Recently, the Central government has introduced the Electricity (Amendment) Bill 2020 to amend various provisions in the Electricity Act 2003.
The Electricity Act, 2003 (the “Electricity Act”) was enacted to consolidate the electricity laws in India. While the Electricity Act facilitated significant private investments, market development, and adoption of transparent tariff mechanism etc., the power sector has been facing various developmental hurdles for some time.
Consequently, to address various issues which have been highlighted by the industry and to further reform the power sector, the Ministry of Power (“MoP”), Government of India, released the draft Electricity (Amendment) Bill, 2020 (the “Amendment Bill”) on April 17, 2020, to amend the Electricity Act.
The MoP has requested the stakeholders to provide their comments and suggestions on the Amendment Bill within 21 (twenty-one) days from the date of release of the Amendment Bill (i.e. by or before 8 May 2020).
The electricity amendment seeks to end the malaise in the production, distribution and transmission. Further, it seeks to revive investments and promote growth in line with the vision of a $5 trillion economy in the near future
Following are the key objectives of the Electricity (Amendment) Bill 2020:
- Ensure consumer centricity
- Promote Ease of Doing Business
- Enhance the sustainability of the power sector
- Promote green power
There are two dimensions, these are as follows:
- Static Dimension: The Electricity Act, 2003 and Privatisation of Discoms and;
- Current Dimension: UDAY Scheme, T&D Losses, Need for a new amendment and Important features.
WHY IS THE NEW AMENDMENT REQUIRED
- Some of the provisions of the Act have become dated and archaic and needs an update.
- Policy modifications are needed to address some recurring issues and to promote further commercial incentive for private players to enter the market in the generation, distribution and transmission of electricity.
- Measures need to be augmented to ease the financial crunch of the Discoms.
- It is necessary to promote a legal and administrative ecosystem which harbours special attention to renewable energy.
- Cost reflective tariff has been a concern for states like Telangana which provide free electricity to the farming sector.
- Formation of ECEA has also been criticized as a move towards centralization of power.
- Recognition of franchisees and sublicensees might open the sector to private players.
IMPORTANT FEATURES OF THE DRAFT
- The bill enables state as well as central power regulators to specify transmission charges under open access (earlier both functions were with the central commission).
- The draft law provides for the introduction of power distribution sub-licensee or franchisee, which would not require a separate licence from the state commission.
- The Electricity Act would be applicable to the entire country, including the Union Territories of Jammu and Kashmir and Ladakh.
- National Selection Committee: Instead of the separate Selection Committee (for appointment of Chairperson and Members of State Electricity Regulatory Commissions-SERCs), there is a proposal to set up a National Selection Committee.
- Introduction of Direct Benefit Transfer: Direct Benefit Transfer will be beneficial for both the State Governments and as well as Distribution Companies. It will be beneficial for the State Government because it will ensure that the subsidy reaches the people who are actually entitled and the State Government gets clear accounts of the amount given as subsidy.
- National Renewable Energy Policy: India is a signatory to the Paris Climate Agreement. It is therefore proposed to have a separate policy for the development and promotion of generation of electricity from renewable sources of energy. The policy prescribes a minimum percentage of the purchase of electricity from renewable sources of production. It seeks to give special attention to hydropower.
- Sustainability: To address this problem, the Amendment has prescribed a period of 60 days to adopt the determined tariffs. Failing such a timeline of 60 days, the tariff would be deemed to be accepted.
- Cost Reflective Tariff: To address this problem, the Amendment has prescribed a period of 60 days to adopt the determined tariffs. Failing such a timeline of 60 days, the tariff would be deemed to be accepted.
- Payment Security: It is proposed to empower Load Dispatch Centres to oversee the establishment of adequate payment security mechanisms before dispatch of electricity, as per contracts.
- Ease of Doing Business:
- Establishment of Electricity Contract Enforcement Authority (ECEA): The Authority will enforce performance of contracts related to purchase or sale or transmission of power between a generating company, distribution licensee or transmission licensee.
- Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERCs) do not have powers to execute their orders as a decree of a civil court.
- Cross Subsidy: The Bill provides for the SERCs to reduce cross-subsidies as per the provisions of the Tariff Policy.
8. Open Access: Under the Electricity Act, open access can be granted to a consumer on the payment of surcharge and wheeling charges as determined by the relevant State Commission. However, such charges do not include charges for intra-state transmission and interstate transmission of power. In view of this, the Amendment Bill proposes to add such transmission charges, wherever applicable, to the existing charges (i.e. surcharge and wheeling charges).
Further, it is proposed under the Amendment Bill that open access surcharge and cross-subsidies will be “progressively reduced” by the State Commission in the manner provided in the tariff policy – Section 42 of the Electricity Act envisaged reduction in cross-subsidy as per discretion of the relevant State Commission, however, the Amendment Bill seek to take away the discretion of the State Commission for determination of cross-subsidy and post amendment the State Commission will be bound to follow the mandate of the Central Government.
- Strengthening of the Appellate Tribunal (APTEL): It is proposed to increase the strength of APTEL to at least seven to facilitate quick disposal of cases.
- Penalties: In order to ensure compliance of the provisions of the Electricity Act and orders of the Commission, section 142 and section 146 of the Electricity Act are proposed to be amended to provide for higher penalties.
- Cross Border Trade in Electricity: Provisions have been added to facilitate and develop trade in electricity with other countries. and Lastly
- The Distribution sub-licensees: To improve quality of supply, an option is proposed to be provided to Discoms to authorize another person as a sub-license to supply electricity in any particular part of its area, with the permission of the State Electricity Regulatory Commission.