17 November 2015

Electricity (Amendment) Bill 2014 was put up to Lok Sabha on 19th December 2014

It was referred on 22nd December, 2014 to the Standing Committee on Energy, headed by Dr. Kirit Somaiya, for Examination.

The Standing Committee has presented its report to Lok Sabha on 7th May 2015.

Salient features of Proposed Amendments:◦ Separation of Carriage and Content in the distribution

sector. ◦ Promotion of Renewable Energy◦ Grid Security.◦ Rationalization of Tariff and making Tariff fixation process

more certain and effective.◦ Performance Monitoring and strengthening of Regulatory

Commissions.◦ Misc. provisions

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Separation of Carriage and Contento Competition and choice being proposed through separation of carriage and

content. Consumer has the option to choose supplier. (S-51B)

o State Governments to frame and notify the scheme for the separation of carriage and content in consultation with Central Government. (S-51A)

o Existing Distribution licensees deemed to have authorization to undertake distribution and supply of electricity till the transfer scheme is notified. (S-14)

o Distribution and supply businesses to be recognized as separate licensed activities. Existing PPA’s to be housed with Intermediary Company.

o Distribution licensee responsible for distribution network business and provide connection on demand.

o Incumbent supply licensee carved out of the existing distribution licensee for arranging supply of electricity for consumers in its area of supply.

o Subsequent supply Licenses to be granted to others in incumbent supply licensee area. At least one company to be a Government Company within a time frame as notified by the Appropriate Government.

o Existing Private Distribution licensee and Franchisee continue as per their contract.

o Universal Service Obligation(USO): On every supply licensee.

o Provider of Last Resort to have obligation to supply in case of failure of any supply licensee.

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Separation of Carriage and Content- Impact

Benefits:

Focus on Distribution function is expected to improve the efficiency and

reliability of wire business.

Reduction in losses in Distribution segment – Technical as well as Commercial

losses.

Competition in Supply business to benefit the end consumer with respect to

quality, affordability and other innovations wrt Tariff and consumer service

related functions .

All of the above will strengthen the important link of the electricity value

chain and improve the viability of Power sector.

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Separation of Carriage and Content- Impact

Issues

A. The framework

Clarity on the level and manner of segregation of distribution network from the supply business.

B. Implementation by States

The broad and flexible guidelines to be framed giving the States due scope to align these

guidelines as per their conditions.

States to have option to implement it in a gradual manner

C. Multiple Supply Licensee

◦ Supply business is a very challenging on account of the inherent complexities

◦ Well defined parameters to be laid down for providing multiple supply licensees with

one incumbent supply licensee

Equitable apportionment of consumers for the purpose of supply of electricity considering - status

of consumers, direct and cross-subsidy being paid to them , technical and commercial losses.

How to avoid the cherry picking of the consumers by the supply licensee.

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Promotion of Renewable Energy ◦ Introduction of Renewable Power Generation Obligation (RGO)

(Section 7) Renewable Generation capacity to be installed by new Thermal power

plants, as notified by central govt, which shall not be less than 10 percent of the Thermal Installed capacity.

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

◦ Bring RPO and RGO under penal provision. ( Sec 142) 

◦ Provision for National Renewable Energy Policy. ( Section 3 )

◦ Person generating and supplying electricity from Renewable Energy are exempted from obtaining license.( Section 14)

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Promotion of Renewable Energy- ImpactBenefits More renewable capacity will reduce environmental impact of conventional

power generation . May further reduce the cost of RE capacity due to economies of scale Make RE generation more affordable Better resource optimization

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Promotion of Renewable Energy- ImpactIssues Introduction of Concept of RGO

◦ RE capacity as per the RGO compliance needs to be developed.

◦ Issues of RE Potential , Implication on Tariff Balancing the requirement of RGO and RPO

◦ Non compliance of RGO shall attract penal provisions.

◦ If RGO by Gencos and RPO by Discoms are not having the matching requirements, there may be problems in getting the RE power dispatch.

Despatch issues◦ Further, as tariff of such RE capacity shall be bundled with new Thermal

capacity, the total bundled tariff will be comparatively on higher side impacting merit order/ dispatch of new capacity.

