Electricity (Amendment) Bill, 2022

The All-India Power Engineers Federation recently called for a strike in protest of the government’s intention to introduce the Electricity (Amendment) Bill 2022 in the Indian Parliament. The bill, which amends the Electricity Act of 2003, aims to bring competition and accountability to electricity distribution, which is the weakest link in the power sector.

Background –

• Electricity is on the Concurrent List (Centre and states have equal rights to frame laws) of the Constitution of India.
• Before the Electricity Act, 2003, the generation, distribution and transmission of electricity were carried out mainly by the State Electricity Boards in various States.
• Due to the politico-economic situation, the cross-subsidies reached an unsustainable level.
• The Electricity Regulatory Commissions Act was enacted in 1998 to detach state governments from tariff determination.
• The Electricity Act was enacted in 2003 in order to further reform the electricity sector through private sector participation and competition.

About the Act of 2003 –

• It is an Act of the Parliament of India enacted to transform the power sector in India.
• The act aims at Consolidating laws relating to generation, transmission, distribution, trading and the use of electricity and promoting competition in the industry.
• The Ministry of Power is responsible for enforcing the Electricity Act, 2003.

Main objectives of the Act –

• Supply of electricity to all users and protecting consumer Interest.
• Rationalisation of electric tariff.
• Transparency in policies regarding subsidies.
• Promotion of efficient and environmentally friendly policies constituted by Central Electricity Authority (CEA), Regulatory commissions and establishment of Appellate tribunal.

Main features of the Act –

• Generation is being de-licensed and captive generation freely permitted.
• Metering of electricity supplied is made mandatory.
• Provisions related to thefts of electricity were made more stringent.
• Trading as a distinct activity recognised with the safeguard of Regulatory commissions being authorised to fix ceiling on trading margins.
• For rural and remote areas, stand-alone systems for generation and distribution are permitted.
• The state governments are required to unbundle State Electricity Boards.
• Setting up the Central Electricity Regulatory Commission (CERC) and the State Electricity Regulatory Commission (SERC) have been made mandatory.
• An appellate tribunal to hear appeals against the decision of CERC and SERC.
• Central government to prepare National Electricity Policy and Tariff Policy.
• Central Electricity Authority (CEA) to prepare the National Electricity Plan.
• The act also recognised the role of renewable energy in the country’s National Electricity Policy and in stand-alone systems.

Key highlights of the Electricity (Amendment) Bill, 2022 –

• The Bill has provisions to ensure timely payment to generation companies by new entrants and existing state utilities, empower state regulators for timely tariff revision, etc.
• It aims at strengthening the regulatory and adjudicatory mechanism in the Electricity Act, 2003.
• It seeks to bring administrative reforms through improved corporate governance of distribution licensees.
• It seeks to enhance the efficiency of distribution companies (Discoms) to provide better services to the end consumer.
• It also aims at increasing the share of green energy in the context of global climate change concerns and India’s commitments at COP 26.

What changes does the Bill propose?

• A key amendment being proposed is to facilitate the use of distribution networks by all licensees under non-discriminatory open access provisions.
  • This will enable competition, enhance distribution licensee efficiency for improving services to consumers and ensure the power sector’s sustainability.
• It also appears to strengthen the functioning of the National Load Despatch Centre (NLDC) for ensuring grid safety and security and the economic and efficient operation of the country’s power system.
• Another key amendment is to enable management of power purchase and cross-subsidy in case of multiple distribution licensees in the same area of supply.
• It also proposes to make provision regarding graded revision in tariff over a year and for mandatory fixing of the maximum ceiling as well as minimum tariff by the appropriate commission.
• The amendments also aim to reduce the rate of punishment from imprisonment and/or fine to just fine, as well as to facilitate decriminalisation by making it mandatory to accept compounding.
• The Bill will also strengthen the functions of the Forum of Regulators.

Concerns raised by Unions –

• Previously, the centre had informed that the Bill would not be introduced until the provisions were discussed with the major stakeholders. However, these unions have not been consulted.
• The provisions for eliminating cross-subsidies will harm farmers and consumers.
• As electricity is on the Concurrent List of the Constitution, the Bill in its current form encroaches on the states’ powers and disadvantages utilities.
• It should be forwarded to the Ministry’s standing committee for further consultation.