elect act 2003 (drum)
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S BANERJEE
A hope of light for all
ELECTRICITY ACT2003
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Presentation OutlinePresentation Outline
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Institutional frame work- Ajourney through
last century
Present status and emergingscenario
Act - 03 - overview Details of provisions What did not covered by Act-03
Way ahead
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BackgroundBackground
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The electricity (supply) act, 1948
State was made primary unit for planning andimplementation
of power generation, transmission and distribution
SEBs functioned as vertically integrated utilities.
Schedule VI of the E(S) Act prescribed the
methodology to befollowed for the determination of tariff oflicencees.
Section 59 of the E(S) Act provided the basis of
tariffdetermination of the SEBs.
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BackgroundBackground
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Main amendments to the existing Acts 1956 Amendment- to increase role of State Govt
to monitor SEBs. Amendment in 1964 to enable REBs Amendment in 1975 to enable generation in
Central sector Amendment to bring in commercial viability in
the functioning of SEBs Section 59 amended to make the earning
of a minimum return of 3% on fixedassets a statutory requirement (w.e.f1.4.1985)
Amendment in 1991 to open generation toprivate sector and establishment of RLDCs
Amendment in 1998 to provide for privatesector participation in transmission, and also
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BackgroundBackground
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1998 Electricity Regulatory Commissions Act:
Distance the Government from the functioningof the SEBs
Independent Regulatory Bodies at Central andState level
Rationalization of Tariff
Transparency in policy formulation,
Promotion of efficient and environmentallybenign policies
Greater involvement of private participation
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BackgroundBackground
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56 Years after independence, many of Indianhouseholds are unable to access electricity
Rural areas get power for less than 8 hours a day;
Theft and corruptions are rampant
Lawlessness characterizes the power sector
Governance hijacked; redressal is elusive
Citizens not free to buy except from monopolies
Sector is a State monopoly!
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Need for the newlegislation
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Requirement of harmonizing and rationalizing theprovisions in the existing laws to
Create competitive environment for benchmarkcompetition which will result in enhancing quality andreliability of service to consumer.
Distancing regulatory responsibilities of Govt.
Reform legislation by several States separately.
Obviating need for individual States to enact their own
reform laws.
Requirement of introducing newer concepts like powertrading, open access, Appellate Tribunal etc.
Special provision for the Rural areas.
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Finally....
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Electricity Act, 2003:
Enactment on 10th June, 2003
Repeals all previous laws.
Seeks a more competitive market- removal ofrestrictive barriers
De-licensing of industry
Consideration of social interests
Protection of consumer interests
Creation of policies consistent with theenvironment friendly objective
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Finally....
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Objective : Competition, Protection of Consumers
interests & Power for all Areas Creates liberal frameworkfor power development. Creates competitive environment. Facilitates private investment. Delicenses generation except for hydro : Captive
free from controls. Rural Areas : Stand alone Generation and
Distribution delicenced Multiple licensing in Distribution. Stringent provisions for controlling theft of
electricity.
Focus on revenue recovery in cases of unauthorizeduse of electricity.
Obliges States to restructure Electricity Boards. Mandates creation ofRegulatory Commissions. Retail tariff to be determined by regulatory
commissions. Open access in Transmission from outset.
El t i it A t 2003El t i it A t 2003
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Electricity Act 2003Electricity Act 2003
(Contents)(Contents)
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I : Preliminary - Sections 1-2II : National Electricity Policy & Plan-
Sections
3-6III : Generation of Electricity-
Sections 7-11IV : Licensing- Sections 12-24
V : Transmission of Electricity-Sections
25-41VI : Distribution of Electricity-
Section42-60
18 parts and 185 sections18 parts and 185 sections
El t i it A t 2003El t i it A t 2003
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Electricity Act 2003Electricity Act 2003
(Contents)(Contents)
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VII : Tariff- Sections 61-66VIII: Works- Sections 67-69IX : Central Electricity Authority-
Sections 70-75X : Regulatory Commissions-
Sections 76-109XI : Appellate Tribunal-
Sections 110-125XII: Investigation & Enforcement-
Sections 126-130
El t i it A t 2003El t i it A t 2003
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Electricity Act 2003Electricity Act 2003
(Contents)(Contents)
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XIII : Reorganization of Board-Sections
131-134
XIV: Offence and Penalties-Sections 135-152
XV: Special Courts- Sections 153-157
XVI: Dispute Resolution-Sections 158
XVII: Other provisions-Sections
159-165XVIII: Miscellaneous Sections
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Detailed provisionDetailed provision
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National Electricity Policy and Plan
Central Govt. to prepare National Electricity Policy and
Tariff Policy in consultation with State Govt. and Central
Electricity Authority. (Clause 3(1)).
