Segregation of Wires & Supply: Way Forward to Promote Competition in Distribution Sector

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Segregation of Wires & Supply: Way Forward to Promote Competition in Distribution Sector

Everyone of us are aware that Electricity Act, 2003 was enacted with the objectives of Rapid growth of the sector, Promoting competition, Protecting interests of all the Stakeholders, particularly the consumers and Supply to all. But there has been a lack of competition in the Distribution sector and several reforms, policies and schemes have been introduced in order to promote the same. But these measures have not produced the expected results reasons being many.
There has been a recent suggestion from the Advisory Group of Ministry of Power to segregate the wires and supply business of Distribution Licensees into two different businesses. This is aimed with the objective to Offer retail consumers a choice and Introduce competition in all possible business segments. This would also address the challenges of minimizing AT&C losses and improving customer service. Below is a mechanism of how this process shall be initiated and it's strategic implementation.
Proposed Scheme - Phased Implementation
Phase I
  • The incumbent Distribution License would be split into two
    • A Wires License; and
    • A Retail Supply License.
  • The incumbent Retail Supply Licensee would also be the Default Retail Supplier with Universal Service Obligation for the entire licensed area.
  • The Wires Licensee would be the Distribution Network Owner (DNO) and shall be responsible for
    • All the activities carried out by the erstwhile Distribution Licensee\
    • Except the activity of retail supply of electricity to consumers.
  • The Distribution Network would include Distribution System starting from the interface with the Transmission System stretching up to the Retail Consumer Meter.
Phase II
  • The Wires Licensee shall continue to be responsible for overall development and growth of the Distribution network - up to the consumer meter.
  • Gradually, in this phase, additional Retail Supply Licenses would be granted by the concerned SERCs with universal service obligation, as per the Licensing philosophy to be adopted and norms notified, offering choice to the retail consumers.
  • The SERC would declare one of the Retail Supply Licensees as the 'Default Supplier' with Universal Supply Obligation for the entire area under the jurisdiction of Wires Licensee.
  • Setting of a Bulk Power Procurer- a Government owned company - with the following responsibilities:
    • Tie-up bulk purchases from the generator
    • Management of existing PPAs,
    • Sale of power in bulk to the Retail Suppliers; and
    • Treasury management
  • The Retail Supply Licensees would have the option to procure power from the Bulk Power Procurer, in addition to the choice of procuring on its own, subject SERCs approval and adherence to the retail tariffs notified by the SERC
    • There would be no cross subsidy surcharge levied on the consumers moving from one Retail Supply Licensee to another.
    • Retail Supply Licensees to develop their own risk mitigation plan to deal with the situation
  • Complete segregation of ownership between the Wires and Supply Licensees - Ownership of the retail licensee would be completely cut off from the wire licensee. Even the group company of wire licensee will not have retail license.
  • The implementation of this phase would be decided by the SERC in terms of:
    • Timing of implementation of the phase
    • Strategic phasing of suggested measures; and
    • The structure of the industry for Bulk power purchase and sale to the Retail Supply Licensees. 
Your valuable comments on the same are most welcome and an healthy discussion on the same should produce more insights into the sectoral performance in terms of operations and financial viability.
Source: Cerebral Business research Pvt. Ltd.

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8 comments :

  1. UnknownNovember 11, 2013 at 5:51 PM

    What Will be the Role of SERC's in the same?

    ReplyDelete
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