It is time to move on to next phase of power reforms

Synopsis: Electricity Act, 2003 has its own achievements and limitations. The new rules are aimed at taking the sector to a new high.

Introduction

The Union Ministry of Power recently notified the rules under Electricity Act, 2003 in the interest of electricity consumers and other stakeholders.

What are the achievements under “Electricity Act 2003”?

The 2003 Act allowed for the delicensing of generation and transmission, which resulted in capacity additions of 50,000 MW in 11th and 88,000 MW in 12th plan period, up from 20,950 MW in the 10th Plan(2002–03 to 2006–07).

Our per capita power consumption has increased almost 2.3 times since 2003.

The country’s installed capacity has increased to 388 gigawatt. Renewable energy capacity (solar, wind and other renewables, excluding hydropower) surpassed 102 GW.

It paved the way for a long series of other reforms that followed.

Why is there a need for new rules?

The Electricity Act was notified in 2003. To remain effective over time it has to continually adapt to the changing needs and desires of consumers in all sectors of economy, including electricity.

The need for a continuous, round-the-clock supply of energy in homes, businesses and industries is set to rise. Hence, the strain on electrical distribution will simultaneously grow. This necessitates the implementation of a new framework for DISCOM’s.

– Innovative technologies will play a larger role in the future. Batteries, other creative storage technologies, electric vehicles and distributed supply are all likely to cause big structural changes.

What new rules have been notified?

These include Electricity (Timely recovery of costs due to change in law) Rules, 2021, and rules on promotion of renewable energy generation by dealing with Must-Run matters and other matters, 2021.

Delicensing of the distribution sector with content (electricity) and carriage (wire) separation is planned.

A framework will be put in place to allow customers the option of choosing from multiple distribution companies. There is also a proposal to allocate Rs 305,984 crore over 5 years for a revamped, reforms-based and result-linked power distribution scheme.

The tariff policy was also amended to improve payment security for power supplies, and to reduce losses and cross-subsidies.

What are the challenges in efficient growth of Electricity sector?

Distribution sector-The debt owed by DISCOM’s to electricity producers is huge,Rs 116,127 crore. DISCOMs haven’t been paying GENCOs on time which mostly affects the coal industry.

Average AT&C loss level of rated discoms: It has been hovering around 21%.

Source: This post is based on the article “It is time to move on to next phase of power reforms” published in “Down To Earth” on 28th October 2021.