National Electricity Plan for a period of 5 years to be
issued by Authority in accordance with National Electricity
Policy (Clause 3(4)).
National Policy on rural electrification including stand
alone systems to be issued by Central Government in
consultation with State Government (Clause 4 & 5).
Role of GovernmentRole of Government
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Detailed provisionDetailed provision
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Central Govt. to formulate a National Policy in
consultation with the concerned State Govts. for bulk
purchase of power and management of local distribution
through Users Association, Cooperatives, Franchisees and
Panchayat Institutions etc. (Section 5). Govt. to endeavor to extend supply of electricity to all
villages/hamlets. (Section 6)
No requirement of licence if a person intends to generate
and distribute power in rural area. (Section 14) Commission is also required to advise government on the
matters of policy.? Slide 30
Role of GovernmentRole of Government
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Detailed provisionDetailed provision
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Generation
Generation free from licensing. (Section 7)
Requirement of TEC for non-hydro generation done away with. (Section 7)
Captive Generation is free from controls. Open access to Captive
generating plants subject to availability of transmission facility. (Section 9)
Clearance of CEA for hydro projects required. Necessary due to concern of
dam safety and inter-State issues. (Section 8)
Generation from Non-Conventional Sources / Co-generation to bepromoted. Minimum percentage of purchase of power from renewables
may be prescribed by Regulatory Commissions. (Section 61(h),86 (1) (e))
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Detailed provisionDetailed provision
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There would be Transmission Utility at the Centre and in the States toundertake planning & development of transmission system. (Sections 38 &
39)
Load despatch to be in the hands of a govt company/organisation. Flexibility
regarding keeping Transmission Utility and load despatch together or
separating them. Load Despatch function critical for grid stability andneutrality vis a vis generators and distributors. Instructions to be binding on
both. (Sections 26, 27,31, 38, 39) Private transmission companies to be licensed by the Appropriate
Commission after giving due consideration to the views of the Transmission
Utility. (Sections 15 (5) (b))
The Load Despatch Centre/Transmission Utility / Transmission Licensee not
to trade in power. Facilitating genuine competition between generators.
(Sections 27, 31, 38, 39,41)
Transmission
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Detailed provisionDetailed provision
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Requires licensing (Clause 12). Commission can issue two or more licenses for
distribution of electricity through their own distribution
system in the same area (Clause(14)).
Distribution licensee can engage a franchisee toundertake distribution in his area of supply (Clause(14)).
All supply would need to be metered within 2 years.
However, State Commission may extend this period for
completing the task of metering (Clause 55(1)).
Distribution
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Detailed provisionDetailed provision
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Every distribution licensee shall establish a forum for
redressal of grievances of the consumers within six months
as per guidelines of the commission (Clause42(5)).
Distribution licensee to provide supply within the period asspecified by the commission or else a penalty upto Rs. 1000
per day to be paid (Clause 43(3)). Disconnection of supply in case of default of payment after
giving 15 days notice (Clause 56(1)). Provision for suspension/revocation of licence by Regulatory
Commission as it is an essential service which can not be
allowed to collapse. (Sections 19, 24)
Distribution
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Detailed provisionDetailed provision
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Open access to the transmission lines to be provided to
distribution licensees, generating companies. (Sections 38-40) This would generate competitive pressures and lead to gradual
cost reduction. Open access in distribution to be allowed by SERC in phases
and to provide open access to all consumers having requirementof 1 MW or more within 5 year(Sections 42)
In addition to the wheeling charges provision for surcharge if
open access is allowed before elimination of cross subsidies, to
take care of
Current level of cross subsidy Licensees obligation to supply. (Section 42)
This would give choice to customer.
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Detailed provisionDetailed provision
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Surcharge & cross subsidy to be progressively eliminated (Clause 42).
In case of captive generating plant carrying the electricity to the
destination of his own use, no surcharge shall be leviable (Clause 42).
