Electricity Amendment Bill, 2022 presents a landmark opportunity in overhauling the electricity sector. It introduces free and fair competition in distribution business as well as updated arbitration procedures.

1. Electricity
(Amendment) Bill,
2022
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Prepared by-
Sounak Mukherjee

2. In order to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity,
the Electricity Act, 2003 was enacted.
The Act aimed to develop electricity industry, promote competition, protect interest of consumers, rationalise
electricity tariff and ensure transparency regarding subsidies. It also constituted the Central Electricity
Authority, Regulatory Commissions, and established the Appellate Tribunal. It has facilitated the transformation
of the transmission grid into a National Grid and provided access to electricity to all households.
However, new challenges such as sustainability of the power sector, contract enforcement, payment security
mechanism, energy transition and the need to provide choice to consumers in order to promote competition
and the like have arisen.
In order to address these challenges, and to strengthen the regulatory and adjudicatory mechanism and to
bring administrative reforms through improved corporate governance of distribution licensees, a new
amendment has been proposed.
Electricity Act, 2003
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3. Streamline the concurrence of the hydro generating station by the CEA to facilitate development of the hydro
sector in the country
Facilitate the use of distribution networks by all licensees under provisions of non-discriminatory open access
Strengthen the functioning of the NLDC for ensuring the safety and security of the grid
Facilitate non-discriminatory open access to the distribution network of a distribution licensee
Enable management of power purchase and cross-subsidy in case of multiple distribution licensees in the same
area of supply
Make provision regarding graded revision in tariff over a year and for mandatory fixing of maximum ceiling as
well as minimum tariff
Enhance the rate of penalty for non-compliance of the provisions of the Act and to facilitate decriminalization
of offence as it would be mandatory to accept compounding
Electricity (Amendment) Bill, 2022
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The Electricity Amendment Bill, 2022 was introduced in Lok Sabha on 8th August, 2022. It seeks to:

4. Multiple discoms in the same area
Electricity Act, 2003
• Section 14 of EA 2003 mandates the SERCs to grant
license to any person willing to distribute electricity as
distribution licensee in any area as specified by the
licensee.
• It also stated that 2 or more person may be granted
licenses to distribute electricity through their own
distribution system within the same area.
• Section 15 mandates SERC to issue license within 90 days
from receipt of application.
Electricity Amendment Bill, 2022
• In section 14 of the amendment, SERCs may grant license
to any person willing to distribute electricity as
distribution licensee in an area of supply in accordance
with such criteria as may be prescribed by the central
govt.
• Distribution licensees within the same area of supply
need not have their own distribution system for license.
• In case of failure to grant or reject the application within
stipulated time, the applicant will be deemed to be a
licensee.
• DLs need not set up their own distribution infrastructure to apply for license to supply power in an area. Existing
infrastructure can be utilized on payment of wheeling charges. Multiple DL may operate within same area which will
increase the competition and quality of service.
• It is expected to attract private players in the distribution business, thus increasing the efficiency of service. This may
streamline the revenue source of the existing DL while increasing the efficiency of service to consumers. It may lead to
increased billing and collection efficiency along with reduction in AT&C losses.
• Issuance of distribution license to applicants have been streamlined. Failure of issuance/rejection of license within 90
days will automatically result in applicant receiving license.
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5. Management of discom governance
• As per section 42 of EA 2003, if the SERC permits consumer
to receive supply of electricity from a person other than the
distribution licensee, the consumer is liable to pay additional
surcharge on wheeling charges.
• Every licensee is to furnish information regarding level of
performance, number of cases in which compensation was
made and the total amount of compensation to the SERCs.
• As per 4th proviso u/s 40, any consumer with a maximum
power demand exceeding 1 MW will be entitled to get open
access to ISTS on payment of appropriate tx. charges and
surcharge
• A distribution licensee shall provide non-discriminatory open
access through its distribution system to all distribution
licensees having licence within the same area of supply,
subject to payment of wheeling charges.
• In addition to information regarding performance level and
compensation, status of compliance of the guidelines issued
by the central govt. related to corporate governance must
also be furnished to SERCs u/s 59 of the Act.
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Electricity Act, 2003 Electricity Amendment Bill, 2022
• Existing DL operating in an area, under no circumstance, can deny the open access through its distribution system to any entity wishing to
operate in that area.
• CERC to grant license to DL applying to operate in more than one state as per section 79 of the Amendment.
• Any entity using the infrastructure of an existing DL to supply electricity in the same area shall be liable to pay wheeling charges to the DL.
• The central govt is being mandated to issue guidelines on corporate governance of discoms, which may introduce good managerial
practices in state-owned DLs.

