computation_of_surcharge

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Computation of Open Access Surcharge

Cross-subsidy surcharge and additional surcharge for open access

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National Electricity Policy lays down that the amount of cross-subsidy surcharge and the additional surcharge to be levied from consumers who are permitted open access should not be so onerous that it eliminates competition which is intended to be fostered in generation and supply of power directly to the consumers through open access.

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A consumer who is permitted open access will have to make payment to the generator, the transmission licensee whose transmission systems are used, distribution utility for the wheeling charges and, in addition, the cross subsidy surcharge. The computation of cross subsidy surcharge, therefore, needs to be done in a manner that while it compensates the distribution licensee, it does not constrain introduction of competition through open access. A consumer would avail of open access only if the payment of all the charges leads to a benefit to him. While the interest of distribution licensee needs to be protected it would be essential that this provision of the Act, which requires the open access to be introduced in a time-bound manner, is used to bring about competition in the larger interest of consumers.

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Accordingly, when open access is allowed the surcharge for the purpose of sections 38,39,40 and sub-section 2 of section 42 would be computed as the difference between (i) the tariff applicable to the relevant category of consumers and (ii) the cost of the distribution licensee to supply electricity to the consumers of the applicable class.

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Surcharge formula: S = T – [ C (1+ L / 100) + D ] Where S is the surcharge T is the Tariff payable by the relevant category of consumers; C is the Weighted average cost of power purchase of top 5% at the margin excluding liquid fuel based generation and renewable power D is the Wheeling charge L is the system Losses for the applicable voltage level, expressed as a percentage 19

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The surcharge may be collected either by the distribution licensee, the transmission licensee, the STU or the CTU, depending on whose facilities are used by the consumer for availing electricity supplies. In all cases the amounts collected from a particular consumer should be given to the distribution licensee in whose area the consumer is located. In case of two licensees supplying in the same area the licensee from whom the consumer was availing supply shall be paid the amounts collected.

Open acess-Govt .Initiatives

Electricity Policy,2005-Cross subsidy surcharge should not eliminate competition.Tariff policy 2006 lays down the formula for calculation of cross-subsidy charges .Cross –subsidy surcharge to be brought down progressively .

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Methods of computation of Open Access Surcharge

15 states have finalised methods to be adopted for computation of Open Access surcharge. Tamil Nadu, Madhya Pradesh, Karnataka,

Rajasthan, Gujarat, Haryana, Chhattisgarh, Jharkhand, Andhra Pradesh, Uttaranchal, Maharashtra, Kerala, Punjab, Assam, Orissa

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State wise details of Open Access

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Tamil Nadu

Embedded Cost Method

- The surcharge would take into account the tariff applicable to the relevant category of consumers and cost of the distribution Licensee to supply electricity to the consumers of the applicable class.

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Madhya Pradesh

Avoided Cost Method

Based on 5% power purchased at margin.

This method adopted since it is recommended by the group of regulators and also in the draft tariff policy.

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Karnataka Methodology for determination of

Surcharge:

Average cost of supply method

The Commission feels that since average cost of supply has been considered for tariff determination, the same methodology shall be adopted for determination of surcharge also and it would be inappropriate to adopt different methodologies.

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Rajasthan

Method adopted for Determination of Surcharge


The basis of calculating the extent of cross subsidy provided by such consumer shall be

(1) The cost of supply to the category of consumers (2) The voltage at which he is connected (3) The realization from that category of consumers.

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Rajasthan Cross subsidy to be phased out over a period of

10 years

Hence, surcharge for various category of consumers is determined at 90% of the current level of cross subsidy

Illustration : The cross subsidy surcharge for EHT consumers (15 MVA & above) works out to Rs.1.72p/unit. However, with a view to phasing out cross subsidy surcharge for EHT consumers is determined at 90% of the current level of cross subsidy i.e. Rs. 1.55/unit.

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Andhra Pradesh


- The Commission is of the opinion that the embedded accounting costs are actually used to allocate costs to various consumer categories and to determine the current level of cross-subsidy. Therefore, the embedded cost model used for determining the tariffs is undoubtedly the best methodology for determining the current level of cross-subsidy and accordingly the cross-subsidy surcharge.

