Amendment to Electricity Act will threaten BEST’s existence: GM...

 

The Brihanmumbai Electric Supply and Transport (BEST) Undertaking's administration has opposed a move by the Union Power Ministry that could prevent BEST from cross-subsidising transport losses from its supply division, and allow private distributors to supply electricity to residential and commercial units in the island city.

The Union ministry has proposed an amendment to the Electricity Act 2003, which the BEST administration believes could threaten the survival of the undertaking. The Ministry plans to send the proposal for Cabinet approval soon.

Om Prakash Gupta, General Manager of BEST on Tuesday said, "I see no reason why the amendments are being made. We have sent a strong objection to the proposed amendment, as it raises questions on the survival of such an old organisation."

During a BEST committee meeting on Tuesday, Gupta asked the members from political parties to support the BEST administration. The committee has now decided to deliberate on the issue, and take it up with Chief Minister Prithviraj Chavan and Shiv Sena leader Uddhav Thackeray.

The Union ministry plans to remove Sections 51 and 42 (3) of the Electricity Act. While Section 51 allows BEST to continue cross-subsidising its transport losses from the supply side, Section 42 (3) prevents private distributors from meeting supply needs of units that consume more than one megawatt of electricity. BEST and New Delhi Municipal Corporation are the only two organisations that use the special provisions in the country.

Gupta said, "Open access will take away our clients and allow private players to distribute electricity in the island city. While this will be similar to the arrangement in suburbs presently, it will go against BEST which serves the island city only."

Of BEST's 10 lakh users, 45 per cent are commercial establishments and the rest residential. Open access will take away high-end users from BEST, forcing the undertaking to raise supply charges for residential units.

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Power ministry to move Cabinet for amending Electricity Act...

 

The power ministry is likely to approach the Cabinet within a month on the issue of amending the Electricity Act 2003.
    
"We have received feedback from all the stakeholders, we will compile all the suggestions, analyse it and then send it to the Cabinet for approval," a Power Ministry official said, adding that this process will take about a month.
    
He declined however to elaborate upon the changes that the government intends make to the Act.
    
Stakeholders who have submitted feedback on the topic include Central Electricity Authority (CEA)), Central Electricity Regulatory Commission (CERC), Principal Secretaries of all the state governments and chairpersons of power generation, transmission and distribution utilities.
    
The government-appointed committee, chaired by power ministry Jyotiraditya Scindia, during its meeting in June this year, had deliberated on amendments to the Electricity Act.
   
According to various sources in the ministry, one of the suggestions made by the committee is to have a formula which would ensure that variation in fuel and power purchase cost is recovered by the power generating firms.
    
The advisory group was set up against the backdrop of multiple problems, including acute fuel shortages, hurting power generation in the country.
    
Members of the group include Tata Group chairman Cyrus Mistry, Reliance Group chairman Anil Ambani, SBI Chairman Pratip Chowdhary and ICICI Bank Managing Director Chanda Kochhar.

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AIPEF opposes provision of supply licensee in proposed amendments of Electricity Act 2003...

 

All India Power Engineers Federation (AIPEF) has opposed the proposed amendment in Electricity Act 2003 regarding provision of supply licensee who will supply electricity in a particular area.

V K Gupta A spokes person of Federation said that since AIPEF is major stake holder on the issue it has requested the Union Power Minister of State that a meeting on the subject may be granted to Federation to discuss the issue threadbare before it is finalized and presented to Parliament for approval.

He further said that as per proposal the supply licensee shall not require a license to undertake trading in electricity and can further appoint any number of franchisees to distribute electricity within his area of supply.

Padamjit Singh Chairman AIPEF in his letter has stated that supply licensees would sell power to high revenue identified consumers such as large supply consumers, industry, shopping malls etc. This will impact revenue of state Discoms and make them financially sick.

The system of a supplier arranging power from outside to be given to a large no. of scattered consumers embedded in the Discoms distribution system is not compatible with the prevailing scheduling system wherein every generator / supplier has to give the power supply to the Discoms as per day ahead schedule.

