Electricity Act 2003 and its proposed amendments
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Major amendment may take place on the Electricity Act 2003 after the Lok Sabha Election 2019
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Electricity Act 2003 and its proposed amendments
- 2. Before 1956 Electricity Act 1910 Electricity (Supply) Act 1948 Establishment of SEBs
- 3. 1956-1991 Industrial Policy Resolution (1956) Generation and Distribution of Power under State ownership Power losses, subsidies, infrastructure bottlenecks and resource constrains
- 4. 1991-2003 Legislative and Policy Initiative (1991) Private sector participation in Generation Fast-track clearing mechanism of private investment proposal Electricity Regulatory Commissions Act 1998
- 5. 2003 onwards Electricity Act 2003 National Electricity Policy 2005 National Tariff Policy 2006 National Tariff Policy 2016
- 6. 1910 The Electricity Act 1910 was enacted by the British for the growth of electricity industry in India through private licensees who could supply electricity in a specified area.
- 7. As per the Constitution of India • Electricity is a concurrent subject. Both parliament and the state legislation have the power to legislate over this subject. Central Legislation shall prevail over State Legislation. • There is only one exception to the aforementioned rule, i.e., when state enacts legislation with Presidential Assent, then state legislation will prevail.
- 8. 1948 After the independence, the Electricity (Supply) Act, 1948 was enacted for creation of State Electricity Boards for arranging the supply of Electricity in the State.
- 9. 1976 Electricity (Supply) Act, 1948 was amended: 1. Govt. Generating Companies recognized 2. Price, terms and conditions of sale of energy by generating companies determined by the appropriate Government.
- 10. 1991 Electricity (Supply) Act was further amended: Private players, including foreign investors was allowed to come in as independent power producers (IPP) and enter into long-term supply contracts (PPA) with utilities.
- 11. 1992 • Government of India adopted a two-part tariff formula for NTPC stations based on the recommendations of the K P Rao Committee. • Even after 1992, overdrawals by some SEBs during peak-load hours and under-drawals during off-peak hours continued unabated, causing serious frequency excursions and perpetual operational/commercial disputes.
- 12. 1993 Government had engaged M/s ECC of USA an international consultants to comprehensively study the Indian power system and recommend a suitable tariff structure. Their report (ECC Report) was submitted in 1994.
- 13. 2002: Availability Based Tariff Central Govt> ECC Inc, USA : 1993 ECC Report> Central Govt.: 1994 Central Govt.>National Task Force 1995 (NTF)>Central Govt>CERC 1999> ABT Regulations 2000, T&C of ABT 2001 WR>July’2002; NR>Dec’2002; SR> Jan’2003; ER> April’2003; NER> Nov’2003
- 14. Evaluation of Transmission Charges Before 1992, cost of transmission was clubbed with Generation Tariff. From 1992 to 2002, transmission charges were apportioned on the basis of energy drawn. From 2002 to 2011, transmission charges were apportioned on the basis of MW entitlements.
- 15. 2011: PoC Transmission Charges From 2011 onwards, PoC transmission charges were introduced. It is the recovery of the cost of transmission infrastructure from an entity in proportion to the extend of usage of inter-State network.
- 16. 1998 In the year 1998, the Electricity Regulatory Commission Act was enacted for distancing govt. from determination of tariffs.
- 17. 1998 Indian Electricity Act 1910 and Electricity (Supply Act) 1948 was further amended: 1. Transmission recognized as independent and licensed activity. 2. Private participation in transmission was allowed.
- 18. Preamble of the Electricity Act 2003 An Act to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalization of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, constitution of Central Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto.
- 19. Main Features of the E Act 2003 1. No license for generation. 2. But hydro project>25MW need clearance from CEA. 3. Provision for private transmission & distribution. 4. Open access. 5. Trading of power.
- 20. Main Features of the E Act 2003 6. Regulatory Commission. 7. Tariff based competitive bidding. 8. Appellate Tribunal. 9. CEA. 10. Cognizance of the offence. 11. Rules and Regulations. 12. Penalties.
- 21. Chapters of the E Act 2003 1. Preliminary: Definitions 2. National Electricity Policy & Plan 3. Generation of Electricity 4. Licensing 5. Transmission of Electricity 6. Distribution of Electricity 7. Tariff
- 22. 18 chapters of the E Act 2003 8. Works 9. CEA (Central Electricity Authority) 10. Regulatory Commissions 11. APTEL (Appellate Tribunal for Electricity) 12. Investigation and Enforcement 13. Reorganization of Board 14. Offences and Penalties
- 23. 18 chapters of the E Act 2003 15. Special Courts 16. Dispute Resolution 17. Other Provisions 18. Miscellaneous The Schedule-Enactments
- 24. Act, Rules, Regulations The Constitution of India The Electricity Act 2003 (1) Rules by Governments (2) Regulations by Commissions according to Electricity Act 2003 and Rules
- 25. Amendments of E Act 2003 Electricity Act 2003 was amended in 2003 and 2007: 1. Captive Plant was allowed to sell power. 2. Rural Electrification was accepted as joint Endeavour of State and Central. 3. Elimination of cross subsidy and surcharge in open access was kept as mandatory.
