TABLE OF CONTENTSFOREWORD iii ACKNOWLEDGEMENTS v EXECUTIVE SUMMARY 1 DEFINING OPEN ACCESS 5 RATIONALE AND BENEFITS OF OPEN ACCESS 11 CHALLENGES AND BARRIERS TO OPEN ACCESS IMPLEMENTATION 15 POLICY AND INSTITUTIONAL COMPONENTS OF AN EFFECTIVE APPROACH TO OPEN ACCESS 20 IMPACT OF OPEN ACCESS ON FREE-MARKET DEVELOPMENT AND INVESTMENT 30 FINDINGS AND RECOMMENDATIONS 34 ANNEX 1 | Power Sector Reform Paths and Open Access Milestones in Selected Countries 39 ANNEX 2 | Factors Contributing to Power Sector Reform Success and Open Access in Peru 43 ENDNOTES 45 REFERENCES 45 ACRONYMS AND ABBREVIATIONS 46 LIST OF BOXES, FIGURES, AND TABLES Box 1 | Transmission Access and Wholesale Markets: Developed Country Examples 8 Box 2 | Market Coupling and Wholesale Electricity Trade in the European Union 9 Box 3 | Brazils Market Design Features Illustrating Minimal vs. Full Open Access 10Box 4 | The U.S. Experience: Aiming for More Efficient Generation through Open Access 12 Box 5 | India: Evidence of Increased Reliability of Supply with Open Access in Manesar, Haryana 13 Box 6 | Small Retail Customers in the United States Tend to Stay with the Incumbent Distribution Company 14 Box 7 | Wholesale Price Convergence in the European Union: the Example of Central Western Europe 15 Box 8 | India: Distribution-Level Challenges to Open Access 16 Box 9 | Turkey: Challenges of Transmission Planning Under Deregulated Entry 18 Box 10 | Brazils Approach to Introducing Open Access to Power Grids 21 Box 11 | The Key Role of Transmission Unbundling 22 Box 12 | Transmission-Related Cost Components and Recovery Mechanisms 23 Box 13 | The United States and United Kingdom Models for the Grid System Operator 24 Box 14 | The Transmission System Operator Model in Turkey 24 Box 15 | Turkey: The Sequence of Open Access Implementation Phases 27 Box 16 | Peru: Second-Generation Reforms of 2006 Reinforce System Planning 28 Box 17 | Indias Day-Ahead Power Exchange Transactions 32 Box 18 | Texas, United States: Generator-Friendly Interconnection Rules Attract Investment in Wind Power 33Figure 1 | An Example of Power Sector Structure Allowing Open Access to Power Grids 6 Figure 2 | Power Purchasers on Brazils Free Trading Floor of the Electricity Trading Chamber in 2011 31Table 1 | Brazil: Free-Market Development, 2006 - 2010 30 Table 2 | India: Power Flows Enabled by Open Access 32EXECUTIVE SUMMARYOpen access to the power grid is an essential element of introducing competition to electricity markets and increasing their efficiency. Open access refers to the possibility for any party selling or buying electricity, for a cost-reflective fee and subject to transparently defined system security constraints, to connect to and make use of transmission and distribution systems, regardless of who owns and operates the power grid. The flexibility permitted by open access allows for multiple and diverse power supply contracts that take advantage of the load and time diversity and contribute to better utilization of resources. Increased competition leads to more efficient sector operation, improved quality of power supply, and downward pressure on tariffs. Experience suggests that opening access to the grid is an evolutionary process, not a discrete event. The basic foundations of open access are laid by establishing an initial, or minimal, open access regime through enforcing the generators legal right to access the grid to sell their capacity and energy, and wholesale buyers right to contract with the generators, either directly or through an authorized market operator. The institu- tional requirements for minimal open access include transparent rules, procedures, and protocols for grid and market operations, and a financially disinterested, competitively neutral system operator. However, affording all market participants the access right is only the first step toward a full-fledged open access regime. Reaping the full benefit of open access requires building a progressively more sophisticated market in which time- and location-specific price signals provide additional information to enhance market efficiency. A number of countries around the world have embraced the concept of open access. Considerable evidence supports the existence of a positive impact of open access on power sector performance. In countries that have successfully established the basic foundations of an open access regime, such as Brazil, Peru, and Turkey, competitive wholesale markets have expanded and incorporated new and more complex design features. New generators, including those utilizing renewable energy sources, have been better able to enter the market. International experience points to the variability of power sector reform paths and open access implementation patterns in different countries. For example, Brazil has success- fully established the legal framework and institutional structure for a basic open access regime, including the creation of a s