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New Electricity Bill 2022

  • Category
    Polity & Governance
  • Published
    19th Aug, 2022

Context

  • The Union Power Ministry has introduced the Electricity (Amendment) Bill, 2022 in Lok Sabha to regulate the electricity sector in India.

About

India’s power sector

  • India is the third-largest producer and second-largest consumer of electricity worldwide, with an installed power capacity of 401.01 GW as of April 30, 2022.
  • 100% FDI allowed in the power sector has boosted FDI inflow in this sector.
  • Sources of power generation range from conventional sources such as coal, lignite, natural gas, oil, hydro and nuclear power, to viable non-conventional sources such as wind, solar, agricultural and domestic waste. 
  • India was ranked fourth in wind power, fifth in solar power and fourth in renewable power installed capacity, as of 2020. India is the only country among the G20 nations that is on track to achieve the targets under the Paris Agreement.

Key provisions under the Electricity (Amendment) Bill:

Multiple discoms in the same area:The Bill aims to amend the Electricity Act, 2003.

  • It provides for multiple distribution licensees (discoms) to operate in the same area of supply.
  • A discom must provide non-discriminatory open access to its network to all other discoms operating in the same area, on payment of certain charges.

Power procurement and tariff:

  • Upon grant of multiple licenses for the same area, the power and associated costs as per the existing power purchase agreements (PPAs) of the existing discoms will beshared between all discoms.
  • To meet any additional power requirements - discom may enter into additional PPAs after meeting the obligations of existing agreements. Such additional power need not be shared with other discoms.
  • In case of multiple discoms in the same area of supply - State Electricity Regulatory Commission (SERC) will specify the maximum ceiling for tariff.

Cross-subsidy Balancing Fund:

  • The Bill grant 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 subsidising 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.

License for distribution in multiple states:

  • As per the Bill, the Central Electricity Regulatory Commission (CERC) will grant licenses for the distribution of electricity in more than one state.

Payment Security:

  • The Bill provides that electricity will not be scheduled or despatched if adequate payment security is not provided by the discom.
  • The central government may prescribe rules regarding payment security.

Contract enforcement:

  • The Bill empowers the CERC and SERCs to adjudicate disputes related to the performance of contracts.
  • These refer to contracts related to the sale, purchase, or transmission of electricity.
  • Further, the Commissions will have the powers of a Civil Court.

Renewable purchase obligation:

  • The electricity bill empowers State Electricity Regulatory Commissions (SERCs) to specify renewable purchase obligations (RPO) for discoms.
  • RPO refers to the mandate to procure a certain percentage of electricity from renewable sources.
  • 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.

Composition of Commissions and APTEL:

  • The Bill increases the number of members (including the chairperson) in SERCs from three to four.
  • Further, at least one member in both the CERC and SERCs must be from a law background.
  • Appellate Tribunal for Electricity (APTEL) consists of a chairperson and three other members, as may be prescribed by the central government.

What are the major challenges faced by the power distribution sector?

  • Inadequate Electricity Generation
  • Shortage of Inputs
  • Poor fiscal health of the DISCOMS and the state governments
  • Government monopoly in power distribution sector
  • gross inefficiencies leading to large technical and commercial losses
  • highly politicised sector

Way Forward

  • Electricity being a subject of the Concurrent List of the Indian Constitution, recommendations from states should be taken into consideration for effective implementation of the provisions of the bill.
  • Provisions related to subsidies should be put up in an elaborate manner to eliminate any scope of confusion/ conflict.
  • Regulations for private players (discoms) should be brought in to avoid differential distribution.
  • Renewables including wind should be ramped up rapidly.
  • Storage must be prioritized for peaking and ancillary (ramping) requirements

    Important Government Scheme

    • PM-KUSUM scheme
    • Solar Roof Top Scheme
    • Solar Parks Scheme
    • Green Energy Corridor Phase I and II
    • DeenDayalUpadhyay Gram JyotiYojana (DDUGJY),
    • Ujwal DISCOM Assurance Yojana (UDAY), and
    • Integrated Power Development Scheme (IPDS).

Conclusion

Electricity is the backbone of the Indian economy. Government should take every step to conserve sources of electricity and regulate as per the demand of every sector.

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