NPTI - MBA (PM) Siddartha & Sanket GI-rT0Z uonequaweldwiy | quawissasse aaAroetD JOJDIS JAMOd UEIPUT U! oY io a ll |Ee POODDOTEForeword Even after 11 years of the effect of The Electricity Act 2003, Open Access is still a distant dream for many stakeholders of the sector. Reasons may be transmission bottlenecks or political will, the end result is the same. Though bulk consumers trade around 40% of the power traded through leading power exchanges to procure power by-passing the local utilities, serious issues in Open Access still remain. Indian GDP is stalled by 0.4% because of power cuts to the industries as per FICCI and the loss of markets because of higher prices, which is the key resultant of higher power procurement cost, is still not found in books of India Inc. A 100% Open Access implementation throughout India by empowering the infrastructure, consumer and local utility is very much important in the scenario to minimize this loss. More than the government's will, itis the lack of Infrastructure and the lack of information for the bulk consumers in performing the cost benefit analysis in the respective states of their businesses, which is the reason for very few consumers availing Open Access even in the states which are permitting the Open Access to the fullest. This year after elections, there will be a positive scenario in the Indian markets providing lots of opportunities for the industries to grow globally by imparting the competitiveness in prices by minimizing the cost of power procurement, ‘This report focuses on providing information on costs and benefits which can incur to the consumers by opting Open Access and will actually pave a way to empower the bulk consumers in the state to get the idea on how Open Access in Electricity is going to be a boon for their businesses. The report have the cost benefit analysis of Open access in the major industrially groomed states of the country and the major constraints in its implementation under its sleeves. Authors SIDDARTHA RAMAKANTH | SANKET oHExecutive Summary “NTPC, the country’s largest generation utility, reported a drop in plant load factor (PLF) due to idling of nearly 5,000 MW capacity (including 2,000 MW of gas-based and 3,000 MW of thermal power).” Business Line “Country’s peak power deficit in the month of January, 2014 is 5,378 MW” Central Electricity Authority ‘The two statements when observed in isolation, are mutually contradicting to each other in evaluating the power scenario of the country. But the scenario is not completely assessed. The poor financial health of the distribution utilities is not allowing them to buy power from the generating utilities, resulting in load shedding and power cuts for all its users. The users include domestic, commercial and industrial. The un- availability of power to the industries not only affects the production of the specific industry but also results in poor GDP, which is an index of the financial condition of the country. This poor financial health of the country is again leading to the in-ability of the consumers to pay electricity bills and the circle forms. The best antidote for the problem is Open Access of electricity for the industries (Bulk Consumers). This helps the industries to procure power un-interruptedly, resulting in better production and thus leading to increase in the financial health of the country. Open Access in electricity is not only a reliability arm for the industries but also a commercially benefitting tool. Open Access consumers can save atleast 7 paisa and up to Rs.1.72 per unit and opportunity cost of not is totally eliminated. This report is a guide for bulk consumers in assessing the cost benefit sis of Open Access and also discusses the issues in the implementation of Open Acces SIDDARTHA RAMAKANTH | SANKET oOPEN ACCESS 2014-15 TABLE OF CONTENTS Bene Introduction Legal Frame work for Open Access Evolution of Open Access Segments of Electricity Market 4.1. Long Term and Medium Term Procurement 4.1.1. Cost - Benefit Analysis of Intra State Open Access over Discoms’ A111. Gujarat 4.1.1.2. Maharashtra 4.1.13. Odisha 41.14. Bihar 4.1.15. Andhra Pradesh 4.1.1.6. Rajasthan 41.17. Punjab 4.1.18. Kerala 4.1.19. Tamil Nadu 