Open access electricity consumers must pay an additional surcharge regardless of the voltage level

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The Tamil Nadu Electricity Regulatory Commission (TNERC), in a recent order, ruled that open access consumers with draw voltage above 66 kV cannot apply for exclusion or exemption from payment an additional supplement.

RS Yarns and Power filed an application seeking clarification as to whether an additional surcharge was applicable to open access consumers with a draw voltage greater than 66 kV who sourced electricity from third party power generators with a voltage of injection greater than 66 kV.

Background

RS Yarns and Power is a private power generation company with an electricity trading license issued by the Commission.

Last April, the Commission imposed an additional surcharge for open access consumers buying electricity from the Indian Energy Exchange (IEX) and any third parties.

The company said it was clear from the submissions of the Tamil Nadu Generation and Distribution Corporation (TANGEDCO) that transmission charges would apply to open-access consumers of the TANGEDCO distribution network, who source electricity from 66 kV, 33 kV, 22 kV, and 11 kV, and not to consumers with free access whose offtake voltage is higher than 66 kV and who obtain their electricity supply from a third party whose injection voltage is higher than 66kV.

On this basis, the petitioner argued that transport costs should not apply and that an additional surcharge should not be levied.

TANGEDCO, in its response, stated that open-access consumers are likely to pay an additional surcharge on transmission charges.

Section 42 (4) of the Electricity Act implies that all consumers using electricity other than the distribution concessionaire must pay an additional surcharge, regardless of the voltage consumption. There is no such category of consumers who are exempt from paying the surcharge since it concerns the recovery of charges for blocked capacity.

The distribution company (DISCOM) added that levying an additional surcharge was different from cross-subsidies and transport charges. Failed capacity charging is common for consumers who use electricity through open access using its network regardless of the voltage level.

Levying an additional surcharge is different from cross-subsidy and freight charges. The failed capacity charge is recovered through an additional surcharge.

Commission analysis

The Commission observed that a consumer or category of consumers who obtained a connection from the distribution concessionaire could buy electricity from anyone other than DISCOM, and that this consumer was required to pay an additional supplement to cover the fixed cost of the distribution concessionaire resulting from their obligation to supply.

The Commission noted that the petitioner could not discriminate between open-access consumers with respect to the payment of the additional surcharge, and that too much reliance was placed on the issue of transport costs to challenge the additional surcharge .

The mere fact that the wording of Article 42(4) suggests the levying of the additional surcharge as a transmission charge would not preclude DISCOMs from levying an additional surcharge on consumers who do not transmit but only transmit.

Furthermore, since the purpose of the transfer and the additional surcharge are entirely different, they cannot be linked to base a case solely on s. 42(4) and conclude that the levying of an additional surcharge survives the concept of transfer.

On the basis of the facts, the Commission concluded that the offtake of electricity by consumers above the voltage level of 66 kV could not claim exclusion or exemption from the payment of an additional surcharge.

The Commission clarified that if it turns out that the fixed cost incurred by the holder of the distribution license for its purchase of electricity is blocked due to the option of the consumer in free access to purchase electricity from a source other than the distributor licensee, it was necessary to recover that cost from the consumer.

In February this year, TNERC decided that the additional surcharge should only be levied on the amount of electricity actually consumed in open access, in accordance with the TNERC Intrastate Open Access Regulation 2014.

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