1 An Act to amend the law relating to the supply and use of electrical energy. inserted by section 5 of the Indian Electricity (Amendment) Act, (Act No. Electricity Act, (2) It extends to the whole of India except the State of Jammu and Kashmir. (3). It shall come into force on such date as the. Main Features of Electricity Act, Electricity (Amendment) Act, for Encouraging Competition in Development of Transmission Projects- amendment dated May 2, The above documents are available in PDF format. Please.
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PDF | The Electricity Act was a landmark Act which promised to remove the maladies which afflict reforming the power sector of India (Chatterjee, ). The Indian Electricity Rules - Free download as Word Doc .doc /.docx), PDF File .pdf), Text File .txt) or read online for free. THE INDIAN ELECTRICITY RULES, CONTENTS. CHAPTER I. PRELIMINARY. 1. Short title and commencement. 2. Definitions. 3. Authorisation.
This memo studies the progress of the restructuring process, identifies additional elements that might be needed to tweak the reforms, and recommends better implementation strategies for improved results. The Indian Electricity Act provided the original framework for the electricity industry.
It was the first legislative directive detailing the rules of functioning for private sector licensees, who were mostly active in the power generation activity. The act detailed process for distributing licenses for generation, the framework for laying down distribution lines, and the rules governing the relationship between licensee and the consumers. There was significant emphasis on promoting private sector activity. Electricity was rightly deemed as one of the most important factors that would determine the economic prospects of a newly independent nation, but the attention led to increased interference by the government in the power sector.
In the decades that followed, the power sector in India was characterized by lack of generation capacity, poor transmission network, frequent blackouts and lack of adequate funds to modernize the grid or to increase generation capacity.
The politically sensitive environment was not attractive for private investment either, and the complex maze of permits and licenses further exacerbated the problem. The led to deterioration of quality of power supply, and increased the effective cost of power to the consumers who had to resort to other sources of power like private diesel generators or kerosene lamps. However, even after attractive terms such as these, private participation in electricity generation was way below target.
Despite the huge demand for power, private sector companies were unable to operate. They could not enter into reliable long term contracts with the private generators with guarantee of download of electricity.
Following the success of electricity industry restructuring in some Latin American Countries, the World Bank put forth power sector reforms as a condition for future assistance to power sector in India in The restructuring process was piloted in the state of Orissa5, which has very low component of agricultural subsidies.
The process began with functional unbundling and corporatization of the SEB into separate entities for generation, transmission and distribution. The presence of a regulatory framework is important in industries with natural monopolies, and which can be influenced by private interests. Following the pilot project in Orissa, more and more states followed the unbundling process. Currently, most of the states have unbundled their SEB into separate entities for generation, transmission and distribution and have an independent state level regulator.
At the central level, reforms were initiated to resolve issues governing generation and transmission issues involving more than one state through enactment of Regulatory Commissions Act in , which led to the formation of Central Electricity Regulatory Commission CERC. CERC is responsible to regulate tariff for generating companies owned by the central government or any other generation company catering to more than one state.
Additionally, in order to introduce transparency and efficiency, CERC has presided over landmark changes in tariff determination by imposing Availability Based Tariff ABT to bring reliability in the grid by providing frequency linked incentives and disincentives. While such measures helped the electricity sector, they were not long term solutions by any means.
In order to remove systemic flaws, the parliament passed Electricity Act , which overrides all pre-existing legislations Indian Electricity Act , Electricity Supply Act and Electricity Regulatory Commissions Act Electricity Act The act aims to bring qualitative transformation in the electricity sector by creating a framework that distances government from regulation.
It consolidates the laws relating to generation, transmission, distribution, trading and use of electricity by taking measures conducive to the electricity sector.
The act provides less constrained environment for potential investors by removing administrative hurdles wherever appropriate, and has created an environment to introduce competitiveness in the market by rationalizing electricity tariff structure. However, a decade after introduction of the reforms, the effects have so far been mixed. There is considerable lack of evaluation of the efficacy of the reforms.
Remaining parts of this paper attempt to outline some of the continuing discrepancies in the power sector that were either overlooked by the reform, or did not bear the intended impact, and the possible strategies to accomplish the same. The existence and development of adequate power infrastructure is essential for sustained growth of the economy. Following successive waves of reforms, the installed electricity generation capacity has grown significantly since independence, from 1, MW in to GW 10 Figure 3 as of December Currently, India has the fourth largest power generation capacity in the world.
The annual per capita electricity consumption in India is kWh13 Figure 4 , which is significantly below those in developed economies as well as the average per capita electricity consumption in the world.
Many parts of the country continue to be under chronic power shortage.
Figure 4- Per Capita Electricity Consumption in Various Countries during the year The power system has high peak demand shortages Figure 5 , which is a serious deterrent to sustained industrial and commercial activity. Restructuring included unbundling of generation, transmission and distribution activities, privatization of generation and distribution, etc. As per the Constitution, both Parliament and state legislatures can make laws on electricity.