6. Amendments in Power procurement
• As per section 60 of EA 2003, if any licensee enters into
any agreement or abuses its dominant position which is
likely to cause adverse effects on the competition in
electricity industry, SERCs may issue appropriate
directions.
• As per section 60A, the power and associated costs from
the existing PPAs with the existing distribution licensee
shall be shared among all the DLs in the area of supply.
• A DL may enter additional PPA, after meeting the existing
commitments, to meet any additional requirement of
power without sharing with other DLs.
• The State Govt. shall set up a cross subsidy balancing
fund which shall be managed by a Govt. company
• Any surplus on account of cross subsidy or cross subsidy
surcharge or additional surcharge shall be deposited into
the fund and the fund shall be utilised to make good
deficits in cross subsidy
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Electricity Act, 2003 Electricity Amendment Bill, 2022
• Introduction of multiple DL may prove beneficial as existing PPA and associated cost will be shared with all entities
operating in the area.
• Cross subsidy balancing fund is to be set up and controlled by the state govt. The excess fund due to subsidies or
surcharge will used to balance out the shortfall of subsidy in the same area or other area. This is likely to rationalise the
subsidies offered across various categories of consumers, and thus improving discom financial health.

7. Amendments in tariff
• In section 61 clause (g), it has been stated that the tariff
progressively should reflect the cost of supply and also
reduce the cross subsidy as a guiding principle.
• As per section 62, in case of multiple DL in the same area,
SERC may fix the ceiling tariff for retail sale of electricity.
• Tariff cannot be ordinarily amended more than once in a
year, except in respect of any changes under the terms of
fuel surcharge formula.
• As per amendment of section 61, the tariff is to recover
all prudent cost incurred for supply of electricity and
cross subsidies to be reduced as may be specified by
SERCs.
• In case of multiple DL in the same area, SERC may fix both
the min and max retail tariff. Cross subsidy, wheeling
charges and any prior period adjustment to be indicated
separately.
• SERC may allow DL to effect graded revisions in tariff up
to 4 times in a year.
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Electricity Act, 2003 Electricity Amendment Bill, 2022
• The guiding principle of tariff has been specified to reduce subsidies. However, there has been no mention of removal
subsidies from any consumer category.
• SERCs have been mandated to fix the upper and lower limit of retail tariff, suo motu u/s 64. This is expected to provide a
level playing field to all entities supplying power in an area, public or private. It will discourage players to utilize predatory
pricing while safeguarding consumer interests.
• Graded and timely tariff revisions will enable DL to recover cash in order to make timely payments to power producers.

