In order 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, with some policy modifications, the Electricity (Amendment) Bill, 2020 has been introduced by the Ministry of Power on April 17, 2020 (Amendment). The proposed amendments are permanent in nature with long term planning. This will enforce the Distribution Utilities to perform better. This will promote Industrial growth, Uniform and transparent tariff structure, reduction of stress of generators due to ensured payment security mechanism.
Various Major Amendments
Electricity Contract Enforcement Authority:
Creation and functioning of the Electricity Contract Enforcement Authority (“Authority”) in place of Appropriate Commission & Appellate Tribunal. The existing authorities, i.e. APTEL, CERC and SERCs constituted under the Electricity Act, 2003 do not have the jurisdiction to deal with the matters pertaining to the enforcement of contract, unless such issue pertaining to enforcement is anywhere related to determination of tariffs, licensing, metering and related matters. It will have power of Civil Court, power to arrest, attachment of property, enforcement of decrees etc. which will put strict discipline among contracting parties. Every contract need to be filed with appropriate Commission within 30 days. Composition of Electricity Contract Enforcement Authority – One Chairperson, 2 or more Judicial Members, 3 or more Technical members.
The Amendment, via an insertion, delegates the Central Government with the power to prepare and notify a National Renewable Energy Policy “for promotion of generation of electricity from renewable sources”, in consultation with State Governments. The said policy may also prescribe minimum percentage of purchase of electricity from renewable sources of production. There is a surety that comes with a minimum percentage in the form of assurance and incentive for power generators. It must be noted that the Amendment seeks to give special attention to hydro power. As of now each state has their own policy on defining renewable purchase obligations (RPO) which creates problem.
Cross Border Trade:
The Central Government has been delegated with the power to prescribe rules and guidelines to allow and facilitate cross border trade of electricity. Central Government may require the Central Commission to make rule for cross border trade of Electricity.
Time limit for adoption of tariff so determined:
Prescribed a period of 60 days to adopt the determined tariffs. Failing such timeline of 60 days, the tariff would be deemed to be accepted. Such deemed acceptance is a good method to not allow red-tapism to impact the functioning of the Electricity sector.
Inclusion of Distribution Sub-licensee and Franchisee:
To ease the burden of distribution licensees and in order to promote some form of demographic specialization, the distribution licensees, can appoint another entity for distribution of electricity on its behalf, within its area of supply. This entity can be either a distribution sub-license appointed with prior permission of the State Commission or it may be a franchisee appointed by merely informing the State Commission. No requirement of separate Licence from Appropriate Authority. This will help to increase private sector investment and participation which in turn increase efficiency and reduce losses.
Grant of Subsidy mandated:
The benefit of subsidy to be granted directly to the consumer by respective Government and the licensee shall charge the consumers as per the tariff determined by the Appropriate Commission. The determination of tariffs shall be fixed by the Commission without accounting for subsidies. States, whatever subsidy they want to provide, need to provide, through direct benefit transfer (DBT) to Consumers. This will make Tariff cost Transparent & reflective.
Constitution of Selection Committee to recommend Members for Commissions/ Authorities:
For making recommendations of Members to the Appellate Tribunal and the Chairperson and Members of Central Commission, Electricity Contract Enforcement Authority, State Commissions and Joint Commissions. Streamlining of selection process for all commissions and authorities is a step in the right direction, bringing in uniformity and higher accountability.
“No electricity shall be scheduled or despatched under such contract unless adequate security of payment as agreed upon by the parties to the contract, has been provided”. This will help to resolve the chronic problem of receivables in Electricity Sector.
Restrict creation of Regulatory assets,
Regulatory Assets create a lot of issue related to approval from Authorities and resultant losses of Discoms.
Enhancement of the powers of the Appellate Tribunal of Electricity:
APTEL is proposed to have the powers of a High Court to deal with wilful disobedience of persons and entities under the Contempt of Courts Act, 1971. Additionally, any person can appeal the decisions of the Authority which is introduced by this Amendment in front of the APTEL.
Codification of responsibility of the National Load Despatch Centre:
Overall authority for carrying out real time operations and monitoring of national grid, supervision and control of the inter-regional and inter-state transmission of network and grid security, and optimum scheduling and despatch of electricity. Every Regional Load Despatch Centre, State Load Despatch Centre, Generating Companies, sub-stations etc. shall follow the instruction issued by National Load Despatch Centre.
Applicable to the whole of India –
Earlier was not applicable to State – Jammu & Kashmir. But it will be applicable to whole India including Jammu & Kashmir.
Opposition on above proposed amendments from States & Employees Unions
Electricity is a concurrent subject as per 7th Schedule of Constitution. Both Central and State Governments have power to make law on it. But the proposed bill creates insecurity of losing their power among various States.
Many states are opposing the bill on the ground that it will take away the right of States to Centre.
Private Sub-franchisee will cherry-pick the profitable geographical area of Discoms Jurisdiction and the non-profitable area lying with Discoms will further increase the financial stress of Discoms.
Discoms are already paying fixed amount of capacity charges to stranded thermal plants and further forced purchase from Non-Conventional/ Renewable Energy sources will increase the financial difficulties of Discoms.
The tight deadline of 60 days for adoption of Tariff, will make the system inefficient and no interference attitude will start.
Here as of now, the subsidy (related to rural consumers, farmers etc.) is paid to Discoms by Governments as per their convenience which is resulting in financial indiscipline in Discoms. It will create serious difficulties in implementing direct benefit transfer (DBT) to power consumers. Collection efficiency is already poor and would get worsen in case tariff (without subsidy) is charged. Further direct payment of subsidy can be utilised by Consumers for some other purpose as well.
This bill was proposed in 2018 too, but due to strike threat from Utilities Employees Union, Lack of Unanimity among various stakeholders the Bill Lapsed.
This time the Government has come with more stringent payment security mechanism, Securing power purchase from non-conventional sources, Authority related changes etc.
Electricity is very critical component of infrastructure which is essential for sustainable growth of Indian Economy and welfare of nation. The Electricity Act 2003 have bought in huge Direct Investment, Public- Private Partnerships, Market development, transparent tariff mechanism. But the Electricity Sector is plagued with critical issues which have weakened the growth of this sector. To address these critical issues which are hampering the sustainable growth of our Country, the amendments are proposed under existing Electricity Act which will be in the favor of all the stakeholders and increase the Investment in Electricity Sector.