Changes to Electricity Act: Diluting states' autonomy

The draft Electricity Amendment Bill 2020 proposed by the Ministry of Power intends to bring certain structural changes in the electricity sector. While some proposals like formulating a National Renewable Energy Policy are welcome and changes are essential in the interest of the sector, other changes appear to weaken the role of the state.

It is proposed to establish an authority known as the Electricity Contract Enforcement Authority (ECEA) to deal exclusively with issues related to the performance of contracts. The justification given is that the Electricity Regulatory Commissions (ERCs) are overburdened with multiple responsibilities with limited powers for adjudication of disputes.

This is far from the truth. In reality, the ERCs have little workload except determining the tariff once in a year or so. Besides, the disputes that are raised before the ERCs are adjudicated without delay.

In fact, it is the ECEA that will be overburdened because it will have to deal with the disputes adjudicated by the 29 ERCs across the country. Further, the amendment proposes to strengthen the ERCs with another member from the legal background, which will take care of additional burden, if any, on the ERCs.

Secondly, the contracting parties derive other advantages if disputes are settled by the ERCs. Since ERCs are located in state capitals, contracting parties need not travel to New Delhi, which is time-consuming and costly. Thirdly, ECEA is likely to restrict public participation in the adjudicatory process. Most of the contract disputes have an impact on consumers at large.

The primary requirements of consumers - cost and quality of power--depend on the contract entered into by DISCOMS and power producers. This being the case, consumer participation is crucial. Consumers may find it difficult to participate in the adjudicating process if it is handled by ECEA at Delhi.

Fourthly, the electricity sector is already saddled with multiple institutions. Expenditure relating to ECEA will further increase the tariff to be paid by the end consumer. Hence, all the powers envisaged to be given to ECEA may be given to ERCs.

As electricity is in the Concurrent List of the Constitution, states have some rights over electricity matters. However, the Amendment Bill appears to dilute the power of the states.

It is proposed that there will be a single selection committee at the Central level for selection to the posts of chairperson and members of the Appellate Tribunal and all ERCs. This will take away the rights of the state, which is not advisable. The selection committees are to be separate at the Centre and state level.

The proposed amendment stipulates that the Regional/State Load Dispatch Centres (RLDC/SLDC) are not to dispatch power unless adequate payment security is provided as per contract. This proposal is legally tenable and ensuring payment security will result in financial discipline and viability of the electricity sector.

Besides, providing such freedom will ensure the independence of the RLDC/SLDC.

However, this proposal, if implemented, may lead to some sort of friction between generators and SLDC. In view of the fact that most of the generating companies and SLDCs are state entities, the implementation of this amendment may not be possible.

The subsidy has been a controversial issue in the electricity sector. The Amendment Bill envisages direct transfer of subsidy to consumers by making it obligatory on the part of the ERCs to fix tariff without taking into account the subsidy element promised to be paid by the government.

LPG subsidy

While this is good in principle and needs to be experimented, the road to implementation may not be as smooth as in case of LPG subsidy. The amendment is not clear whether subsidy will be transferred to distribution companies and then to the beneficiaries or directly to consumers’ accounts. Issues like identification of beneficiaries, usage of electricity by the unmetered category of consumers etc, may pose practical difficulties.

Though electricity bills are paid by the users, the owner of the premises may be different. In such a case, to whose account will the subsidy is to be transferred or credited? Secondly, there may be delay (as is now the case) on the part of the government in providing the subsidy amount to the distribution companies.

In such a case, the distribution company will raise bills as per retail tariff. This may result in tariff shock to the end consumers leading to non-payment of bills resulting in financial strain on distribution companies.

The amendment envisages certain structural changes in the sector. It is proposed to introduce distribution sub-licensees (DSL) and amend provision relating to franchisees.

The amendment bill is not clear about the rights and obligations of the DSL like procurement of power, implementation of rules and regulations issued by the ERC, filing of tariff petitions, consumer grievance handling, billing disputes etc.

While the DSL is required to obtain the permission of the ERC for its operations, the Franchisee is not obliged to do so. It can operate merely by ‘informing’ the ERC.

Once again, DSL is a burden to the consumers without any additional benefits. Since the present distribution companies are quite efficient, DSL may not be required. The Bill is silent on other amendments relating to consumer protection.

(The writer is with Consumer Rights Education and Awareness Trust)