Electricity Act (Amendment), 2020

Earlier this act was known as the Electricity Act, 2003.On 17 April 2020 Ministry of Power has introduced the Electricity (Amendment) Bill, 2020 in order to address some recurring issues, and to promote further commercial incentive for private players to enter the market in the generation, distribution and transmission of electricity.

All the major changes that this Amendment has introduced in the Electricity Act, 2003:

Amendments in the Policy

(a) Renewable Energy: This Amendment seeks to promote a legal and administrative eco-system which harbours special attention to renewable energy. The Amendment, via an insertion, delegates the Central Government with the power to prepare and notify a National Renewable Energy Policy “for promotion of generation of electricity from renewable sources”, in consultation with State Governments.The Amendment seeks to give special attention to hydro power.

(b) Cross Border Trade: In addition to the focus on renewable energy, a substantial makeover in the market of the electricity sector revolves around cross border trade of electricity. The Central Government has been delegated with the power to prescribe rules and guidelines to allow and facilitate cross border trade of electricity.

(c) Electricity Contract Enforcement Authority: The Amendment has inserted a new chapter in the Act which prescribes the creation and functioning of the Electricity Contract Enforcement Authority (“Authority”).
This new authority keeping a close watch on such issues is reassuring for all stakeholders. This Electricity Contract Enforcement Authority has been proposed to be given sole jurisdiction to adjudicate upon matters on performance of obligations under a contract regarding sale, purchase and transmission of electricity, which exclusion of this specialized authority’s jurisdiction on determination of tariff or any other dispute regarding tariff.

2. Amendments in the Functions

(a) Payment Security: There has been a lack of monitoring system in place vide the Act, which created a void of a check and balance mechanism for the any form of payment security. Lack of payment security mechanism has created a large pool of unpaid dues.

(b) Constitution of selection committee to recommend members for commissions/ authorities: There is a slew of provisions for the constitution of a Selection Committee for making recommendations of members to the Appellate Tribunal and the Chairperson and Members of Central Commission, Electricity Contract Enforcement Authority, State Commissions and Joint Commissions. Streamlining of selection process for all commissions and authorities is a step in the right direction, bringing in uniformity and higher accountability.

(c) Grant of Subsidy mandated: The benefit of subsidy to be granted directly to the consumer and the licensee shall charge the consumers as per the tariff determined by the Appropriate Commission. The determination of tariffs shall be fixed by the commission without accounting for subsidies. Further, basis the tariff policies, surcharges and cross subsidies shall be progressively reduced.

(d) Time limit for adoption of tariff so determined: There had been the issue of lazy attempts from the commissions in adopting the tariffs determined, causing issues of cost escalation. To address this problem, the Amendment has prescribed a period of 60 days to adopt the determined tariffs. Failing such timeline of 60 days, the tariff would be deemed to be accepted. Such deemed acceptance is a good method to not allow red-tapism to impact the functioning of the sector.

(e) Inclusion of Distribution Sub-licensee and Franchisee: To ease the burden of distribution licensees and in order to promote some form of demographic specialization, the distribution licensees, can appoint another entity for distribution of electricity on its behalf, within its area of supply. This entity can be either a distribution sub-license appointed with prior permission of the State Commission or it may be a franchisee appointed by merely informing the State Commission. This move could possibly give more leeway to power generators and licensed distributors sub-contract the obligations and allot risk to specific parties, where they belong. However, there is no addition of further clauses which specifically govern either of these newly introduced entities, wherein the extent of statutory obligation of each of the entities is co-extensive with one another.

(f) Codification of responsibility of the National Load Despatch Centre: By inserting fresh provisions, the Amendment has enumerated some responsibilities of the National Load Despatch Centre. Including overall authority for carrying out real time operations and monitoring of national grid, supervision and control of the inter-regional and inter-state transmission of network and grid security, and optimum scheduling and despatch of electricity.

(g) Enhancement of the powers of the Appellate Tribunal of Electricity: APTEL is proposed to have the powers of a High Court to deal with wilful disobedience of persons and entities under the Contempt of Courts Act, 1971. Additionally, any person can appeal the decisions of the Authority which is introduced by this Amendment in front of the APTEL. The numbers of members at the APTEL have also been proposed to be increased by the Amendment.

(h) Applicable to the whole of India: It is needless to mention, that in addition to the above mentioned broad themes that the Amendment seeks to cover, the Act shall now be applicable to the territory which was erstwhile exempted from the Jammu and Kashmir.

The provisions of  this Amendment are of a permanent nature, with long term planning and large-scale impact, it will be interesting to see the strategy of the Ministry of Power in terms of implementation of the new regime. Tariff and subsidy related measures are aimed at easing the financial crunch of the Discoms. In light of other relief measures and interim announcements to mitigate the hardship caused by the Covid-19 situation, the Ministry already has a lot of recovery process to contemplate. The ease of implementation of the new regime will be a challenge in the middle of these impending reforms.

The Electricity (Amendment) Bill, 2020 provides the Central government more power to determine tariff and regulations in the power sector.