|Highlights of the Bill
- The Bill amends the Electricity Act, 2003. It seeks to segregate the distribution network business and the electricity supply business, and introduce multiple supply licensees in the market.
- The Bill introduces a supply licensee who will supply electricity to consumers. The distribution licensee will maintain the distribution network and enable supply of electricity for the supply licensee.
- The State Electricity Regulatory Commissions will grant supply licenses. Consumers can choose to buy electricity from any of the supply licensees in a given area of supply.
- If a supply licensee ceases to be a supply licensee, or is suspended, electricity will be supplied by a provider of last resort (POLR). The POLR will be a supply licensee designated by the State Electricity Regulatory Commission.
- The Bill defines renewable energy and provides for a National Renewable Energy Policy. It requires coal and lignite based thermal generators to produce 10% of thermal power installed capacity as renewable energy.
Key Issues and Analysis
- The Bill requires the presence of a government company as a supply licensee in an area of supply. This may affect competition. Currently, state distribution companies often keep tariffs lower than the cost of electricity. If this behaviour by a government owned supply licensee continues, it may drive out other supply licensees. This could defeat the objective of increasing competition.
- The Bill states that all revenue deficits in the electricity sector prior to the enforcement of the Bill will be recovered.
- The deficits were a result of several factors such as (i) state distribution companies not revising tariffs in a timely manner, (ii) an inefficient tariff structure and cross-subsidisation by high paying consumers, and (iii) high aggregate technical and commercial losses because of low investment, theft, pilferage, lack of metering and poor billing systems. Some of these issues could be addressed by a new scheme “UDAY”.
- Becoming a provider of last resort (POLR) may have financial implications on a supply licensee. However, the Bill does not envisage any financial support for these supply licensees. Some other countries provide financial support for a POLR