Regulators' forum critical of Centre's overreach in Electricity Bill, 2022

Proposed amendments are diluting the basic premise of the Electricity Act, it says

Forum of Regulators (FOR), the collective apex body of all Electricity Regulatory Commissions (ERCs), in its special meeting on the proposed Electricity (amendments) Bill, 2022, has criticised the Centre for diluting the premise of the legislature which it said would hinder the functioning of the power sector.

“Electricity lies in the concurrent list of the Constitution of India, making both the State and the Central Government responsible for the development of the sector. In view of this, the Electricity Act 2003 made a fine balance between the role and responsibilities of the State and the Central Governments. However, the proposed amendments to the Act, at several places, tend to shift this balance towards the Central Government,” the FOR said in its remarks. Business Standard has reviewed the document.

The comments of the FOR have been submitted to the Standing Committee of Energy which is currently holding stakeholders’ discussion on the Electricity Bill, 2022. The meeting was chaired by the Chairman, Uttar Pradesh ERC (UPERC) in the absence of the chairman, Central ERC (CERC), who usually chairs the FOR sessions.

The FOR has said, one of the objectives of the Electricity Act 2003 is to “distance the Government from the process of determination of tariff and it was ensured through the establishment of Regulatory Commission at the Central and State levels, who were responsible for regulating the sector.

“However, through the proposed amendments, this basic premise of the Electricity Act is getting diluted, as Central Government interventions have been suggested on various regulatory matters, which may create avoidable confusion in the sector. Such amendments should ideally be dropped in the interest of smooth functioning of the power sector,” the FOR observed.

In the clause-wise remarks, FOR has asked for the regulator to prescribe the rules, not the Central government. These remarks are on the clauses which pertain to opening of power distribution for private investment, several definitions related to the same, dispute settlement mechanism and penalty provisions.

The amendments to the Electricity Act, 2003 which was introduced in the Parliament recently has given overarching power to the Centre and central government agencies in areas which were either state subject or followed a federal model, this paper reported recently.

The bill has 35 proposed amendments in all, half of which would come under the ambit of the “as prescribed by the Centre”. This includes provisions on to inviting private investment in power distribution, which is a state subject. In the power sector supply chain, generation and transmission are under the Centre while distribution is a state subject.

The Bill has provided CERC the authority to approve anyone who applies for a power distribution licence in an area. This is likely to cover players such as Tata Power, Adani Electricity, Torrent Power, CESC etc which are already operating power distribution in some states.

The erstwhile Act always had the provision for State ERCs (SERCs) to allow more than one licensee in an area but was not clear on the network access and tariff regulations. An amendment to the Section 14 and 42 of the Act has provided new licensees access to the existing power network in a state. The new licensees need not build a new network and use the existing network by paying the state-owned power distribution company (discom).

The capital adequacy, creditworthiness, code of conduct and criteria for new distribution licensees would also be provided by the Centre. SERCs would decide the minimum and maximum tariff for power supply in an area.

In the most stringent step taken under the amendments, the grid operator – National Load Despatch Centre (NLDC) has been empowered to curtail electricity supply to a state/discom if they default in their payment to power generating companies (gencos) and transmission service providers. The payment security mechanism however would be “prescribed by the Centre.”

“During the finalization of this Act and subsequent rules and policies based on the amended Act, Government should remain sensitive towards the desirable balance in terms of burden to be borne by the electricity rate payers vs tax payers. For the benefit of the electricity consumers, it should be ensured that rate paying electricity consumers are not subjected to adverse impact for subsidizing development of any other sector,” the FOR noted.