Electricity Market Structures: Before & After the Electricity Act 2003
In this model, an integrated single entity would take care of generation, transmission and distribution of electric power to the end users. In this kind of model, the monopoly lies with the Government.
Monopsony (Single Buyer) Model:
In this model all the generation companies would sell power to only one buyer who in turn sells it to transmission or state distribution companies. So being only one buyer there was competition on generation side to sell electricity at cheaper rate. All state discoms had no freedom to choose seller instead were forced to buy power from single buyer only.
Open Access Market Model:
With announcement of the Electricity Act 2003 and implementation of open access, the market structure is upgraded to a multi-buyer model. In this model, generator could sell power to any buyer (including end consumer) using the open access provision in transmission and also buyer had option to choose their supplier. Previously SEBs were handling the regulatory works, after implementing of Electricity act 2003 the regulatory commission were created.
NEED OF OPEN ACCESS:
Multiple licensees (Discoms) are in distribution sector so consumer has choices to select any licensee.
Monopolistic approach in electricity market is reduced due to open access in transmission & distribution lines.
OPTIMUM RESOURCE UTILIZATION
Open access will boost investment sentiments, private investment will help to improve age old utility infrastructures connectivity. It will strengthen the evacuation system.
Strengthening will reroute power from surplus region to deficit region.
User will gain access to multiple licensees who will compete on low prices &better facilities for users.
Consumer having large demand can directly enter in to long run tie ups with generators directly which will result in savings in money & long term stability in prices.