Open access can help in reducing power tariffs, says IEX

A leading power bourse, IEX has about 95 percent share of the power trading market in the country.

Updated: Jul 15, 2012, 12:05 PM IST

New Delhi: Faster implementation of open access system, where consumers of over 1-MW power can choose their supplier, would help in significantly reducing overall electricity tariffs, according to Indian Energy Exchange.

A leading power bourse, IEX has about 95 percent share of the power trading market in the country.

"Faster implementation of open access would help in bringing down overall electricity tariffs," IEX Managing Director and Chief Executive Officer Jayant Deo said.

Once open access is implemented, bulk consumers would be out of regulated tariff regime in phases, thereby effectively insulating retail consumers from paying higher cost, he noted.

Earlier this year, the Power Ministry issued directives towards implementation of open access system.

As per the directives, state regulators would not have any control on fixing the energy charges for consumers of 1 MW and more power, who are deemed to be open access consumers.

The concept of open access was introduced in the Electricity Act 2003, with the aim of promoting competition and providing choice to consumers.

Deo pointed out that demand for electricity is going up not because of higher consumption by ordinary consumers but due to "increased demand from industrial users".

Further, he said, average cost of power procurement has gone up due to bulk consumers.

Based on 2008-09 data from the Central Electricity Authority, IEX has calculated that average cost of power went up by at least 55 paise if 30 percent of the buyers were considered as bulk consumers. This was on the premises that country's power requirement, during that time, was 117 GW.

In a recent communication to the Power Ministry, IEX suggested creation of a "National Bulk Market" for electricity whereby "the 15,000 bulk consumers (1 MW+) are brought into the market and supplied power through the day-ahead-market where prices are realised on the prevalent market forces".

Presently, the prices of electricity on the power exchanges are discovered on a day-ahead-market basis. The price is discovered every 15 minutes.

"The present situation where consumers are forced to use back up diesel-generator sets at Rs 13/unit while cheap power at approximately Rs 4/unit is not utilised is putting lenders, developers and the Indian economy as a whole at peril," the communication said.

In recent times, many power distribution companies due to their poor financial health are finding it difficult to purchase electricity from the exchanges.

"Over the past three years we have seen that while power has been available at IEX at less than Rs 4 per unit, a significant quantum (700 MW to 2000 MW) could not be cleared as the state utilities preferred to shed load rather than purchase cheap power," Deo said.