4.11.10. Karnataka 4.2. Short Term Power Procurement 4.2.1, Price Dynamics 4.2.2. Analysis 4.3. Best Mix of Power Procurement for Different Time Blocks Current Status of Open Access consumers in India Transmission Constraints 6.1. Congestion in Transmission Corridor for Day Ahead market on Power Exchanges 6.2. Recent Bid areas that faced the problem of Transmission congestion 6.3. Impact of National Grid and southern Corridor Issues to be Addressed in Open Access Conclusion SIDDARTHA RAMAKANTH | SANKET oINTRODUCTION It has been almost 11 years since the Indian electricity act 2003 passed in which the concept of open access has been mentioned. In fact, open access in India owes its genesis to electricity (supply) act 1948 and we still believe that open access is in very nascent stage in our country. ‘The basic objective of Indian electricity act 2003 was to induce competition in the sector for performance and efficiency improvement. But various factors such as technical feasibility of open access in different states and political will create hurdles for the implementation of the idea. ‘The cross subsidy surcharge in some states is very high making the Open Access unviable. Power sector was re-structured to commercialize and create competition among all the stake holders of the power sector all sectors of consumption. Through Open Access the competition at wholesale (more than MW) was introduced in order to decrease the cost of power Procurement at the consumption level which could help in the Industrial Growth of the country. Power, which is treated as a commodity is open for buying and selling in the markets. Open Access is one the vital features of the act to introduce competition both in upstream and downstream market among generators and distributors. LEGAL FRAMEWORK FOR OPEN ACCESS SECTION 2 (DEFINITIONS) ‘The Indian electricity act defines open access under section 2(47) as: ““Open access means the non-discriminatory provision for the use of transmission lines or distribution system or associated facilities with such lines or system by any licensee or a consumer or a person engaged in generation in accordance with the regulations specified by the appropriate commission.” This definition simply points towards the regulators’ intention of separating ‘wire business’ from that of ‘electricity’. The one who ‘owns some network in an area will no longer necessarily be the supplier of electricity to the destination. Hence the consumers are now free to choose their own supplier without laying off new network for the same which increases competition among the suppliers all over the country. SECTION 9 (RELEVANCE WITH CAPTIVE, GENERATION) Not only the consumers, the concept also helps industries to reduce unavailability of quality power supply. The captive generating plant ‘owners also now have the right to open access to supply electricity from their generating plant to the point of use. This has been mentioned in section 9(2) of the act. Moreover under section 38(2d), section 39(2d) and section 40(c), captive generating utilities have been made free from the payment of cross subsidy surcharge to the utilities providing open access of their transmission network. SECTION 38 AND SECTION 39 (CENTRAL, AND STATE TRANSMISSION UTILITIES’ FUNCTIONS) Under section 38 and section 39, the functions of central and state transmission utilities have been provided. Under these, the subsections (24) of both the sections specify the role of CTUs and STUs respectively in providing open access to transmission network to the generating utilities and consumers on the payment of transmission charges and surcharges for meeting the requirements of cross subsidies. Since the consumers shall procure power through distribution utilities and cross subsidies is imposed only through distribution utilities, the SIDDARTHA RAMAKANTH | SANKET BHtransmission utilities in such case shall not levy cross subsidy surcharge on the consumers. SECTION 40 (DUTIES OF TRANSMISSION LICENSEE) Section 40(2) specifies the role of central and state transmission utilities and divides the responsibility to appropriate commission for looking into the matters of cross subsidy surcharges. SECTION 42 (DUTIES OF DISTRIBUTION LICENSEE) Section 