8. Constitution of CERC
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• Under section 77, the chairperson of CERC shall be a person who is or has been-
1. Head of an organisation dealing with generation, transmission or distribution of electricity; or
2. Secretary to the Government of India or its equivalent
• The members shall be appointed as-
1. One person having adequate qualifications and experience in the field of engineering with
specialisation in generation, transmission or distribution of electricity,
2. One person having adequate qualifications and experience in the field of finance, economics,
commerce, public policy, public administration or management,
3. One person, who is, or has been holding a judicial office or is a person possessing adequate
professional qualifications and experience in law

9. Functions of CERC
As per section 79, following are the functions of CERC-
• To regulate the tariff of generating companies and inter
state transmission of electricity
• To issue license for transmission and trading
• To adjudicate disputes involving transmission licensees
and generating companies
• To levy fees and to specify grid code
• To specify and enforce standards
• To fix trading margin in the inter-state trading of
electricity
Under section 79, following functions are added to CERC-
• To adjudicate upon the disputes including those relating
to performance of obligations under a contract related to
sale, purchase or transmission of electricity, involving
generating companies or licensees
• To adjudicate upon the disputes involving the NLDC or
the RLDC regarding matters connected with sections 26,
28 and 29
• To grant license for distributing electricity in more than
one State
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Electricity Act, 2003 Electricity Amendment Bill, 2022
• CERC has been empowered to adjudicate upon disputes related to contracts. This is to encourage the compliance of the
terms of contract
• CERC has also been mandated to issue licenses to applicants wishing to distribute electricity in multiple states. This is
expected to ease the grant of licenses to applicants and streamline the process.

10. Constitution of SERCs
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• Under section 84, the chairperson of SERC shall be a person who is or has been-
1. Head of an organisation dealing with generation, transmission or distribution of electricity; or
2. Principal Secretary to the State Government or its equivalent
• The members shall be appointed as-
1. One person having adequate qualifications and experience in the field of engineering with
specialisation in generation, transmission or distribution of electricity,
2. One person having adequate qualifications and experience in the field of finance, economics,
commerce, public policy, public administration or management,
3. One person, who is, or has been holding a judicial office or is a person possessing adequate
professional qualifications and experience in law

11. Functions of SERCs
• Section 86 states that SERC shall determine the tariff for
retail electricity provided where open access has been
provided, SERC shall determine only the wheeling and
surcharge.
• Clause (e) mandates SERCs to specify percentage of total
consumption of electricity to be purchased from
renewable energy sources.
• Clause (f) empowers SERC to adjudicate upon disputes
between licensees and generating companies, and to
refer any dispute for arbitration.
• Under section 86, the RPO percentages to be specified by
the SERCs cannot be less than any such percentage
specified by the central govt.
• It is stated that in case of reneging of PPA by generating
company or licensees, the dispute is to be adjudicated
within 90 days with appropriate compensation.
• SERCs are also mandated to issue guidelines/regulations
to secure consumer choice in case of multiple DLs.
• Review the resource adequacy at intervals of every six
months for each of the distribution licensees in
accordance with the guidelines issued by the Central
Government
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Electricity Act, 2003 Electricity Amendment Bill, 2022
• RPO percentages as notified by MOP will be considered as the minimum limit for states. This will encourage greater
integration of renewable energy.
• Dispute resolution regarding PPAs within 90 days from petition will discourage players from defaulting. It will discourage
utilities from non-honouring the terms of PPA

12. Powers of regulatory commissions
• No provision of non-scheduling of electricity over lack of
payment security by NLDC, RLDC or SLDC, has been made in
the Act.
• Section 94 states that for the purpose of enquiry or
proceedings, SERCs to have the powers of a civil court.
However, the powers vested in SERC are limited.
• Section 26 sub-section 4 clause (b), section 28 sub-
section 3 clause (a) and section 32 sub-section 2 clause
(a) maintains that no electricity shall be scheduled or
despatched under contract unless adequate security of
payment as may be prescribed by the central govt. has
been made.
• As per amendment in section 94, any order made by
SERC shall be executable as a decree of civil court and
SERC shall have all the powers of civil court including
powers of attachment.
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Electricity Act, 2003 Electricity Amendment Bill, 2022
• The amendment introduces tougher measures for the lack of adequate payment security by the discoms. It is intended to ensure timely
payment of dues by both discoms and generating companies.
• Civil court powers have been extended to regulatory commissions to ensure compliance of the orders.

