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Draft Electricity Amendment Bill 2021: All you need to know

Industry:

July 23, 2021

Overview:

Indian Government is proposing to amend the Electricity Act 2003 ( called Draft Electricity Amendment Bill 2021) to address some important issues. Amendments are focused on giving more choice to the electricity consumers, uniform selection of various regulatory bodies like CERC, SERC, APTEL, and promoting renewables.

Issues:

Major Issues addressed in the Draft Electricity Amendment Bill 2021 are:

  1. Giving choice to the Electricity Consumers
    • The Act empowers a distribution licensee to authorise a Franchisee or a Distribution Sub-Licensee which can be authorised by a distribution licensee to distribute electricity on its behalf.  So the consumer can have more choice.
  2. Changing appointment process for regulatory bodies
    • The Draft Bill proposes a common selection committee to recommend appointments to all SERCs, CERC, APTEL, and ECEA. Earlier there were separate selection committees
  3. Promoting Renewable Energy
    • The Draft Bill empowers the central government to formulate a National Renewable Energy Policy in consultation with state governments.
    • The Act empowers the SERCs to mandate a percentage of electricity purchase from renewable sources known as Renewable Purchase Obligation (RPO).
  4. Electricity Contract Enforcement Authority: The Draft Bill sets up the Electricity Contract Enforcement Authority (ECEA). ECEA will adjudicate on matters involving the performance of contracts regarding the purchase, sale, or transmission of electricity between a generation company and other licensees.
  5. Change the way subsidy is given: From the earlier cross subsidy based tariff system, it is proposed that the subsidy may be given directly to the beneficiary like it is given for LPG
  6. Payment Security Mechanism: As per the Act, the regional and state load despatch centres (RLDCs and SLDCs) are responsible for scheduling and despatch of electricity from the generator to the distribution licensee. The Bill prohibits the RLDCs and SLDCs from dispatching electricity if adequate payment security, as agreed in the contract, has not been provided by the distribution licensee.

Going Forward:


  • Electricity is a subject in the concurrent list of the Constitution. So states would likely oppose the selection of State regulatory bodies by a common committee.
  • There are various factors on which states determine cross subsidy that include consumer mix, sale projections of electricity, power procurement mix, and cost of power procurement and supply. Such variations across states may not be adequately captured in the National Policy
  • Distribution franchisee and sub-licensee would operate on profit based on approach, and may not bid for non profitable areas like villages. Also, more accountability and regulation is needed to protect the rights of the consumer in case of dispute.
  • Direct benefit transfer may have issues like large number of unmetered connections in rural areas, tenant using electricity connection, delay in transfer of DBT etc. More guidelines are needed in this regard.
  • Renewable Purchase Obligations has been there for long time, and hasn’t been successful so far.

Impact:

Overall the bill aims to solve problems of distribution sector and provide payment guarantee to renewable sector as there are no power purchase agreements in renewables like in coal power. It also aims to provide a uniform cost plus tariff to consumers, and provide targeted subsidy through direct transfer. The impact remains to be seen.

References:

1. https://prsindia.org/billtrack/draft-electricity-amendment-bill-2020
2. https://pib.gov.in/PressReleasePage.aspx?PRID=1615781
3. https://powermin.gov.in/sites/default/files/webform/notices/Draft_Electricity_Amendment_Bill_2020_for_comments.pdf

Author:
Strategy Boffins Team

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