Present Government has issued a draft notification proposing changes to the Electricity Law of the country and has invited comments from stakeholders. It is expected that the bill will be presented in the upcoming winter session of parliament which will also be the last parliament session of the present Government. The bill if passed will result in sea changes in Electricity law as we know today.

The current Electricity Act was brought out by earlier NDA Government in 2003 and it replaced all the previous electricity statutes. The EA 2003 act promised uninterrupted power for all, rationalisation of tariff and an independent regulatory mechanism free from Government intervention .

Today, it is claimed that Electricity has reached all 6 Lakh villages and efforts are also being done to give electricity to all homes on demand. On the supply side the country is having surplus installed electricity generation capacity- by some counts it is almost double the requirement. Today’s Per capita electricity consumption is about 1200 units – this is almost three times what it was 15 years back . The electricity consumption is expected to grow as per the current plans for usage like electricity for efficient cooking and several other drivers. By some estimates it is expected that per capita consumption could increase to 3000 units by next decade. Government to. Some of important points are discussed below

Following are some musings on the proposed changes and what should and should not be done with some history behind the recommendations and thoughts.

Electricity by choice and market – The draft proposes separating the Content from the Carrier at the retail level for which a new segment of Supplier category is proposed to be introduced. Today distribution companies supply electricity. The Supplier of Electricity will contract with generators or buy from market and sell the power to retail consumers. Instead of tariff the draft introduces a concept and term called Ceiling Tariff. It is expected that this would lead to

emergence of new players to supply electricity and consumers will get power and supplier as per choice. The Act envisages a forward market and future market that will enable consumers to play with in the market. Of course, domestic consumers will not be able to play but it is expected that large consumers of power can buy power in the market like any other commodity . However, the experience of last 15 years in Open Access was not good - out of around 1,20,000 industrial consumers only handful consumers (about 2000) have been able to enter market through open access . In addition most of the states have opposed Open Access and involved in arm twisting game. Today only 5% of power is routed through exchange which is bought by distribution companies with deficit supply to meet their demand. The big question under the proposed law will be who will take ownership of the the distribution company losses which by some counts is about Rs10 Lakh crore - a substantial portion (75 %) has been taken by respective state government.

ELLIMATION OF CROSS SUBSIDY

Cross subsidy has become thorn to any Government and is a bane on consumers who pay for electricity. To lower the prices of electricity to a group of consumer the tariff proposes higher price for large volume consumers- the group of consumers in addition to lower tariff also receive Government Subsidy. This makes consuming more power costly not desirable when there is surplus power and the country is looking to grow in manufacturing to give more jobs to people and grow the economy. The bill proposes elimination of cross subsidy in three years and direct transfer to beneficiary like Gas. The effect of such move need to be watched as now a days all state governments are giving sops of free or cheap power options to low end consumers. Renewable Power Obligation – The Electricity Act spells lot about Renewable Energy. Government has also ambitious targets of 1.75 GW through Renewable Sources. The RPO obligation set by Regulators is being adhered but now through this act Government is planning to bring Renewable Generation Obligation thus person who is producing Fossil Fuel based Generation and Person who is buying Power both need to buy Renewable Power or in lieu Certificates . This move will add up cost of power both sides. In fact India is the only country where separate Ministry for taking care of Renewable energy exist and the best couse would have been introduction of Renewable Energy Law which would have taken care

of other produces of Renewable Energy in transportation , mining and other non conventional means . India is the only country where law for Renewable Energy does not exist .

Regulatory Watch Dog – The country has been under Regulatory watch from 1998 and today there are 29 Regulators. It was thought that with set up of Regulators, Government will be at a distance and electricity business will be under the watch of regulators. Over a period selection of Regulators and decision taken by Regulators specially in respect Tariff and PPAs are questioned. Very recently Supreme Court has asked to have a Judicial person on the regulatory commission and now with the proposed changes selection committee would be from Central Agencies. NITI Aayog is separately studying a Regulatory Bill and few provisions will either be redundant or overlapping . The best course for the government is to prepare appointment clauses in coordination with NITO aayog and State Governments. Secondly most of the decisions taken by Regulators are being questioned .

PENALTIES

The amendment proposes that all PPAs will have to be honoured otherwise there will be huge penalties on the defaulting party. This proposal seems to be in discourage states from cancelling or dishonouring agreements which is resulting financial crisis in the distribution sector. The Bill proposes penalties in if power not supplied to a consumer and to dispose connection application in time frame manner.

Few of State Governments have already opposed these amendments claiming Electricity is being centralized. Electricity sector employees are expressing resentment and they claim that the sector is being privatised. So far in the sector privatisation has not paid any dividends - most of the private generators are shut down on account of unavailability of fuel and finance. On other hand at retail level electricity in Mumbai which is in hands of private parties is the costliest power in the country. It was expected that private players would bring investment and efficiency but on the contrary most of private players are eyeing on Government to rescue. At the distribution level the privatisation plan has not been successful and now with these amendments we should just wonder and watch if we will be able to get cheaper power .