Moreover the energy accounting and losses not yet developed / streamlined by state Discoms as has been done in USA and Australia to handle the work of supply licensee using network of Discoms and Transco. In case supplier’s generator / source trips the unscheduled overdraws impact will come on state Discoms. How this unscheduled overdrawl will be loaded on to supplier.

Discoms are supposed to apply power cuts as per guidelines of regional load dispatch centers. In applying power cuts, the feeder being common, the consumers getting supplier licensee power will also get cut which could lead to disputes.

Consumer will have to deal with two agencies the network owner and the supplier. Ownership of metering equipment/meters could create problems -supplier may not agree to meters of Discoms and vice versa.

In case a LS consumer above 1 MW gets power from outside source as permissible now, through open access, he has to get the power as per a schedule. By contrast with a supplier giving power to large number of scattered consumers in the state, it would not be possible to give any kind of schedule on day ahead basis accurately.

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FOR bats for wide consultations before separation of content and carriage in power distribution...

 

Power Ministry's for separation of "carriage and content" in distribution has received support from the Forum of Regulators (FOR) which is a representative body of central state electricity regulators. Ministry's move to amend the Electricity Act, 2003 is aimed at the introduction of competition in retail electricity supply.

The ministry proposal is based on the Central Electricity Authority's recommendation in the recent report that the distribution system may be separated from supply of electricity with two separate licensees to two separate legal entities.

However, FOR at its recent meeting held on November 18 opined that electricity being a concurrent subject, such a model should be implemented after wide consultation with stake holders including state Governments, state utilities, consumers, NGOs.  Besides, smaller States, especially, the hilly states may need separate treatment and the model may need to be modified accordingly. FOR also suggested that the consumers should not be burdened with dealing with two licensees separately.

As per the proposed amendment, the distribution licensee will have an obligation to provide connection on demand to any consumer in its area of distribution. Further the incumbent supply licensee will have universal supply obligation to serve all the consumers in its area of supply. The subsequent supply licensee will have to have service obligation to supply on demand to all consumers of the specified voltage level for which supply licensee has been granted to it. The existing intra-state traders will be treated as deemed supply licensees with service obligation to supply on demand to all consumers of specified voltage level.

However, FOR has suggested that the subsequent supply licences should be granted for the entire area co-terminus with the incumbent supply licensee, with the obligation to supply electricity to all the consumers in its area of supply.

RP Singh, former chairman, PowerGrid Corporation told Business Standard ''The electricity sector will become viable through commercialization of the distribution sector which can only be feasible if content is separated from the carrier whereby the distribution network be assigned to a licensee on similar lines as the central transmission utility and state transmission utility have been assigned for the development of transmission network. The content (sale of power) be opened to competition may be at the taluka and district levels while in the towns and cities there could be multiple players. The present form of privatization of distribution replaces the government monopoly by a private monopoly which would focus on maximizing the profit.''

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MoP's draft replies on queries with respect to "implementation of Central Eletricity Act 2003 - a review"

 

The Ministry of Power has prepared draft reply to a list of queries with respect to the 'Implementation of the Central Electricity Act, 2003 -  A Review'.

The draft replies prepared ranged from queries relating to steps taken in furtherance of the objectives of the Central Electricity Act, 2003 to queries on challenges affecting the power sector.

As per the draft replies prepared for the Lok Sabha Secretariat, the Ministry of Power states that the National Electricity Policy (2005), Tariff Policy (2006) and the Rural Electrification Policy (2006) have been implemented over the years in furtherance of the objectives of the Electricity Act, 2003.

The MoP also mentioned that the recently issued Standard Bidding Documents (SBDs) containing RFQ, RFP and model PPA for long term procurement of power from case-2 projects and Standard Bidding Document for long term procurement of power from Case-1 projects. This SBD comprising the Model RFQ, RFP and PPA is expected to bring in larger private sector investment in the power sector and make tariffs competitive.

The draft replies also highlighted the major challenges afflicting the power sector such as financial health of the distribution sector, lack of freedom of SLDCs which results in inefficient handling of grid related matters, issues related to Open Access, separation of Carriage & Content in the distribution sector, violation of grid discipline, etc.

