Elect Act 2003 (DRUM)

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DEVELOPMENTTHROUGHINTERNATIONAL PARTNERSHIPS

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S BANERJEE

A hope of light for all

ELECTRICITY ACT2003

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Presentation OutlinePresentation Outline

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Institutional frame work- Ajourney through

last century

Present status and emergingscenario

Act - 03 - overview Details of provisions What did not covered by Act-03

Way ahead

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BackgroundBackground

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The electricity (supply) act, 1948

State was made primary unit for planning andimplementation

of power generation, transmission and distribution

SEBs functioned as vertically integrated utilities.

Schedule VI of the E(S) Act prescribed the

methodology to befollowed for the determination of tariff oflicencees.

Section 59 of the E(S) Act provided the basis of

tariffdetermination of the SEBs.

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Main amendments to the existing Acts 1956 Amendment- to increase role of State Govt

to monitor SEBs. Amendment in 1964 to enable REBs Amendment in 1975 to enable generation in

Central sector Amendment to bring in commercial viability in

the functioning of SEBs Section 59 amended to make the earning

of a minimum return of 3% on fixedassets a statutory requirement (w.e.f1.4.1985)

Amendment in 1991 to open generation toprivate sector and establishment of RLDCs

Amendment in 1998 to provide for privatesector participation in transmission, and also

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1998 Electricity Regulatory Commissions Act:

Distance the Government from the functioningof the SEBs

Independent Regulatory Bodies at Central andState level

Rationalization of Tariff

Transparency in policy formulation,

Promotion of efficient and environmentallybenign policies

Greater involvement of private participation

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56 Years after independence, many of Indianhouseholds are unable to access electricity

Rural areas get power for less than 8 hours a day;

Theft and corruptions are rampant

Lawlessness characterizes the power sector

Governance hijacked; redressal is elusive

Citizens not free to buy except from monopolies

Sector is a State monopoly!

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Need for the newlegislation

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Requirement of harmonizing and rationalizing theprovisions in the existing laws to

Create competitive environment for benchmarkcompetition which will result in enhancing quality andreliability of service to consumer.

Distancing regulatory responsibilities of Govt.

Reform legislation by several States separately.

Obviating need for individual States to enact their own

reform laws.

Requirement of introducing newer concepts like powertrading, open access, Appellate Tribunal etc.

Special provision for the Rural areas.

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Finally....

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Electricity Act, 2003:

Enactment on 10th June, 2003

Repeals all previous laws.

Seeks a more competitive market- removal ofrestrictive barriers

De-licensing of industry

Consideration of social interests

Protection of consumer interests

Creation of policies consistent with theenvironment friendly objective

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Finally....

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Objective : Competition, Protection of Consumers

interests & Power for all Areas Creates liberal frameworkfor power development. Creates competitive environment. Facilitates private investment. Delicenses generation except for hydro : Captive

free from controls. Rural Areas : Stand alone Generation and

Distribution delicenced Multiple licensing in Distribution. Stringent provisions for controlling theft of

electricity.

Focus on revenue recovery in cases of unauthorizeduse of electricity.

Obliges States to restructure Electricity Boards. Mandates creation ofRegulatory Commissions. Retail tariff to be determined by regulatory

commissions. Open access in Transmission from outset.

El t i it A t 2003El t i it A t 2003

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Electricity Act 2003Electricity Act 2003

(Contents)(Contents)

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I : Preliminary - Sections 1-2II : National Electricity Policy & Plan-

Sections

3-6III : Generation of Electricity-

Sections 7-11IV : Licensing- Sections 12-24

V : Transmission of Electricity-Sections

25-41VI : Distribution of Electricity-

Section42-60

18 parts and 185 sections18 parts and 185 sections


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VII : Tariff- Sections 61-66VIII: Works- Sections 67-69IX : Central Electricity Authority-

Sections 70-75X : Regulatory Commissions-

Sections 76-109XI : Appellate Tribunal-

Sections 110-125XII: Investigation & Enforcement-

Sections 126-130


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XIII : Reorganization of Board-Sections

131-134

XIV: Offence and Penalties-Sections 135-152

XV: Special Courts- Sections 153-157

XVI: Dispute Resolution-Sections 158

XVII: Other provisions-Sections

159-165XVIII: Miscellaneous Sections

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Detailed provisionDetailed provision

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National Electricity Policy and Plan

Central Govt. to prepare National Electricity Policy and

Tariff Policy in consultation with State Govt. and Central

Electricity Authority. (Clause 3(1)).

National Electricity Plan for a period of 5 years to be

issued by Authority in accordance with National Electricity

Policy (Clause 3(4)).

National Policy on rural electrification including stand

alone systems to be issued by Central Government in

consultation with State Government (Clause 4 & 5).

