Explained: Electricity (Amendment) Bill 2020

By Gautam Kumar

As farmers’ protest continues, the government on 30th December 2020 agreed to withdraw the Electricity (Amendment) Bill 2020 – one out of the four demands made by the farm unions. So far, the government and farm unions have met six times and very little progress has been made on the deadlock concerning the recently passed agri laws by the center. While the government and farm unions get ready for the next round of talks on 4th January 2021, we take a look at what the new Electricity (Amendment) Bill talked about.

What changes did the draft Electricity (Amendment) Bill 2020 proposed?

There were as many as 39 minor and major changes proposed in the new amendment bill. Some major ones are:

Provision for National Renewable Energy Policy: It was proposed that the central government in consultation with the state governments, will prepare a National Renewable Energy Policy for the promotion of the generation of electricity from renewable sources of energy. The policy should also prescribe a minimum percentage of the purchase of electricity from renewable and hydro sources of energy.

Establishment of Electricity Contract Enforcement Authority: Under the present act there is no specific provision to deal with issues arising in relation to power purchase agreements (PPA) – an agreement between the generator and the buyer of the electricity. To seek better regulation and adherence to executed PPAs, the amendment proposed the creation of an Electricity Contract Enforcement Authority to supervise the fulfillment of contractual obligations under a PPA.

A new Selection Committee for the appointment of Chairperson and Members of Commission: It also proposed one single selection committee for posts of chairpersons and members of the Appellate Tribunal for Electricity (APTEL) and all regulatory commissions. As per existing provisions of the Electricity Act 2003, there are multiple committees for selection to the posts of chairpersons and members of APTEL, the central commission and state commission.

Payment Security Mechanism: As per the existing law, the load dispatch centers are used to scheduling electricity without payment of any kind of security from the Discoms. As a result, there has been a large accumulation of unrealized revenues. In the new amendment, it was proposed to empower the load dispatch centers to oversee the payment security mechanism before scheduling the dispatch of electricity from the Discoms.

Renewable Purchase Obligation (RPO): The amendment proposed to expand the scope of RPO to include hydro sources. To harmonize the national level commitments for environmental protection, it was also proposed to empower the state commissions to specify the RPO targets as per the directions prescribed by the central government from time to time.

Why did stakeholders oppose the draft amendment bill?

Concurrent List: It has been observed that the subject of electricity is in the concurrent list of the Constitution and the blanket power with the central government to prescribe RPO will affect the autonomy and independence of state electricity regulatory commissions (SERCs). The new bill proposed to take away the SERC adjudicatory functions such as fixing tariffs, approving power purchase agreements (PPAs) and settling disputes in connection therewith.

Privatization of the Distribution Systems: Employee unions have raised concerns around the importance given to contracts, payment security mechanisms and privatizing Discoms. They argue that the bill was an attempt to secure the interests of the power producers and that privatizing the distribution systems would have led to private monopolies replacing public monopolies.

Electricity Contract Enforcement Authority: One of the major mandates of State Electricity Regulatory Commissions is to ensure enforcement of contracts. Without this, they are only left with the roles of setting tariffs and developing codes and regulations. It would have also resulted in the loss of revenue as each contract related case carries substantial court fees.

What do the experts say?

Industry experts are not happy with the government agreeing to withdraw the draft amendment. They believe that the amendment was a very good opportunity to rescue the state electricity boards that are already reeling under huge debts. Through measures like direct benefit transfer (DBT) scheme of subsidies, promoting retail competition, payment security mechanism government hoped for introducing financial discipline in the sector, which was in the national interest.

“As per a report by Crisil in June 2020, the debt of state-owned electricity distribution companies is expected to hit an all-time high of ₹4.5 trillion this fiscal year.”

What is the current regulatory regime?

At present, the power sector is governed by the Electricity Act 2003. It is the legal framework for the regulation of the generation, distribution, transmission, license regime, trading and use of electricity in India. The act is said to be the culmination of the power reforms that started in the early 1990s.

The 2003 act is a 100 odd page document with 185 sections covered in 18 parts. Before the enactment of the 2003 act, the Electricity industry in India was governed by three laws, the Indian Electricity Act 1910, the Electricity (Supply) Act 1948 and the Electricity Regulatory Commissions Act 1998.

(Writer is a final year law student at UPES School of Law, Dehradun. He tweets at @stoic_gautamkr)

Featured Image Source: Philstar Global Corp.

The Analysis (TA) is a research and communication group | Analyzing India’s legal, policy and political affairs. Write to us at contact@theanalysis.org.in

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s