Indian Electricity Act 2003 & Amendments

Presented By :Sanket SamantrayNIT Rourkela

Electricity Act 2003The Need for enactment of Electricity Act 2003, was felt by the Central

Government in the backdrop of the on going Economic Reforms in the country coupled with power sector reforms in various States.

Poor performance of SEBs which were formed and operating under IE Act 1910 and Electricity Supply Act 1948 forced the Government to bring out an uniform and unified law to take care of the current needs of power sector in the areas of Generation, Transmission, Trading and Distribution of Electricity

Electricity Act 2003 is a single legislation which addresses all the key areas of Electricity in the country and provides a road map for over all and uniform development of electricity sector in the country

Electricity Act 2003Purpose of the Act

To consolidate the laws relating to generation, transmission, distribution, trading and use of electricity.

To take measures conducive for development of electricity sector.To promote Competition in the sector.To protect the interests of ConsumersTo rationalize the electricity tariffsTo Establish Regulatory commissions and Appellate Tribunal for

Electricity. To ensure supply of electricity to all areasTo rationalize tariff and lowering the cross-subsidization levels

An overview of Electricity Act 2003Enacted in 2003 and given to effect from 10th June 2003Consists of 18 ( XVIII) parts, 185 Sections and one schedule.It extends to the whole of India except the State of Jammu and

Kashmir.

New concepts introduced in Electricity Act 2003National Electricity Policy and Tariff Policy (section 3)

Separation of Electricity Trading( Section 12 , 39 and 52)

Introduction of Open Access {section 39(d)}

Introduction of MYT ( Multi Year Tariffs) (section 61(f))

Constitution of Appellate Tribunal and its functions ( sections 110 – 125)

Salient features of the Electricity Act, 2003

Role of Government Rural Electrification Generation Transmission Distribution Consumer Protection Trading / Market Development Regulatory Commission / Appellate Tribunal Tariff Principles CEA Measures against Theft of electricity Restructuring of SEBs

Role of GovernmentCentral Government to prepare National Electricity Policy and Tariff Policy.

(Section 3)

Central Govt. to notify a National Policy for rural areas permitting stand alone systems based on renewal and Non-Conventional energy sources in consultation with States. (Section 4)

Central Government to formulate a National Policy in consultation with the concerned State. for bulk purchase of power and management of local distribution through Users’ Association, Cooperatives, Franchisees and Panchayat Institutions etc. (Section 5)

 

Appropriate Government to endeavor to extend supply of electricity to

all villages/hamlets. (Section 6)

No requirement of licence if a person intends to generate and distribute

power in rural area. (Section 14)

Rural Electrification

Generation free from licensing. (Section 7)

Requirement of TEC for non-hydro generation done away with. (Section 7)

Captive Generation is free from controls. Open access to Captive generating plants subject

to availability of transmission facility. (Section 9)

Clearance of CEA for hydro projects required. Necessary due to concern of dam safety and

inter-State issues. (Section 8)

Generation from Non-Conventional Sources / Co-generation to be promoted. Minimum

percentage of purchase of power from renewable may be prescribed by Regulatory

Commissions. (Sections 61 (h), 86 (1) (e))

Generation

There would be Transmission Utility at the Centre and in the States to undertake planning & development of transmission system. (Sections 38 & 39)Load dispatch to be in the hands of a government company/organisation. Flexibility regarding keeping Transmission Utility and load dispatch together or separating them. Load Dispatch function critical for grid stability and neutrality as compare to generators and distributors. Instructions to be binding on both. (Sections 26, 27,31, 38, 39)Transmission companies to be licensed by the Appropriate Commission after giving due consideration to the views of the Transmission Utility. (Sections 15(5)(b))The Load Dispatch Centre/Transmission Utility / Transmission Licensee not to trade in power. Facilitating genuine competition between generators. (Sections 27, 31, 38, 39,41) Open access to the transmission lines to be provided to distribution licensees, generating companies. (Sections 38-40)This would generate competitive pressures and lead to gradual cost reduction.

