ELECTRICITY ACT 2003 & ELECTRICITY RULES 2005

1. ELECTRICITY ACT 2003&ELECTRICITY RULES 2005 - A PRESENTATION Presented by: Er. Suneel Grover Power Controller, HPSEB 20th Feb. 2008 HIPA

2. Contents • Erstwhile Acts – a brief • The Electricity Act, 2003 • Main Features • Important Sections • The Electricity Rules, 2005 – A brief • Conclusions

3. Some posers • Who is an Engineer? • What is Energy? • What is Electricity? • What is the status of subject Electricity as per constitution ? • What is an Act?

4. Who is an Engineer? As per Webster’s Dictionary (Page 413) • en-gi-neer \1en-je-1nir\ n [ME engineour, fr. AF, fr. Enginer to devise, construct, fr. Engin] (14c) 1: a member of a military group devoted to engineering work 2 obs” a crafty schemer : PLOTTER 3 a: a designer or builder of engines b: a person who is trained in or follows as a profession a branch of engineering c:a person who carries through an enterprise by skillful or artful contrivance4: a person who runs or supervises an engine or an apparatus • engineervt (1843) 1: to lay out, construct, or manage as an engineer (~ a bridge) 2 a: to contrive or plan out usu. With more or less sub-tie skill and craft (~ a business deal)b: to guide the course of (~ a rally) 3: to modify or produce by genetic engineering (corn ~ed to resist crop pests) syn see GUIDE • en-gi-neer-ing\-1nir-irj\ n (1720) 1: the activities or function of an engineer 2 a: the application of science and mathematics by which the properties of matter and the sources of energy in nature are made useful to people b: the design and manufacture of complex products (software ~) 3: calculated manipulation or direction (as of behavior) (social ~) – compare GENETIC ENGINEERING

5. What is Energy? Some definitions Energy is the ability to do work {It can be chemical energy, electrical energy, heat (thermal energy), light (radiant energy), mechanical energy and nuclear energy} Energy can be transformed into another form of energy. But it cannot be created. AND it cannot be destroyed. Energy has always existed in one form or another. Initial measurement terms of energy Btu, Joules 1000 Joules = 1Btu (Energy = Power*Time) It takes about 2000 Btus to make a pot of coffee and 1000 Btus roughly to average chocolate candy bar of 4 inches. A piece of butter toast contains about 315 Kilojoules of energy, sufficient to light 60 watt bulb for 1 – ½ hours

6. What is Electricity? Where does the word Electricity come from? Electrons, Electricity, Electronic and other words that begin with electr… all originate from the Greek word ‘Elektor’ meaning Beaming Sun. In Greek, “elektron” is the word for amber. The latin word, electricus, means to “produce from amber by friction”. So we get our English word electricity from Greek and latin word that were about amber. One kWh is the energy consumed by a 1000W devise in one hour. “Electricity in the present day contex has become a basic necessity like air and water”

7. What is the status of subject Electricity as per Constitution? • In the constitution of India the subject matter of Electricity has been included in list-III concurrent list at Sr.No.38 • Article-246 of constitution of India determines the relationship between Union and States about concurrent list

8. What is the status of subject Electricity as per constitution ? ARTICLE - 246 • Notwithstanding anything in clauses (2) and (3) , Parliament has exclusive power to make laws with respect to any of the matters enumerated in list I in the Seventh Schedule (in this Constitution referred to as the “Union List”) • Notwithstanding anything in clause (3), Parliament, and , subject to clause (1), the Legislature of any State also, have power to make laws with respect to any of the matters enumerated in List III in the Seventh Schedule (in this Constitution referred to as the “Concurrent List”) • Subject to clause (1) and (2), the Legislature of any State has exclusive power to make laws for such State or any part thereof with respect to any of the matters enumerated in List II in the Seventh Schedule (in this Constitution referred to as the “State List”). • Parliament has power to make laws with respect to any matter for any part of the territory of India not included in a State notwithstanding that such matter is a matter enumerated in the State List. From the above, it is clear that Parliament as well as State Legislatures are vested with the power to make laws with respect to Electricity.

