The government introduced the Electricity (Amendment) Bill 2022 in Lok Sabha on August 8, which may potentially be transformational for the power sector as it suggests changes in the beleaguered power distribution space which has been a drag on the overall sector.
The government has sent the bill to the parliamentary standing committee for further discussion. It was introduced amid opposition from opposition parties who alleged that it ignores the role of states and gives more power to the centre and, therefore, violates federal principles as electricity is a concurrent subject. The bill has also faced protests from other quarters. The All India Power Engineers Federation (AIPEF) protested against the bill by boycotting their duties. In the past farmers have burnt copies of it. The power sector faces deep rooted issues such as mounting debt of the loss-making power distribution companies (discoms), high technical and commercial losses, inefficiency in payment recovery in the ecosystem, coal production and supply constraints, among others. Moneycontrol has been writing extensively about the challenges the power sector faces in a special series called the Power Shock. This explainer aims to simplify what Electricity (Amendment) Bill 2022 is all about and what are the concerns.Why were the amendments needed?The power sector has been reeling under the pressure due to the poor financial health of power distribution companies (discoms), who together owe over Rs 1 lakh crore to power generation companies, who in turn have mounting dues with Coal India Ltd. The entire supply chain in the power sector has been stretched due to payment related issues. In March-April, parts of India faced power outages and there was a sudden spike in power demand due to heatwaves and pick up in demand from industry and households as Covid related concerns eased, even as coal supply dwindled at power plants as Coal India was not able to scale up production to match demand. In this backdrop, the bill aims to streamline the payment framework, empower regulators and encourage competition in the sector.“The amendments to the Act are also necessary in view of the importance of green energy for our environment in the context of global climate change concerns and our international commitments to increase the share of renewable energy,” the bill states. “Further, it has become necessary to strengthen the regulatory mechanism, an adjudicatory mechanism in the Act and to bring administrative reforms through improved corporate governance of distribution licensees."What are the suggested changes and why?Some of the key amendments include:More than one power distributor can operate in an area and they will be allowed to use the power distribution infrastructure of other suppliers. This is aimed at boosting competition and giving more choice to the consumers. Regulators to fix a minimum tariff ceiling to discourage unhealthy pricing wars among distributors and a maximum ceiling to ensure consumers are protected. If the regulator does not approve or reject the power distribution license application of an entity within the prescribed period (90 days), the applicant will be deemed to have been granted the license. This is aimed to reduce inordinate delays that plague the system right now. Regulators will be empowered to execute orders as a decree of a civil court. This is aimed at improving compliance. The bill has specified eligibility criteria for appointment of members to regulatory bodies and aims to push for timely appointment in key roles. This is aimed as improving the functioning of the regulators and streamlining tariff revision. The bill proposes that if any state commission is unable to perform its functions on account of vacancies, the central government may, in consultation with the state, entrust its functions to any other state commission or a joint commission. There is also a provision for removing a member of a regulatory body in case of wilful violation or gross negligence of rules.The bill has amendments that focus on boosting green energy in the country and align states to the national goals. Among other things, it seeks to make changes so that the Renewable Purchase Obligation set by any state is at or above the levels prescribed by the central government.The bill aims to strengthen the functioning of the National Load Despatch Centre for ensuring the safety and security of the grid and for the economic and efficient operation of the power system in the country. It states that the dispatch centres, both at state and centre, may cut supplies in case discom has not maintained adequate security of payment, as may be prescribed by the central government.Why the protest?Opposition parties such as the Aam Aadmi Party, Shiromani Akali Dal and Congress have criticized the bill, most of them citing that it goes against the federal structure of the country and gives more powers in the hands of the Centre. Some of the key concerns raised by the opposition and others are as follows:
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