Transmission

DistributionDistribution to be licensed by SERCs. Distribution licensee free to take up generation & Generating co. free to take up

distribution licence. This would facilitate private sector participation without Government guarantee/ Escrow. (Sections 7, 12)

Retail tariff to be determined by the Regulatory Commission. (Section 62)Metering made mandatory. (Section 55)Provision for suspension/revocation of licence by Regulatory Commission as it is an

essential service which can not be allowed to collapse. (Sections 19, 24)Open access in distribution to be allowed by SERC in phases. (Section 42)In addition to the wheeling charges provision for surcharge if open access is allowed

before elimination of cross subsidies, to take care of Current level of cross subsidyLicensee’s obligation to supply. (Section 42)This would give choice to customer.

Consumer Protection

Consumer to be given connection within stipulated time. (Section 43(1))

Penalty in the event of failure to give connection (Section 43(3))

Payment of interest on security deposit. (Section 47(4))

Regulatory commission to specify Electricity supply code to be followed

by licensees. (Section 50)

No sum due from consumers recoverable after a period of two years

unless the same was shown recoverable continuously. (Section 56(2))

Redressal forum for redressal of grievances of consumers, to be appointed by every distribution licensee within six months. Ombudsman scheme (Section 42 )

Standards of performance

Licensees required to meet standards of performance specified by Regulatory Commission. Failure to meet standards makes them liable to pay compensation to affected person within ninety days.

Licensee to furnish to the Commission periodical information on standards of performance (Section 57)

District level committee - (a) to coordinate and review extension of electrification in each district; (b) to review quality of power supply and consumer satisfaction, etc. (Section 166 (5))

Consumer Protection contd…

Trading/Market Development

Trading distinct activity permitted with licensing (Section 12)

Regulatory Commission may fix ceiling on trading margin to avoid artificial price volatility (Section 79 (2) (b) & 86 (2) (b)

The Regulatory Commission to promote development of market including trading (Section 66)

State Electricity Regulatory Commission to be constituted within six months. (Section 82)Provision for Joint Commission by more than one State/UT. (Section 83)Provision for constitution of Appellate Tribunal consisting of Chairman and three Members. (Section 110, 112)Appellate Tribunal to hear appeals against the orders of CERC/SERC, and also to exercise general supervision and control over the Central/State Commissions. (Section 111)Appeal against the orders of Appellate Tribunal to lie before the Supreme Court. (Section 125)Appellate Tribunal considered necessary to-

Reduce litigation and delay in decisions through High Court. Provide technical expertise in decision on appeals

Regulatory Commissions/Appellate Tribunal

CEA to continue as the main technical Advisor of the Govt. of India/ State Government

with the responsibility of overall planning. (Section 70)

CEA to specify the technical standards for electrical plants and electrical lines. (Section 73)

CEA to be technical adviser to CERC as well as SERCs.(Section 73)

CEA to specify the safety standards. (Section 53)

 

Central Electricity Authority

Tariff Principles Regulatory Commission to determine tariff for supply of electricity by generating co. on long/medium term contracts. (Section 62)No tariff fixation by regulatory commission if tariff is determined through competitive bidding or where consumers, on being allowed open access enter into agreement with generators/traders. Consumer tariff should progressively reduce cross subsidies and move towards actual cost of supply. (Section 61 (g), (h)) State Government may provide subsidy in advance through the budget for specified target groups if it requires the tariff to be lower than that determined by the Regulatory Commission. (Section 65) Regulatory Commissions may undertake regulation including determination of multi-year tariff principles, which rewards efficiency and is based on commercial principles. (Section 61 (e), (f))Regulatory Commission to look at the costs of generation, transmission and distribution separately. (Section 62 (2))

Measures Against Theft of Electricity

Focus on revenue realization rather than criminal proceedings. (Sections 126, 135)

Penalties linked to the connected load and quantum of energy and financial gain involved in theft. (Section 135)

Provisions for compounding of offences. (Section 152)

Assessment of electricity charges for unauthorized use of electricity by the assessing officer designated by the State Government. (Section 126)

Theft punishable with imprisonment. (Section 135)

Punishment provision for abetment of theft. (Section 150)

Special Courts (Sections 153-158)