9. Erstwhile Acts • The Electricity Act, 1910 • The Electricity (Supply) Act, 1948 • The Electricity Regulatory Commissions Act, 1998

10. The Indian Electricity Act, 1910 1. The Indian Electricity Act, 1910 (IEA) which provides for the following: • Grant of licenses; • Power to control the distribution & consumption of energy; • Submission of the licensee’s accounts; • Control over the laying down & placing of electric supply lines & other works; and control over the supply, transmission & use of energy by non-licensees. Contd….

11. The Indian Electricity Act, 1910 • This act has 4 Parts and 58 Sections and a schedule • Section 36 led to formation of CEB with very wide representation & this CEB under Section-37 was empowered to frame rules which are known as Indian Electricity Rules, 1956. • These Electricity Rules of 1956 has 11 chapters & 143 sections. Contd….

12. The Electricity (Supply Act), 1948 2. The Electricity (Supply)Act, 1948(ESA) which controls: • Powers & duties of the SEBs & generating companies • According approvals for the establishment, acquisition or replacement of power stations. • Terms, conditions & tariffs relating to the sale of electricity; & submission of accounts by the SEBs, generating companies, licensees. • This Act has VII chapters & 83 sections & nine schedules came in time to time.

13. The Electricity (Supply Act), 1948 “An Act to provide for rationalisation of production & Supply of Electricity & generally for taking measures conducive to ‘electric development’” • This led to formation of State Electricity Boards/ utilities in various States & UTs of Union of India. Under this Act these Electricity Utilities have been charged with the duty of promoting “Coordinated development of generation, supply & distribution of electricity within the State in the Most efficient & economic manner.

14. Objectives that the extent these Acts had enabled SEBs to achieve are... • To provide the industry with power at affordable rates. • To take electricity to rural & urban slum areas & provide electricity to the economically disadvantaged irrespective of their capacity to pay. • To encourage & build self-reliance. • To ensure regional co-operation in a complex plural society within a situation of shortage of capital and resources. Contd….

15. Objectives that the extent these Acts had enabled SEBs to achieve are... • To support the growth of industry, rail transport and communication. • To optimally utilise domestic primary energy resources. • To make electricity a backbone for food security-based on electrical irrigation pump sets, especially after having to live from ship to mouth under the PL-480

16. The Electricity Regulatory Commission Act, 1998 • Provided setting up of Central/ State Electricity Regulatory Commissions with powers to determine the tariff. • Sought to distance the Government in functioning of SEBs • Constitution of SERC optional for States • Powers to State Commission only under Section-22(1) is mandatory

17. Key bodies comprising the institutional framework of the power sector under Govt. control are... • The Central Electricity Authority (CEA) which is responsible for developing a sound, adequate, uniform policy for the control & utilisation of national power resources. It is also responsible for the techno-economic appraisal of the project reports for proposed generating stations. The CEA is a unique organisation comprehensively involved in: • Design & technology development. Contd….

18. Key bodies comprising the institutional framework of the power sector under Govt. control are... • Techno-economic appraisal of projects. • Construction & plan progress monitoring. • Operation monitoring of power plants. • Technical consultancy. • Monitoring the performance of the SEB’s. • Power policy formulation. • Grid management.

19. The Electricity Act, 2003 Important Events: • Electricity Bill 2000 was placed in Lok Sabha on 30th Aug., 2001 and was referred to Standing Committee on Energy which submitted its report on 19th Dec., 2002. • This bill was passed by Lok Sabha & Rajya Sabha on 9th April, 2003 & 5th May, 2003 respectively. • Bill received President’s Assent on 26th May, 2003. Contd……

20. The Electricity Act, 2003 Important Events: • This was notified in the Gazette of India on 2nd June, 2003 and finally “In exercise of powers conferred, the Central Government appointed the 10th day of June, 2003 as the date on which the following of the said Bill came into force as Electricity Act, 2003, namely: - Sections 1 to 120 and Sections 122 to 185”

21. Main features of Bill / Act (Under Statements of Objects & Reasons) • The main features of the bill are as follows: • Generation is being delicensed and captive generation is being freely permitted. Hydro projects would, however, need approval of the State Government and clearance from the Central Electricity Authority which would go into the issues of dam safety and optimal utilisation of water resources . • There would be a Transmission Utility at the Central as well as State level, which would be a Government company and have the responsibility of ensuring that the transmission network is developed in a planned and coordinated manner to meet the requirements of the sector. The load dispatch function could be kept with the Transmission Utility or separated. In the case of separation the load dispatch function would have to remain with a State Government organisation/company. Contd….