The Act sought to introduce more competition in the sector by enabling private sector participation. However, in cities such as Delhi and Mumbai, private entities also participate in the distribution business. The Act enabled larger consumers with consumption more than 1MW to download power from any source through non-discriminatory access to transmission lines.
The Commissions also determine tariffs for generation, transmission and distribution of electricity. The Bill amends the Act to: i bring in further competition and efficiency in the distribution sector, ii rationalise tariff determination, and iii promote renewable energy.
The Bill provides for separate licences for maintaining the distribution system distribution licence and for the supply of electricity supply licence. Multiple supply licences may be granted by the SERC within an area of supply. Consumers will have the choice to download electricity from any of the supply licensees. The Bill mandates that at least one of the supply licensees in a given area of supply should be a government company. Under the Act, distribution licensees enter into power download agreements PPAs with generation companies for the retail sale of electricity.
The Bill states that, post segregation, supply licensees will download power and sell it to consumers. If the supply licensee chosen by a consumer ceases to be a supply licensee or if his supply licence is suspended, the consumer will be provided electricity by the provider of last resort.
The provider of last resort will be a supply licensee designated by the SERC. Transfer of supply business The Bill provides for the transfer of the supply function from the distribution licensees to the supply licensees. This includes the existing assets, liabilities and the power download agreements. For enabling the transfer, the Bill provides for the setting up of an incumbent supply licensee and an intermediary company.
Incumbent supply licensee: As part of the transfer process, state governments will transfer the supply function from the existing distribution licensee to an incumbent supply licensee.
This will include the property, and the rights and liabilities, relating to the supply of electricity. The incumbent supply licensee will provide electricity till the new supply licensees enter the market. Intermediary company: State governments will transfer the existing PPAs and procurement arrangements from the distribution companies to an intermediary company.
The intermediary company will then allocate these PPAs to the supply licensees. The tariff for retail sale of electricity will be subject to a ceiling price to be determined by the SERC. The tariff determined by the SERC for a licensee must provide for recovery of all prudent costs of the licensee through an appropriate price adjustment formula. With regard to the guiding principles for the determination of tariff, the Bill states that the revenue deficit, if any, prior to the commencement of the Bill, will be recovered.
Renewable energy The Bill defines renewable energy sources to include small hydro, wind, solar, bio-mass, co-generation from these sources, geothermal and other sources as notified by the central government. A National Renewable Energy Policy will be prepared by the central government, in consultation with state governments.
The Policy will provide for the development of the power system based on optimal utilisation of hydro and renewable sources of energy. Under the Act, penalties for all companies are up to Rs 1 lakh for each contravention and up to Rs 6, for every day that such contravention continues.
The Bill increases these to Rs 1 crore and Rs 1 lakh respectively. For companies generating renewable energy, the penalty will be up to Rs 10 lakh for each contravention and up to Rs 10, per day for continuing failure. If the supply licensee fails to supply electricity within 15 days of application, he shall be liable to a penalty which may extend to Rs 1, for each day of default.
Conditions of service of commission members Under the Act, the term of office for the chairperson or other members of the Regulatory Commissions is five years. The Bill reduces the term to three years and also allows for their re-appointment.
In order to encourage competition in the supply of electricity, the Bill segregates these two functions. It allows multiple supply licensees to operate in a given area of supply. However, the Bill requires that one of the supply licensees in a given area of supply must be a government owned company. The state governments are required to unbundle State Electricity Boards. However they may continue with them as distribution licensees and state transmission utilities.
Metering of electricity supplied made mandatory. Provisions related to thefts of electricity made more stringent.
Trading as a distinct activity recognised with the safeguard of Regulatory commissions being authorised to fix ceiling on trading margins. For rural and remote areas, stand-alone system for generation and distribution is permitted. Thrust to complete rural electrification and provide for management of rural distribution by panchayat, cooperative societies, NGOs, franchisees etc.
Preparation of technical standards for construction of electrical plants, electric lines and connectivity to the grid is the responsibility of CEA as per section 73 b of the Electricity Act, This implies that generating stations need not follow compulsory the CEA technical standards specified for construction of electrical plants and electric lines. Left Parties Opposition[ edit ] Left parties opposed the clauses related to competition in electricity market such as unbundling of Electricity Boards and open access and also had strong objection regarding elimination of cross subsidies.
UPA government , in its first tenure agreed for some of the amendments and according clause regarding cross subsidies are amended. In its second tenure, UPA government published a draft amendment of The Electricity Act with the main intension of separation of retail sale of electricity from distribution business. Amendments[ edit ] Several amendments were made after in the Act. The amendments proposed during is to make major changes.
The important provision is to introduce electricity supply companies who will not own electric lines. The Government says it would attract competition and therefore will cause reduction in price.