The draft Electricity Act (Amendment) Bill, 2020 was released by the Ministry of Power on the 17th of April 2020 for public comments. Key proposals in the amendment relate to:

  • Creation of sub-distribution licensee
  • Creation of the electricity contracts enforcement authority
  • Ensuring payment security
  • Change in SERC selection process
  • Direct transfer of subsidies to consumers
  • Reduction in cross subsidy as per central government policy
  • Mandatory central government purchase obligation for renewable energy and hydro and high penalties for non-compliance

While the proposals seek to address specific issues related to the sector’s financial viability, the approach seems piecemeal, impinges on the concurrent nature of the electricity sector, and could result in implementation challenges. The amendments seek to introduce crucial structural and institutional changes in the sector without providing clarity on the long-term framework they aim to achieve. There is also lack of clarity on many proposed amendments which could increase ambiguity and litigation in the sector, if introduced.

Having said that, some of the proposed amendments would provide legal mandate for certain necessary changes and are therefore required. For example, increasing the number of members of the Appellate Tribunal of Electricity would aid the establishment of functional benches and improve access to the forum. Stipulating deemed adoption of tariff for competitively bid projects after 60 days of receipt of complete application by the regulator would ensure timely completion of this crucial process. Further, providing clarity on NLDC functions and levy as well as collection of cross subsidy surcharge on transmission open access consumers would help intra-state and open access transactions.

At the same time, crucial changes aimed at long-term, structural improvements, especially with respect to ensuring balanced, risk-reward regime in retail competition framework for consumers as well DISCOMs, are not present. Additionally, increased accountability for supply and service quality is also missing.

An integrated version of the proposed amendments and the prevailing act to help understand the amendments better is available here.

Prayas (Energy Group)’s (PEG) comments and suggestions attached below highlight issues with some proposed amendments and suggest changes towards increasing financial viability, protecting consumer interests and improving accountability in a sector which is also facing rapid changes due to technological shifts.