Electricity Amendment Bill 2022: A mixed bag

Source: The post is based on the article “Electricity Amendment Bill 2022: A mixed bag” published in the Indian Express on 1^st September 2022.

Syllabus: GS 2 – Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

Relevance: About Electricity Amendment Bill 2022

News: Recently, the government introduced the Electricity Amendment Bill 2022 in the Lok Sabha.

What are the progressive steps mentioned in the Electricity Amendment Bill 2022?

States revoking power purchase agreements (PPAs): The Bill states that if PPAs are renegotiated, the affected party has to be compensated within 90 days from the date of submission of the petition.

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 motu powers to regulators: Regulatory commissions have been given suo motu jurisdiction if tariff petitions are not filed within 30 days of the stipulated time.

A much-needed payment security mechanism: the Bill talks about ensuring a payment security mechanism before dispatch. This will ensure that dues to generators do not swell up to unmanageable levels.

Does the Bill encroach on State’s domain on power sector governance?

The Bill facilitates the Centre to give additional distribution licences in an area already serviced by a distribution company (discom). This is considered an encroachment on the state’s power. But this is not because, a) The licence will be deemed to have been granted if the state electricity regulatory commission (SERC) does not take any action within the stipulated time. b) Power is a Concurrent subject.

What are the various concerns raised by states on the Electricity Amendment Bill 2022?

Firstly, according to the Bill, for the applicants seeking a distribution licence in more than one state the Central Electricity Regulatory Commission (CERC), and not the SERC, will grant a licence for additional distribution.

SERC is likely to be more aware of the field-level conditions in a state than the centre.

Secondly, till now, the CERC received instructions from the Centre and the SERCs. But the Bill has a provision empowering the Centre to give directions directly to the SERCs. This will enable the Centre to bypass state governments.

Thirdly, the Bill has made a small change in the composition of the committee for the selection of Chairman/members of the SERCs. It facilitated a nominee of the central government at the level of additional secretary as the third member.

What should be done to improve the Electricity Amendment Bill 2022?

1) 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.

2) The government had declared the Railways to be a deemed distribution licensee in 2014 under the third proviso of Section 14 of the Electricity Act 2003. The exception made for the railways had led to demands for a similar licence from entities such as the metro rail and ports.

Since the railways were never transmitting, distributing or trading in electricity but were bulk consumers, they should not be qualified to be a deemed distribution licensee.