New Electricity Rules Curb Arbitrary Hikes in Open Access Surcharge

The changes are expected to facilitate open access and bring certainty to consumers


The Ministry of Power has made changes to the Electricity Rules, 2005. According to the notification, the surcharge that open access consumers must pay, as determined by the state commissions, should not exceed 20% of the average cost of supply of power.

The power distribution companies (DISCOMs) often levy stiff open access surcharges on commercial and industrial (C&I) consumers to dissuade them from opting for other sources of power. The new rules are expected to curb DISCOMs’ tendency and allow competition between suppliers and private generating companies for the benefit of consumers.

The new rules apply to surcharges including both cross-subsidy and additional surcharges.

Further, the amendments said that the appropriate commission should within 90 days of publication of these rules, specify a price adjustment formula for recovery of the costs, on account of the variation in fuel prices, or power purchase costs. It added that the impact on the cost due to such variation should be automatically passed through in the consumer tariff, on a monthly basis.

If the distribution licensee fails to compute and charge the fuel and power purchase adjustment surcharge within the timeline, its right to recovery of costs on account of the fuel and power purchase adjustment surcharge will be forfeited.

Moreover, in such cases, the right to recovery of the fuel and power purchase adjustment surcharge determined during true-up will also be forfeited and the true-up of fuel and power purchase adjustment surcharge by the commission, for any financial year, will be completed by June 30 of the next financial year.

Resource Adequacy

The state commission should create regulations for resource adequacy based on the guidelines from the central government and the model regulations from the Forum of Regulators. The distribution licensees should develop a resource adequacy plan that follows these regulations and obtain approval from the commission.

The National Load Despatch Center and the Regional Load Dispatch Center should carry out assessments of resource adequacy for operational planning at the national and regional levels, respectively, on an annual basis, in accordance with the guidelines issued by the central government.

Energy storage systems

As per the amendments, an energy storage system (ESS) can be owned, leased, or operated by a generating company, transmission licensee, distribution licensee, system operator, or independent energy storage service provider. If an ESS is located with and operated by a generating station, transmission licensee, or distribution licensee, it will have the same legal status as its owner.

The developer or owner of the ESS will have the option to sell, lease, or rent out the energy storage space to a generation or transmission, or distribution utility, or to a load despatch center. The owner of the ESS may also use some or all of the energy storage space to purchase and store electricity for sale at a later time.

The independent energy storage system will be a delicensed activity at par with a generating company in accordance with the provisions of the Act. If the owner or developer or lessee or user seeks to operate the ESS as an independent energy storage system, it should be registered with the authority and the capacity of such ESS should be verified by the authority.

The new rules are expected to bring clarity to regulatory issues.

Development of hydropower

The authority concerned will rule on the approval of hydroelectric generation projects, as outlined in Section 8 of the Act, within 150 days of receiving a complete application.

Also, the authority will decide on the approval of off-the-river pumped storage projects within 90 days of receiving a complete application.

Recently, the Ministry of Power announced that it was considering changes in the tariff policy that would allow the state governments to provide subsidies to eligible categories of consumers directly into their bank accounts by way of direct benefit transfer. The ministry said that the intention behind the proposed move is to ensure that the cross-subsidy surcharge component of the tariff does not keep escalating over time to cover for the higher subsidies being provided to retail consumers.

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