Computation of

Open Access Surcharge

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Cross-subsidy surcharge and
additional surcharge for open access
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
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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. 6
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 . 7
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

 Embedded Cost Method

 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

 Embedded Cost Method

- 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

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 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
 Surcharge using avoided cost method
based on
 top 5% of power purchase / own
generation
 excluding NCE and liquid fuel sources

works out to be 189.55 P/Unit for

Coal mines

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Himachal Pradesh
 Surcharge using avoided cost method
based on
 top 5% of power purchase / own
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
 Surcharge using avoided cost
method based on
 top 5% of power purchase / own
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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Thank You

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