Restructuring of SEBs

Provision for transfer scheme to create one or more companies from SEB. (Section 131)

Provision for continuance of SEBs (Section 172 )

States given flexibility to adopt model/path

Amendments in Electricity Act, 2003

Amendments in Electricity Act, 2003

The Electricity (Amendment) Act,2003The government passed the Electricity (Amendment) Act in December 2003

The Electricity (Amendment) Act,2007In May 2007, the government passed the Electricity (Amendment) Bill, 2007 recommending amendments to Electricity Act (EA), 2003. Subsequent to this, it passed the Electricity (Amendment) Act in June 2007

Electricity (Amendment) Bill, 2014 The Bill was introduced in the Lok Sabha on December 19, 2014 Current Status: Pending

Highlights of The Electricity (Amendment) Act,2003

• The State Commission shall, not later than five years from the date of commencement of the Electricity (Amendment) Act, 2003, by regulations, provide such open access to all consumers who require a supply of electricity where the maximum power to be made available at any time exceeds one megawatt. (Section 42{4})

• The Appellate Tribunal may, after hearing the Appropriate Commission or other interested party, if any, from time to time, issue such orders, instructions or directions as it may deem fit, to any Appropriate Commission for the performance of its statutory functions under this Act. (Section 121)

• Whoever, negligently breaks, injures, throws down or damages any material connected with the supply of electricity, shall be punishable with fine which may extend to ten thousand rupees. (Section 139)

The Electricity (Amendment) Act,2007Highlights of Amendments :

Joint responsibility of State Government and Central Government in Rural Electrification (Section 6)

The concerned State Government and the Central Government shall jointly endeavour to provide access to electricity to all areas including villages and hamlets through rural electricity infrastructure and electrification of households

The term ‘elimination’ has been omitted in relation to cross-subsidies (Section 42)

The government has omitted the term ‘eliminated’ in the context of cross-subsidies. (Earlier, the Act stated that ‘the cross-subsidy surcharge and cross subsidies shall be progressively reduced and eliminated’.)The amendment suggests that cross-subsidies would be reduced gradually, and not completely eliminated, as per the earlier provision of ‘elimination of cross-subsidy’. Hence, the amendment is likely to make states more lenient in setting targets for cross-subsidy reduction.

Captive units will not require a licence to supply power to any user.(Section 9)

Provided further that no licence shall be required under this Act for supply of electricity generated from a captive generating plant to any licensee in accordance with the provisions of this Act

The Electricity Supply Code (Section 50)

The State Commission shall specify an electricity supply code to provide for recovery of electricity charges, intervals for billing of electricity charges, disconnection of supply of electricity for non-payment thereof, restoration of supply of electricity, measures for preventing tampering, distress or damage to electrical plant or electrical line or meter, entry of distribution licensee or any person acting on his behalf for diconnecting supply and removing the meter, entry for replacing, altering or maintaining electric lines or electrical plants or meter and such other matters

Strict action against unauthorised usage of power (Section 126)

Amendments related to penalties for unauthorised usage of power amendments would simplify the process of identifying those consumers stealing power, as well as increase the assessment amount, which would help curb losses in the system

Power theft has been recognised as a criminal offence, punishable under Section 173 of the Code of Criminal Procedure, 1973. (Section 135)

The country faces T&D losses of around 30 per cent, which implies that onethird of the power is lost due to theft, pilferage and technical inefficiencies.Amendments related recognition of power theft as an offence punishable under Section 173 of the Code of Criminal Procedure, 1973, are to ensure strict action against power theft. This is expected to strengthen the drive by respective state utilities to eliminate power theft and improve operational efficiencies. Therefore, focused efforts towards eliminating theft of power can help reduce distribution losses substantially

Electricity (Amendment) Bill, 2014The amendments will usher in much needed further reforms in the power sector. It will also promote competition, efficiency in operations and improvement in quality of supply of electricity in the country resulting in capacity addition and ultimate benefit to the consumers.

