Cross-subsidy
The draft EA Amendment proposes (a) time-bound reduction in cross-subsidies (CSS), and (b) CSS to be not more than 20% of the wheeling charge. These provisions are nothing new. The EA 2003 also included provisions for reduction of CSS. But these were watered down later.
The proposal that CSS be 20% of wheeling charges is significant, as if implemented, it will reduce CSS significantly. Also, the provision for charging “additional surcharge” is proposed to be deleted – this will also have a significant impact as in recent years states have used high additional surcharge as a tool to discourage open access.
Open Access
The draft EA Amendment states the following with respect to open access:
“With effect from the commencement of the Electricity (Amendment ) Act, 2018, all consumers having a connected load of 1 Mega Watt and above with the power system, may procure at their option electricity through open access under contractual agreement from any generating company, trading licensee, or from any other source.”
This implies automatic open access, without the need for permission from the Discom. If implemented, this will be a radical change and can potentially transform the electricity market in the country.
Separation of Carriage and Content
One of the key provisions in the previous EA amendment (proposed in 2014) was the separation of carriage and content – i.e. further breakup of the Discom into supplier and network operator, and also allowing multiple suppliers in the area of the Discom. This proposal was met with significant resistance from the state when the Standing Committee of the Parliament viewed the amendment. As a result, the current amendment, while retaining the provisions, has significantly diluted the scope of carriage and content separation by leaving it entirely to the decision of the state government.
In our opinion, this is a pragmatic approach, as it may allow the passage of the EA Amendment act without significant resistance from the states. However, the flip side of this approach is that such a reform will take a long time to be realized on the ground, and there will be significant differences between states. The EA2003 has heralded the break-up of Electricity Boards into Genco, Transco and Discom’s. Fifteen years on, the separation is still only partially effective in most states.
Others
Conclusion
We believe that the proposed changes will have a wide and deep impact on the electricity sector. The promotion of RE and removal of roadblocks for development of RE and of open access in the country is a welcome step and one that was long overdue.
The separation of distribution and supply function also signifies a fundamental shift in the way electricity is distributed in the country. However, by watering down the provisions for the same and giving states the choice to implement is a pragmatic way the government has adopted to allow the passage of EA Amendment. In any case, this change is likely to take a long time to start showing on the ground.
Another radical change proposed is of paying subsidies through “Direct Benefit Transfer” only. This can be a potential game-changer for the sector and can pave the way for genuine Discom reforms on commercial principles.
The Infographic displayed above analyses the extent of usage of certain keywords in Electricity Act 2003, Draft EA amendment bill 2014 and the latest Draft Electricity Act 2018. The graph is prepared to understand how the government’s priority has evolved over the years from only conventional power to renewable energy as well.
The word ‘Renewable’ is used 22 times in Draft EA 2018, 23 times in Draft EA bill 2014 and just 4 times in EA 2003. Similarly, Open Access is used 20 times in EA 2003, 32 times in Draft EA bill 2014 and 23 times in Draft EA 2018.
Terms like RPO and Smart Grid have no mention in EA 2003, while in Draft EA bill 2014 RPO was used once & smart grid 7 times whereas Draft EA 2018 smart grid was used 5 times and Franchisee was used the highest 8 times in Draft EA 2018. The term Cross Subsidy is used the least in Draft EA 2018 just once and 3 times in both EA 2003 and Draft EA bill 2014.
“We’re looking at presenting amendments to the Electricity Act in this session of parliament, for strengthening the penalty provisions manifold in the renewable purchase obligations, to make these more stringent,” said Mr. Piyush Goyal, Minister of Power, in a statement.
He said that the current renewable purchase obligation (RPO) is also being re-looked and added, “Earlier, we had certain set of targets till 2022, which we are bringing forward to 2019, we hope that 15 per cent of the renewable power purchase obligation can be enforced to 2015”.
The concept of RGO will also be introduced in the act, in which companies setting up new power projects will have obligation to generate 10% Renewable Energy component.