42(2) specifies the role of state commission to lead the concept of open access in EVOLUTION OF OPEN ACCESS the respective states in successive phases. Also state commissions have been made responsible for determining the wheeling charges and cross subsidy surcharges to be levied on the open access consumers. SECTION 86 (FUNCTIONS OF STATE COMMISSION) Under section 86 subsection (a) of the act, the state commissions have been allowed to determine the wheeling charges and surcharges to be levied on the open access consumers with in the respective states. Stage of Evolution Electricity Act 2003 30.01.2004 First CERC Regulation 21.02.2005 Open Access 2005 (First Amendment) Open Access 2006-07 (Second Amendment) 25.01.2008 Open Access Regulation 2008 20.05.2009 Amendment 2009 Description Introduction of Competition in Power Sector and Open Access in Inter State Transmission. Introduced LTOA & STOA and Congestion Management through Fax/Email. Introduction of new products under STOA: Advanced Scheduling, FCES, Day Ahead, Same day, E-bidding invited for STOA. Developing a common platform for Electricity Trading and ‘grant of permission for setting up and operating Power Exchange. Exit Option provided with payment of up to 5 days of ‘Open access charges. Exit Option provided with payment of up to 2 days of Open access charges. ‘CERC Power Market regulation 2010 SEGMENTS OF ELECTRICITY MARKET ‘There are three ways to procure wholesale electricity in India: Long term Power Purchase Agreements between Buyers and sellers which are essentially bilateral contracts, medium term markets and short term markets which are called Term-ahead market (including weekly and Introduction of REC contracts monthly power procurement contracts) & Day- ahead market (including a real-time balancing mechanism called unscheduled interchange now replaced by deviation settlement mechanism). SIDDARTHA RAMAKANTH | SANKET BHLong term and Medium term procurement, Long term and medium term power procurement is mainly done by bilateral PPAs in case of open access and through Discoms in case of traditional methods. Bilateral contracts can be made inter- state as well as intra-state, In case power is procured through more than one state then the charges as mentioned by the respective states depending up on the point of delivery would also be levied over the consumer in addition to charges fixed by the central transmission utility. In the next part of our report we will discuss the cost benefit analysis of power procured by the consumer through intra-state open access, Cost benefit analysis of intra-state open access over Discoms Opting for open access is not feasible for bulk electricity consumers in every state. There are many charges apart from power procurem from the generators that are to be paid to the intermediaries. In case of intra-state open access, charges like transmission charges, distribution charges, cross subsidy surcharges and state load dispatch center charges are levied over consumers. Moreover, the intermediate losses are also bone by the consumer only. This makes open access costly for the consumer. ‘Though there are so many constraints in the path of opening up of Indian power market through open access, many consumers requiring power opt for open access for better quality and reliability of power for better performance of their assets. Power through Discoms being unreliable causes a number of problems for smooth functioning of the industries. Therefore it becomes necessary for these industries to have some back up source of power. For that source industries have two major options, either to hold a DG set at their premises with huge operating cost or to go for open access. Open access, in that case, is more cost effective alternative for addressing this issue. In this report, Average power procurement cost from generating stations has been assumed to be Rs.4 per unit. Each consumer can find a generator at lower tariff for himself which can further reduce his cost of open access power. SIDDARTHA RAMAKANTH | SANKET oOGUJARAT [Ue ReE We Oe OT UNIT) Et ors ENERGY(RS.4/K WH) TRANSMISSION CHARGES(RS.0.12/K WH) DANO OE ANSEL RE LOS COO MOL Oe SL SUMP Lan | SLDC OPERATING CHARGES(RS2000/DAY) (RODEO