The document discusses key aspects of the Electricity Act of 2003 in India, including: 1) It establishes a "Two Thirds Phenomenon" where actual power delivered is about 20% of original planned capacity due to losses at each stage. 2) It outlines the historical context including the 1910 Act and reforms of 1991 that introduced unbundling, private participation, and competition. 3) The 2003 Act is a consolidating law that promotes competition, consumer protection, tariff rationalization and establishes regulatory bodies like CEA, ERCs and the Appellate Tribunal. 4) It discusses provisions for generation, transmission, distribution companies, and the roles of Central and State Governments in

1. Two Thirds Phenomenon
Total Capacity Planned
Capacity Sanctioned = 2/3rd of Capacity Planned
Generation = 2/3rd of Capacity Installed
Capacity Installed = 2/3rd of Capacity Sanctioned
Actual Power to consumer = 2/3rd Generation
Fact : Actual Power
delivered to end
consumer in relation to
the capacity originally
planned is 19.75% or
approx 20%.

2. Electricity Act 2003
Legal Framework,
Policies, Regulations
and Organizational

3. Background of the Act
1) Indian Electricity Act, 1910 : passed by the
British Parliament to lay the foundations of
the power systems in India—main stress on
supply of ‘quality’ power and inspection
procedures; paved the way for Indian
Electricity Rules- magna carta of the
electricity inspectors;

4. Liberalization
• Liberalization of the economy, 1991:This rested
on 3 planks-
a) Unbundling of utilities---Generation, Transmission and
Distribution
b) Private sector participation—to supplement public sector
c) Introduction of Competition.
• Electricity Regulatory Commissions Act, 1998:
Establishment of regulators in the power sector
to achieve the objects of liberalization;

5. The Electricity Act,2003
• The Electricity Act, 2003: legally speaking a consolidating Act of all
previous Acts and incorporating the requirements of reform with a
view to adding capacities in generation, transmission capabilities and
ushering in the much needed distribution reforms. The key to the Act
is to be seen in the Preamble to the Act:
a) Promotion of Competition;
b) Protection of Consumer Interest;
c) Rationalization of electricity tariff; and
d) Constitution of structures as CEA, ERCs and Appellate Tribunal

6. Broad legal framework of the Act
Total no. of Parts:-XVIII and no. of Sections:--185.
• Provisions relating organizational structures:
– Central Electricity Authority—Part IX—Sections-70 to75;
– Electricity regulatory Commissions—Part X—Secs.-76 to 109;
– Appellate Tribunal for Electricity—Part XI—Secs.-110-125.
• Unbundling provisions in the Act:
– Distribution licensee—Part VI—Secs.-42 to 60;
– (b)Transmission set-up—Part V—Secs.-25 to 41;
– (c)Generating Company—Part III-Secs.-7 to 11.
• Judicial Provisions:
– Supreme Court—final court of appeal—Section-125;

7. National Electricity Policy and Plan
• National Electricity Policy and Plan- provided under the Act in its
Part II. It is the prerogative of the Central Government as
provided under Sections 3 to 5 of the Act. However, in their
finalization, the CERC has to be approached for ‘advice’ under
Section 79 (2)(1) of the Act. Policy includes Tariff Policy.
• Can a State Government lay down a power policy?
• What is a policy? This has been a controversial question and it
differs according to the context. Broadly, ‘policy’ may be defined
as a course of action to lay down the guiding principles for
meeting the legislative intent.

8. • Public policy: law that encourages promotion
of public welfare—a term often used in
Contract Act- an agreement contrary to public
policy is void and not a contract. There have
been a plethora of case laws on the subject.
• The central theme of a policy of a Government
rests on ‘public interest.’
National Electricity Policy and Plan
(contd.)

9. RULES by the Government—Central and State
• Rule-making powers are vested in the Government by law.
Statutes authorize a Government to frame rules to enforce
the provisions of that law. Therefore, ‘rule’ is defined as a
principle governing conduct, action, procedure, arrangement
etc. of the Government.
• EA 2003 vests the rule-making powers to the Central Government
under Section 176. In its subsection (2), it lists the matters from (a)
to (z) on which rules can be framed. Similarly, the State
Governments have similar authority under Section 180 and the
matters are listed from (a) to (o) under Subsection (2).

10. Regulations by the Authority and
Commissions
• The Act bestows powers to the ERCs to frame regulations for
various purposes. Regulation can be defined as a rule of order
having the force of law prescribed by a superior or competent
authority, relating to the actions of those under the control of
authority. This is often “an expression of legislative intent” which
ensures uniform application of law.
• The powers for regulation are in the EA 2003 as follows:
– CEA—under Section 177—matters listed from (a) to (g) in subsec.(2)
– CERC-under Section 178—matters listed from (a) to (zee) in subsec.(2)
– SERC-under Section 181—matters listed from (a) to (zp) in subsec.(2).

11. Tariff Regulations
• The EA 2003 deals with tariff regulation-making powers
separately.
• Part VII sets the guidelines from Section 61 (a) to (i) of
the Act. These powers are vested in appropriate
Commission, meaning either CERC or SERC. When the
CERC frames tariff regulations it has to ensure that they
are within the ambit of the National Electricity Policy and
Plan under Section 61(i). When the SERCs frame the tariff
regulations, they have to ensure conformity with the
principles and methodologies of CERC.
• If competitive bidding process is followed by the ERCs,

12. Competitive Bidding
• If competitive bidding process is to be followed by the
ERCs, they should be in accordance with the guidelines
prescribed by the Central Government under Section
63 of the Act.
• Development of market including trading is the
responsibility of the ERCs under Section 66 .

13. Subordinate legislation
• The rules made by the Central Government
and the regulations made by the CERC are in
the nature of subordinate legislation. This is so
as under Section 179 of the Act, they have to
be placed before Parliament as soon as they
are made and should be kept for 30 days
subject to any amendment which may be
made by either House or both Houses in their
sessions.

14. Regulatory Issues - Topics
• Constitution of Regulatory Commissions
• Unbundling of the board
• Private sector participation
• Competition
• Trading
• Consumer Interest

15. Challenges
 The Act of 2003 and the regulators have
been in position for more than a decade and
it is the right time to look at the regulatory
issues; the main emphasis is to see whether
the regulators were successful or not;
 What are the challenges which need to be
faced by them by them and what could be
perhaps done to remove the handicaps in

16. Future trends
Problem of too many regulators—In the case
of power sector, it affects the fuel price which
is substantial portion of the tariff;
Coal—Gas—petroleum---Separate regulators
will fix separate prices on which power
regulator has no control;
Competition Commission has also a role to
play to prevent monopolies/cartel formation

17. Regulatory Convergence
>A time may come when the need for
coordination among the regulators may arise;
This may lead to some form of cross-
consultation among the regulators ;
It could lead to a new coordinating agency;
Result: Regulatory Convergence

18. Electricity Act 2003
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