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The power ministry has floated a Cabinet note to resolve a contentious issue in implementing open access that allows large users to choose their electricity supplier.
One of the most disappointing aspects of the power sector reform has been the lack of tangible progress on competition and open access to wires in the sector. This is an area that significant responsibility may be placed on state electricity regulators, who should have been more proactive in “encouraging” introduction of open access and third party sales to break the monopoly of the state-owned utilities.
Although, several SERCs have notified open access regulations besides fixing surcharge, transmission and wheeling charges, it has hardly helped consumers to come forward to avail of the open access facility. There may be compelling reasons such as cross subsidy surcharge, transmission charges etc. that disincentivize the consumers to go in for open access. Applications seeking open access for over 25,700 MW have been submitted but actual implementation has, however, been as low as 7,400 MW, and that too largely for captive power.
The magnitude of wheeling charges and cross subsidy surcharges has de facto made open access unviable. Hopefully, the Cabinet can take on the power ministry, which has been reluctant in creating a competitive market for electricity, and suggest penalties for not mandating open access.
The government’s plan to encourage trading of power has received a severe jolt with some companies surrendering their trading licence to power sector regulator Central Electricity Regulatory Commission (CERC).
Even though pronouncements have been made and a CERC staff paper in 2006 recognised trading both for meeting short term fluctuations in demand and for resource optimization trading at present is feebly meeting the former objective and the design of the market microstructure has paid little attention to resource optimization. Section 66 of the Electricity Act, 2003 mandates that Appropriate Commission shall endeavor to promote development of market (including trading) in power.
In the absence of a deep market for electricity trades the regulator has resorted to trading margins and caps on short-term prices to contain the volatility of these prices. By CERCs own admission these regulatory steps have throttled the contribution of trades in providing new trading products and bringing more supplies to the market. So this development is not a major surprise as all the incentive structures for trading have been distorted. | 
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