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ELECTRICITY BILL, 2003

ELECTRICITY BILL, 2003. Presented by Mohit Saraf Partner Luthra & Luthra Law Offices May 22, 2003. Background. Power Sector Reform began 12 years ago Generation “Centric” Exclusive off-taker being bankrupt SEBs – Lenders Centric Distribution Centric Piece-meal legislation

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ELECTRICITY BILL, 2003

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  1. ELECTRICITY BILL, 2003 • Presented by • Mohit Saraf • Partner • Luthra & Luthra • Law Offices • May 22, 2003 Luthra & Luthra, Law offices

  2. Background • Power Sector Reform began 12 years ago • Generation “Centric” • Exclusive off-taker being bankrupt SEBs – Lenders Centric • Distribution Centric • Piece-meal legislation • New Comprehensive legislation : Electricity Bill, 2003 • Better late than never! Luthra & Luthra, Law offices

  3. Highlights of Electricity Bill, 2003 • Generation – Delicense • Competition and choice • First time Recognition of Non-discriminatory Open Access • Compulsory Metering • Independent Regulatory Body • Commission has power, both for granting license and tariff fixation. • Transco cannot engage in Trading • Excessive Tariff Regulation Luthra & Luthra, Law offices

  4. Highlights of Electricity Bill, 2003 (cont’d.) • Special Courts – Theft/Consumer • Reorganize Electricity Industry on modern principles • Setting up of Standards of performance • Consumer Protection • CEA Role Streamline Luthra & Luthra, Law offices

  5. Open Access • Competition & Choice • Non-discriminatory Open Access to the wires network (Gas) • Principle: Allow producer to sell directly to Bulk Consumers by wheeling power through the existing transmission lines on payment of surcharge • Recognition of Open Access as “panacea” and “key” to power reforms: Standing Committee Luthra & Luthra, Law offices

  6. Open Access (cont’d.) • Request for Open Access within a “definite” and “mandated” time frame not considered. • Open Access at the sole discretion of Regulatory Commissions • Is it excessive & unguided delegation? • Success would depend on the “independence” and “maturity” of Regulatory Commission • State is an interested Party Luthra & Luthra, Law offices

  7. Open Access (cont’d.) • Absence of Open Access means limited private investment in capacity addition. • Absence of Open Access also means perpetuating monopolies; leading to high tariffs and not so improved service for consumers. Luthra & Luthra, Law offices

  8. Regulatory Commissions • Timing of Open Access: Regulatory Commission to decide • The bar on re-employment of Commission members by the same State Government has been removed. Luthra & Luthra, Law offices

  9. Regulatory Commissions(cont’d.) • Removal of the Commission member by the Government upon enquiry by a retired judge Vs. removal by the Governor/ president, upon enquiry by HC/SC • In light of these provision, can Regulatory Commission work independent of Government? Luthra & Luthra, Law offices

  10. Appellate Tribunal • All Commissions will be placed under the Administrative Control of a retired judge (chairperson of Appellate Tribunal) • The Centre to appoint the retired judge for a term of 3 years - he can be reappointed if the Centre so wishes – thus amenable to pressure • Infringes the independence of the Regulatory Commission and bring them to a subordinate position Luthra & Luthra, Law offices

  11. Cross Ownership Vs. Unbundling • Despite the Committee’s recommendations, allows private companies to own transmission along with generation and distribution – the reverse of unbundling in the public sector • Can this ensure “non-discriminatory Open Access”? Luthra & Luthra, Law offices

  12. Second License • Competition & Choice • Empowers the Centre to impose restrictions (like networth, capital adequacy) on grant of a second distribution license • 12 existing Laws/Bills (Electricity Act, 1910, 8 State Reform Acts and 3 Bills) allow multiple licenses • If the said criteria are met, license cannot be denied on the ground that there already exist a licensee in the same area for the same purpose Luthra & Luthra, Law offices

  13. Second License (cont’d.) • BSES & TEL supply to Bulk Consumers in the same area in Mumbai • Grant of Second License for Transmission have been omitted • Telecom Experience Luthra & Luthra, Law offices

  14. Will SEBs/Discoms survive the Electricity Bill? • Industrial unit and other bulk consumers will be able to form association and acquire shares in a generating company, thereby securing the right to Open Access without payment of surcharge in lieu of cross subsidy • High chance of migration of HT Consumers of SEB/Discom • Will deprive SEBs/Discoms of Best Customers who presently cross-subsidise • Definitely, it may put burden on Consumers. But surely make Industry more competitive Luthra & Luthra, Law offices

  15. Superseding State Laws • 8 States are implementing reforms as per their respective Reforms Acts; 3 more ready to enact their laws • The State laws were enacted during the past five years with Centre’s concurrence • State laws should not be superseded- Standing Committee • Is there a justification? • Uniformity! Luthra & Luthra, Law offices

  16. Conclusion • Beginning of long awaited Step • Real success would depend on introduction of Open Access • Leading to competition & choice • Otherwise private monopolies may perpetuate and consumer interest be compromised. • Success of Bill depends on “maturity” and “independence” of Regulatory Commission. Luthra & Luthra, Law offices

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