Proposed amendments in Electricity Act to power up demand, ease supply

At a time when the power sector has been struggling with sluggish power demand, proposed amendments in the Electricity Act could boost demand and also ease supply.
 
Moving away from dated laws, the Act includes renewable sources of energy in every regulation governing supply, payment and penalty.
 
Along the same lines of widening its boundaries, the Act provides Metro Rail networks to be eligible for distribution licence. Along with railways, a Metro rail network can now also purchase electricity from any generator directly, through open access. Till yet, it had to sign power purchase agreement (PPA) with power distribution companies in the host state for sourcing electricity.
 
Delhi Metro Rail Corporation (DMRC), for instance, tied up for purchasing renewable power directly from Madhya Pradesh, but had to pay extra transmission cost as it doesn’t have distribution licence. With the current amendment, DMRC’s finances would be positively impacted as it will have a control over cost and choice of supplier. With Metro rail network propping in all Metro cities and Tier-I and II towns, this is likely to propel power demand and also reduce power price for commercial users.
 
Identifying the growing acceptance and need of electric vehicles, the Act has laid down regulations governing the charging of EVs. “Transactions involving charging of batteries for electric vehicles by charging stations shall not be construed as distribution, trading or supply to the extent undertaken for the said purpose and subject to such terms and conditions,” the Section 14 of the Act states.

 
This entails a separate commercial business for EV charging and would help states and EV manufacturers set up charging infrastructure. The rate and tariff for EV charging would then also be a competitive business, separate from power distribution by states or private power distribution companies (discoms). This would increase the demand of EVs among individual and commercial consumers. The state regulator would be free to decide on how EVs can be charged and at what rates.
For the first time, the Act mandates 24x7 power supply to consumers and penal provisions if the discoms fail to do so. Sector experts said this was needed, given several schemes of the Centre aiming at energy access. “While power connectivity is being provided under schemes such as Saubhagya, the states need to be cognizant of their obligation of providing uninterrupted supply. Else the idea of connecting households at record pace is lost. Obligation to provide power, and penalty on default, is a step in the right direction,” said a senior sector executive.
 
Section 42 of the Act mentions that the SERCs will carry out review of the discoms if they have tied up adequate sources of power to meet the annual average demand of the area it is required to serve. “Failing which, remedial action be taken, which includes suspension of the licence under Section 24 and revoking of licence under Section 19.”
 
A new insertion is also to safeguard the power generators, which face delayed payments violation of PPA by sourcing less power. The Act now provides for penalty for the same. “Violation of PPA will lead to penalties… and may include fines which may extend to Rs10 million per day. In case of licensees, it may also extend to suspension and cancellation of licence,” the proposed amendment said.
 
This comes at a time when power generation assets are facing threat of being non-profitable due to tepid power demand, PPA and delayed payment by states.

Major reforms on the cards

• Identifying the growing acceptance of electric vehicles, the proposal lays down regulations governing the charging of EVs 
• This entails a separate commercial business for EV charging
• For the first time, it mandates 24x7 power supply to consumers and penal provisions if discoms fail to do so
• There is a new insertion to safeguard power generators which face delayed payments violation of power purchase agreement by sourcing less power