Powering long-pending electricity reforms

The proposed delicensing of the supply of electricity, by allowing multiple distributors to operate in the same area, and ending the monopolies of state-run entities, is a big step towards reforming the power sector.

The Cabinet is expected to soon consider the proposal to enable consumers to switch between power suppliers, following which the Bill to amend the Electricity Act will be introduced in Parliament, possibly in the session starting today. What’s important is that the distribution infrastructure of an incumbent discom can now be used by a new entrant to supply power in the area.

The draft Bill proposes to curtail the powers of SERCs with regard to cross-subsidies. Essentially, it seeks to shift the responsibility of framing the regulations relating to the calculation of the cross-subsidy away from the SERCs. The idea is to get them to determine the extent of the cross-subsidy using the National Electricity Tariff Policy. The move has been initiated because it is felt that the tariff determined by the SERCs doesn’t reflect the real costs, with political considerations overruling financial prudence.

The maximum tariff that industrial consumers pay is proposed to be capped at 20% of the average cost of supply; in some states, the commercial tariff is more than 20% than the ACS. Experts believe the states could challenge this in the court since electricity is a concurrent subject. They believe SERCs are better placed to calculate the cross-subsidy since they would take into account factors that vary from state to state.

A long-overdue move to strengthen the Appellate Tribunal for Electricity (Aptel) is now being initiated. Experts point out Aptel has not functioned properly for several years since the bench has almost always been short of members.