ea ORL) PNR OSS DRO MEU EKO Re EOE) Drago a eta AON) oOo oy; DEMANDED ADDITIONAL SURCHARG Open access in Gujarat as shown in the above table is not much beneficial at lower levels as far as cost is concemed. On the other hand, bilateral power transaction with TATA Power, Mundra can be a great option for such consumers as the power procurement cost in that case comes down to about Rs.2.73 per unit and therefore reduces the overall landed cost. Opting for open access in that case becomes very cost effective and reliable. As an estimate, the difference between per unit landed cost and Discom tariff may reach up to Rs.0.53 which can save as high as Rs.19 SMW SMW SMW SMW 24.00 24.00 24.00 24,00 120.00 12000 120.00 120.00 481% 481% 4.81% 4.81% 114.23 11423 114.23 114.23 10.01% 10.01% 10.01% 0.00% 102.79 102.79 10279 114.23 Sine oer ae) lakhs per month for a 24 hour running industry (at 5 MW-11 KV) Moreover, for EHT consumers, power Procurement through other sources is much beneficial than through Discoms. The cost saving for such consumers is Rs.0.09 per unit which makes Rs.3.25 Lakhs per month for the industry (if the above mentioned conditions are considered). somnmanmncor seer IEMAHARASHTRA Nee Re ees ena) Teme OO) a OF POWER DEMANDED ENERGY TRANSFERRED(MWH) rare inte) VVC TKO PONENT I ENERGY(Rs.4.48/K WH) TRANSMISSION CHARGES(RS.0.43/KWH) WHEELING CHARGES PAID BY CONSUMERS(Rs.0.6:Rs.0.11:Rs.0/KWH) ‘CROSS SUBSIDY SURCHARGES(non- eR CHE eee Mil) SLDC OPERATING CHARGES(Rs2000/DAY) TOTAL CHARGES(PER 5 MWH) PANU TRO DNC GONE DURKEE ENC ENO AUD) ENCE(PER UNIT) Maharashtra is a state which has high industrial tariff through Discoms. The industrial consumers with non-express feeders have been taken into consideration in this report. The net difference for all levels of voltages for such consumers comes out to be positive which means shopping malls, industries and other consumers must opt for open access in order to curtail their energy expenses. A 22kV consumer can save up to Rs.0.23 per unit if he could find an appropriate power producer for him, ‘This can save up to Rs.8.28 lakhs per month for such an industry. If the voltage level is too high for consumption, installing a step down transformer in the fr MENT COST(PER Sine ean ee) premises would prove to be a more cost effective option in the long run than installing DG Sets. Similarly if the drawl point is at 132kV, one can save Rs0.35 per unit and thereby, Rs.12.6 Lakhs per month. The industrial parks developed by MIDC (including Automobiles and Auto Components, Biotechnology, Consumer Durables, Chemicals, Engineering, Electronics, Information Technology, Petrochemicals, Pharmaceuticals, Transportation, Textile, Wine) in various regions like Pune, Aurangabad, Amravati, Nagpur and Konkan may certainly opt for open access as a cost saving measure, SIDDARTHA RAMAKANTH | SANKET | «|ODISHA COMO Oe OE NUT eo) DISCOMS Tra oMnW Io) Wav} SINEea te NTE CESU —-NESCO_ WESCO—SESCO oMW sMW SMW SMW 24.00 24.00 24.00 24,00 120.00 120.00 120.00 120.00 3.80% 3.80% 3.80% 3.80% 1154411544 115.44 115.44 8.00% 8.00% 8.00% 8.00% 106.20 106.20 106.20 106.20 4.00 4.00 4.00 4.00 -480000.00 480000,00 489000.00 480000.00 7200.00 7200.00 7200.00 7200.00 9360.00 97200.00 73200.00 120000.00. 23640000 188400.00 189600.00 331200.00, 2000.00 2000.00 2000.00 81920000 774800.00 752000.00 940400.00, a Toa 7 708 8.85 443 4a3 443 443 a a 3.28 2.87 265-442 On 2" march 2014, members of Rourkela Chamber of Commerce and Industries had a meeting with the officials of GRIDCO and WESCO to demand uninterrupted supply to the industries. Being an intensive iron ore producing region of the country and having a large number of industries situated, there is a huge demand of quality and reliable power in the state. In such a scenario, these industries may either go for their own DG sets for backup during power cuts or may opt for open access as an option of procuring quality and reliable power. The cost of power through diesel generator comes out to be about Rs.12-15 per unit and on the other hand the landed cost of power procurement through open access comes out in the range of Rs.7-8 per unit. In case there is a few hours of scheduled power cut in a region, one should