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Power politics at play

Power politics at play

Article

  1. The articles discusses about the proposed amendments in the Electricity Act.

Important analysis:

Electricity Act, 2003

  • The Electricity Act, 2003 is an Act of the Parliament of India enacted to transform the power sector in India.
  • The act covers major issues involving generation, distribution, transmission and trading in power.
  1. Competition and choice
  • The proposed amendment aims to bring in competition and choice in supply for the final consumer.
  • A single public utility will run the wires through which electricity flows, multiple supply licenses  (both public and private) will be allowed to compete for licenses.
  • The competition will lead to improved supply and lower bills.
  1. Issue of cross-subsidy

  • The amendment aims to get price right by capping cross-subsidies at 20% immediately and eliminating them within three years.
  • The cross-subsidy surcharge on open access customers- the fee that holds back customers from leaving the grid- would be eliminated within two years.

Need for these changes

  • India has among the highest electricity tariffs for industry, which bears the burden of low-performance and losses among other consumers, impacting their global competitiveness.
  • The amendment talks about subsidizing the poor through direct benefit transfers.
  • The proposed legislation makes subsidy to the poor the collective responsibility of the States and the Centre.
  1. Three-level committees

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

  • National Power Committee
  • Regional Power Committee
  • State Power Committee

Objectives of the committee

  • The committees will aid voluntary inter-connections and coordination of facilities for inter-State, regional and inter-regional generation and transmission of electricity.
  • 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.
  1. Power purchase agreements (PPAs)
  • A power purchase agreement (PPA) is a legal contract between an electricity generator (provider) and a power purchaser (buyer, typically a utility or large power buyer/trader).
  • The proposed amendment said, “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.”
  • Penalties for violation of PPAs 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.
  1. Separation of content & carriage:
  • This would entail more than one electricity supplier in an area and consumer will have options to choose their preferred electricity supplier.
  1. Getting smarter:
  • The Electricity Act  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.
  1. 24X7 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.
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