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Gujarat Cross- Subsidy Surcharge:

Avoided Cost Method Reasons for adopting Avoided Cost Method (1) Recommended by FOIR (2) adopted in the Draft Tariff Policy of MoP (3) Avoided Cost Method takes care of loss to the

existing Licensee on losing the subsidizing consumers and promotes competition.

The Commission has decided to consider Pooled Power Purchase and Generation Cost as Avoided Cost for calculation of Cross-Subsidy Surcharge.

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Haryana Embedded Cost Method

The Commission has decided that following factors would be used for calculating surcharge:-

(1) The cost of supply to the category of consumers.

(2) The voltage at which he is connected. (3) The realization from that category of

consumers.

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Chhattisgarh

The Commission has decided to adopt Embedded Cost method for computation of cross-subsidy surcharge.

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Wide variation in surcharge on application of uniform formula for all

States

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UTTARANCHAL

Surcharge using avoided cost method based on top 5% of power purchase / own

generation excluding NCE and liquid fuel sources works out to be 25.96 P/Unit for HT

and LT Industry

Traiff:Rs:Rs3 Cost of power Rs1.50(Higher Paying

consumer 5% merit order dispatch) 20% distribution loss 10 paisa wheeling charges Rs 1.50x120/100=1.70+.10=1.80 Surcharge:Rs3-Rs1.80=1.20

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Madhya Pradesh


generation excluding NCE and liquid fuel sources works out to be 189.55 P/Unit for Coal

mines

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Himachal Pradesh


generation excluding NCE and liquid fuel sources works out to be (-)6.58 p/unit and

21.41 p/unit for EHT and HT customer respectively.

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Karnataka Surcharge using avoided cost method

based on top 5% of power purchase / own generation excluding NCE and liquid fuel sources works out to be (-)103.86 p/unit (BESCOM), (-)

74.85p/unt (MESCOM), (-)23.85 p/unit (HESCOM) and (-) 9.87 p/unit ( GESCOM) for HT (ind.) customer.

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West Bengal


generation excluding NCE and liquid fuel sources works out to be 128.8 P/unit for HT

customer

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Computation of Surcharge by using the method specified in the

concerned SERC Order

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Madhya Pradesh

Illustration of Surcharge in Open Access (at 132 KV ) (as in MPERC order)

(1) Average tariff applicable from HT consumers at 132 KV = 413 p/unit

(2) Cost of power at margin (5%) =283 p/unit(3) Transmission charge =11 p/unit(4) Cash impact of system losses = 25 p/unit(5) Cross Subsidy Surcharge Difference (5) = (1)-(2)-(3)-(4) = 94 p/unit

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Gujarat

Sample Surcharge Calculation: (using Avoided Cost Method) Surcharge for Industrial High Voltage (66 KV and above) (1) Average Tariff of the Category (P/ unit) = 421

(2) Pooled Power Purchase and Generation Cost (P/unit) = 213

(3) System Loss = 4.40%

(4) Discounting factor for System loss [(1) – (3)/100)] = 0.9559

(5) Expected Pooled Power Purchase and Generation Cost (P/unit) [(2) ÷ (4) ]= 223

(6) Wheeling Charges P/unit =14

(7) Cross Subsidy Surcharge (1)-(5)-(6) P/unit = 184

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Karnataka

Illustration of Surcharge in Open Access (for HT consumers)

(1) Average cost of supply as per Tariff (Amendment) Order, 2003: 362 p/ unit

(2) Average billing demand for HT consumers in FY05 as per actuals : 477 p/ unit

Hence, Cross subsidy surcharge applicable shall be (1) –(2) = 115 p/ unit

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Rajasthan

Illustration of Surcharge in Open Access (for HT consumers AT 33 Kv)

(1) Cost of supply for Large ind. (33 Kv) = 240 p/ unit

(2) Average realization for Large ind. ( 33 Kv) = 410 p/ unit

Hence, Cross subsidy surcharge applicable shall be (2) –(1) = 170 p/ unit

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computation_of_surcharge