The Ministry of Power (MoP) has introduced new rules facilitating industries like Green Hydrogen manufacturers and expediting the establishment of energy storage capacity. A press release on these rules were issued on January 15, 2024.
The regulations empower consumers with a specified quantum of load and Energy Storage Systems (ESS) to establish, operate, and maintain dedicated transmission lines without the need for a license, fostering energy transition and security.
This decision extends a privilege already available to generating companies and captive generating stations. The rule specifies that a generating company, an entity setting up a captive generating plant, an Energy Storage System, or a consumer with a load exceeding twenty-five Megawatts (for Inter-State Transmission System) and ten Megawatts (for Intra-State Transmission System) need not obtain a license if they comply with the regulations, technical standards, guidelines, and procedures stipulated under the Electricity Act.
One of the notable features of the Electricity Act, 2003, is Open Access, allowing consumers to access electricity through alternative sources. However, due to high Open Access charges imposed by some State Regulators, its utilization has been limited. The new rules address this by prescribing methodologies for determining various open access charges, including wheeling charges, state transmission charges, and additional surcharge, with the aim of making them reasonable and uniform nationwide.
To rationalize open access charges, the rules state that for consumers availing General Network Access or Open Access, the additional surcharge will be progressively reduced and eliminated within four years. Importantly, the surcharge will only apply to consumers who are or have been customers of the concerned Distribution licensee, sparing those who have never been customers from this additional cost.
In a move to ensure financial sustainability of the power sector, the rules emphasize the need for a cost-reflective tariff and discourage revenue gaps created by some State Regulators disallowing various incurred costs. The rules mandate that the tariff must be cost reflective, and any revenue gap created, except under extraordinary circumstances like natural calamity, should not exceed three percent of the approved Annual Revenue Requirement.
To further enhance the viability of distribution companies, the rules prescribe a time-bound liquidation of any existing revenue gap, ensuring that the sector remains financially sound. The Minister for Power, emphasized that these rules are part of a series of reforms undertaken by the government, contributing to the reduction of distribution company losses from 27% in 2014 to 15.41% in 2022-23. The Minister expects that these rules will further diminish losses and increase the viability of distribution companies, ultimately benefiting consumers and fostering a conducive environment for industry growth.
