The Electricity Act, 2003

By ANIL KUMAR

1
 Background

• Three erstwhile Acts that regulated the electricity

sector:

• The Indian Electricity Act, 1910

• The Electricity (Supply) Act, 1948
• The Electricity Regulatory Commissions Act, 1998

2
 Background (contd..)

• The Indian Electricity Act, 1910 ( Total five parts)

• Provided basic framework for electric supply industry in
India.
• Growth of the sector through private licensees. Licence by
State Govt.
• Provision for licence for supply of electricity in a specified
area.
• Legal framework for laying down of wires and other works.
• Provisions laying down relationship between licensee and
consumer.

3
The Electricity (Supply) Act, 1948
• Mandated creation of SEBs. As after independence country
needed growth & development of Power in all areas & sectors.
• Need for the State to step in (through SEBs) to extend
electrification (so far limited to cities) all across the country.
• States & SEBs used to be nodal agencies for Power.

4
 Amendments in 1948 Act

• Main amendments to the existing Acts

• Amendment in 1975 to enable generation in Central sector
• Amendment to bring in commercial viability in the
functioning of SEBs –
• Section 59 amended to make the earning of a minimum return of 3%
on fixed assets a statutory requirement (w.e.f 1.4.1985)
• Amendment in 1991 to open generation to private sector and
establishment of RLDCs
• Amendment in 1998 to provide for private sector
participation in transmission, and also provision relating to
Transmission Utilities.
5
 ERC Act, 1998

• The Electricity Regulatory Commissions Act, 1998

• Provision for setting up of Central / State Electricity
Regulatory Commission to with powers to determine tariffs.

• Constitution of SERC optional for States. .

• Distancing of Govt. from tariff determination as
rationalization of tariff was requirement. ( WB Model)
• But SECs were not mandatory for states although at centre
CERC was mandatory.

6
 Need for the new legislation

• Requirement of harmonizing and rationalizing the provisions in the

existing laws to
- Create competitive environment for benchmark competition which
will result in enhancing quality and reliability of service to consumer.
- distancing regulatory responsibilities of Govt.
• Reform legislation by several States separately.
• Obviating need for individual States to enact their own reform laws.
• Requirement of introducing newer concepts like power trading, open
access, Appellate Tribunal etc.
• Special provision for the Rural areas.

7
Salient features of the Electricity Act, 2003
 Role of Government
 Rural Electrification & Distributed Generation
 Generation
 Transmission
 Distribution
 Consumer Protection
 Trading / Market Development
 Regulatory Commissions
 Appellate Tribunal
 Tariff Principles
 CEA
 Measures against Theft of electricity
 Restructuring of SEBs

8
 Role of Government

 Central Government to prepare National Electricity

Policy and Tariff Policy.(Section 3)
 Central Govt. to notify a National Policy for rural areas
permitting stand alone systems based on renewal and
Non-Conventional energy sources in consultation with
States. (Section 4)
 Central Govt. to formulate a National Policy in
consultation with the concerned State Govts. for bulk
purchase of power and management of local
distribution through Users’ Association, Cooperatives,
Franchisees and Panchayat Institutions etc. (Section 5)
9
 Rural Electrification & Distributed Generation
 

