In a recent Judgement, the Competition Commission of India (CCI) considered the case of an electricity consumer that was repeatedly denied open access permission. In this case, the consumer approached the CCI alleging “abuse of dominant position” on part of the state utilities. The case was filed by HPCL-Mittal Pipelines Limited (‘HMPL’) against denial of open access. In this case, “upstream network constraints” were cited to disallow OA application multiple times.


The CCI found that prima facie denial of open access in the above case did result in violation of Sec 4(2)(c) of the Competition Act 2002. This clause refers to “abuse of dominant position by denial of market access”. The CCI has ordered a detailed investigation in the matter.


The CCI also made certain other interesting observations in the case:


  1. In the above case, it identified “conflict of interests situation” between the various constituents of the electricity utilities like the Discom, TransCo, SLDC, etc due to “structural linkages”, i.e. common holding structure. The order states the following:

It appears that OP-2 has leveraged its dominant position in the relevant market to adversely affect the competition in the downstream market, where it is present through its group entity OP-3. The structural linkages between the OPs as depicted in the diagram illustrated earlier also points toward the conflict of interest that exists in the present case. Thus, given the conflict of interest situation that exists in the present case, anti-competitive motive behind such denial by OP-2 cannot be ruled out and may need to be tested in detailed investigation.


  1. The case dwells in depth on the jurisdiction of the CCI to rule on such cases given that the EA2003 is also a special statute that deals with all matters of electricity. The CCI finds that there are enough grounds and supporting case laws to justify its jurisdiction as far as competition related matters are concerned across all sectors.


This judgement is certainly a very interesting development for the electricity sector, as denial of open access permissions is a problem across most states. The inherent conflict of interest is evident, as often the Discom itself has to approve OA applications, in what will effectively result in taking away of its own best paying consumers.

The regulatory regime of the sector itself, especially the State Regulatory Commissions (SERCs) have so far taken a view that has supported the Discom’s, at the cost of the overall market and sector. Examples include setting of Cross-subsidy surcharges without regards to the formula and limits defined in the National Tariff Policies, upholding denial of open access in many cases, etc.


It is hoped that an outsider, for example CCI, which does not bring with it the baggage of the SERCs, or the “conflict of interest” that results from the government appointing the electricity regulator and owning the entire value chain, will catalyse real change in the electricity sector.

Gujarat’s first amendment to RPO regulations

Gujarat Electricity Regulatory Commission (GERC) on 4th March 2014 amended its principal RPO regulations of 2010. In these regulations, Gujarat set its RPO targets post FY13. The RPO set are from FY14 to FY17.

Gujarat announced 10% of energy procurement to come from renewable sources, for its obligated entities for FY17.

The year-wise RPO targets effective April 2014 are tabulated below:

GERC also introduced the definition of APPC which was hitherto missing. Average Power Purchase Cost (APPC) for the purpose of REC Mechanism is in line with that of CERC and is defined as -

‘Average Power Purchase Cost’ means the weighted average pooled price at which the distribution licensee has purchased the electricity including cost of self generation, if any, in the previous year from all the energy suppliers long-term and short-term, but excluding those based on renewable energy sources, as the case may be.’

In addition, GERC also clarified that a RE project registered under REC mechanism selling power under captive or third party mode will receive payment equal to APPC for excess injection after off-setting its own consumption, from the discom.

The present order on amendment can be accessed here

The principal RPO regulations of 2010 can be read here

Kerala drafts regulation for net-metering of small solar projects

Kerala State Electricity Regulatory Commission (KSERC) recently unveiled its draft copy of “KSERC – Grid Interactive Distributed Solar Energy Systems, Regulations, 2014″ (refer). With this Kerala joins the league of states namely; Tamil Nadu, Andhra Pradesh, Delhi, Punjab and Uttarakhand, which have a similar policy in their respective states. The highlights of the regulation are as under:

Eligibility – All consumers are eligible to install solar energy systems, either self-owned or that owned by a third party.

The maximum capacity of solar energy systems shall be capped at 3 MW and should be in conformity with Kerala Electricity Supply Code’14.

Cumulative capacity of all solar energy systems within a particular area shall be limited to 50% of local transformer capacity. If the cumulative capacity limit exceeds the above limit, licensee is obligated to replace the existing transformer with a higher capacity transformer within 2 months.

