Power ministry weighs parallel distribution licensing for power sector

The proposed framework seeks to enable competition in electricity supply by allowing new distribution licensees to use existing networks without duplication

The consultative committee of the power ministry on Thursday discussed the proposed framework for parallel distribution licensing, which seeks to introduce competition in electricity supply without duplicating the physical distribution network.

 

Under the proposal, existing distribution licensees will continue to own, operate and maintain their networks. New licensees will be allowed to use the existing network by paying regulated wheeling charges, while retaining the option to build their own networks wherever permitted by the concerned State Electricity Regulatory Commission (SERC), the ministry said.

 

Although the Electricity Act, 2003 permits multiple distribution licensees in the same area, it requires each to establish its own distribution network. This results in duplication of poles, lines and substations, raises capital expenditure, discourages fresh investment and leads to inefficient use of resources.

   

Addressing the committee, Union Power Minister Manohar Lal said the Electricity Act introduced competition in electricity generation, transmission and trading, while distribution remains the only major segment where competition is limited.

 

He said the detailed implementation framework would be developed by the SERCs to ensure non-discriminatory access to the network. All distribution licensees would continue to be bound by the universal service obligation under the Electricity Act, while the regulatory framework would prevent selective supply only to profitable consumers, the ministry said.

 

The minister said consumers would be free to choose their electricity supplier, similar to the choices available in sectors such as telecommunications and aviation.

 

He cited Mumbai as an example, where consumers have exercised supplier choice for several years while the distribution network continues to be developed in a coordinated manner under the supervision of the SERC.