Power Update

Upward pressure on open access charges likely to continue: ICRA

The upward pressure on open access charges is likely to continue given the lack of progress in tariff rationalisation and sustained gap between average cost of supply and average tariff realisation for the distribution utilities leading to weak financials. With the overall open access charges being high – in the range of Rs 2.5 – 5 per unit across most key industrial states, an ICRA note in this regard states that this increasing trend in open access charges as well as imposition of additional charges levied by the State Electricity Regulatory Commissions (SERCs) in several key states is adversely affecting the procurement of power through open access by High Tension (HT) consumers.

Sabyasachi Majumdar, Senior Vice President and Group Head, ICRA Ratings says, “The high open access charges across the key states largely offset the positive impact of availability of power at reasonable tariffs in the short-term power market. The impact of increase in these charges is further compounded by the risk of restrictions that is refusal of the permissions or consent by nodal agency as seen in the past in few states for availing open access, thus impeding the growth of the open market.”

Open access charges primarily comprise of cross subsidy surcharge (CSS), additional surcharge, wheeling and transmission charges and transmission and distribution losses in kind. The national tariff policy prescribes that the amount of CSS and the additional surcharge to be levied on large consumers procuring electricity under open access should not be so burdensome that it eliminates competition. While a gradual reduction in cross subsidy levels has been suggested, the progress with respect to tariff rationalisation by SERCs across states has been modest so far.

Sabyasachi adds, “In this context, the measures for tariff rationalisation and the approach for calculation of open access charges as proposed by the Ministry of Power in its consultative paper in August 2017, if implemented, could bring consistency in the levels of open access charges across the states. However, in ICRA’s view, it may not lower the open access charges in the near term.”

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