opt for short term open access rather than setting up a new DG unit as ‘open access power procurement would cost Rs.5- 6 per unit lesser than DG set. Of course open ‘access is somewhat costly than the tariff charged by Discoms in Odisha but can be utilized as a backup source of power during power cuts at critical times for smooth functioning. SIDDARTHA RAMAKANTH | SANKETBIHAR 5MW 24,00 120.00 4.00% 115.20 6.00% 108,29 COS Ren Re MON AVERAGE POWER PROCUREMENT CeO a OURO RO TRENT) ENERGY(Rs.4/KWH) EN ISS | CHARGES(RS.0.15/K WH) Dia CER eT Me URSELF WIT ES ern ese SLDC OPERATING Fer ete ON) ORO Ue PASSO NEN DISCOM TARIFF(TOD CHARGES Pe nm oO) Popa e ne AON Bihar is one of fastest growing states in India. According to Indian Brand Equity Foundation, the Gross State Domestic Product of Bihar in the year 2012-13 was $56.8bn and CAGR reported was 18.8%. In 2012-13. The total outstanding investments in Bihar were $52.5bn out of which 70% was for electricity industry. Open access in Bihar according to above analysis is cost beneficial at every level of voltage at drawl point. For an 11kV drawing industry, per unit saving for open access consumer is about Rs.0.7. This can make about Rs.25.2 lakhs per SMW SMW SMW) SMW 2400 24.00 2400, 24.00 12000 120.00 120.00 120.00 4.00% 4.00% 4.00% 4.00% 11520 1152011520 115.20 6.00% 5.00% 5.00% 0.00% 108.29 109.44 109.44 115.20 Sone eee ‘month for the consumers of electricity through ‘open access. For larger industries, which draw the power at higher level of voltage, this amount escalates further. The key industries of Bihar like rubber and plastics, chemicals, tobacco, leather and textile have this golden opportunity to save cost on their electricity usage. Moreover, the news of identification and evaluation of a site for an UMPP in Bihar may attract more industries to the state, sommmanmancor seer IEANDHRA PRADESH TOTAL POWER REQUIRED COTULLA OED) Andhra Pradesh is the state with the most cost beneficial scope of open access for industrial consumers. In this report, the comparison for industrial colonies and industrial tariff has been done with open access landed cost. For each Discom of the state, the comparison gives positive results for an industry drawing at 11kV. ‘The highest difference for the cost of power through Discom and Open access is given by NPDCL that is of about Rs1.98 per unit. On a monthly basis, this saving amounts to Rs.71.28 lakhs. Also, if one opts for open access for industrial colonies, per unit cost benefit comes out to be Rs.1.10 for consumers procuring power INE WOU ROL UTS SES CPDCL = EPDCL = SPDCL_——NPDCL. SMW SMW SMW SMW 24.00 24.00 24.00 24.00 120.00 120.00 120,00 120.00 3.43% 3.43% 3.43% 3.43% 115.88 115.88 115.88 115.88 3.92% 367% = 4.12% 4.15% 11134 111.63 un 11.07 372 3.72 372 372 446400.00 446400.00 446400.00 446400.00 1080.00 10800.00 1080.00 —-10800.00 5040.00 3840.00 7200.00 27600.00, 0.00 0.00 0.00 0.00 2000.00 2000.00 200,00, 2000.00) 509603.72 497603.72 496403.72_ 486803.72 458 4.46 aay 4.38 6.36 636 6.236 6.36 5.68 5.68 5.68 5.68 178 1.90 1.89 1.98 1.10 1.22 1.21 1.30 from CPDCL at 11kV voltage. This amount grosses up to Rs.39.6 Lakhs on monthly basis. ‘The net saving for this category of consumers (SMW) procuring power from open access over other Discoms of the states is much higher. Hyderabad and Vishakhapatnam — the most favorable cities for upcoming ITIR projects proposed by the Government of India, can attract even more of such projects by providing a better inter-regional transmission infrastructure as it is a major bottleneck now. The count of 623 consumers in the state is a clear indication of feasibility of OA in the state. SIDDARTHA RAMAKANTH | SANKETRAJASTHAN COST CALCULATION AVERAGE POWER PROCUREMENT COST(PER TiN) TOTAL (ery NOLEN eS TRANSMISSION CHARGES(RS.0.37/KWH) Pa NeRe Ene As Cosy SUBSIDY | SURCHARGES(0.05,0.13,0.18/K WH) OF DEMANDED Seo DUNS LL LLU) (ROR UROL COL) LANDED TARIFF OPEN ACCESS DISCOM TARIFF DIFFERENCE(PER UNIT) Rajasthan is one of the most favorable state for Open access. Being a hub for electricity intensive industries like Textiles, Granite and Chemicals, the need for reliable and economic power is very prominent. Rajasthan is among the leading investment