•National policy on stand alone system for rural areas &

non- conventional energy system. ( Section -4)
•National policy on electrification & local distribution in
rural areas (Section 5).
•Govt. to endeavor to extend supply of electricity to all
villages/hamlets i.e. obligations to supply electricity to
rural areas. (Section 6)
•No requirement of licence if a person intends to generate10
and distribute power in rural area. (Section 14)
•Generation (Sections 7 -11)
• Generation free from licensing. (Section 7)
•Requirement of TEC for non-hydro generation done away with.
(Section 7)
•Captive Generation is free from controls. Open access to Captive
generating plants subject to availability of transmission facility.
(Section 9)
•Clearance of CEA for hydro projects required. Necessary due to
concern of dam safety and inter-State issues.
(Section 8)
•Generation from Non-Conventional Sources / Co-generation to be
promoted. Minimum percentage of purchase of power from renewables
may be prescribed by Regulatory Commissions.
(Sections 61(h), 86 (1) (e))
11
 Transmission (25 to 41)
• There would be Transmission Utility at the Centre and in the States to undertake
planning & development of transmission system. (Sections 38 & 39)
• Load despatch to be in the hands of a govt company/organisation. Flexibility
regarding keeping Transmission Utility and load despatch together or separating
them. Load Despatch function critical for grid stability and neutrality vis a vis
generators and distributors. Instructions to be binding on both.
(Sections 26, 27,31, 38, 39)
• Private transmission companies to be licensed by the Appropriate Commission
after giving due consideration to the views of the Transmission Utility.
(Sections 15 (5) (b))
• The Load Despatch Centre/Transmission Utility / Transmission Licensee not to
trade in power. Facilitating genuine competition between generators
(Sections 27, 31, 38, 39,41)
• Open access to the transmission lines to be provided to distribution licensees,
generating companies. (Sections 38-40)
This would generate competitive pressures and lead to gradual cost reduction.

12
  Distribution :
- Distribtution to be licensed by SERCs.
- Distribution licensee free to take up generation & Generating co. free
to take up distribution licence. This would facilitate private sector
participation without Government guarantee/ Escrow. (Sections 7, 12)
- Retail tariff to be determined by the Regulatory Commission.
(Section 62)
- Metering made mandatory. (Section 55)
- Provision for suspension/revocation of licence by Regulatory
Commission as it is an essential service which can not be allowed to
collapse. (Sections 19, 24)
- Open access in distribution to be allowed by SERC in phases. (Sections
42)
- In addition to the wheeling charges provision for surcharge if open access
is allowed before elimination of cross subsidies, to take care of
(a) Current level of cross subsidy
(b) Licensee’s obligation to supply. (Section 42)
- This would give choice to customer.
13
 Consumer Protection
 Consumer to be given connection within stipulated time.
(Section 43(1))
 Penalty in the event of failure to give connection
(Section 43(3))
 Payment of interest on security deposit. (Section 47(4))
 Regulatory commission to specify Electricity supply
code to be followed by licensees. (Section 50)
 No sum due from consumers recoverable after a period
of two years unless the same was shown recoverable
continuously. (Section 56(2))
14
 Consumers (contd..)

•Redressal forum for redressal of grievances of consumers, to be

appointed by every distribution licensee within six months.
Ombudsman scheme (Section 42 )
•Standards of performance
•Licensees required to meet standards of performance specified
by Regulatory Commission. Failure to meet standards makes
them liable to pay compensation to affected person within
ninety days.
•Licensee to furnish to the Commission periodical information
on standards of performance (Section 57)
•District level committee - (a) to coordinate and review extension
of electrification in each district; (b) to review quality of power
supply and consumer satisfaction, etc. (Section 166 (5))
15
 Trading/ Market development

- Trading distinct activity permitted with licencing. (Section

12)

- Regulatory Commission may fix ceiling on trading margin

to avoid artificial price volatility. (Sections 79 (1) (j) & 86
(1) (j))

- The Regulatory Commission to promote development

of market including trading. (Section 66)

16
 Regulatory Commission (76-109)
 Constitution of Central Commission ( Section 76) & Function (79)
 Central Advisory Committee ( Section 80) & its objects ( Sec. 81)
 State Electricity Regulatory Commission to be constituted within six
months. (Section 82) & its function ( Sec. 86)
 Provision for Joint Commission by more than one State/UT.
(Section 83)
 State Advisory Commission ( Section 87) & its objects ( Sec.88)

17
Appellate Tribunal (110-125)
 Provision for constitution of Appellate Tribunal consisting of
Chairman and three Members. (Section 110, 112)
 Appellate Tribunal to hear appeals against the orders of
CERC/SERC, and also to exercise general supervision and
control over the Central/State Commissions. (Section 111)
 Appeal against the orders of Appellate Tribunal to lie before the
Supreme Court. (Section 125)
 Appellate Tribunal considered necessary to-

Reduce litigation and delay in decisions through High Court.

