Open Access Consumers in Tamil Nadu to Pay Additional Surcharge of ₹0.70_kWh

The Tamil Nadu Electricity Regulatory Commission (TNERC) has heard a petition filed by the distribution company and approved an additional surcharge of ₹0.70 (~$0.0093)/kWh, payable by open access consumers.

The Tamil Nadu Generation and Distribution Corporation (TANGEDCO) had requested an additional surcharge of ₹1.23 (~$0.016)/kWh.

The respondents to the petition were Tamil Nadu Spinning Mills Association; Indian Wind Power Association; Southern India Mills Association; Watsun Infrabuild Limited; and Tamil Nadu Power Producers’ Association.

TANGEDCO, in its petition, requested the Commission to uphold the obligation of the state distribution licensee in terms of power purchase agreements, as it continues to be stranded. It said that there was an unavoidable obligation to bear fixed costs consequent to such agreements.

The state distribution company had said that open access consumers were buying a considerable quantum of power considering the present power requirements and future needs.

TANGEDCO informed the Commission that power was being purchased from different sources to meet the peak load shortages and maintain grid stability. It said that the petition was to determine additional surcharge payable by open access consumers on the quantum of power purchased using the network of the distribution licensee in line with section 42 (4) of the Electricity Act 2003.

The Act states: “Where the State Commission permits a consumer or class of consumers to receive the supply of electricity from a person other than the distribution licensee of his area of supply, such consumer shall be liable to pay an additional surcharge on the charges of wheeling, as may be specified by the State Commission, to meet the fixed cost of such distribution licensee arising out of his obligation to supply.”

TANGEDCO said that it was making continuous efforts towards strengthening the distribution networks to reduce the Aggregate Technical & Commercial (AT&C) losses in the system to a target level of below 15% in the ensuing year through the implementation of various reform programs.

At present, around 3,178 long-term, short-term, and medium-term open access users are availing open access power in Tamil Nadu. During the financial year 2019-20, more than 3,000 open access applications were received and approved.

Though TANGEDCO has incurred the transmission charges for its entire contracted transmission capacity, including stranded capacity, the same had not been considered for the calculation of fixed capacity charges for six months.

The Commission ruled that unless fixed costs due to stranded capacity were recovered from open access consumers, this burden would be unjustly passed on to other consumers of the distribution licensee. It would be unfair and unwarranted to pass the burden of fixed cost recovery of such stranded cost to other consumers through a tariff hike.

TANGEDCO arrived at an additional surcharge of ₹1.23 (~$0.016)/kWH, while the Commission calculated it at ₹0.85 (~$0.011)/kWh.

The Commission observed that the levy of cross-subsidy surcharge and additional surcharge on the open access consumer should not eliminate the electricity price competitiveness available to the consumer.

The additional surcharge applies to consumers who purchase the power through third parties and power exchanges.

The Commission stated that if the additional surcharge calculated at ₹0.85 (~$0.011)/kWh is fixed, the all-inclusive price of the electricity may be higher than the electricity tariff chargeable to the consumer by the distribution licensee.

The Commission, considering the interest of both the parties, decided to levy 80% of the additional surcharge on open access consumers, i.e., ₹0.70 (~$0.0093)/kWh (₹0.85 x 80% = ₹0.68 rounded off to ₹0.70).

The Commission ordered that the open access consumers pay the additional surcharge at the rate of ₹0.70 (~$0.0093)/kWh on the quantum of the electricity scheduled by them. TANGEDCO will collect the additional surcharge from April 16, 2021, to September 30, 2021.

Commercial and industrial entities are increasingly opting for open accesss renewable power to meet their clean energy needs and also reduce their operating expenses. The total installed capacity in the open access market as of December 2020 stood at almost 4 GW, with a project development pipeline of over 1 GW, according to Mercom India Research’s updated report, Open Access Solar Market in India – Key States. Developers in Tamil Nadu are facing hurdles in getting approvals for third-party sale projects from DISCOMS. The state saw a 57% decline in open access installations as of December 2020, from the end of 2019.

In July 2020, Gujarat announced an additional surcharge of ₹0.60 (~$0.008)/kWh for consumers sourcing power through open access for the period between October 01, 2020, and March 31, 2021.