Explained: Electricity Bill – promise, problems

Source: The post is based on the article “Explained: Electricity Bill – promise, problems” published in Indian Express on 10th August 2022.

What is the News?

The government has tabled the Electricity (Amendment) Bill 2022 in the Lok Sabha soon after which it was referred to the parliamentary standing committee on energy for wider consultation with stakeholders.

What is the Electricity Amendment Bill,2022?

The Bill amends the Electricity Act, 2003. The Act regulates the electricity sector in India. It sets up the Central and State Electricity Regulatory Commissions (CERC and SERCs) to regulate interstate and intrastate matters, respectively.  

What are the key provisions of the Bill?

Multiple discoms in the same area: More than one power distributor can operate in an area and they will be allowed to use the power distribution infrastructure of other suppliers. This is aimed at boosting competition and giving more choice to the consumers. 

Tariffs: The Bill makes provision for “mandatory” fixing of minimum as well as maximum tariff ceilings by the “appropriate commission” to avoid predatory pricing by power distribution companies and to protect consumers.

Timely Tariff Revisions: The Bill has several provisions to ensure graded and timely tariff revisions that will help provide state power utilities with enough cash to be able to make timely payments to power producers.

Cross-subsidy Balancing Fund:  The Bill adds that upon grant of multiple licenses for the same area, the state government will set up a Cross-subsidy Balancing Fund. Cross-subsidy refers to the arrangement of one consumer category subsidizing the consumption of another consumer category.

Any surplus with a distribution licensee on account of cross-subsidy will be deposited into the fund. The fund will be used to finance deficits in cross-subsidy for other discoms in the same area or any other area.

Renewable purchase obligation(RPO): The Act empowers SERCs to specify renewable purchase obligations(RPO) for discoms. RPO refers to the mandate to procure a certain percentage of electricity from renewable sources.

The Bill adds that RPO should not be below a minimum percentage prescribed by the central government. Failure to meet RPO will be punishable with a penalty between 25 paise and 50 paise per kilowatt of the shortfall.

Strengthen Regulators: The Bill seeks to strengthen payment security mechanisms and give more powers to regulators. 

Why have opposition parties opposed this Bill?

Firstly, the bill is violative of India’s federal structure in as much as Electricity is a subject mentioned as item 38 in the Concurrent list. This implies that it is the duty of the Centre to have effective consultation with State governments. However, no consultation was done before introducing the bill.

Secondly, the provision to encourage competition may lead to more entities entering lucrative and urban areas, while loss-making areas may continue to be underserved.

Thirdly, some farmers are concerned that it will eventually lead to the end of subsidies power.