The Ministry of Power`s draft replies on `Implementation of Central Electricity Act, 2003 - A review` also tends to queries regarding tariff regulation such as details of tariff determination mechanisms available for arriving at the tariff rates being levied on consumers.

The Ministry presented that the Electricity Act, 2003 provides for two alternatives methods for determination of tariff. While under Section 62 of the Act, tariff on the generating station and inter-state transmission system is determined on cost plus basis in accordance with the tariff regulations specified by the Central Commission, the other method is through a process of competitive bidding.

The MoP also clarifies its policies with reference to Regulatory Commission having no say in the bidding process for tariff determination. In this regard, the draft reply states that the Central Government has already issued detailed guidelines for tariff based bidding process.

And as per the guidelines, tariff determined after completion of the bidding process has to be adopted by the Commission and must ensure that a transparent process is followed during the bidding process. Moreover, under the guidelines, the Commission is empowered to adjudicate the disputes between the seller and procurers or between the transmission service providers and long term transmission customers with regards to tariff and other provisions of the PPA.

Source: Energy Line India

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Indian Government consider amendments in the Electricity Act 2003...

 

It seems that the Indian Government is considering to amend the Electricity Act 2003, which is the governing framework for the Indian Power Sector.

The Electricity Act has brought together laws relating to generation, transmission, distribution, trading of electricity etc.

However, amidst the crisis being faced by the Indian Power Sector, the Government seems to amend certain aspects of the Electricity Act. As per the government officials, the amendments will be mostly limited to the governance, accountability and implementation issues.

A high level advisory panel committee, headed by the Hon'ble Power Minister are looking into possible amendments needed in the Electricity Act and has already made various suggestions, including mechanism to pass through higher fuel costs to consumers.

One of the suggestions made by the committee is to have a formula which would ensure that variation in fuel and power purchase cost is recovered by the generators.

A change in the Act in this regard would help in clarifying the need for surcharge formula which at minimum covers various costs, including mix variance that are to be passed through to consumers in a reasonable time-frame.

Many power plants are facing issues related to rise in fuel costs, especially pricier overseas coal.

 

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Additional Reading...

http://economictimes.indiatimes.com/news/news-by-industry/energy/power/electricity-act-needs-changesrules-implementation-important/articleshow/21549797.cms

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Power Ministry proposed amendments to Electricity Act 2003…

The Power Ministry has proposed certain amendments in the Electricity Act 2003, in the Section 11 and  Section 61(1); which are targeted to smoothen the implementation process of the said Act.

• Amendments proposed to curb the alleged misuse by state governments and prohibit the sale of surplus power from generating plant to entities outside the state.
• It has proposed an appropriate government may specify that a generating company shall, in extraordinary circumstances, operate and maintain any generating station in accordance with the direction of that government.
• ‘extraordinary circumstances’ mean those arising out of threat to the security of a state, a public order or a natural calamity, or other circumstances arising in public interest, except for the implementation of open access, as envisaged in the Act.”
• The ministry’s proposal has secured support from the Forum of Regulators, an apex body of power regulators. The forum said, “The Act may be amended to provide greater clarity on the meaning of the ‘extraordinary circumstances’ mentioned in Section 11.”
• The ministry’s move is crucial, given several states were resorting to invoking Section 11, citing rising power shortages. These were asking all power generating stations to operate at their full capacity and supply power within the state. Recently, states like Andhra Pradesh, Karnataka and Tamil Nadu had exercised their powers, invoking Section 11.
• While the ministry has also proposed an amendment to Section 61(1), the Forum of Regulators said amendments in Sections 62 and 63 would introduce more clarity. However, it said determining generation tariff should be based on competition.

 

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More Literature on this topic:

• http://business-standard.com/india/news/powermin-for-amendments-to-electricity-act-2003/473359/
• http://articles.economictimes.indiatimes.com/2012-04-29/news/31477511_1_cerc-central-electricity-regulatory-commission-electricity-act

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