Jammu Electricity Act 2003 – Distribution Reforms1

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Electricity Act 2003Distribution Reforms


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Background

Three erstwhile Acts that regulated the electricity

sector:

The Indian Electricity Act, 1910

The Electricity (Supply) Act, 1948

The Electricity Regulatory Commissions Act, 1998

Contd..


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Background (contd..)

The Indian Electricity Act, 1910

Provided basic framework for electric supply industry in

India. Growth of the sector through private licensees. Licence by

State Govt.

Provision for licence for supply of electricity in a specifiedarea.

Legal framework for laying down of wires and other works. Provisions laying down relationship between licensee and

consumer.

The Electricity (Supply) Act, 1948 Mandated creation of SEBs.

Need for the State to step in (through SEBs) to extend

electrification (so far limited to cities) all across the country.

Contd..


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Main amendments to the existing Acts

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 fixed assets a statutory requirement (w.e.f 1.4.1985)

Amendment in 1991 to open generation to private sector and

establishment of RLDCs

Amendment in 1998 to provide for private sectorparticipation in transmission, and also provision relating to

Transmission Utilities.


Contd..


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The Electricity Regulatory Commissions Act, 1998 Provision for setting up of Central / State Electricity

Regulatory Commission to with powers to determine tariffs.

Constitution of SERC optional for States. .

Distancing of Govt from tariff determination.



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State Reform Acts

Orissa (1995)

Haryana (1997)

Andhra Pradesh (1998)

Uttar Pradesh (1999)

Karnataka (1999)

Rajasthan (1999)

Delhi (2000)

Madhya Pradesh (2000)

Gujarat (2003)


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Common features of State Acts

Independent Regulatory Mechanism

Constitution of SERC

Powers of tariff fixation, licensing, regulation or working of

licensees, performance standards etc. to SERC

Reorganisation of SEB

TRANSCO as successor entity

Single buyer model

Separation of generation, transmission & distribution

Contd..


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Common features contd..

Powers of State Governments to give policy directions

to SERCs.

Policy directions also on subsidy

State Governments to compensate licensee affected by

direction regarding subsidy


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Need for the new legislation

Requirement of harmonizing and rationalizing the provisions in the

existing laws to

- Create competitive environment for benchmark competition which

will result in enhancing quality and reliability 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 power trading, open

access, Appellate Tribunal etc.

Special provision for the Rural areas.

S li t f t f th El t i it A t


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Salient features of the Electricity Act,2003

Role of Government

Rural Electrification Generation

Transmission

Distribution

Consumer Protection Trading / Market Development

Regulatory Commission / Appellate Tribunal

Tariff Principles

CEA Measures against Theft of electricity

Restructuring of SEBs

R l f G t


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Role of Government

Central Government to prepare National Electricity Policy and

Tariff Policy.(Section 3)

Central Govt. to notify a National Policy for rural areas

permitting stand alone systems based on renewal and Non-

Conventional energy sources in consultation with States.

(Section 4)

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)


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Appropriate 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)

Rural Electrification

i


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Generation free from licensing. (Section7)

Requirement of TEC for non-hydro generation done away with. (Section7)

Captive Generation is free from controls. Open access to Captive

generating plants subject to availability of transmission facility. (Section9)

Clearance of CEA for hydro projects required. Necessary due to concern of

dam safety and inter-State issues. (Section8)

Generation from Non-Conventional Sources / Co-generation to be

promoted. Minimum percentage of purchase of power from renewables may

be prescribed by Regulatory Commissions. (Sections61 (h), 86 (1) (e))

Generation

T i i


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There would be Transmission Utility at the Centre and in the States to undertake

planning & development of transmission system. (Sections38 & 39)

Load despatch to be in the hands of a govt company/organisation. Flexibilityregarding keeping Transmission Utility and load despatch together or separating

them. Load Despatch function critical for grid stability and neutrality vis a vis

generators and distributors. Instructions to be binding on both.

(Sections26, 27,31, 38, 39)

Transmission companies to be licensed by the Appropriate Commission aftergiving due consideration to the views of the Transmission Utility.

(Sections15(5)(b))

The Load Despatch Centre/Transmission Utility / Transmission Licensee not to

trade in power. Facilitating genuine competition between generators

(Sections27, 31, 38, 39,41)

Open access to the transmission lines to be provided to distribution licensees,

generating companies. (Sections38-40)

This would generate competitive pressures and lead to gradual cost reduction.

Transmission

Distribution


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- Distribtution to be licensed by SERCs.

- Distribution licensee free to take up generation & Generating co. free

to take up distribution licence. This would facilitate private sector

participation without Government guarantee/ Escrow. (Sections 7, 12)- Retail tariff to be determined by the Regulatory Commission.

(Section 62)

- Metering made mandatory. (Section 55)

- Provision for suspension/revocation of licence by Regulatory

Commission as it is an essential service which can not be allowed tocollapse. (Sections 19, 24)

- Open access in distribution to be allowed by SERC in phases. (Section

42)

- In addition to the wheeling charges provision for surcharge if open access

is allowed before elimination of cross subsidies, to take care of

(a) Current level of cross subsidy(b) Licensees obligation to supply. (Section 42)

- This would give choice to customer.