The amendment will focus on bringing RE into mainframe, as the REC market has not been performing well and there is little RPO compliance by the obligated entities. The RGO will help the govt. to meet its ambitious target of 100 GW solar power by 2022 with wind capacity addition of 10 GW per year.
The provision for forecasting and scheduling of Renewable Energy is expected in act. Also the concept of ‘Must Run’ and ‘Deemed Generation’ are also expected to be part of this amendment. The idea of ‘Hydro Purchase Obligation’ and the provision of giving Renewable status to large Hydro projects can also be included.
It will be interesting to see how this amendment affects the market performance, before the proposed Renewable Energy Act is passed early next year.
Media Articles:
]]>Included in the filings of each Discom will undergo corresponding changes, along with the volume of power supplied to subsidized consumers. All these changes will feed into the cost of service for each DISCOM, which will impact the level of subsidy to be provided to each DISCOM.
2.?????? Share of Powers between DISCOM
Following substation will be become Inter Discom Points between APSPDCL and TGSPDCL.
Commission has granted permission to avail interstate transaction between APSPDCL and TGSPDCL using existing Infrastructure and energy settlement till March 2015. If power plant is connected at any of these feeders, the contradiction arising out of geographical location has to be resolved.
Further, the respective shares of power allocated between the four Discoms originally fixed in G.O.Ms.No.58, dated 07.06.2005 under the 3rd Transfer scheme has been amended in G.O.Ms.No.20, dated 08.05.2014. As per the GO, the revised share of 46.11% for Seemandhra is higher than the existing allocation of 38.07% (increase of 8.04%), while the new 53.89% allocation for Telangana is lower than the existing 61.93% allocation. Allocation of power to new DISCOMS is another political issue.
4.?????? Merit Oder Dispatch and Energy Settlement codes:?
A common merit order dispatch month wise for all Discoms. i.e., for entire state has been previously considered by the Commission in its earlier examination of the filings. This merit order dispatch is no longer relevant in the light of the creation of the two new states of Andhra Pradesh and Telangana and the respective DISCOMs have to redraw the merit order dispatch for the two states separately.
Energy settlement codes and polices of old AP may be redefined.
5.?????? Tariff Order for FY-14-15 :
Thus, the existing tariff filings mentioned in the reference cited, which were a valid base for the Commission to issue a Retail Supply tariff order on 29.03.2014 have now been overtaken by events and the creation of two new states. These filings can no longer be considered by the Commission for the purpose of determining tariffs because the jurisdiction of the four DISCOMs in the two new states has been changed. Significant Policies involving budgetary Support need to be confirmed by newly formed states.
6.?????? Impact of Subsidy:
Further the DISCOM filing contains zero tariff proposals for certain categories of consumers. This zero tariff was proposed as per then extant policy of the erstwhile Government of Andhra Pradesh which anticipated payment of subsidy to meet the deficit u/s 65 of the Electricity Act, 2003.
In this scenario, subsidies and polices of new state will have impact on Cross Subsidy Surcharge. For the new state it is more likely that subsidies will be announced which will have impact on CSS.
Under this condition it is difficult to predict Impact of Bifurcation on existing PPAs.
Contributed by Nikhil Dhamankar.
“”renewable energy sources” means renewable sources such as small hydro, wind, solar including its integration with combined cycle, biomass, bio fuel co-generation, urban or municipal waste and other such sources as approved by the Central Government in consultation with MNRE from time to time prescribed.”
The proposed amendment leaves out some very important changes from the renewable energy perspective.
At present RPO trajectory is defined in the National Action Plan for Climate Change. Solar RPO trajectory was also included in the National Tariff Policy by way of an amendment. If these policies indeed become ‘binding’ then it will pave the way for easier changes and implementation of RPO and development of REC markets. Nevertheless, in our opinion, a direct reference in the EA would have been stronger. And the need for the
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