Provide technical expertise in decision on appeals.

18
 Central Electricity Authority ( 70 to 75)

•CEA to continue as the main technical Advisor of the Govt. of

India/ State Government with the responsibility of overall
planning. (Section 70)
•CEA to specify the technical standards for electrical plants and
electrical lines. (Section 73)
•CEA to be technical adviser to CERC as well as SERCs.(Section
73)
•CEA to specify the safety standards. (Section 53)
 

19
 Tariff Principles
• Regulatory Commission to determine tariff for supply of electricity by generating
co. on long/medium term contracts. (Section 62)
No tariff fixation by regulatory commission if tariff is determined through
competitive bidding or where consumers, on being allowed open access enter into
agreement with generators/traders.
• Consumer tariff should progressively reduce cross subsidies and move towards
actual cost of supply. (Section 61 (g), (h))
• State Government may provide subsidy in advance through the budget for
specified target groups if it requires the tariff to be lower than that determined by the
Regulatory Commission. (Section 65)
•Regulatory Commissions may undertake regulation including determination of
multi-year tariff principles, which rewards efficiency and is based on commercial
principles. (Section 61 (e), (f))
•Regulatory Commission to look at the costs of generation, transmission and
distribution separately. (Section 62 (2)) 20
 Measures against Theft of electricity
- Focus on revenue realisation rather than criminal
proceedings. (Sections 126, 135)
- Penalties linked to the connected load and quantum of
energy and financial gain involved in theft. (Section 135)
- Provisions for compounding of offences. (Section 152)
- On the spot assessment of electricity charges for
unauthorised use of electricity by the assessing officer
designated by the State Government. (Section 126)
- Theft punishable with imprisonment. (Section 135)
- Punishment provision for abetment of theft. (Section 150)
- Special Courts (Sections 153-158)
21
 Restructuring of SEBs
- Provision for transfer scheme to create one or more companies
from SEB. (Section 131)

- Provision for continuance of SEBs (Section 172)

22
 Issues
- Open Access and computation of surcharge

- Trading – regulation of traded power?

- Market in electricity – Power exchange!

23
The Electricity Act 2003
 Part 1 – Preliminary (Section – 1 & 2)
 Part 2 – National Elect. Policy & Plan (3 – 6)
 Part 3 – Generation ( Section – 7 -11)
 Part 4 – Licensing ( Section – 12 – 24)
 Part 5 – Transmission ( 25 - 41)
 Part 6 – Distribution ( 42 – 60)
 Part 7 – Tariff ( 61 - 66)
24
EA 2003 ( Cont.)
 Part 8 – Works ( Section 67 – 69)
 Part 9 – CEA ( 70 -75)
 Part 10 – Regulatory Commission ( 76 – 109)
 Part 11 – Appellate Tribunal ( 110 – 125)
 Part 12 – Investigation & Enforcement (126-30)
 Part 13 – Reorganization of Board (131-34)
 Part 14 – Offences & Penalties ( 135 – 152)
25
EA 2003 Cont.
 Part 15 – Special Courts ( 153 – 157)
 Part 16 – Dispute Resolution (158 – Arbitration)
 Part 17 - Other Provisions (159 – 165)
 Mainly related to safety & protection
 Part 18 – Miscellaneous ( 166 – 185)
 Section 183- Power to remove difficulties
 Section 184 – Not to apply in certain cases
 Section 185 – Repeal & Savings
26
Some milestone sections
 Section 25 – Interstate, Regional & Inter-Reg. Transmission
 Section 50 – The Electricity Supply Code
 Section 75 – Direction by Cent. Govt. to CEA
 Section 100 – Accounts & Audits of Cent. Com.
 Section 125 – Appeal to Supreme Court
 Section 150 – Abetment
 Section 175 – Provisions are in addition, not against of
other laws

27
Thank You

28