22. Main features of Bill / Act (Under Statements of Objects & Reasons) • There is provision for private transmission licensees. • There would be open access in transmission from the outset with provision for surcharge for taking care of current level of cross subsidy with the surcharge being gradually phased out. • Distribution licensees would be free to undertake generation and generating companies would be free to take up distribution licensees. • The State Electricity Regulatory Commissions may permit open access in distribution in phases with surcharge for- • Current level of cross subsidy to be gradually phased out along with cross subsidies; • Obligation to supply. . Contd….

23. Main features of Bill / Act (Under Statements of Objects & Reasons) • For rural and remote areas stand alone systems for generation and distribution would be permitted. • For rural areas decentralized management of distribution through Panchayats, Users Associations, Cooperatives or Franchisees would be permitted. • Trading as a distinct activity is being recognised with the safeguard of the Regulatory Commissions being authorised to fix ceilings on trading margins, if necessary. • Where there is direct commercial relationship between a consumer and a generating company or a trader the price of power would not be regulated and only the transmission and wheeling charges with I surcharge would be regulated .. Contd….

24. Main features of Bill / Act (Under Statements of Objects & Reasons) • There is provision for a transfer scheme by which company/companies 'Can be created by the State Governments from the State Electricity Boards. The State Governments have the option of continuing with the State Electricity Boards which under the new scheme of things would be a distribution licensee and the State Transmission Utility which would also be owning generation assets. The service conditions of the employees would as a result of restructuring not be inferior. • An Appellate Tribunal has been created for disposal of appeals against the decision of the CERC and State Electricity Regulatory Commissions so that there is speedy disposal of such matters. The State Electricity Regulatory Commission is a mandatory requirement. • Provisions relating to theft of electricity have a revenue focus. Contd….

25. The Electricity Act, 2003(No.36 of 2003) “An Act to consolidate the laws relating to generation, transmission, distribution, trading & use of electricity & generally for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalisation of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, constitution of Central Electricity Authority, Regulatory Commissions & establishment of Appellate Tribunal and for matters connected therewith or incidental thereto” (Be it enacted by Parliament in fifty fourth year of republic of India as follows…) Contd….

26. The Electricity Act, 2003This Act has eighteen parts with 185 sections ANNEX - A Contd….

27. The Electricity Act, 2003 Contd….

28. The Electricity Act, 2003 Contd….

29. The Electricity Act, 2003

30. The Electricity Act, 2003 • Some Relevant Extracts: National Electricity Policy & Plan “3(1) The Central Government shall, from time to time, prepare the National Electricity Policy and tariff policy, in consultation with the State Governments and the Authority for development of the power system based on optimal utilisation of resources such as coal, natural gas, nuclear substances or materials, hydro and renewable sources of energy.” “4. The Central Government shall, after consultation with the State Govts. Prepare & notify a national policy, permitting stand alone systems (including those based on renewable sources of energy and other non-conventional sources of energy) for rural areas.” Contd….

31. The Electricity Act, 2003 • Some Relevant Extracts: National Electricity Policy & Plan “5. The Central Government shall also formulate a national policy, in consultation with the State Govts. & the State Commissions, for rural electrification and for bulk purchase of power & management of local distribution in rural areas through Panchayat Institutions, users’ associations, co-operative societies, non-governmental organisations or franchisees.” “6. The Appropriate Government shall endeavour to supply electricity to all areas including villages & hamlets.” Contd….

32. The Electricity Act, 2003 • Some Relevant Extracts: Generation of Electricity “7. Any generating company may establish, operate & maintain a generating station without obtaining a licence under this Act if it complies with the technical standards relating to connectivity with the grid referred to in clause (b) of Section-73.” “8.(I) Notwithstanding anything contained in Section 7, any generating company intending to set up a hydro-generating station shall prepare & submit to the Authority for its concurrence, a scheme estimated to involve a capital expenditure exceeding such sum, as may be fixed by the Central Government, from time to time, by notification.” Contd….

