The Electricity Act: Charging up the electric vehicle ecosystem

Given the government’s clean energy push, domestic automobile industry has been quick to take up position on the electric vehicle path. However, individual and commercial consumers are likely to take to this route once they have a clear idea on how such vehicles can be charged.
 
The power distribution ecosystem, which is governed by the Electricity Act and the regulations issued under it by the central and the state regulators, will need an additional mechanism for dispensing power for vehicles. Charging vehicles at stations, as opposed to charging in private premises for captive use, will need to be compliant not just with regulations but have an arrangement that is recognised by the regulator.
 
Under Section 12 of the Electricity Act, no person can transmit electricity or distribute electricity or undertake trading in electricity without a licence issued under Section 14 of the Act by the regulatory commissions. The Act, however, recognises incumbent power distributors and government entities in the business as deemed licensees and grants certain exemptions under Section 13 for local bodies and non-government organisations. This leads to the question: Are charging stations authorised to sell power without a licence from regulators?
 
“In view of Section 2 (23) of the Electricity Act, 2003, the concept of electricity means and implies the sale of electricity and that means the activity of electric vehicles charging qualifies as a sale of electricity,” says Praveer Sinha, chief executive officer and managing director, Tata Power Delhi Distribution.
 

The Electricity Act says

• Section 2 (3) "area of supply” means the area within which a distribution licensee is authorised by his licence to supply electricity

• Section 2 (17) "distribution licensee" means a licensee authorised to operate and maintain a distribution system for supplying electricity to the consumers in his area of supply

• Section 2 (23) "electricity" means electrical energy- (a) generated, transmitted, supplied or traded for any purpose; or (b) used for any purpose except the transmission of a message

• Section 2 (27) “franchisee means a persons authorised by a distribution licensee to distribute electricity on its behalf in a particular area within his area of supply

According to experts, a plain reading of Section 2(15) of the Act implies that the electric vehicles falls under the category of the consumers. That means the charging stations qualify as 'distribution system'.
 
As long as an individual institution or a consumer charges a vehicle for captive consumption, a licence is not required. But a licence is required if power is sold. A way out is seen in the franchisee model, which is already adopted for privatisation of power distribution across a host of cities in the country.
 
Sinha says the distribution utilities can appoint an agency in the name and spirit of "franchisee" defined under Section 2(27) of the Act for the purpose of distribution of electricity. In such a case, no separate licence is required to undertake distribution of electricity under Section 14 of the Act, he adds.
 
The Section 2(27) defines a franchisee as a person authorised by a distribution licensee to distribute electricity on its behalf in a particular area within his area of supply. Tata Power-DDL has set up charging stations for three-wheelers based on a franchisee model.
 
Besides, charging stations have recently been set up by NTPC that is allowed to sell power as a deemed licensee. Finnish company Fortum, which tied up with the government distribution licensee New Delhi Municipal Corporation, has also entered this arena. Under the Faster Adoption and Manufacturing of Hybrid and Electric Vehicles in India (FAME-India) scheme of the Union government, 25 charging stations have been installed at six different locations in Bengaluru by Mahindra REVA Electric Vehicles. In addition, four other companies, including BHEL, have the government approval to set up charging stations.
 
Though, the legal provision for franchisee could help scaling up the number of charging stations, there is a need for standardisation of automobiles, charging equipment and infrastructure. Tata Power Delhi Distribution, for instance, has set up charging stations that adhere to the specifications under the Bharat Standards drafted by the department of heavy industry.
 
Another aspect of vehicle charging that would require clarity is the rate at which power is to be sold. The electric cars currently on road are mostly charged at home by the owners at power rates meant for households. In Delhi, however, the regulator has given a tariff order to ensure suitable metering arrangements for more than 100,000 e-rickshaws.
 
While there are more than 6,000 electric cars and two-wheelers, and a large number of buses and e-rickshaws, there aren’t any uniform regulation on the rate of power, the model to be adopted for selling such power and standards and safety norms. Before the e-vehicles embark on a fast lane, a regulatory clarity is needed in order to avoid a situation like that of cab aggregators that proliferated in a policy vacuum, but found themselves fumbling when the regulations tightened.