The government introduced the Electricity Amendment Bill 2022 in the Lok Sabha recently. Though the Bill has been referred to the Parliamentary Standing Committee for Energy, states fear that the Centre is encroaching into their domain in power sector governance.
What are the concerns of states?
Their biggest grouse is against the proposal to give additional distribution licences in an area already serviced by a distribution company (discom). The licence will be deemed to have been granted if the state electricity regulatory commission (SERC) does not take any action within the stipulated time.
Why the concerns are misplaced?
- The proposal doesn’t tantamount to encroaching into the their domain because it pertains to policy matters. The Centre is well within its rights to suggest additional licences because power is a Concurrent subject.
- The feasibility of multiple licences is, however, another issue. The fact is that till we do away with commercial losses, remove cross-subsidies and have complete metering right from the periphery of a discom to the consumer, we really cannot have multiple licences.
What are the problematic provisions?
- That said, some provisions in the Bill do give an impression that the Centre is attempting to undermine the states. Amongst them is the clause pertaining to applicants seeking a distribution licence in more than one state. It states that the Central Electricity Regulatory Commission (CERC), and not the SERC, will grant the licence.
- This is problematic because a SERC is likely to be more aware of the field-level conditions in a state than its central counterpart. Even if an applicant applies for licences in several states, they should be processed by the SERCs concerned — wherever necessary, these agencies should consult each other. Moreover, the agency that grants the licence should also administer it.
- Second, the Bill has a provision empowering the Centre to give directions directly to the SERCs. Till now, the CERC received instructions from the Centre and the SERCs were under the state. The new Bill enables the Centre to bypass state governments. It’s not surprising that this is a matter of concern for the states.
- Third, the Bill states that the SERC chairperson will now be a nominee of the central government and will be an additional secretary-level official. This gives the impression that the Centre is trying to control the appointments to the SERCs.
What is good about the bill?
- The first relates to states reneging on power purchase agreements (PPAs), especially those with renewable power producers. Renegotiation of such PPAs has become a fraught issue. The Bill states that if PPAs are renegotiated, the affected party has to be compensated within 90 days from the date of submission of the petition.
- Second, new tariffs have to be made applicable from the beginning of the financial year. New tariffs often come into force in the middle of the financial year (due to delays in the issuing of orders by SERCs). This means that discoms do not earn their full revenues leading to cash flow problems.
- Third, the Bill has proposed a reduction in the time for processing tariff petitions from 120 days to 90 days. This is a welcome step.
- Fourth, regulatory commissions have been given suo motu jurisdiction if tariff petitions are not filed within 30 days of the stipulated time. This too is a step in the right direction.
- Fifth, the Bill talks about ensuring a payment security mechanism before dispatch. This will ensure that dues to generators do not swell up to unmanageable levels.
- Sixth, the Bill proposes to give more teeth to the national load dispatcher. We need to strengthen the load dispatcher for the smooth functioning of the grid, especially with a huge renewable capacity — where intermittency of generation is a major issue — in the offing.
The bill seems to be a mixed bag where the intent of the centre is to revamp the power sector in India. It can be done by assuaging the concerns of the states in a cooperative atmosphere.
Source – The Indian Express
QUESTION – The Electricity Amendment Bill, 2022 has been criticised for being too intrusive into powers of states. Is it correct? Discuss the major provisions of the bill and how it aims to revamp the power sector?