33. The Electricity Act, 2003 • Some Relevant Extracts: Generation of Electricity “10.(1) Subject to the provisions of this Act, the duties of a generating company shall be to establish, operate & maintain generating stations, tie-lines, sub-stations & dedicated transmission lines connected therewith in accordance with the provisions of this Act or the rules or regulations made thereunder” (2) A generating company may supply electricity to any licensee in accordance with this Act and the rules & regulations made thereunder and may, subject to the regulations made under sub-section(2) of section 42, supply electricity to any consumer.” Contd….

34. The Electricity Act, 2003 • Some Relevant Extracts: Licensing “12. No person shall - (a) transmit electricity; or (b) distribute electricity; or (c) undertake trading in electricity, unless he is authorised to do so by a license issued under section 14, or is exempt under section 13.” Contd….

35. The Electricity Act, 2003 • Some Relevant Extracts: Licensing “14. The Appropriate Commission may, on an application made to it under section 15, grant a license to any person - (a) to transmit electricity as a transmission licensee; or (b) to distribute electricity as a distribution licensee; or (c) to undertake trading in electricity as an electricity trader, in any area as may be specified in the license.” Contd….

36. The Electricity Act, 2003 • Some Relevant Extracts: Licensing Provided that any person engaged in the business of transmission or supply of electricity under the provisions of the repealed laws or any Act specified in the Schedule on or before the appointed date shall be deemed to be a licensee under this Act for such period as may be stipulated in the license, clearance or approval granted to him under the repealed laws or such Act specified in the Schedule, and the provisions of the repealed laws or such Act specified in the Schedule in respect of such license shall apply for a period of one year from the date of commencement of this Act or such earlier period as may be specified, at the request of the licensee, by the Appropriate Commission & thereafter the provisions of this Act shall apply to such business. Contd….

37. The Electricity Act, 2003 • Some Relevant Extracts: Licensing Provided further that the Central Transmission Utility or the State Transmission Utility shall be deemed to be a transmission licensee under this Act. Provided also that in case an Appropriate Govt. transmits electricity or distributes electricity or undertakes trading in electricity, whether before or after the commencement of this Act, such Govt. shall be deemed to be a licensee under this Act, but shall not be required to obtain a license under this Act. Contd….

38. The Electricity Act, 2003 • Some Relevant Extracts: Licensing Provided also that the Appropriate Commission may grant a license to two or more persons for distribution of electricity through their own distribution system within the same area, subject to the conditions that the applicant for grant of license within the same area shall, without prejudice to the other conditions or requirements under this Act, comply with the additional requirements (including the capital adequacy, creditworthiness, or code of conduct) as may be prescribed by the Central Govt. and no such applicant, who complies with all the requirements for grant of license, shall be refused grant of license on the ground that there already exists a licensee in the same area for the same purpose. Contd….

39. The Electricity Act, 2003 • Some Relevant Extracts: Licensing Provided also that in a case where a distribution licensee proposes to undertake distribution of electricity for a specified area within his area of supply through another person, that person shall not be required to obtain any separate license from the concerned State Commission & such distribution licensee shall be responsible for distribution of electricity in his area of supply. Contd….

40. The Electricity Act, 2003 • Some Relevant Extracts: Licensing Provided also that where a person intends to generate & distribute electricity in a rural area to be notified by the State Govt. such person shall not require any license for such generation & distribution of electricity, but he shall comply with the measures which may be specified by the Authority under section 53. Provided also that a distribution licensee shall not require a license to undertake trading in electricity.” Contd….

41. The Electricity Act, 2003 • Some Relevant Extracts: Licensing “19. (1) If the Appropriate Commission, after making an enquiry, is satisfied that public interest so requires, it may revoke a license in any of the following cases, namely: (a) where the licensee, in the opinion of the Appropriate Commission, makes willful & prolonged default in doing anything required of him by or under this Act or the rules or regulations made thereunder; (b) where the licensee breaks any of the terms or conditions of his license the breach of which is expressly declared by such license to render it liable to revocation; Contd….

