Electricity Amendment Rules, 2023: What Bill proposes, why it's being opposed

The Union Power Ministry has invited comments from stakeholders till April 14 on the Draft Electricity (Rights of Consumers) Amendment Rules, 2023, which seeks to “bring transparency and give more control to the consumers” when dealing with power distribution companies (discoms). However, the proposed rules are facing opposition from several quarters.

While power sector employees have argued that the new Bill will lead to rampant privatisation of the sector and impact farmers adversely, Opposition parties allege that it violates the federal principles of the Constitution. Union Power Minister RK Singh has rejected these allegations as “false propaganda”.

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Multiple discoms in same area

The Bill provides for multiple discoms to operate in the same area of supply. It adds that a discom must provide “non-discriminatory open access” to its network to all other discoms operating in the same area, on payment of certain charges. The Union government may prescribe the criteria for determining an area of supply. It will allow for the use of distribution networks by all licensees, enabling competition, enhancing efficiency of distribution licensees for improving services and ensuring sustainability of the power sector.

Power procurement & tariff

Upon grant of multiple licences for the same area, the power and associated costs as per the existing power purchase agreements (PPAs) will be shared between all discoms, helping them trim the losses. To meet any additional power requirements, a discom may enter into additional PPAs after meeting the obligations of existing agreements. Such additional PPAs need not be shared with other discoms. Under the Act, in case of multiple discoms in the same area of supply, the State Electricity Regulatory Commission (SERC) is required to specify the maximum ceiling for tariff. The Bill adds that the SERC will also specify a minimum tariff for such cases.

Cross-subsidy Balancing Fund 

The Bill adds that upon the grant of multiple licences for the same area, the state government will set up a Cross-subsidy Balancing Fund. Any surplus with a distribution licensee on account of cross-subsidy will be deposited into the fund. The fund will be used to finance deficits in cross-subsidy for other discoms in the same area or any other area.

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More powers with Centre

The Bill expands the Union government’s jurisdiction to make rules and may be guilty of encroaching on territory over which the state governments traditionally, under the constitutional scheme, exercised jurisdiction. The Bill proposes that the Central Electricity Regulatory Commission (CERC) will have the power to issue licences for distributing electricity in more than one state. This clearly circumvents the ability of the state government (and that of the incumbent distribution licensee) to stall the process of allowing parallel licensees to come in and operate in their territory.

Employees fear privatisation

Electricity employees and engineers led by All India Power Engineers Federation (AIPEF) allege that the Bill will lead to privatisation of power distribution system. Besides, it will end all subsidies to power consumers and affect farmers adversely, they charge. The AIPEF further allege that the only aim of the Bill is to bring corporate and private companies into the power sector and privatise the whole power distribution system.

“The Bill seeks to centralise almost all functions of the discoms as well as the state regulatory commissions and changes the character of the electricity supply industry and the federal structure of the Constitution,” it says.

“The Bill aims to give multiple players open access to distribution networks of power suppliers using the infrastructure of state discoms developed at the cost of taxpayers and by paying only wheeling charges and also allowing consumers to choose any service provider,” says the federation.

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Violates federal principles: Oppn

Opposing the Bill, the Congress, Left parties, and TMC have alleged that it not only violates the federal principles of the Constitution but will also lead to privatisation. The AAP governments in Delhi and Punjab too have resented the move. Delhi Chief Minister Arvind Kejriwal has said that the Bill is dangerous since it will only benefit a few power distribution companies.

Punjab Chief Minister Bhagwant Mann has said the Centre’s move is an attack on the constitutional rights of the states. States like Punjab will not be able to extend free power facility to farmers and other sections of society if the Centre amends the Electricity Act, he observed.

Kerala resents ‘unstable pricing’

Kerala has expressed its strong reservations to the Centre regarding a proposal to let discoms automatically recover their additional spending on power purchases on a monthly basis from the consumers. It would lead to an “unstable pricing situation” similar to the one in the petroleum sector and subject electricity consumers to frequent price fluctuations, contended the state government.

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The draft seeks to replace the system of computing the thermal fuel surcharge, periodically imposed by licencees (for instance Kerala State Electricity Board in Kerala’s case) on electricity bills, with a Fuel and Power Purchase Adjustment Surcharge (FPPAS). According to Rule 14 of the draft, “The impact in the cost due to variation in price of fuel or power purchase cost” shall be automatically passed through in the consumer tariffs, on a monthly basis. The truing-up by regulatory commissions needs to be done only on an annual basis.

Kerala expressed opposition the move, stating that this provision dilutes the mandatory prudence check now done by the state-level regulatory commissions before such costs are passed on to consumers. At present, the surcharges need the commission’s nod. On its part, the commission holds public hearings before taking a decision.