- 26. Proposed Electricity(Amendment)Act 2018 Separation of Carriage & Content in the Distribution sector Determination of retail-tariff based on market principles To keep carriage (distribution network) as a regulated activity.
- 27. Proposed Amendment of E Act (Pending) Provision for a separate National Renewable Energy Policy Provisions of ‘Tariff Policy’ are proposed to be made mandatory Directions for use of Smart Meters
- 28. Thanks END
Editor's Notes
- The Chairman, WBSETCL writes in the beginning of any annual report of WBSETCL “It gives me immense pleasure to share with you the performance of your company” . Who is the owner of WBSETCL?
- The period before 1956 may be stated as Introductory Stage.
- 1956 to 1991 may be named as Nationalization Stage. From the mid-1980s, under an economy wide approach for state-owned enterprises in general, the central government had attempted to improve the efficiency of SEBs by giving them greater managerial autonomy and increasing their access to capital, with the hope that they would become more entrepreneurial.
- 191 to 2003 may be stated as Liberalization Era. The central government adopted a new approach in 1991 because of India’s financial crisis, under which it sought immediate remedies. Since many years would be needed to rectify the SEB’s inefficiencies, the new approach focused on the immediate problem of meeting the shortfall in generating capacity that had been perpetuated by the SEB’s poor finances. The government hoped that private investors would provide large amounts of efficient and inexpensive power capacity, even though there was little track record in developing countries to provide credibility for this approach. A focus on private investors was also consistent with the reformist agenda of attracting foreign direct investment. There was a broad consensus supporting this approach to reform because of the lack of viable alternatives. The central government created the legal conditions needed to attract private investors in electricity generation, and it set tariff rules that would be particularly attractive to investors, with a guaranteed 16 percent return on equity (after tax) and full repatriation of profits in dollars. To jump-start the process, the government awarded “fast track” status to eight projects (many with foreign participation), promising rapid clearances and central government repayment guarantees to assuage investors’ concerns about selling their output to insolvent SEBs. Most of these projects included a cost-plus PPA between the operator and an SEB. Only three of the fast track projects, however, have produced power more than a decade after the fast track initiative.
- 2003 onwards may be stated as Growth Era.
- Sate Electricity Boards through 5 yr plans undertook rapid growth expansion by utilizing plan funds. Regional planning in Power Sector was introduced. DVC ACT 1948 was enacted. CEA was formed. Atomic Energy Act 1962. In 1964, the Regional Electricity Boards were established. In 1975, NTPC & NHPC were created. In 1989, Power grid was created. In 1990, HVDC regional link was thought of. In 1992 NER & ER were synchronized. Availability Based Tariff (ABT), with a unique Unscheduled Interchange (UI) component, was recommended for Central Sector generation and private generation by M/s ECC, USA after a nation-wide, World Bank/ADB-sponsored study in 1993-94. In 1994, RLDCs came under PGCIL. In 1995 Mega Power Policy was declared by Central Govt. Power sector restructuring by Odisha in 1996 followed by a few States like Haryana, Andhra, Uttar Pradesh, Karnataka, Rajasthan, Delhi, MP and Gujrat. In 1999 transmission system planning reoriented towards all India system. ABT has been implemented during 2002-2003.
- Economic reform in 1991 for fiscal deficit, IPP policy in 1992 to attract private and foreign investment which gave 16% RoE at 68.5% PLF when NTPC was given 12% RoE, unbundling of SEBs was thought of World Bank and Asian Development Bank. Unbundling was seen as a necessary prior condition for privatisation. Orissa pursued unbundling (1995 Act) followed it up with privatisation of the distribution companies with the transmission company being still in state hands (Ref. Ajay Pandey & Sebastian Morris, IIMA), Haryana, Andhra, UP, Karnataka, Delhi, MP and Gujrat followed by State reform Acts. Due to participation of private players need for regulating the business was felt. Hence came Regulatory Commission Act 1998.
- Obliging electricity enterprises to operate according to commercial principles. These principles require that enterprises pay taxes and market-based interest rates, earn commercially competitive returns on equity capital, and have the autonomy to manage their own budgets, borrowing, procurement, and labor employment.