42. The Electricity Act, 2003 • Some Relevant Extracts: Licensing (c) where the licensee fails, within the period fixed in this behalf by his license, or any longer period which the Appropriate Commission may have granted therefore- (i) to show, to the satisfaction of the Appropriate Commission, that he is in a position fully & efficiently to discharge the duties and obligations imposed on him by his license; or Contd….

43. The Electricity Act, 2003 • Some Relevant Extracts: Licensing (ii) to make the deposit or furnish the security, or pay the fees or other charges required by his license; (d) where in the opinion of the Appropriate Commission the financial position of the licensee is such that he is unable fully & efficiently to discharge the duties & obligations imposed on him by his license. Contd….

44. The Electricity Act, 2003 • Some Relevant Extracts: Transmission of Electricity “30. The State Commission shall facilitate & promote transmission, wheeling & inter-connection arrangements within its territorial jurisdiction for the transmission & supply of electricity by economical & efficient utilisation of the electricity.” “31.(I) The State Govt. shall establish a Centre to be known as the State Load Despatch Centre for the purposes of exercising the powers & discharging the functions under this part. (2) The State Load Despatch Centre shall be operated by a Govt. company or any authority or corporation established or constituted by or under any State Act, as may be notified by the State Government.” Contd….

45. The Electricity Act, 2003 • Some Relevant Extracts: Transmission of Electricity Provided that until a Government company or any authority or corporation is notified by the State Government, the State Transmission Utility shall operate the State Load Despatch Centre. Provided further that no State Load Despatch Centre shall engage in the business of trading in electricity.” Contd….

46. The Electricity Act, 2003 • Some Relevant Extracts: Transmission of Electricity “39.(1) The State Govt. may notify the Board or a Govt. company as the State Transmission Utility. Provided that the State Transmission Utility shall not engage in the business of trading in electricity. (2)(d) to provide non-discriminatory open access to its transmission system for use by- (i) any licensee or generating company on payment of the transmission charges; or Contd….

47. The Electricity Act, 2003 • Some Relevant Extracts: Transmission of Electricity (ii) any consumer as & when such open access is provided by the State Commission under sub-section (2) of section 42, on payment of the transmission charges & a surcharge thereon, as may be specified by the State Commission. Provided that such surcharge shall be utilised for the purpose of meeting the requirement of current level cross-subsidy. Provided further that such surcharge and cross subsidies shall be progressively reduced & eliminated in the manner as may be specified by the State Commission, Contd….

48. The Electricity Act, 2003 • Some Relevant Extracts: Transmission of Electricity Provided also that such surcharge may be levied till such time the cross subsidies are not eliminated. Provided also that the manner of payment and utilisation of the surcharge shall be specified by the State Commission. Provided also that such surcharge shall not be leviable in case open access is provided to a person who has established a captive generating plant for carrying the electricity to the destination of his own use.” Contd….

49. The Electricity Act, 2003 • Some Relevant Extracts: Distribution of Electricity “42.(I) It shall be the duty of a distribution licensee to develop & maintain an efficient, co-ordinated & economical distribution system in his area of supply & to supply electricity in accordance with the provisions contained in this Act.” “(2) The State Commission shall introduce open access in such phases & subject to such conditions, (including the cross subsidies, & other operational constraints) as may be specified within one year of the appointed date by it and in specifying the extent of open access in successive phases & in determining the charges for wheeling, it shall have due regard to all relevant factors including such cross subsidies, & other operational constraints.” Contd….

50. The Electricity Act, 2003 • Some Relevant Extracts: Distribution of Electricity “(3) Where any person, whose premises are situated within the area of supply of a distribution licensee, (not being a local authority engaged in the business of distribution of electricity before the appointed date) requires a supply of electricity from a generating company or any licensee other than such distribution licensee, such person may, by notice, require the distribution licensee for wheeling such electricity in accordance with regulations made by the State Commission and the duties of the distribution licensee with respect to such supply shall be of a common carrier providing non-discriminatory open access.” Contd….