Background
Before Electricity Act, 2003, the Indian Electricity sector was guided by The Indian Electricity Act, 1910 and The Electricity (Supply) Act, 1948 and the Electricity Regulatory Commission Act, 1998. The generation, distribution and transmission were carried out mainly by the State Electricity Boards in various States. Due to politico-economic situation, the cross-subsidies reached at an unsustainable level. For the purpose of distancing state governments from tariff determination, The Electricity Regulatory Commissions Act was enacted in 1998. So as to reform electricity sector further by participation of private sector and to bring in competition, Electricity Act was enacted in 2003. With effect from 2 June 2003 India has adopted a new legislation called the Electricity Act 2003, to replace some age-old existing legislation operating in the country. The new act consolidates the position for existing laws and aims to provide for measures conducive to the development of electricity industry in the country. The act has attempted to address certain issues that have slowed reform in the country and consequently has generated new hopes for the electricity industry. This paper reviews the Electricity Act 2003, to highlight how the new features are different from the existing legal provisions and whether these measures have economic rationale. An act to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalisation of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, constitution of Central Electricity Authority Regulatory Commissions and establients of Appellate Tribunal for matters therewith or incident thereto.Generation
The Act delicenses power generation completely (except for all nuclear and hydro-power projects over a certain size). As per the Act, 10 per cent of the power supplied by suppliers and distributors to the consumers has to be generated using renewable and non-conventional sources of energy so that the energy is reliable. Electricity generation has been made a non-licensed activity and the techno-economic clearance from the Central Electricity Authority (CEA) has been done away with for any power plant, except for hydro-electric power stations above a certain amount of capital investment. This has been provided in section 7 and 8 of the Electricity Act 2003. The generators can sell electricity to any licensees or where allowed by the state regulatory commissions, to consumers directly. The provision of direct sale of electricity by the generators, when and where allowed, would promote more IPP participation in the power generation, as these consumers are more creditworthy and bankable compared to many SEB's. However the act provides for imposition of a surcharge by the regulatory body to compensate for some loss in cross-subsidy revenue to the SEB's due to this direct sale of electricity by generators to the consumers.Distribution
The Act delicenses distribution in rural areas and brings in a licensing regime for distribution in urban areas. However, as per the Act, only 16 states in India have notified what constitutes as rural areas and therefore the rural distribution is yet to be freed up in nearly one third of the country.Key features
The main features of the act are as follows: # Generation is being de-licensed and captive generation freely permitted, i.e. any generating company may establish, operate and maintain a generating station without obtaining a licence under this Act with the only exception that it should comply with the technical standards relating to connectivity with the grid referred to in clause (b) of section 73. #:Note: Hydro-projects, however, need concurrence from the Central Electricity Authority. # No person shall #:(a)transmit electricity; or #:(b)distribute electricity; or #:(c)undertake trading in electricity, #:unless he is authorised to do so by a licence issued, exceptions are informed by authorised commissions through notifications. # Central Government may, make region-wise demarcation of the country, and, from time to time, make such modifications therein as it may consider necessary for the efficient, economical and integrated transmission and supply of electricity, and in particular to facilitate voluntary inter-connections and co-ordination of facilities for the inter-State, regional and inter-regional generation and transmission of electricity.Role of CEA
The role of CEA is limited to policy recommendations, monitoring electricity sector performance, advising the Ministry of power on technical issues, data management/dissemination of the power sector, etc. Preparation of technical standards for construction of electrical plants, electric lines and connectivity to the grid is the responsibility of CEA as per section 73 (b) of the Electricity Act, 2003. However, as per section 7 of this Act, a generating company may establish, operate and maintain a generating station if it complies with the technical standards only relating to connectivity to the grid as given in clause (b) of section 73. This implies that generating stations need not follow compulsory the CEA technical standards specified for construction of electrical plants and electric lines. Similarly, transmission / distribution licensees need not implement compulsory the standards for construction of electric lines except the Grid Code/ Grid Standards for the operation and maintenance of transmission lines specified by CEA under clause 73 (d) of this Act. Many times, these CEA standards are conservative compromising optimum design features /cost/ utility and also do not give full clarity in selection of the system / sub system capabilities of electrical plants and electric line.Left parties opposition
Left parties opposed the clauses related to competition in electricity market such as unbundling of Electricity Boards and open access and also had strong objection regarding elimination of cross subsidies.Amendments
Several amendments were made after 2003 in the Act. The amendments proposed during 2015 is to make major changes. The important provision is to introduce electricity supply companies who will not own electric lines. The Government says it would attract competition and therefore will cause reduction in price. But those oppose these amendments say that in Indian situation competition can not bring down the cost. Some electricity finance experts are of the opinion that it will weaken the public sector discoms and can damage power sector industry in the country. Section 25 of the electricity act, 2003 authorises the central government to demarcate the country into regions necessary for the efficient, economical and integrated transmission and supply of electricity, and in particular to facilitate voluntary interconnections and co-ordination of facilities for the inter-State, regional and interregional generation and transmission of electricity. Electricity is listed in the concurrent list (entry 38 of list III). The traditional and unscientific demarcation of the country into five regions (north, south, east, west and north east regions) without giving any valid justification and applying one set of rules for intra region and different set of rules for inter regions in sharing electricity transmission system and transmission losses, etc. is considered discriminating one state from another state. Without theExceptions
The Act extends to the whole of India except the state of Jammu and Kashmir. However, Jammu and Kashmir is part of the northern region for sharing the transmission network and the electricity generated from the central power generating stations located in the Northern region. As of now above rule may not be applicable as article 370, a special status for Jammu and Kashmir had been ruled out.Electricity (Amendment) Bill 2022
It is mentioned in this bill that now Electricity Private Company will also be able to distribute. Read Full Article aSee also
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