Introduction: Contextual introduction. Body: Explain how Electricity Amendment Bill 2022 rectifies the problems of the power sector. Also, write some challenges with it.Conclusion: Write a way forward. |
Despite multiple sets of reforms since 2003, the electricity sector is still facing problems of operational inefficiencies and financial solvency. The Electricity Amendment Bill 2022 seeks to delicense distribution of electricity just like generation.
How it rectifies the problems of the power sector?
- Delicensing the distribution will reduce entry barriers for private players for creating competition in the segment.
- Applicability of new tariffs: New tariffs often come into force in the middle of the financial year. The Bill states that new tariffs have to be made applicable from the beginning of the financial year.
- Reduction in processing time: The Bill has proposed a reduction in the time for processing tariff petitions from 120 days to 90 days.
- Suo moto powers to regulators: The regulatory commissions were earlier called ‘toothless tigers’ by some. Thus, Regulatory commissions have been given suo motu jurisdiction if tariff petitions are not filed within 30 days of the stipulated time.
- Payment security mechanism: the Bill talks about ensuring a payment security mechanism before dispatch. This will ensure that dues to generators do not gather upto unmanageable levels.
- More power to the national load dispatcher: to strengthen the load dispatcher for the smooth functioning of the grid, especially with a huge renewable capacity in the offing.
Challenges of Electricity Amendment Bill 2022:
- The biggest objection is against the proposal to give additional distribution licences in an area already serviced by a distribution company (discom).
- These rules are solely related to distribution which, no doubt, is a state subject.
- The feasibility of multiple licences is another issue.
- If applicants seeking a distribution licence in more than one state, the Central Electricity Regulatory Commission (CERC) will grant the licence. This is problematic because a SERC is likely to be more aware of the field-level conditions in a state than its central counterpart.
- Empowering the Centre to give directions directly to the SERCs. Till now, the CERC received instructions from the Centre and the SERCs were under the state.
- The exception made for the railways had led to demands for a similar licence from entities such as the metro rail and ports.
Way forward:
- A broad guideline to reduce tariffs could have been part of the proposed amendment bill.
- CERC and SERC agencies should consult each other while granting licences for discoms seeking licenses for more than one state. The agency that grants the licence should also administer it.