ELECTRICITY AMENDMENT BILL, 2021

This Article is written by Ashima Gupta student of VIPS, Delhi.

INTRODUCTION

A proposal to get the approval of the Cabinet for the Electricity (Amendment) Bill, 2021 was circulated in January 2021 and during the Budget session the new bill was tabled in the Parliament. It is very likely that the Bill will be pushed for passage in the monsoon session of the Parliament. The main purpose of the bill is to seek to delicense the distribution of electricity just like generation of electricity. The bill is likely to solve a lot of problems that has been faced by the power sector but for that a holistic approach is the need of the hour.Another major objective of the Electricity bill is to give the power to customers to pick from a variety of different service providers as also has been seen in telecom sector.  Certain amendments to the Electricity Act, 2003 have also been proposed by the Electricity (amendment) Bill, 2021.

NEED FOR THE AMENDMENT

  1. Though there have been a lot of reforms in the past, the electricity sector still has been facing a lot of issues like operational inefficiencies and financial solvency which has also negatively impacted other sectors and manufacturing competitiveness.
  2. Due to a poor financial health the electricity distribution companies are not able to pay the transmission and generation companies as well as banks and financial institutions.

KEY FEATURES OF THE AMENDMENT BILL

  1. Electricity distribution delicensing: Electricity distribution is delicensed by the Amendment Bill which would give consumers a choice to choose a distribution company in their area. The Electricity (amendment) Bill 2021 will provide choice to the electricity consumers which is in accordance with the announcement in the Union Budget 2021-22.
  2. The Renewable Power Obligation (RPO): The responsibility of fixing the renewable power obligations (RPO) is shifted from the state commissions to the central government. This is in line with the national climate change goals.
  3. Adjudication of disputes: With the addition of renewable generators the interconnected power system is getting more and more complex and thus the role of load dispatch centres is also gaining more importance. Thus Adjudication of disputes which are related to the load despatch centres (LDC) have also been included in the functions of regulatory commissions in the Amendment Bill of 2021.
  4. Increased Penalties: Penalty for the contravention of the provisions of the Act has also been increased. Now the penalty for contravention is up to Rs 1 crore. In case there is Non-fulfilment of the RPO, it will attract strict penalties as per the proposed amendments.
  5. The Amendment makes an appointment of a Member from a Law background in the Electricity Regulatory Commissions mandatory. This will give effect to a Supreme Court judgement where it was held that Electricity Regulatory Commissions must have a member with law background.
  6. Universal service obligation: A provision of a universal service obligation fund is provided in the amendment. This fund shall be managed by a government company and would be utilized to meet any deficits that are there in cross-subsidy. Security deposit will not be required, however, in case of supply through pre-paid meters. Cross-subsidy basically means that one set of customers receives favourable prices at the expense of other customers. For eg: If the average cost of electricity is Rs 7/unit. An industrial consumer is charged Rs 8/unit while a household consumer is charged Rs 5/unit. In this case a domestic consumer is being cross-subsidized by an industrial consumer.
  7. Strengthening of APTEL: The number of members of Appellate Tribunal for Electricity (APTEL) has been sought to be increased by way of the amendment . This has been done with the objective to strengthen it. The domains from where the members of State Electricity Regulatory Commissions (SERC) and Central Electricity Regulatory Commission (CERC) will come from have also been described.

ISSUES

  1. The bad state of the existing discom network: The newly registered companies are given the facility to use the network of existing discom as well as to use the power allocation which might be in a poor condition in a lot of cases because of paucity of funds. The quality of supply to the electricity consumers will be severely affected with such a network. Discoms collect revenue from the consumers and they feed the supply chain upstream. However they are unable to recover their costs and 75-80 per cent of it are power purchase costs.
  2. Mandatory qualifications: A fourth member is added to SERC and CERC by the way of the Amendment 2021.They should have experience and qualifications in the field of commerce, economics, public administration/public policy or management. Such experience and background in the field of finance and economics should have been made mandatory for this post in order to avoid rehabilitation of favourite retired officers.
  3. The clauses for removal of members of CERC / SERC are very vague which makes them liable to be misused.
  4. Electricity is a matter on the concurrent list and till now the states have played a major and dominant role in electrification. However through the draft Electricity Amendment Bill, 2021 the government is trying to shift this delicate balance of authority.
  5. Entry of private players: The barriers on entry of private players has been reduced. This can adversely affect the consumers. The results of operationalisation of parallel licensing can result in unnecessary litigations, steep consumer tariffs, skyrocketing expenses and regulatory failure.

CONCLUSION AND SUGGESTIONS

A provision of corporate governance risk management committee within discoms should be added irrespective of whether a company is listed or not. The proposed amendment bill should have included a broad guideline to reduce the tariffs.

A Direct Benefits Transfer (DBT) provision should have been included for better targeting: The fertiliser subsidies have been rationalised through Direct Benefits Transfer ( DBT). The same thing can be achieved in the electricity sector. Direct Benefits Transfer (DBT)can lead to better targeting of subsidies and accounting. Presently amendment majorly focuses on the compliance and competition aspect. Electricity regulatory commissions would play a significant role in this.

The regulatory commissions must be built as strong institutions. They should have autonomy and the same should be maintained and respected. The government should try and reduce its frequent interventions in the electricity sector and a proper framework must be provided to ensure the efficient functioning of it. Thus the bill might bring major changes in the sector but there are certain issues and concerns that still need to be addressed going forward.

REFERENCES

  1. Electricity (Amendment) Bill 2021 by Mehak Shah; https://lawx.in/news/view/electricity-amendment-bill-2021#!
  1. Electricity Amendment Bill, 2021
  2. Electricity Act, 2003
  3. Electricity (Amendment) Bill, 2021: How it can play out by Binit Dash; https://www.downtoearth.org.in/blog/energy/electricity-amendment-bill-2021-how-it-can-play-out-78132
  4. Explained: Electricity (Amendment) Bill 2021 by Gautam Kumar; https://theanalysis.org.in/2021/01/03/explained-electricity-amendment-bill-2020/