ELECTRICITY BILL, 2003

5/22/2003 Luthra & Luthra, Law offices 1

ELECTRICITY BILL, 2003

Presented by

Mohit SarafPartner

Luthra & LuthraLaw Offices

May 22, 2003


Background

• Power Sector Reform began 12 years ago– Generation “Centric”– Exclusive off-taker being bankrupt SEBs –

Lenders Centric– Distribution Centric– Piece-meal legislation– New Comprehensive legislation : Electricity

Bill, 2003– Better late than never!


Highlights of Electricity Bill, 2003

• Generation – Delicense• Competition and choice• First time Recognition of Non-discriminatory

Open Access• Compulsory Metering• Independent Regulatory Body• Commission has power, both for granting license

and tariff fixation.• Transco cannot engage in Trading• Excessive Tariff Regulation


Highlights of Electricity Bill, 2003 (cont’d.)

• Special Courts – Theft/Consumer

• Reorganize Electricity Industry on modern principles

• Setting up of Standards of performance

• Consumer Protection

• CEA Role Streamline


Open Access

• Competition & Choice• Non-discriminatory Open Access to the wires

network (Gas)• Principle: Allow producer to sell directly to Bulk

Consumers by wheeling power through the existing transmission lines on payment of surcharge

• Recognition of Open Access as “panacea” and “key” to power reforms: Standing Committee


Open Access (cont’d.)

• Request for Open Access within a “definite” and “mandated” time frame not considered.

• Open Access at the sole discretion of Regulatory Commissions– Is it excessive & unguided delegation?– Success would depend on the “independence”

and “maturity” of Regulatory Commission– State is an interested Party


Open Access (cont’d.)

• Absence of Open Access means limited private investment in capacity addition.

• Absence of Open Access also means perpetuating monopolies; leading to high tariffs and not so improved service for consumers.


Regulatory Commissions

• Timing of Open Access: Regulatory Commission to decide

• The bar on re-employment of Commission members by the same State Government has been removed.


Regulatory Commissions (cont’d.)

• Removal of the Commission member by the Government upon enquiry by a retired judge Vs. removal by the Governor/ president, upon enquiry by HC/SC

• In light of these provision, can Regulatory Commission work independent of Government?


Appellate Tribunal• All Commissions will be placed under the

Administrative Control of a retired judge (chairperson of Appellate Tribunal)

• The Centre to appoint the retired judge for a term of 3 years - he can be reappointed if the Centre so wishes – thus amenable to pressure

• Infringes the independence of the Regulatory Commission and bring them to a subordinate position


Cross Ownership Vs. Unbundling

• Despite the Committee’s recommendations, allows private companies to own transmission along with generation and distribution – the reverse of unbundling in the public sector

• Can this ensure “non-discriminatory Open Access”?


Second License• Competition & Choice• Empowers the Centre to impose restrictions (like

networth, capital adequacy) on grant of a second distribution license

• 12 existing Laws/Bills (Electricity Act, 1910, 8 State Reform Acts and 3 Bills) allow multiple licenses

• If the said criteria are met, license cannot be denied on the ground that there already exist a licensee in the same area for the same purpose


Second License (cont’d.)

• BSES & TEL supply to Bulk Consumers in the same area in Mumbai

• Grant of Second License for Transmission have been omitted

• Telecom Experience


Will SEBs/Discoms survive the Electricity Bill?

• Industrial unit and other bulk consumers will be able to form association and acquire shares in a generating company, thereby securing the right to Open Access without payment of surcharge in lieu of cross subsidy

• High chance of migration of HT Consumers of SEB/Discom

• Will deprive SEBs/Discoms of Best Customers who presently cross-subsidise

• Definitely, it may put burden on Consumers. But surely make Industry more competitive


Superseding State Laws• 8 States are implementing reforms as per

their respective Reforms Acts; 3 more ready to enact their laws

• The State laws were enacted during the past five years with Centre’s concurrence

• State laws should not be superseded- Standing Committee

• Is there a justification?• Uniformity!


Conclusion

• Beginning of long awaited Step• Real success would depend on introduction of Open

Access• Leading to competition & choice• Otherwise private monopolies may perpetuate and

consumer interest be compromised.• Success of Bill depends on “maturity” and

“independence” of Regulatory Commission.

Documents

ELECTRICITY BILL, 2003