Transmission Pricing Practices in Restructured Indian Power Market

Abstract

The electric power industries round the globe are operating in regulated and monopolistic market. Large power companies often dominate the overall authority over generation, transmission and distribution sectors. These companies own the assets and operational activities and termed as vertically integrated utilities. The vertically integrated utilities are operated by government in many parts of the world. They operate in a regulated market with very little competition, usually none at all. Airlines and communication industry introduced economic benefits of deregulation in 1980s and consequently reforms begun to take place in the electric power industry. In the past few decades, worldwide power sector has experienced a rapid change in generation, transmission, and distribution system like in Italy and Singapore. These changes in the power sector have been mainly due to huge increase in the power requirement and large investment involved in order to meet the growing demand. A reform has lead to economical and environmental benefits, challenging competitive market and ensures return on investment to investors. Restructuring of power industries is a difficult task as it involves fundamentals of management and operations of industries. The main issue is to find ways and means to generate and inject more competition, thereby forcing the conventional monopolistic power market to deregulated market. Restructuring in Iran, Bulgaria, Russia and China has revealed better structural and managerial changes. Even in countries with privately own utilities, such as the U.S, there been a good initiation toward deregulation and participation of third party generation. newlineSince early 1990s, Indian power sector has witnessed significant changes in endemic power shortages, poor operational performance and precarious financial condition of State Electricity Boards (SEBs). It encourages changes in a number of policies and regulatory-focusing better management and control of the power industry and attracts investment.