Electricity (Amendment) Bill, 2021

• Opposition parties claimed the Centre’s Electricity (Amendment) Bill was not in the interest of the country, and states were not consulted on its provisions.
• The Electricity (Amendment) Bill, 2021 seeks to enable power consumers to choose from multiple service providers as in the case with telecom services.
• The proposed amendments also include de-licensing of the power distribution business.

Key provisions of the bill:

• Electricity distribution is delicensed, giving consumers a choice to choose a distribution company in their area.
• There is the provision of a universal service obligation fund, which shall be managed by a government company. This fund shall be utilised to meet any deficits in cross-subsidy.
• The Appellate Tribunal for Electricity (APTEL) is being strengthened by an increasing number of members.
• The domains from where the chairperson and members of Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERC) will come have been described.
• The responsibility of fixing renewable power obligation (RPO) is shifted from state commissions to the central government.
• Disputes related to the despatch of power are increasing, adjudication of load despatch centres related disputes have been included in the functions of regulatory commissions.
• The regulatory commissions’ orders will now be executable as decree including attachment of property, arrest and detention in prison.
• With member (law) in the commission, these powers will be exercised appropriately, resulting in better enforcement.
• The penalty for contravention of the provisions of the Act has been increased up to Rs 1 crore. Non-fulfilment of RPO will attract stringent penalties as per the proposed amendments.

Issues :

• Discoms collect revenue from the consumers and feed the supply chain upstream. They are, however, unable to recover their costs, out of which nearly 75-80 per cent are power purchase costs.
• There is no regulatory intervention to fix coal costs and railway freight.
• No solution (to power distribution and generation companies) are offered to reduce the fixed cost of unutilised power through the amendment bill.
• The Aggregate Technical & Commercial (AT&C) losses of 12 states were more than 25 per cent and of six states between 15 and 25 per cent, according to a report released by the distribution utility forum based on Uday dashboard in 2020.
• There is lack of clear guideline to reduce tariffs.
• Power distribution is proposed to be delicensed. However, the eligibility criteria shall be prescribed by the central government and the conditions for registration by the SERC.
• Setting power sector economics right is key to power sector reforms. Such background and experience in the field of economics / finance may have been made mandatory for this post to avoid rehabilitation of favourite retired officers.
• Provisions for power market development, market-based economic despatch and gross bidding in the amendment bill could have paved the way for next-generation reforms.
• Provisions to avoid an increase in discom viability gap and at the same time to prevent an abnormal increase in tariff may have been included in the amendment bill, at least as a lighthouse to guide navigation for reforms.

Significance of the Bill:

• The reforms will especially make the RE generation, transmission and distribution, financially more attractive to investors.
• Technological upgrades including smart metering and infrastructure advancements will reduce the huge AT&C losses the industry is currently suffering from.
• These measures will ultimately benefit consumers by improving systemic efficiencies and enabling competitive tariffs.
• It will also give more options to the consumers in choosing their discoms.
• The introduction of Direct Benefit Transfer (DBT) of power subsidies will ensure greater transparency and accountability and ensure that the subsidy reaches people who are entitled to it,
• The reduction in power costs through higher indigenisation, particularly for industrial and manufacturing customers.
• This will ensure faster resolution of long-pending issues and reduce the legal hassles for all stakeholders.
• It will compel power distribution companies to buy a fixed amount of RE and reduce their reliance on fossil fuels.