Role of GovernmentRole of Government

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Central Govt. to formulate a National Policy in

consultation with the concerned State Govts. for bulk

purchase of power and management of local distribution

through Users Association, Cooperatives, Franchisees and

Panchayat Institutions etc. (Section 5). Govt. 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) Commission is also required to advise government on the

matters of policy.? Slide 30

Role of GovernmentRole of Government

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Generation

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 bepromoted. Minimum percentage of purchase of power from renewables

may be prescribed by Regulatory Commissions. (Section 61(h),86 (1) (e))

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There would be Transmission Utility at the Centre and in the States toundertake planning & development of transmission system. (Sections 38 &

39)

Load despatch to be in the hands of a govt company/organisation. Flexibility

regarding keeping Transmission Utility and load despatch together or

separating them. Load Despatch function critical for grid stability andneutrality vis a vis generators and distributors. Instructions to be binding on

both. (Sections 26, 27,31, 38, 39) Private 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 Despatch Centre/Transmission Utility / Transmission Licensee not

to trade in power. Facilitating genuine competition between generators.

(Sections 27, 31, 38, 39,41)

Transmission

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Requires licensing (Clause 12). Commission can issue two or more licenses for

distribution of electricity through their own distribution

system in the same area (Clause(14)).

Distribution licensee can engage a franchisee toundertake distribution in his area of supply (Clause(14)).

All supply would need to be metered within 2 years.

However, State Commission may extend this period for

completing the task of metering (Clause 55(1)).

Distribution

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Every distribution licensee shall establish a forum for

redressal of grievances of the consumers within six months

as per guidelines of the commission (Clause42(5)).

Distribution licensee to provide supply within the period asspecified by the commission or else a penalty upto Rs. 1000

per day to be paid (Clause 43(3)). Disconnection of supply in case of default of payment after

giving 15 days notice (Clause 56(1)). 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)

Distribution

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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. Open access in distribution to be allowed by SERC in phases

and to provide open access to all consumers having requirementof 1 MW or more within 5 year(Sections 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 subsidy Licensees obligation to supply. (Section 42)

This would give choice to customer.

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Surcharge & cross subsidy to be progressively eliminated (Clause 42).

In case of captive generating plant carrying the electricity to the

destination of his own use, no surcharge shall be leviable (Clause 42).

Open AccessOpen Access

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Trading/ Market development

Trading distinct activity permitted with licencing. (Section )11

Regulatory Commission may fix ceiling on trading margin to

avoid artificial price volatility.(Sections ( ) (b) & ( ) (b))111 111

The Regulatory Commission to promote development of market

including trading. (Section )11

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State Electricity Regulatory Commission to beconstituted within six months. (Section 82)Provision for Joint Commission by more than oneState/UT. (Section 83)Provision for constitution of Appellate Tribunal

consisting of Chairman and three Members.(Section 110, 112)Appellate Tribunal to hear appeals against theorders of CERC/SERC, and also to exercise generalsupervision and control over the Central/State

Commissions. (Section 111)Appeal against the orders of Appellate Tribunal tolie 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

egulatory Commissions/Appellate Tribunalegulatory Commissions/Appellate Tribunal

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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 electricalplants 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 AuthorityCentral Electricity Authority

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Regulatory Commission to determine tariff for supply of electricityby 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 andmove towards actual cost of supply. (Section 61 (g))

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))

Tariff PrinciplesTariff Principles

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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 recoverablecontinuously. (Section 56(2))

Consumer Protection

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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 byRegulatory 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

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Restructuring of SEBs

Provision for transfer scheme to create one or more

companies from SEB. (Section )111

Provision for continuance of SEBs (Section )111

States given flexibility to adopt reform model/path.

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THANK YOU

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Electricity Act 2003

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National Electricity Policy

Objectives:

Availability of electricity to all households in five yearsAs per 2001 Census, 45% households do not have

access to households

Demand to be fully met by 2012.Energy and peaking

shortages to be overcome and spinning reserve to be

available.Reliability and quality of power to be of international

standard by 2012.Raising the per capita consumption to 1000 units by

2012.Minimum lifeline consumption of 1 unit per household

per day.

Protection of consumer's interests

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Salient features of National Electricity Policy

CEA to notify first National Electricity Plan in six months

with a perspective up to year 2017. The Plan prepared byCEA to be used by prospective generating companies and

transmission licensees as reference document

Development of Rural Electrification Distribution

backbone (REDB).