Banking facility - Discoms are obligated to provide banking facility to eligible consumers only upto a target capacity of solar RPO. Eligible consumers not in ToD regime is allowed to use the same regardless of any specific period.

Licensee shall provide net-metering arrangement to consumers, and consumer shall be liable to pay security deposit & rent as per norms determined by KSERC.

A consumer can supply excess power to any other self owned premise located anywhere, within the same distribution area, provided wheeling charges of 5% are paid for wheeling of power.

 The consumer will receive payment for excess generation of solar power injected in distribution network at APPC (1.99 Rs. per unit).

If an eligible consumer happens to be an obligated entity as per relevant RPO regulations, then the energy consumed by the consumer will be accounted towards solar RPO.

There shall be no banking or cross subsidy charges applicable on any eligible consumer.

A summary of such policies across other with main points can be read in the table below:

Andhra Pradesh declares APPC for FY 2013-14

An order dated 28th December 2013, for determination of APPC of FY 2012-13 (for FY 2013-14), considered 6,88,79.12 MUs of power bought at  22,594.78  crore INR by discoms of the state.

Accordingly the APPC for FY 2013-14 is finalized to be at Rs. 3.28/unit.

The following can be read on the payment adjustment issue -

“The difference between the provisional pooled cost of power purchase @ Rs 2.69/kWh (of FY 2011-12 considered for FY 2012-13) and the pooled cost now determined shall be paid to the developer in six equal monthly installments.”

All relevant orders on APPC in other states can be accessed here.

Our previous coverage on APPC of FY 2012-13 in Andhra Pradesh can  be accessed here.

The present order can be read here.


Pass RE cost to Industries says MSEDCL

Maharashtra state electricity distribution company limited (MSEDCL) has requested the Hon’ble MERC to consider passing on the cost due to renewable energy purchase to Industries of the state. As per MSEDCL, Industries in the state are responsible for pollution and climate change and consequently they should be burdened with higher purchase cost of RE, not common consumers.

MSEDCL has provided the average cost of RE power purchase to be : Rs. 3.81 per unit, Rs 4.12 per unit, Rs. 4.26 per unit & Rs. 4.32 per unit for FY11 to FY13 respectively. Based on this MSEDCL has requested to segregate the RE power purchase from the ARR so that the overall tariff gets reduced, even-though, a cursory look reveals that the %age in such increase is declining on year to year basis (8.31% to 3.3 % to 1.41 % finally for FY13).

In the form of an additional information, MSEDCL in the order has elaborated that it has met the RPO targets of FY11 and FY12 and has tied with adequate renewable capacity to meet RPO of FY14. However, it has mentioned that due to infirm nature of RE power, challenges remain in claiming the contracted capacity as RE purchase capacity.

However, in the present order Hon’ble commission has stated that burdening one category of consumers with higher tariff is a matter of tariff determination process and has held that such a decision will be appropriately taken up during tariff determination of MSEDCL.

Copy of the order.

RERC to finalize APPC of FY 2011-12

Jodhpur vidyut vitran nigam Limited has submitted to RERC the proposition to finalize the APPC for FY 2011-12 as the audited for  financial year ending by March 2011, are now available.

RERC in an order dated 2nd Nov, 2011 had determined the APPC of Rajasthan to be Rs. 2.57 per unit on provisional basis. In the petition filed ,  the Jodhpur DISCOM, as per audited accounts for FY11 has worked out the APPC of FY 2011-12 to be Rs. 2.7350 per unit. Comments on the same were invited by RERC no latter than 15th Oct 2013. This increase in APPC if finalized will be 6.42 % higher than that declared previously.

The working excel on the same can be accessed on the home-page of RERC –

It will be pertinent to note that RERC, unlike most states, in its definition of APPC, excludes short term power purchase also along with renewable energy. APPC in Rajasthan is defined as -

“The weighted average price at which the distribution licensee has purchased the electricity including cost of self generation, if any, in the previous year from all the energy suppliers, excluding short term power purchases and those based on renewable energy.”

APPC for FY 2012-13 can be known by clicking here.

