Draft Electricity (Amendment) Act 2018, which is an amendment to  the Electricity Act, 2003 aims at being in line with the country’s changing electricity markets and systems, with their large renewable capacities and the emergence of a smart grid network.

The Act tries to bring in greater structural accountability into the market in several ways, with licensing requirements extended explicitly to all electricity suppliers. 

Provisions and their significance:-

Accountability of power distribution companies

• The highlight of the Amendment is the strong focus on resolving multiple issues plaguing the distribution sector. The proposed amendment puts the onus of supplying 24×7 power to all consumers squarely on the DISCOM.
• The amendments propose a biennial review of the DISCOM to ensure that sufficient PPAs have been signed to meet the customer demand and see that customer complaints and other operational glitches are solved on time.
• Failing to do so will invite revocation of the DISCOM license, with the state government empowered to transfer its assets to another supply company that is incorporated or pre-existent.
• The amendment allow for more than one distribution licensee to operate in a single area, signaling an end to area monopolies.

Open access (OA) has also been structured further in the draft amendment. The proposal deems that every OA power purchase agreement (PPA), be it long-, medium- or short-term, shall be subject to review by the appropriate electricity regulatory commission.Their PPAs cannot be terminated without approval from the said commission and violation of terms can invite penalties up to Rs 1 crore.

Ceiling on cross-subsidisation of tariffs:-

• The draft amendment proposes that the cross-subsidy component within an area cannot exceed 20 per cent, and is to be phased out in three years. Additionally, the time-of-day tariffs finds mention in the draft alongside pre-paid electricity billing.
• The amendment also states that costs borne due to inefficiency of DISCOMs cannot be passed on to the customers through additional tariffs. This has the potential to make DISCOMs accountable if they fail to reduce their commercial losses.
• Important proposal is the use of direct benefit transfer for providing subsidy to lower income group customers. It is an attempt at eliminating consumers misusing the subsidy, thus, improving efficiency in DISCOM business.

Transparency in power generation market

• Specific caveats for conventional assets, including mandatory spinning reserves (extra generating capacity) for new or expanding thermal power capacities, have been introduced in the proposed amendment.

Penalties:-

• There have also been upward revisions of penalties to better reflect the market in 2018. For instance, non-compliance with load dispatch centres now carries a penalty of Rs 1 crore, up from Rs 1.5 million. These penalties fall in line with the regulations being proposed to hold power generators accountable for make variation in scheduled generation, especially in renewable energy.
• Open access is to be allowed provided wheeling charges are paid, along with the surcharge, which cannot exceed 20 per cent of the wheeling charges.

Renewable energy:-

• In a positive move to support renewable energy, rural standalone mini-grid systems are restricted to renewable sources only: solar, wind, biomass, biogas, etc. This is likely to boost the decentralised energy sector.

Three-level committees to facilitate efficient, economical and integrated transmission and supply of electricity :-

• The committees will aid voluntary inter-connections and coordination of facilities for inter-State, regional and inter-regional generation and transmission of electricity.
• At the top will be the National Power Committee, established by the Centre to facilitate integrated operations of the power system at the national level.
• The Centre shall also establish a Regional Power Committee. The third layer is the State Power Committee that will be established by the respective State governments.
• These committees are expected to set the base for the Centre’s larger goal of having a national-level discom that can balance the integration of renewable energy in the national grid

Separation of content & carriage:

• The long-pending demand to separate the infrastructure builder for power distribution to consumers and the licensee to supply has been introduced in the Act.
• This would entail more than one electricity supplier in an area and consumer will have options to choose their preferred electricity supplier.

Getting smarter: 

• The Electricity Act for the first time has mentioned Smart Meter and Prepaid Meters and regulations related to the same, making it mandatory to install smart meter. This would help proper accounting of power consumption and wastage.

24*7 Power supply is an obligation: 

• The draft amendments propose that 24X7 power supply is an obligation and the state electricity regulatory commission can penalise the power distribution company (discoms), if it fails to do so.
• The Commission can suspend or revoke the license of the discoms as well, which has been mandated for the first time.

Violation of PPA to be penalised: 

• The Act said that violation of PPA will lead to penalties which may be as determined by the Appropriate Commission which may be fines which may extend to Rupees One crore per day and, in case of licensees may also extend to suspension and cancellation of licence.
• This comes as a major relief for power generators which lately have been facing brunt of states cancelling PPA citing high cost or lack of funds.