Primer to Electricity (Amendment) Bill, 2020
Author: Smeet Anklesaria
Designation: Student, Gujarat National Law University
Email ID: firstname.lastname@example.org
The Electricity Act, 2003 is responsible for governing all the laws regarding every aspects of the electricity market cycle i.e. the generation, distribution, transmission, trading and use of electricity. This law is formulated keeping in mind the interests of the state and central departments, producers and consumers of electricity, setting rules and regulations and regulatory authorities to govern a major component of the power sector. Experts around the country have opined that some of the provisions of the Act have become dated and archaic, needing an update.
In order to address some recurring issues, and to promote further commercial incentive for private players to enter the market in the generation, distribution and transmission of electricity, with some policy modifications, the Electricity (Amendment) Bill, 2020 has been introduced by the Ministry of Power on April 17, 2020 (“Amendment”).
OBJECTIVES BEHIND ELECTRICITY (AMENDMENT) BILL, 2020
Ministry of Power has prepared a draft proposal for Amendments in Electricity Act, 2003 in the form of draft Electricity (Amendment) Bill, 2020 with the following broad objectives:
1. Ensure consumer centricity
2. Promote Ease of Doing Business
3. Enhance sustainability of the power sector
4. Promote green power
KEY AMENDMENTS BY ELECTRICITY (AMENDMENT) BILL, 2020
Relevant Section: Section 3A
Present Situation: Presently, the state government is responsible for initiating within its state, ideas for promoting the purchase of electricity from renewable sources.
After the Amendment: A new section, section 3A is proposed to be added after section 3 of the principal act which shall be dealing with the “National Renewable Energy Policy”. Under this section, the Central Government will be authorized with the power to prepare and notify a National Renewable Energy Policy “for promotion of generation of electricity from renewable sources”. However, while exercising the said power, the same shall be done with the consultation of the State Government. In accordance to the new section, it will become mandatory to purchase a minimum said percentage of electricity from renewable sources with special attention to hydro power. However, the draft is silent about the time period for validity of a National Renewable Energy Policy that is to say that the amendment does not provide for a pre-determined time period during which the government has to come up with a new policy keeping in mind the economic, social, technical and political situation of that time.
Direct Benefit Transfer:
Relevant Section: Section 65
Present Situation: Currently, the state government, under section 65 of the Act, is required to pay subsidy in advance to the Discoms and the customers therefore, indirectly benefits from the subsidy due to reduced price of power.
After the Amendment: The amendment bill introduces the concept of Direct Benefit Transfer to the Act. This means that after the amendment, the amount of subsidy will be transferred directly in the account of the consumer and thus, the consumer will directly benefit from the subsidy amount.
This is in lieu of the amendment aiming at bringing transparency and accountability to the State Government regarding the subsidy released.
Relevant Section: Section 49
As per this amendment, no electricity shall be scheduled or dispatched unless adequate security of payment as agreed upon by the parties to the contract, has been provided.
This provision aims at protecting the power generators from issues of non- payment.
Power to Load Dispatch Centre: It is proposed to empower State Load Dispatch Centres so as they may oversee the payment security mechanisms as per contracts, prior to dispatch of electricity.
Electricity Contract Enforcement Authority(ECEA):
Relevant Section: 109A to 109N
Present Situation: The existing authorities, i.e. APTEL, CERC and SERCs constituted under the Electricity Act, 2003 do not have the jurisdiction to deal with the matters pertaining to the PPAs; unless, such issue pertaining to enforcement is anywhere related to determination of tariffs, licensing, metering and related matters.
After the Amendment: The amendment provides for the creation of Electricity Contract Enforcement Authority [ECEA] which shall have the sole jurisdiction for deciding the contractual matters related to PPAs such as sale, purchase and transmission of electricity. The Enforcement Authority will have the powers of a civil court of arrest, attachment of property including to execute its orders as a decree of a civil court and will be headed by a retired judge of the High Court.
It is important to note that only contractual matters fall under the jurisdiction of ECEA whereas, the jurisdiction of any matter related to determination of tariff or any dispute related to tariff shall continue to remain with the SERC.
Relevant Section: Section 14
The Distribution licensee can recognize and authorize a person as “Distribution sublicensee” and such a Distribution sublicensee will be responsible for distributing electricity on behalf of the Distribution licensee in a particular area within its area of supply, with the permission of the appropriate State Commission.
By way of this amendment, privatization of distribution of electricity is aimed to be achieved.
Cross Border Trade:
Relevant Section: Section 49A
Present Section: Currently there is no provision in the Act that deals with cross border trade of Electricity.
After the Amendment: This amendment proposes to add a section, “section 49A”, to the act providing for provision of cross border trade. The said section will allow the Central Government to prescribe rules and issue guidelines for allowing and facilitating cross border trade of electricity in accordance with the provisions of this Act.
Relevant Section: Section 142 and Section 146
Penalties under Section 142 of the Electricity Act in relation to non-compliance with the rules/ regulations of the Electricity Act and/or orders or directions of the relevant SERC have been increased to INR 1,00,00,000 and INR 1,00,000 per day for continuing failures. Additionally, for noncompliance with the renewable and hydro-power purchase obligations, the Amendment proposes a penalty of INR 0.50/kWh for the shortfall in purchase in the 1st year of default, and if such default continues for the 2nd successive year, then the penalty is proposed to be increased to INR 1 /kWh and thereafter INR 2/kWh. Under Section 146 of the Electricity Act, the penalty for general contravention of any order or direction issued under the Electricity Act, or any of its rules/ regulations, has also been increased from INR 1,00,000 to INR 1,00,00,000 and in case of continuing failures, from INR 5,000 per day to INR 1,00,000 per day.
National Selection Commission:
Present Situation: The Selection Committee currently has equal number of members from the Central and State Government – one member from Central Government and one from State Government.
After the Amendment: According to the amendment instead of the Selection Committee being presided over by a retired Judge of the High Court, it is proposed that the committee be headed by a sitting Judge of the Supreme Court. Instead of multiplicity of Selection Committees, there be one Selection Committee for drawing up of panels for the vacancies in the Central Electricity Regulatory Commission and State Electricity Regulatory Commissions. The appointments will continue to be made by Central Government for the Central Electricity Regulatory Commission and by the State Governments for the State Electricity Regulatory Commissions as before.
However, based on the suggestions received, the Central Government is now considering to continue with the existing separate Selection Committees for each state – but make them Standing Selection Committees so that there is no need for constituting them afresh every time a vacancy occurs. The Selection Committee will continue to have equal number of members from the State and Central Governments, as earlier with the only difference that it will now proposed to be presided by the Chief Justice of the High Court of the state.
Cost Reflective Tariff:
Present Situation: Over the period, the regulatory Commissions have been recognizing cost but defer it to recover in future period and also factoring the subsidies based on commitment.
After the Amendment: Under the Amendment, it is proposed that the tariff should be 'cost reflective', i.e. reflect the cost of the supply of electricity and that the retail tariff should reflect the actual cost or fair cost of the power which is to be supplied.