APERC order on APPPC FY13

The state of Andhra Pradesh has finally got its awaited “average pooled power purchase cost” in an order dated 29.06.2013 released by Hon’ble APERC. as Rs. 2.69 per unit. Although, the same is for FY 2012-13. Before determining the final APPPC cost for the state, Hon’ble APERC had a provisional rate in place which was Rs. 2.00 per unit.
It is worthwhile to iterate the definition that the com-mission follows for determination of its APPPC.

‘Pooled Cost of Power Purchase’ means the weighted average pooled price at which the distribution licensee has purchased electricity in the previous year from all the long-term energy suppliers excluding the purchases based on liquid fuel’. Provided that the purchases from traders, short-term purchases and purchases from renewable sources shall not be taken into account while determining Pooled Cost of Power Purchase.

The power purchase cost incurred by AP DISCOMs were verified by the commission. The order also reads that the difference between new and provisional rate will be paid to the developer in six monthly installments.

For a copy of order – Click Here

For other recent APPC related updates, please follow the links:



Discoms – the weakest link in the power chain

An article in the Business Standard provides a birds eye view of the power sector as it stands now. It reiterates the obvious – the problem is at the discom end, and is not easy to solve.

Whats interesting is that it provides a good assessment of the overall power scenario – something that is not so easy to see in the context of recent pessimism about the economy as a whole and the power sector in general. The conclusions are very interesting, and not very intuitive:

  • Most of the problems of fuel availability and cost pass through are history. The 12th plan target of adding 88,000 MW capacity seems easily achievable as about 60,000 MW is already under implementation.

” Political and administrative decisions on import-aggregation, pooled pricing and tariff pass-through, have, for all practical purposes, been taken.”

  • The recent grid-collapse aside, the transmission portion of the value chain has been well managed and required investment plans are in place
  • At the Discom level, the author identifies some factors that will affect the power sector as a whole:
  1. States are likely to move slowly to resolves issues like open access, free power to farmers, tariff increases. However, the plan for bailing out of discom’s may spur some reform: “This package for distribution companies comes with a host of conditionalities. There have to be regular tariff increases, and states will have to commit to undertake key power sector reforms, including change in the management control of loss-making distribution circles. There will be a quarterly review of distribution companies before the release of fresh funds.”
  2. State regulators will have to play a leading role in the reform of discoms
  3. Operatoinalising “open access” as envisaged by the central government will strain the discoms further in the short-term


Significant Changes are Proposed in the REC Mechanism


NLDC and Central Board of Irrigation and Power (CBIP) organized a day-long workshop on the REC mechanism in Delhi in June.


Shri Pramode Deo, Chairman CERC was the key note speaker at the event. In his speech, he gave a preview of the significant changes expected in the REC mechanism. The highlights of these are:


  • Quarterly compliance of RPO to be put in place soon
    • As we have mentioned earlier in our newsletter and on this blog, this is a necessary step to make the market function smoothly. The interesting point that Shri Deo made was that all the regulatory requirements to implement this change quickly are in place – as a result we may see quarterly compliance sooner that we expected.


  • Vintage based RECs to be considered, particularly in Solar
    • This will help remove a major obstacle in Solar investments. Faced with rapidly reducing capital costs, investors opting for the REC mechanism face a sudden reduction in revenue as REC prices are revised downward, even though they are locked-in with high capital investment. A vintage-based REC will solve that problem. As an example, a 2010 Solar REC may be made equal to 1.3X of a 2012 Solar REC to factor in the higher capital investment required in 2010.
    • Vintage based RECs are a common feature in international markets.


  • Electricity duty exemption clause to be reviewed
    • A large number of units generating RE power in captive mode are in-eligible for RECs as they enjoy ED exemption. However, the ED exemption available and the REC revenue foregone are disproportionate. At the same time, this clause is preventive entire states and regions (like UP, Punjab and Vidharba) from participating in the REC market.


  • Consider Discom’s to sell RECs when they purchase RE in excess of their RPO requirement
    • This will be a welcome step, as this will enable Discom’s to lessen the burden of RE power purchase, particularly as many are not in good financial health. However, this approach also has risks – a Discom may disallow open access in the state and monopolize REC trading. One way out could be to allow this only in states where open access is allowed in its true spirit and form.
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