Article

Key Changes - The Electricity (Amendment) Bill, 2020

1. Establishment of Electricity Contract Enforcement Authority –
An Authority consisting of Chairperson (Retd. High Court Judge), Judicial member (Retd. District Judge) and Technical member (Expert in field) has been proposed to be constituted, which will have original jurisdiction to adjudicate upon matters regarding specific performance of contracts related to purchase or sale of power between a generating company and a licensee or between licensees (Provisions for execution and enforcement of contracts between two licensees has been included in the bill); and contracts related to transmission of electricity between a generating company and a licensee or between licensees.

Orders of the Electricity Authority shall be executable as decree of civil court. The Appeal against orders of the Electricity Tribunal shall be heard by Appellate Tribunal for Electricity.

2. Two categories defined – 'Distribution sub-licensee' & 'Franchisee'-
A term 'Distribution sub-licensee' has been introduced by the bill and the term 'Franchisee' has been proposed to be amended. The only difference is that the 'Distribution sub-license' is appointed by the Distribution licensee with the 'permission' of the State Commission whereas the 'Franchisee' is appointed with 'information' to the State Commission. At the present, in the Electricity Act there are only two categories, Distribution License and Franchisee. Franchisee had been defined as persons authorised by a distribution licensee to distribute electricity on its behalf in a particular area within his area of supply, which has now been amended to "a person recognized as such and authorized by a distribution licensee to distribute electricity on its behalf in a particular area within his area of supply, under information to the appropriate State Commission. Subject to the provisions of the agreement entered into between the distribution licensee and the franchisee, any reference to a distribution licensee in the Act shall include a franchisee."

The Distribution licensee can recognize and authorize a person as "Distribution sub-licensee” to distribute electricity on its behalf in a particular area within its area of supply, with the permission of the appropriate State Commission. Enabling provisions have been made to address the situations to deal the issues in sections 126, 135, and 164, when a distribution licensee proposes to undertake distribution of electricity for specific area within his area of supply through another person.

3. Promotion of Renewable Energy Sources -
With a view to promote Renewable Energy Sources, Bill intends to add a Section 3-A to the Electricity Act, which deals with National Renewable Energy Policy and states that- "The Central Government may, from time to time, after such consultation with the State Governments, as may be considered necessary, prepare and notify a National Renewable Energy Policy for the promotion of generation of electricity from renewable sources of energy and prescribe a minimum percentage of purchase of electricity from renewable and hydro sources of energy."

Further, Hydro sources of energy have been recognized as renewable source of energy. It is proposed to expand the scope of renewable power purchase obligations to include Hydro sources. To harmonize the national level commitments for environment protection, it is proposed to empower the State Commissions to specify the RPO as per RPO trajectory prescribed by the Central government from time to time.

4. Procedure to regulate inter-regional and interstate transmission network through National Load Dispatch System -
As per the Act, the National Load Dispatch System was only responsible for 'scheduling and dispatch of electricity among the Regional Load Dispatch System'. Now, the Bill proposes to give additional responsibilities and functions which include 'exercise supervision and control over inter-regional and interstate transmission network'; 'have overall authority to carry real-time operations'. Further, power has been given to issue directions which shall be followed at State and Regional Level.

5. Payment Security Mechanism -
In the functions of Regional (Section 28) and State (Section 32) Load Dispatch Centers, a proviso has been introduced by the Bill:- "Provided that no electricity shall be scheduled or despatched under such contract unless adequate security of payment, as agreed upon by the parties to the contract, has been provided."

The load dispatch centre is scheduling electricity without payment security mechanism. There is huge accumulation of unrealized revenues. In that view, the payment security mechanism before scheduling dispatch of electricity has been proposed.

6. Transfer of subsidy directly to Consumer –
In Section 62, a proviso is proposed to be added "Provided that the Appropriate Commission shall fix tariff for retail sale of electricity without accounting for subsidy, which, if any, under section 65 of the Act, shall be provided by the government directly to the consumer."

Proposed amendment in Section 65 further elucidates direct transfer of subsidy, which after the amendment would read as-"If the State Government requires the grant of any subsidy to any consumer or class of consumers in the tariff determined by the State Commission under section 62, the State Government shall, notwithstanding any direction which may be given under section 108, pay, in advance the amount of subsidy directly to the consumer and the licensee shall charge the consumers as per the tariff determined by the Commission.

Provided that no such direction of the State Government shall be operative if the payment is not made in accordance with the provisions contained in this section and the tariff fixed by State Commission shall be applicable from the date of issue of orders by the Commission in this regard."

7. Tariff Determination as per cost of supply of electricity and reduction of cross-subsidies-
Provisions related to tariff determination have been expanded and strengthened by imposing restriction on deferring revenue recovery. Bill proposes that tariff should reflect the cost of supply of electricity and cross-subsidies to be reduced.

8. Time-limit to Tariff determination by Bidding Process
In Section 63, a time limit of 60 days has been fixed from the date of submitting an application to State Commission for determination of tariff. It will result in determination of tariff in a timely manner. Further, proviso has been inserted that prescribes deemed adoption of tariff as per guidelines of Central Commission in the event the Commission fails to determine the same. The proviso reads as under -

"Provided that on expiry of sixty days from the date of application, if it is not decided by the Appropriate Commission, the tariff shall be deemed to have been adopted by the Appropriate Commission."

9. Cross Border Trade of Electricity -
Provisions to regulate cross border transactions of electricity with other countries have been included in the bill. The Central Commission has been empowered to oversee the cross border transactions.

10. Enhanced Penalty –
For non compliance of order of Commission (Section 142), at present penalty of “not exceed one lakh rupees for each contravention and in case of a continuing failure with an additional penalty which may extend to six thousand rupees for every day during which the failure continues after contravention of the first such direction”, has been prescribed. As per the Bill the one lakh is substituted with one crore and six thousand is substituted with one lakh. Thus, the intention of this Bill is to have a strict regime for compliance of orders.

*Note: Any reference to the word ‘Act’ means the Electricity Amendment Act, 2003 as it exists at present. Any reference to the word ‘Bill’ means the Electricity (Amendment) Bill, 2020.

---

Authored By: Adv. Raghujeet S. Madan & Adv. Sonia Madan