Wheeling Charges

Think of a trucking company that does not own the highway its lorries travel on. It still gets its goods to market, but it pays a toll for every kilometre of someone else's road it uses. Wheeling charges are that toll, applied to electricity instead of goods.

When a large industrial or commercial consumer buys power directly from a generator, often a renewable project in another part of the state or even another state entirely, rather than from its local DISCOM, that electricity still has to physically travel over transmission and distribution wires it does not own. Wheeling charges are the fee paid to whichever transmission or distribution licensee's infrastructure actually carries that power from the generator to the buyer.

These charges are not a minor footnote. Along with the Cross Subsidy Surcharge, wheeling charges are one of the two big line items that determine whether buying power through Open Access genuinely ends up cheaper than simply staying with the local DISCOM. A renewable Power Purchase Agreement that looks attractively cheap at the generator's gate can lose much of its advantage once wheeling charges, and other add-on costs, are layered on top.

Because wheeling charges are set by each state's electricity regulatory commission and vary considerably from state to state, they are also one of the reasons a large corporate buyer's decision to source renewable power through Open Access depends heavily on exactly which state the consuming facility sits in.

Whenever a company announces it is sourcing a share of its power through Open Access renewable contracts to cut costs or meet a green target, wheeling charges are part of the arithmetic that decided whether that deal actually made financial sense.