Electricity Act, 2018 proposal encapsulates changing power market

Business Standard explains the major changes introduced in the 2018 avatar of the torch-bearing Electricity Act for the sector and its impact

The draft amendments to the Electricity Act, 2003 is finally out and it aims to keep at pace with the changing market dynamics, increasing renewable capacity and challenge of providing quality power supply. Business Standard explains the major changes introduced in the 2018 avatar of the torch-bearing Act for the sector and its impact. The draft amendments would need comment from the industry and stakeholders before being placed on the floor of the Parliament.

Direct Benefit Transfer of Subsidy: Breaking the cycle of subsidy and losses incurred by the discoms, the Act has introduced DBT in electricity as well. The Act says: if the State Government or Central Government desires the grant of any subsidy to any consumer or class of consumers, such subsidy shall be directly transferred to the beneficiary by direct benefit transfer into the bank account of the beneficiary.” The same will apply if subsidy is given through any government scheme as well.

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. Allied to it is introduction of time of the day tariff – power rate as per the energy source, season, time and demand.

Honourable mention to renewable energy: Since 2013, the renewable capacity in the country has grown more than 80 per cent currently standing at 70,000 MW. The draft Act has introduced Renewable Purchase Obligation and also defined penalty for defaulting on it. Hydropower has been defined under renewable source, but the size of projects isn’t. The Act also aims to introduce one member from the ministry of new & renewable energy in the Central Electricity Regulatory Commission, in place of a representative of department of consumer affairs.

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.