Issues in Retail Competition A Utilitys Perspective

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Issues in Retail Competition A Utilitys
Perspective
International Conference on Power Market
Development in India Reflections from
International Experience April 19-21, 2005

• Subodh Shah

Dept. of Industrial Management
Engineering Indian Institute of Technology Kanpur
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Benefits arising out of Competition
Reduction in bulk supply tariff
Wholesale Competition
80 RST
Retail Competition
20 RST
Shouldnt wholesale competition precede retail
competition?
Reduction in retail supply tariff
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Issues in Wholesale Competition (1)

• Generation Constraints
• In a severely supply constrained scenario,
  introduction of wholesale competition is likely
  to lead to a significant increase in generation
  prices

What form of a transition market structure needs
to be adopted to address this issue?
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Issues in Wholesale Competition (2)

• Transmission constraints
• Under the integrated planning framework,
  transmission network established/upgraded to the
  extent necessary to evacuate proposed generation
  capacity
• Very limited surplus capacity, which will hinder
  the development of a wholesale power market

What should be the approach to transmission
capacity planning to facilitate a well
functioning wholesale power market?
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Approaches to Retail Competition

• Should the regulator prefer one approach to the
  other and, if so, how?
• Issues in areas where both forms of retail
  competition exist?

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Issues in Distribution Open Access

• Challenges primarily in implementation
• Upgrading the infrastructure to facilitate
  distribution open access
• Separation of wires and supply business of
  incumbent
• Computation of cost of service and cross subsidy
  surcharge
• Computation of additional surcharge, where
  applicable

• Time frame and approach to retail competition?
• Does the supply business need to be regulated?
• What is the model to be adopted for computing
  cost of service?
• Are there any stranded costs in the Indian
  context?
• Issues in balancing and settlement?
• Issues in provision of default supply?

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Issues in Parallel Licensing (1)

• Unique Concept
• No full fledged parallel networks elsewhere since
  distribution networks are natural monopolies
  economies of density

• Role of the Commission in granting a parallel
  license?
• Under what conditions can a parallel license be
  granted?
• Greenfield areas?
• Inefficient incumbent where loss levels are high?
• Severely constrained network?
• Tariff determination in a parallel license
  regime?
• Challenges in distribution open access where
  parallel networks exist?

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Issues in Parallel Licensing (2) - Level Playing
Field
USO
Cross Subsidy
Stranded Costs

• Aggressive rollout plan
• Operation only after minimum rollout

• USO Fund ? similar to the Access Deficit Charge
  imposed in Telecom

• Section 42(4) ? Recovery of costs incurred
  towards obligation to supply

Uniform Tariff
Minimum License Area
Level Playing Field

• Tariff Schedule ? normative costs
• Competition ? quality of service
• Ceiling tariff only after elimination of cross
  subsidy

• Existing license area or Municipal Council/
  Corporation NK Singh Report

How will a level playing field be created and
enforced?
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Thank You!