Electricity Act 2003

Salient Features
&
Implications
 History

• Indian Electricity Act 1910

• Indian Supply Act 1948

• Electricity Regulatory Commissions Act 1998

• Electricity Act 2003 replaces all the three acts

 Defining Electricity Act 2003
An Act to consolidate the laws relating to generation,
transmission, distribution, trading and use of electricity and
generally for taking measures conducive to development of
electricity industry, promoting competition therein, protecting
interest of consumers and supply of electricity to all areas,
rationalization of electricity tariff, ensuring transparent
policies regarding subsidies, promotion of efficient and
environmentally benign policies constitution of Central
Electricity Authority, Regulatory Commissions and
establishment of Appellate Tribunal.

*Shift to Multi-seller and Multi-buyer system

 Salient Features
• Central Government Role
• Generation
• Transmission
• Distribution
• Trading of Electricity
• Tariff Principles
• Central Electricity Authority
• Regulatory Commissions
• Appellate Tribunal for Electricity
• Restructuring of SEB’s
 Role of Central Gov.
• National Electricity Policy (NEP)

• National Tariff Policy

• Authority* in accordance with NEP prepares National Electricity Plan

• National policy on stand alone systems for rural area

• National policy for electrification & local distribution in rural areas

* Authority refers to CEA

 Generation
• De-Licensing subject to complies with Grid code

• Hydro Power : Concurrence with Authority

• TEC Clearances : Dam Design & Inter State Issues

• Captive Power Plants*: Right to open Access, No Surcharge for wheeling of power

• Amendment 2007: No license required for dedicated Transmission line for CPP

• Any Genco. can sell power to any licensee

*Person setting up Gen. Station and generating Electricity primarily for own use .
 Transmission

• Still remains a licensed activity: CERC or SERC & CEA

• Region wise demarcation of country for efficient, economical & integrated

transmission & supply of electricity

• Inter State & Inter Regional Transmission: RLDC,SLDC & NLDC

• Central & State Transmission Utilities: Licensee for planning transmission

& Coordinating

• CTU & STU : No Trading and Generation

• Non Discriminatory Open Access to Transmission System

 Distribution
• Critical link b/w power generation, transmission and end users of power
• Investments are low - High AT & C losses, Weak financial health of SEBs
- Estimated cost of around 40,000 crore
• Formulation of APDRP
• APDRP Scheme – Components
• Investment component
- Central assistance for strengthening and upgrading the sub-transmission and distribution
network
- 25 % of the project cost is provided as central plan assistance
- Utilities need to arrange for 75% of the project cost from PFC/REC or their own resources
- Under the investment component, projects worth Rs 17033.58 crore had been
sanctioned (planning commission for 11th Plan )
• Incentive component
- Incentive equivalent to 50 % of the actual cash loss reduction by SEBs/Utilities is
provided as grant
- Cash losses are calculated net of subsidy and receivables
 Trading
• Licensed activity – Purchase of electricity for resale
• Types of supplies traded – Wholesale and Retail
• Trading License regulations 2009
• Indian Energy Exchange
- Commenced on June 9, 2008
- India’s first nation wide automated and online electricity trading platform
- Facilitates efficient price discovery and price risk management
- Enables participants to adjust their portfolio
• Power Exchange India Limited
- Fully electronic, nation wide exchange for trading of electricity
- Promoted by leading exchanges NSE and NCDEX
- Aims to provide transparent and fair price discovery mechanism which
can signal massive potential investments into the Indian Power Sector.
 Structure of Power Sector

CENTRE STATE
     
POLICY   Ministry of Power STATE
PLAN   CEA Government
REGULATIONS   CERC SERC
GENCOS,IPPs,
GENERATION   CENTRAL GENERATING UNITS Private Players
TRANSMISSION   CTU STU
NRLDC
SUPPLY OPERATION   NLDC SLDC
Distribution Licensee,
DISTRIBUTION     Private Players
TRADE   TRADING LICENSEE TRADING LICENSEE
APPELLATE   Appellate Tribunal Appellate Tribunal
Organization Roles
Central Electricity • Regulating Tariffs for Central Generating Stations
Regulatory • Regulating tariff for Inter-State Transmission
Commission • Issue of Licenses for Transmission & Trading of Electricity
• Advice Central Gov. for making National Electricity Policy
• Specify Grid Codes
• Specify and enforce standards w.r.t quality ,continuity &
• Reliability of services of licensee
• Open access to grid at central level

State Electricity • Determine the tariff for generation, Supply ,transmission and
Regulatory wheeling of power with in the state.
Commission • Facilitate intra-state transmission of electricity
• Issuing Transmission & Distribution license
• Adjudicate upon the disputes b/w the licensees & Generating
Companies
Central Electricity • Advice Central Gov. relating to NEP &NEP
Authority • Specify the technical standards for the construction of plants,
transmission lines & grid connectivity
• TEC clearances
• Collect data regarding Generation, Transmission, Trading etc.
Appellate Authority • To hear appeals against the orders of CERC and SERC
• To maintain a general supervision on the regulators
 Tariff Principles
• Regulatory Commissions are empowered to determine the tariff for
• Supply of electricity(min and max ceiling are fixed)
• Transmission
• Wheeling
• Retail sale(max ceiling alone is fixed)

• Reg. Commissions may determine Multi year Tariff which rewards efficiency

• Tariff of a particular project depends on the mode of participation

• Two ways of determining tariff are :

- based on tariff principles prescribed by CERC
- competitive bidding ; purely market based
 Modes of Participation

MoU Route Bid Route

Cost plus
approach

Long Term Medium Term

Many Single
Request For
Complexities Two Stage
Qualification
Stage Process
(RFQ)
Process
Combine
Request For RFP and RFQ
Proposal
(RFP)
Restructuring SEB’s

Y axis : INR (crore)

 Implications
• Economic Reforms in Power Sector: Investment in XI plan 140 US BN
• 100% FDI allowed : 4 % of the total FDI in XI plan
• Privatization : Share of Private player has increased
• Increased Competition has led to good performances
• Reduction in AT&C losses : Provision for theft, Privatization
• Reduction in T&D losses
• Increased rate of capacity addition : 20000 MW commissioned till now in
XI plan
• Cost of power : Protection of consumer interest
• Captive power capacity in 2009 reached 12.97% of total installed capacity
• Due to biding had led to market determination of tariffs
• Hydro has seen huge development : 32% share of Private players
• Incentives by Merchant Power tariffs
Installed Capacity
Installed Capacity Ownership
Privatization
 References:
References:
CEA Annual Report 2008
Planning Commission Report : IX Plan
KPMG
Electricity Act 2003
 Thank You
GROUP 9
Arvind
Hitvallabh
Kalyan
Paritosh