasing and selling entities, Open Access can be classified in two categories:

Inter-State Open Access:

Under this, purchasing and selling entities belong to different states, following the Central Electricity Regulatory Commission (CERC) regulations for access to power. Purchase rights under inter-state open access can be for the Short, Medium or Long Term i.e., from a month to up to twenty-five years. 

Intra-State Open Access:

In this case, the purchasing and selling entities belong to the same state. It follows the State Electricity Regulatory Commission (SERC) regulations. It can also be classified as Short Term, Medium Term and Long Term where the durations of these terms vary based on the regulations of respective states.

The buyer and seller of electricity can opt for either collective or bilateral transactions. In collective transactions, electricity trade is facilitated through exchanges with a very small margin fixed towards exchange members. In case of a bilateral transaction, the seller and consumer signs a Power Purchase Agreement, for buying power at mutually agreed tariff for a predetermined number of years. Leading solar energy manufacturers in India usually resort to bilateral agreements for tariff determination with C&I clients.

In order to achieve better implementation of Open Access, the draft rules proposed by the Ministry of Power must address key issues impeding the growth of healthy competition among power manufacturers and distribution companies.