Realization issues◦ Stressed financial position of most of the State Discoms may make

realization against sale of such capacity a key challenge.

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Grid Security◦ Considering the need for strengthening the Grid Security , amendments are

proposed for increasing penalties significantly in the relevant provisions of Act as a proper deterrent. (Section 29, 33, 142 & 146).

◦ Increase in penalty for non-compliance of directions: Rs. 15 Lac to Rs. 10 Crore (Section 29) w.r.t. RLDC directions. Rs. 5 Lac to Rs. 1 Crore (Sections 33) w.r.t. SLDC directions. Rs. 1 Lac to Rs. 1 Crore w.r.t. Appropriate Commission’s directions.

Recurring penalty increased from Rs. 6000 to Rs. 1 Lac for every day of non-compliance.( Section 142)

Rs. 1 Lac to Rs. 1 Crore w.r.t. any order or any other direction. Recurring penalty from Rs. 5000 to Rs. 1 Lac for every day of non-compliance. ( Section 146)

Penalty for Renewable Energy generating companies to be 10% of the normal penalty.

Impact: This will ensure reliability and security of gridImpact: This will ensure reliability and security of grid

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Tariff Rationalization & efficiency improvement in Distribution Sector

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

◦ Provisions of Tariff Policy made mandatory. (Section 61(2))◦ Pass through for fuel and power purchase cost more than

once in a year. (Section 62(5))◦ Provision for initiating suo-motu proceedings for determination

of tariff. (Section 64)◦ Recommendation by Government for revocation of license due

to non-compliance of standards. (Section 59A)

The measures proposed in the amendment shall improve the financial position of State Discoms which will benefit Generators in getting timely realization of dues for sale of power to such Discoms and boost investment in the Sector.

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Performance oversight of Regulatory Commissions

◦ Tenure of Chairperson/Members proposed to be reduced to 3 years (against existing 5 years) but eligible for second term on re-appointment. (Section 89)

◦ Period for disposal of tariff petitions by the Commission reduced 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. (Section90)

◦ Interim Nomination by Govt. of India for delay of more than 5 months in appointment of Chairpersons/ Members of State Commissions. (Section 85)

Impact: •Faster disposal of Petitions by the Regulators will help in reducing the regulatory uncertainty on the Tariff and faster recovery of cost by Utilities.•Better Regulatory certainty and accountability

Impact: •Faster disposal of Petitions by the Regulators will help in reducing the regulatory uncertainty on the Tariff and faster recovery of cost by Utilities.•Better Regulatory certainty and accountability

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Misc. Provisions:◦ The generating stations shall be required to maintain a specified

capacity as spinning reserve for the grid safety and security. (S- 7)

◦ The generating stations before establishing or expanding the capacity of a generating station shall submit a detailed project report and duly inform about the same to the Authority. (S- 7)

◦ Exemption to developer of SEZ area for obtaining Distribution License. (S-14)

◦ Exemption to Railways and Metro Rail for obtaining license(Metro and other Transport Entities are added).(S-14)

◦ Collection and Realisation of any dues along with the electricity dues. (S-45A)

◦ Metering through smart meters introduced. (S-55)

◦ 15 days notice period for disconnection of supply not required in case of Pre-paid meters. (S-56)

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Misc. Provisions:◦ Introducing levying of fees for the inspection for electrical

installations. (S-162)◦ Selection Committee for selecting Members of Appellate

Tribunal and Chairperson and Members of Central Commission – Chairperson of PESB shall be the Chairperson of Selection

Committee ( earlier Member, Planning Commission). Secretary ( Deptt of consumer affairs in Central Govt) shall be

member ( earlier Chairperson of PESB)

Thank You

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Whether following issues have been adequately addressed in the amendments:

◦ How to make Open Access transaction an attractive option to

the customer to avail the service.

◦ How to ensure that Regulatory Commissions are functioning

efficiently, transparently and also as per the spirit of law.

◦ Mechanism for liquidation of the regulatory assets of Discoms

◦ Deemed licensee status to Indian Railways, Delhi Metro rail

corporation, Damodar Valley Corporation, SEZs – clarity on

Regulatory jurisdictions?