Salient features of Proposed Amendments

Enforcing Grid Security. Thrust on Renewable Energy. Streamlining ofTariff determination process. Matters relating to Regulatory Commissions. Encouraging Retail Sale Competition: Separation of Carriage and Content in the

Distribution Sector

Enforcing Grid Security

Increase in penalty for non-compliance of orders/ directions relating to Grid Security and other directions. Rupees Fifteen Lacs to Rupees Ten Crore (Section 29), Rupees Five Lacs to Rupees One Crore (Section 33), Rupees One Lac to Rupees One Crore and recurring penalty of Rupees Six thousand to Rupees One Lac on every day of non-compliance (Section 142) and Rupees One Lac to Rupees One Crore and recurring penalty of Rupees five thousand to Rupees One Lac on every day of non-compliance (Section 146).

Note:The penalty for Renewable Energy generating companies shall be Rupees Ten Lacs and

in case of continuing failure an additional penalty of Rupees Ten thousand per day; andNo penalty on individuals (Section 149).

Thrust on Renewable Energy

Introducing atleast 10% Renewable Power Generation obligation on setting up of new coal and lignite based thermal power plants (Section 7)

Exemption of sale of electricity generated from renewable energy sources from cross subsidy and open access charge for a period as prescribed (Section 42(4))

Bringing ( Renewable Purchase Obligation) RPO and (Renewable Generation Obligation) RGO under penal provision with penalty under Section 142 (Section 142).

Provision for National Renewable Energy Policy (Section 3)

Exemption for licence for persons generating and supplying electricity from Renewable Energy sources (Section 14).

Streamlining of Tariff Determination Process

Allowing licensees to recover cost of electricity without any revenue deficit (Section 61(d)).

Provisions ofTariff Policy made mandatory forTariff determination (Section 61(2))

Provision for initiating suo-motu proceedings for determination of tariff (Section 64).

Recommendation for revocation of license by Government due to non-compliance of standards (Section 59A).

Matters relating to Regulatory Commissions

The term of office for the Chairperson or other Member shall hold office for a term of three years from the date he enters upon his office or 65 years of age whichever is earlier and eligible for second term on re-appointment (Section 89).

Provision for expeditious disposal of tariff petitions by the Commission from 120 days to 90 days (Section 64).

Review of performance of Regulatory Commissions by a Peer Committee constituted by Forum of Regulators (Section 109A).

Removal of Member in case of non-performance (Section 90).

Interim nomination against vacancies in case of delay of more than 5 months in the appointment of Chairpersons/ Members of the State Commissions (Section 85).

Promotion of competition and choice to consumers

Electricity Act, 2003 has encouraged competition in generation and transmission sectors.

Distribution sector has been largely regulated marked by high losses and inefficient operation.

Competition and choice is proposed through separation of carriage and content in the proposed amendment.

Encouraging Retail Sale Competition: Separation of Carriage & Content in the Distribution Sector (1/2) Distribution and supply businesses to be recognized as separate licensed activities (Section 14)

Distribution licensee to be responsible for development, operation and maintenance of distribution network business and shall have an obligation to provide connection on demand to any consumer in its area of distribution (Section 42)

Incumbent supply licensee To be carved out of the existing distribution licensee Responsible for arranging supply of electricity for all the consumers in its area of supply

(Section 51A)

Subsequent supply licensee Licenses to be granted to other applicants in the area of supply of the incumbent supply licensee

– atleast one company to be a Government Company (Section 14). Existing Distribution licensee and Franchisee shall continue as per the terms of their on-going

license/ contract (Section 14).

Intermediary Company to hold all the PPAs as per re-organization scheme (Section 131(4A))

Supply licensees so designated by Appropriate Commission to be Provider of the last resort (Section 51B)

Tariff for consumers not to be regulated – only ceiling tariff (Section 51D)

Sections amended:14, 20, 24, 42, 44, 45, 47, 48, 49, 50, 69A and introduction of new part VI and VIB as consequential changes.

Encouraging Retail Sale Competition:Separation of Carriage & Content in the Distribution Sector (2/2)

Exemption to developer of SEZ area for obtaining distribution licence

Exemption to Railways and Metro Rail for obtaining distribution licence

Making provisions for collection and realisation of any dues along with the electricity dues.

15 days notice period for disconnection of supply not required in case of Pre-paid meters.

Other Issues

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