Open AccessOpen Access
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Detailed provisionDetailed provision
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Trading/ Market development
Trading distinct activity permitted with licencing. (Section )11
Regulatory Commission may fix ceiling on trading margin to
avoid artificial price volatility.(Sections ( ) (b) & ( ) (b))111 111
The Regulatory Commission to promote development of market
including trading. (Section )11
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Detailed provisionDetailed provision
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State Electricity Regulatory Commission to beconstituted within six months. (Section 82)Provision for Joint Commission by more than oneState/UT. (Section 83)Provision for constitution of Appellate Tribunal
consisting of Chairman and three Members.(Section 110, 112)Appellate Tribunal to hear appeals against theorders of CERC/SERC, and also to exercise generalsupervision and control over the Central/State
Commissions. (Section 111)Appeal against the orders of Appellate Tribunal tolie before the Supreme Court. (Section 125)Appellate Tribunal considered necessary to-
Reduce litigation and delay in decisions
through High Court.Provide technical expertise in decision on
egulatory Commissions/Appellate Tribunalegulatory Commissions/Appellate Tribunal
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Detailed provisionDetailed provision
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CEA to continue as the main technical Advisor of the
Govt. of India/ State Government with the responsibility
of overall planning. (Section 70)
CEA to specify the technical standards for electricalplants and electrical lines. (Section 73)
CEA to be technical adviser to CERC as well as SERCs.
(Section 73)
CEA to specify the safety standards. (Section 53)
Central Electricity AuthorityCentral Electricity Authority
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Detailed provisionDetailed provision
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Regulatory Commission to determine tariff for supply of electricityby generating co. on long/medium term contracts. (Section 62)
No tariff fixation by regulatory commission if tariff is determined
through competitive bidding or where consumers, on being allowed
open access enter into agreement with generators/traders.
Consumer tariff should progressively reduce cross subsidies andmove towards actual cost of supply. (Section 61 (g))
State Government may provide subsidy in advance through the
budget for specified target groups if it requires the tariff to be lower
than that determined by the Regulatory Commission. (Section 65)
Regulatory Commissions may undertake regulation including
determination of multi-year tariff principles, which rewards
efficiency and is based on commercial principles. (Section 61 (e), (f))
Regulatory Commission to look at the costs of generation,
transmission and distribution separately. (Section 62 (2))
Tariff PrinciplesTariff Principles
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Detailed provisionDetailed provision
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Consumer to be given connection within stipulated time.
(Section 43(1))
Penalty in the event of failure to give connection (Section
43(3))
Payment of interest on security deposit. (Section 47(4))Regulatory commission to specify Electricity supply code
to be followed by licensees. (Section 50)
No sum due from consumers recoverable after a period of
two years unless the same was shown recoverablecontinuously. (Section 56(2))
Consumer Protection
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Detailed provisionDetailed provision
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Redressal forum for redressal of grievances of consumers, to be
appointed by every distribution licensee within six months. Ombudsman
scheme (Section 42 )Standards of performance
Licensees required to meet standards of performance specified byRegulatory Commission. Failure to meet standards makes them
liable to pay compensation to affected person within ninety days.Licensee to furnish to the Commission periodical information on
standards of performance (Section 57)District level committee - (a) to coordinate and review extension of
electrification in each district; (b) to review quality of power supply and
consumer satisfaction, etc. (Section 166 (5))
Consumer Protection
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Detailed provisionDetailed provision
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Restructuring of SEBs
Provision for transfer scheme to create one or more
companies from SEB. (Section )111
Provision for continuance of SEBs (Section )111
States given flexibility to adopt reform model/path.
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THANK YOU
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Electricity Act 2003
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National Electricity Policy
Objectives:
Availability of electricity to all households in five yearsAs per 2001 Census, 45% households do not have
access to households
Demand to be fully met by 2012.Energy and peaking
shortages to be overcome and spinning reserve to be
available.Reliability and quality of power to be of international
standard by 2012.Raising the per capita consumption to 1000 units by
2012.Minimum lifeline consumption of 1 unit per household
per day.
Protection of consumer's interests
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Salient features of National Electricity Policy
CEA to notify first National Electricity Plan in six months
with a perspective up to year 2017. The Plan prepared byCEA to be used by prospective generating companies and
transmission licensees as reference document
Development of Rural Electrification Distribution
backbone (REDB).
1At least one 33/11(66/11) kV substation in each blockFrom REDB, one distribution transformer in at least
each village settlement
Financial support in terms of capital subsidy & soft longterm debt to States for rural electrification.Special preference to Dalit Bastis, Tribal Areas and
other weaker sections for rural electrification
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Salient features of National Electricity Policy
Creation of adequate generation capacity
Capacity addition of 1,00,000 MW during the period 2002-2012. Availability
of installed capacity at 85%, with a spinning reserve of at least 5% by 2012
for grid security.Full development of hydro potential.
50,000 MW hydro initiatives already launched to be vigorously pursued.