destinations in India, Hundreds of Industries are expected to come up in IT and Manufactui Mahindra World City, Jaipur and the areas facing National Capital fields in In this state, the difference in cost between the traditional power procurement and open access is considerable at 11KV and significant at 33, SMW SMW SMW SMW 24.00 24,00 24.00 24.00 120.00 120.00 120.00 120.00 4.20% 4.20% 4.20% 4.20% 11496 114.96 114.96 114.96 12.60% 3.80% 0.00% 0.00% 10048 110.59 114.96 114.96 EX (as on 1 may 2014) 66KV. A bulk consumer of 11KV can save up to Rs.2.52 Lakhs per month on the other hand bulk consumers at 33KV and 66 and 132KV can save Rs.26.28 Lakhs and Rs.34.92 Lakhs per month respectively. Apart from economic power procurement, the reliability factor is very much important because scheduled and unscheduled power cuts in areas of Udaipur, Jaipur and Kota are prominent and the cost comparison between DG sets as well as opportunity cost for the businesses in highly regarded with Open Access. SOAR | HETPUNJAB COST CALCULATION INO Ce RCO Sree TiN) TOTAL ra NOLEN eS TRANSMISSION CHARGES(RS.0.27/KWH) DNC CRO MUL TROL SU) ‘CROSS SUBSIDY SURCHARGES(.07/KWH) OF DEN) SRO LAUER EU EPO) KOM URO TRU CONT PEND RU Leg! DISCOM TARIFF Dyn po eA resvi) CGS Punjab has an agrarian economy with a lower industrial output as compared to other states of India. A prominent feature of the industrial scenario of the Punjab is its small sized industrial There 194,000 small. scale units in the state in large medium units. Ludhiana is an important center for industry units, are_nearly industr addition to 586 and ‘The state has a significant number of other industrial towns like Jalandhar and Mandi Gobindgarh which deals with sugar, dairy and other agro based industries. Apart from that, textile ty intensive industries which have been reported of shutting industries are elect sMW SMW SMW SMW 24.00 24.00 24.00 24.00 120.00 120.00 120.00 120.00 2.50% 2.50% 2.50% 2.50% 117.00 117.00 117.00 117.00 6.03% 2.26% 2.26% 0.00% 109.94 114.36 11436 117.00 their operations for hours because of unscheduled cuts by distribution companies. Though Power procurement in Punjab is not economical compared to open access but when the reliability is considered then Open access is life saver for industries because on an average i there is a scheduled power cut for 3 hours then the cost benefit analysis of Open Access over DG sets always ends up with a green ink in the balance sheet, And during unscheduled power cuts, Open access is always reliable and opportunity cost of spending 41 paisa less by procurement power through Discom is not calculable in peak demand season, SOAR | HETKERALA COST CALCULATION AVERAGE POWER PROCUREMENT COST(PER UNIT) REECE SIMO MOAI A ENOL CEM Und! TRANSMISSION CHARGES(RS.0.19/K WH) PLLA RO EUS LONE OOLL) CROSS SUBSIDY SURCHARGES(0.AND 0.52/KWH) SLDC OPERATING CHARGES(RS2000/DAY) TROP URSL RU eo ROL) TENE COIS DISCOM TARIFF DIFFERENCE(PER UNIT) In Kerala, the power procurement cost through Open access is 78 paisa less than traditional source for 66KV drawl industries. This is because of the great performance of existing SEB in the state (recently corporatized). The point to be noted during the study about the electricity scenario of the state is its projected zero per cent cross subsidy surcharges for the consumers below 220KV. But as the level of drawl voltage reaches 220KV, cross subsidy surcharges are imposed over the consumers atthe rate of Rs.0.52 per unit which increases the landed cost of power SMW SMW SMW 24.00 24.00 24.00 120.00 120.00 120.00 3.00% 3.00% 3.00% 116.40 11640 116.40 0.00% 0.00% 0.00% 116.40 116.40 116.40 al Ee [ees Sie ce ee through open access significantly i.e. from Rs.4.14 per unit to Rs.4.68 per unit The reliability factor is not a factor in the state when the state receives good rainfall. But still the state is not so industrially exploited throughout However, because of the possible El Nino effect and state being majorly dependent on the rain fed hydro power projects, the Medium Power procurement through CGS and other private generating stations for the period from August to November through Open Access will prove to be highly beneficial for the industrial units. SOAR | HET