1At least one 33/11(66/11) kV substation in each blockFrom REDB, one distribution transformer in at least

each village settlement

Financial support in terms of capital subsidy & soft longterm debt to States for rural electrification.Special preference to Dalit Bastis, Tribal Areas and

other weaker sections for rural electrification

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Creation of adequate generation capacity

Capacity addition of 1,00,000 MW during the period 2002-2012. Availability

of installed capacity at 85%, with a spinning reserve of at least 5% by 2012

for grid security.Full development of hydro potential.

50,000 MW hydro initiatives already launched to be vigorously pursued.

Choice of fuel for thermal generation to be based on economics ofgeneration and supply of electricity.Imported coal based thermal power stations, particularly at coastal

locations, would be encouragedA National Gas Grid would facilitate development of Gas Turbines/

Combined Cycle Gas Turbine Technologies

Public-private partnership in Nuclear Plants would be facilitated.All existing Generation capacity should be brought to minimum acceptable

standards.

R&M on well defined plan with cost-benefit analysis to be taken up

The captive generation to be harnessed for meeting shortages particularly for

load periods.

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Development of National Grid.Network expansion should be planned and implemented

keeping in view the anticipated transmission needs thatwould be incident on the system in the open access regime.

Prior agreement with the beneficiaries would not be a pre-condition for network expansion.

A national transmission tariff framework, sensitive todistance, direction and related to quantum of flow, needs tobe implemented. As far as possible, consistency needs to bemaintained in transmission pricing framework in inter-Stateand intra-State systems.

The National Load Despatch Centre (NLDC) would be notifiedwithin three months


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Crux of the sectors financial viability lies in the efficient managemenof Distribution Sector.

The Central Government would assist the States, which develop a clearroadmap for proper restructuring, in arranging transition financing from

various sources.

Performance based regulation through Multi-Year Tariff (MYT)

framework is an important structural incentive.

Private sector participation in distribution to be encouraged for achievingthe requisite reduction in Transmission and Distribution losses and

improving the quality of service to the consumers.

State Govts. may restructure distribution zones. a revenue district, a

Municipal Council as the minimum area for second and subsequent

license. The second and subsequent licensee for distribution in the

same area shall have obligation to supply to all consumers. The State Regulatory Commissions to put in place independent third

party meter testing arrangement.Support for adoption of IT system for ensuring correct billing to

consumers.

Speedy implementation of stringent measures againsttheft of electricity

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Cost of recovery of service from consumers at tariff reflecting

efficient costs to ensure financial viability of the sector.

Consumers below poverty line may be provided life-line supply

subsidy, say 30 units per month. Tariffs for such designated group

of consumers will be at least 50 % of the average (overall) cost of

supply.

The existing cross-subsidies for other categories of consumers

would need to be reduced progressively and gradually.

Efficient technologies, like super critical technology, coalgasification etc. would be gradually introduced for generation of

electricity. .A suitable funding mechanism would be evolved for promoting

R& D in the Power Sector

The Government will facilitate establishment of a major Technology

Center

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Salient features of National Electricity PolicyPart of new generating capacities may be sold competitively to promotemarket development targeted to reduce prices and benefit consumers.

Availability based tariff (ABT) to be extended to State level for better griddiscipline through economic signaling. Increasingly higher electricity to be made available for sale through market.

To meet the objective of "power for all" including household electrification, itis estimated that an investment of the order of Rs.9,000,000 crores would berequired to finance generation, transmission, sub-transmission, distribution

and rural electrification projects.

It would be imperative that an appropriate surplus is generated through returnon investments and, at the same time, depreciation reserve created so as tofully meet the debt service obligation.

Conducive fiscal regime for attracting investment in the power sector. TheState Governments also advised for reviewing tax structure at their level forreducing the cost of electricity.

Steps would also be taken to address the need for regulatory certainty togenerate investors confidence.

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Demand side management through energy conservation measures.

Labels regarding energy efficiency to be displayed on appliances. Efficient agricultural pump sets and efficient lighting technologies to be

promoted. Appropriate tariff structure for managing the peak load, differential tariff

structure for peak & off-peak supply.

Environmental concerns would be suitably addressed by way of

comprehensive Environmental Impact Assessment and implementation ofEnvironment Action Plan (EAP).

Setting up of coal washeries will be encouraged.

Boost to renewable and non-conventional energy sources

A prescribed percentage of power to be purchased from such sources ofenergy.

To be made applicable for the tariffs to be determined by the SERCs from 1stApril, 2005.

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Necessary regulations and appointing Ombudsman forredressal of consumers' grievances to be in place in sixmonths.

Reliability Index (RI) of supply of power to consumers

should be indicated by the distribution licensee.

The Central Government, the State Governments andElectricity Regulatory Commissions should facilitatecapacity building of consumer groups and their effective

representation before the Regulatory Commissions

Detailed provision

Elect Act 2003 (DRUM)

Documents

Transcript of Elect Act 2003 (DRUM)