New Delhi

Electricity Act Amendment Bill, 2014 Introduced in Lok Sabha; Changes Aimed at Promoting Competition, Efficiency in Operations and Improvement in Quality of Supply of Electricity

The Electricity (Amendment) Bill, 2014 was introduced today in the Lok Sabha by the Minister of State (I/c) for Power, Coal and New& Renewable Energy Shri. Piyush Goyal. The amendments will usher in much needed further reforms in the power sector. It will also promote competition, efficiency in operations and improvement in quality of supply of electricity in the country resulting in capacity addition and ultimate benefit to the consumers.

Salient features of the proposed amendments

The Electricity Act, 2003 was enacted to amalgamate and modernize the earlier Electricity Laws, namely, the Indian Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998. The Act was reviewed and amended twice, in the year 2004 and 2007, to give effect to certain changes considered necessary.

Based on the experience gained over the years, it was felt to review the provisions further to bring efficiency and competition in the distribution sector, strengthening grid security and safety, promotion of renewable energy, rationalization of tariff and strengthening and performance oversight of Regulatory Commissions etc.

Certain legislative changes were suggested by the Working Group on power for the formulation of 12th Five Year Plan which were further examined under a Committee constituted under Chairperson, CEA. Based on the recommendations of the said Committee, the proposed amendments were uploaded on the website of Ministry of Power in the month of October, 2013. Thereafter, consultations were held with various stakeholders including those from Central Ministries, State Governments, Generation, Transmission, Distribution utilities, Regulatory Commissions, Private Developers, traders, industry associations, consumer groups, power exchanges and individuals etc., in meetings taken in the Ministry.

Based on exhaustive consultations, certain amendments to the Electricity Act, 2003 have been proposed broadly covering the following areas:-

A. Enhancing Grid safety and security: In order to strengthen and enhance Grid safety and security, specific measures regarding maintenance of spinning reserves along with strong and effective deterrence in the form of enhanced penalties for violations of the directions given by the State and Regional Load Despatch Centres etc., have been envisaged.

B. Separation of Carriage & Content in the Distribution sector: To achieve the objectives of efficiency and for giving choice to consumers through competition in different segments of electricity market, concept of multiple supply licensees is proposed by segregating the carriage from content in the distribution sector and determination of tariff based on market principles, while continuing with the carriage (distribution network) as a regulated activity. To protect the interest of consumers, the tariff for retail sale of electricity is proposed to be capped through the Regulator and one of the supply licensees is proposed to be a Government controlled company. Further, the existing distribution licensees are proposed to continue till the expiry of their term as specified in their licence.

C. Promotion of Renewal Energy: In order to accelerate the development of Renewable Energy sources, a number of measures including the provision for a separate National Renewable Energy Policy, development of renewable energy industry, Renewable Generation Obligation on coal and lignite based thermal power plants, specific exemptions to Renewal Energy sources from open access surcharge, separate penal provisions for non-compliance of Renewal Purchase Obligation etc., have been envisaged under the Renewable Generation Obligation for coal and lignite based thermal power plants.

D. Tariff Rationalization: To rationalize the tariff structure on sound financial principles for the viability of the distribution sector and recovery of revenue requirement of licensees without any gap, the provisions of Tariff Policy are proposed to be made mandatory for the determination of tariff. Further, the bill envisages timely filing of tariff petitions by utilities, disposal of the same by the Appropriate Commission within a specified time period and powers to Appropriate Commissions for initiating suo-motu proceedings for determination of tariff in case the Utility/Generating Companies do not file their petitions in time.

E. Miscellaneous : Suitable amendments are also proposed for improving the accountability and transparency in the working of Appropriate Commissions without affecting their functional autonomy; bringing clarity in regard to appointments, functions and powers of the Chief Electrical Inspector/ Electrical Inspectors and levying of fees for electrical inspections; exemption to developer of SEZs, Railways and Metro Rail for obtaining distribution licence; collection and realization of any dues along with the electricity dues, etc.