Choice of fuel for thermal generation to be based on economics ofgeneration and supply of electricity.Imported coal based thermal power stations, particularly at coastal
locations, would be encouragedA National Gas Grid would facilitate development of Gas Turbines/
Combined Cycle Gas Turbine Technologies
Public-private partnership in Nuclear Plants would be facilitated.All existing Generation capacity should be brought to minimum acceptable
standards.
R&M on well defined plan with cost-benefit analysis to be taken up
The captive generation to be harnessed for meeting shortages particularly for
load periods.
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Salient features of National Electricity Policy
Development of National Grid.Network expansion should be planned and implemented
keeping in view the anticipated transmission needs thatwould be incident on the system in the open access regime.
Prior agreement with the beneficiaries would not be a pre-condition for network expansion.
A national transmission tariff framework, sensitive todistance, direction and related to quantum of flow, needs tobe implemented. As far as possible, consistency needs to bemaintained in transmission pricing framework in inter-Stateand intra-State systems.
The National Load Despatch Centre (NLDC) would be notifiedwithin three months
Salient features of National Electricity Policy
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Salient features of National Electricity Policy
Crux of the sectors financial viability lies in the efficient managemenof Distribution Sector.
The Central Government would assist the States, which develop a clearroadmap for proper restructuring, in arranging transition financing from
various sources.
Performance based regulation through Multi-Year Tariff (MYT)
framework is an important structural incentive.
Private sector participation in distribution to be encouraged for achievingthe requisite reduction in Transmission and Distribution losses and
improving the quality of service to the consumers.
State Govts. may restructure distribution zones. a revenue district, a
Municipal Council as the minimum area for second and subsequent
license. The second and subsequent licensee for distribution in the
same area shall have obligation to supply to all consumers. The State Regulatory Commissions to put in place independent third
party meter testing arrangement.Support for adoption of IT system for ensuring correct billing to
consumers.
Speedy implementation of stringent measures againsttheft of electricity
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Salient features of National Electricity Policy
Cost of recovery of service from consumers at tariff reflecting
efficient costs to ensure financial viability of the sector.
Consumers below poverty line may be provided life-line supply
subsidy, say 30 units per month. Tariffs for such designated group
of consumers will be at least 50 % of the average (overall) cost of
supply.
The existing cross-subsidies for other categories of consumers
would need to be reduced progressively and gradually.
Efficient technologies, like super critical technology, coalgasification etc. would be gradually introduced for generation of
electricity. .A suitable funding mechanism would be evolved for promoting
R& D in the Power Sector
The Government will facilitate establishment of a major Technology
Center
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Salient features of National Electricity PolicyPart of new generating capacities may be sold competitively to promotemarket development targeted to reduce prices and benefit consumers.
Availability based tariff (ABT) to be extended to State level for better griddiscipline through economic signaling. Increasingly higher electricity to be made available for sale through market.
To meet the objective of "power for all" including household electrification, itis estimated that an investment of the order of Rs.9,000,000 crores would berequired to finance generation, transmission, sub-transmission, distribution
and rural electrification projects.
It would be imperative that an appropriate surplus is generated through returnon investments and, at the same time, depreciation reserve created so as tofully meet the debt service obligation.
Conducive fiscal regime for attracting investment in the power sector. TheState Governments also advised for reviewing tax structure at their level forreducing the cost of electricity.
Steps would also be taken to address the need for regulatory certainty togenerate investors confidence.
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Salient features of National Electricity Policy
Demand side management through energy conservation measures.
Labels regarding energy efficiency to be displayed on appliances. Efficient agricultural pump sets and efficient lighting technologies to be
promoted. Appropriate tariff structure for managing the peak load, differential tariff
structure for peak & off-peak supply.
Environmental concerns would be suitably addressed by way of
comprehensive Environmental Impact Assessment and implementation ofEnvironment Action Plan (EAP).
Setting up of coal washeries will be encouraged.
Boost to renewable and non-conventional energy sources
A prescribed percentage of power to be purchased from such sources ofenergy.
To be made applicable for the tariffs to be determined by the SERCs from 1stApril, 2005.
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Salient features of National Electricity Policy
Necessary regulations and appointing Ombudsman forredressal of consumers' grievances to be in place in sixmonths.
Reliability Index (RI) of supply of power to consumers
should be indicated by the distribution licensee.
The Central Government, the State Governments andElectricity Regulatory Commissions should facilitatecapacity building of consumer groups and their effective
representation before the Regulatory Commissions
Detailed provision
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