Distribution

C P t ti


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Consumer Protection

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 recoverable continuously. (Section 56(2))

Contd

Consumer Protection contd


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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 by

Regulatory 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 contd


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- Trading distinct activity permitted with licencing. (Section

12)

- Regulatory Commission may fix ceiling on trading margin

to avoid artificial price volatility. (Sections 79 (2) (b) & 8(2) (b))

- The Regulatory Commission to promote development

of market including trading. (Section 66)

Trading/ Market Development

Regulatory Commissions/Appellate Tribunal


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Regulatory Commissions/Appellate Tribunal

State Electricity Regulatory Commission to be constituted within six

months. (Section 82)

Provision for Joint Commission by more than one State/UT. (Section 83)

Provision for constitution of Appellate Tribunal consisting of Chairman

and three Members. (Section 110, 112)

Appellate Tribunal to hear appeals against the orders of CERC/SERC, and

also to exercise general supervision and control over the Central/State

Commissions. (Section 111)

Appeal against the orders of Appellate Tribunal to lie 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 appeals.

C t l El t i it A th it


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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 electrical plants 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 Authority

Tariff Principles


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Tariff Principles Regulatory Commission to determine tariff for supply of electricity bygenerating co. on long/medium term contracts. (Section 62)

No tariff fixation by regulatory commission if tariff is determinedthrough competitive bidding or where consumers, on being allowedopen access enter into agreement with generators/traders.

Consumer tariff should progressively reduce cross subsidies and movetowards actual cost of supply. (Section 61 (g), (h))

State Government may provide subsidy in advance through the budgetfor specified target groups if it requires the tariff to be lower than thatdetermined by the Regulatory Commission. (Section 65)

Regulatory Commissions may undertake regulation including

determination of multi-year tariff principles, which rewards efficiencyand is based on commercial principles. (Section 61 (e), (f ))

Regulatory Commission to look at the costs of generation, transmissionand distribution separately. (Section 62 (2))

Measures Against Theft of Electricity


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Measures Against Theft of Electricity- Focus on revenue realisation rather than criminal proceedings. (Sections 126, 135)

- Penalties linked to the connected load and quantum of energy and financial gain

involved in theft. Acts of tapping, or tampering with meter also constitute the offence.Offence punishable with imprisonment up to three years or fine up to six time financial

gains assessed or both.(Section 135)

- Provisions for compounding of offences. (Section 152)

- Assessment of electricity charges for unauthorised use of electricity by the assessing

officer designated by the State Government. (Section 126)

- Theft of electric lines and materials made punishable with imprisonment or fine or both.

(Section 136)

- Punishment provision for abetment of theft. (Section 150)

- Special Courts (Sections 153-158)

Rest ct ing of SEBs


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- Provision for transfer scheme to create one or more

companies from SEB. (Section 131)

- Provision for continuance of SEBs (Section172)

- States given flexibility to adopt reform model/path.

Restructuring of SEBs

New Central Law vis a vis State Reform /


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All licenses, authorisations, permissions, approvals, clearances

issued under the repealed laws are saved for a maximum period ofone year. (Section 172(b)).

Action taken under corresponding provisions of the repealed laws

or rules made thereunder are saved to the extent of

consistency/correspondence with the provisions of the newAct(Section 185 (2)).

Provisions of State Reform laws not inconsistent with provisions

of the new Central law will continue to apply in that State (Section

185(3)).

State Governments can defer implementation of the new Act by

a maximum period of six months. (Section 172(d)).

New Central Law vis a visState Reform /Amendment Laws


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National Electricity Policy(under section 3(1) of the Electricity Act, 2003)

Aims and ObjectivesAccess of Electricity-Available for all households in next five years.

Availability of Power -Demand to be fully met by 2012.Energy and peaking shortages to be overcome and adequate spinning reserve to

be made available.

Supply of Reliable and Quality Power of specified standards in an efficient

manner and at reasonable rates.

Per capita availability of power to be increased to 1000 units by 2012.

Minimum lifeline consumption of 1unit/household/day as a merit good by 2012Financial Turnaround and commercial viability of sector.

Protection of consumers interests.


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Issues Addressed

The policy addresses the following issues:

Rural ElectrificationGeneration

Transmission

Distribution

Recoveries of cost of services and targetted subsidies

Technology Development and research and development (R&D)Competetion aimed at consumer benefits

Financing power sector programmes including private sectorparticipation

Energy conservation

Environmental issuesTraining and Human Resource Development

Cogeneration and Non conventional Energy sources

Protection of consumer interests and Quality standards.


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Rural Electrification Policy, 2006

RE policy notified in August-2006 in compliance withSections 4 and 5 of Electricity Act 2003

Goals

Rural (Village) Electrification should be completed

by the end of the 10th Plan i.e. by year 2007;

Access to all households should be provided by the

end of the 11th Plan i.e. by year 2012;

At least one unit of electricity per day is provided toall households Below the Poverty Line.


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AARQA Goal

Accessibility to electricity: Increase from the currently

assessed levels to all households by 2012

Availability of power: Increase from the current limited levels

to demand matched by 2012

Reliability of power supply: Increase from the currently low

levels to 24 hours by 2012

Quality of power supply: Increase from the currently poor

levels to 100% by2012

Affordability of power: Pricing based on the ability of the

customer to pay

Documents

Jammu Electricity Act 2003 – Distribution Reforms1