13. Penalty provisions
• Section 142 states that in case of non-compliance with any
provision, a penalty of Rs. 1 lakh may be levied and for
continuing failure additional penalty of Rs. 6000/day may be
imposed.
• As per section 146, failure to comply with order or direction
is punishable with imprisonment up to 3 months or fine up
to Rs. 1 lakh or both. Additional fine may extend up to Rs.
5000/day for continuing failure.
• u/s 152, compounding to offence was optional and at the
discretion of appropriate govt.
• u/s 142, the following are the penalty provisions-
o For contravention of any provisions of the Act, penalty shall not
exceed Rs. 1 crore for each contravention and in case of a continuing
failure with an additional penalty which may extend to Rs. 6 lakh for
each day without prejudice to any other penalty.
o For contravention of regulation or direction by ERC, penalty shall not
exceed Rs. 10 lakh for each contravention and in case of a continuing
failure with an additional penalty which may extend to Rs. 60
thousand for each day.
o For non-compliance with RPO, penalty calculated @ between Rs.
0.25/kWh and Rs 0.35/kWh for first year and @ Rs. 0.35/kWh and Rs.
0.5/kWh for rest
• u/s 146, failure to comply with order or direction is punishable with fine
which may extend to Rs. 1 crore, in respect of each offence and in the case
of a continuing failure, with an additional fine which may extend to Rs. 1 lakh
for every day.
• u/s 152, the appropriate govt. shall accept from any consumer who have
committed theft of electricity a sum of money by way of compounding of the
offence
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Electricity Act, 2003 Electricity Amendment Bill, 2022
• Specific penalty norms have been introduced for non-compliance of RPO mandates in order to encourage RPO compliance.
• Non-compliance have been decriminalised by removal of imprisonment provisions. This is expected to enhance the ease of doing business
in electricity sector.

14. Powers of Central govt and SERCs for
regulations
• Under section 176, following functions are added to the Central Govt.-
o To make rules regarding the security of payment.
o The time within which the objection and suggestions on the draft National Electricity Plan to be invited by the CEA
o The manner of concurrence by the CEA of the hydro-generating stations
o The criteria for area of supply under section 14
o The percentage of total consumption of electricity in the area of supply of distribution licensee u/s 86
o The number of members of the Appellate Tribunal u/s 112
• Under section 181, the SERCs can make regulation under the following additional matters-
o The payment of transmission charges and a surcharge thereon by the consumer u/s 40
o The arrangements for sharing of power and associated costs amongst the distribution licensees in the area of supply
u/s 60A
o The managing of cross subsidy balancing fund by a Government company
o Securing the consumer choice u/s 86
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15. Duties of NLDC and distribution licensees
(as per Electricity Amendment Bill, 2022)
Duties of NLDC (section 26):
The National Load Despatch Centre shall-
a) Be the apex body to ensure integrated operation of the
power system in the country
b) Be responsible for optimum scheduling and despatch of
electricity in the country across different States and
regions in accordance with the contracts entered into with
the licensees or the generating companies; Provided that
no electricity shall be scheduled or despatched under such
contract unless adequate security of payment, as may be
prescribed by the Central Government, has been made
c) Monitor grid operations and ensure security of the
electricity grid and for this purpose give directions as
necessary to the Regional Load Despatch Centre or State
Load Despatch Centre, as the case may be
d) Exercise supervision and control over the inter-regional
and inter-State transmission network
e) Have overall authority for carrying out real time
operations of the electricity grid of the country
Duties of distribution licensees (section 42):
It shall be the duty of all distribution licensees to—
a) Ensure an efficient, co-ordinated and economic
distribution system in their area of supply;
Provided that a distribution licensee may use the
distribution systems of other licensees in the
area of supply for supplying power through the
system of non-discriminatory open access
b) Give non-discriminatory open access to other
distribution licensees on payment of wheeling
charges
c) Provide supply of electricity to the consumers
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16. Thank you