Overview of Indian Power sector – Institutional, legal and policy framework

1. Overview of Indian Power sector – Institutional, legal and policy framework Prayas - EGI Skill-share workshop for Tajikistan and Kyrgyzstan DelegatesNovember 16-18, 2010, Pune, IndiaPrayas Energy Groupwww.prayaspune.org/peg, energy@prayaspune.org

2. Implemented NotImplemented Reg.Commn, Unbundling (most states) Full Cost Recovery Reform Status Partially Implemented Distbn-Privatisation (Orissa (99),Delhi (02), Urban Franchisee - Bhivandi(07), Nagpur (08), MP, Agra-Kanpur (09), Gujarat, Rajasthan (in progress) Slow increase in private gen & distrbn, Technocratisation of decision making, Commercial/Efficiency focus, Evolving Electricity market - Trading, Power exchange Prayas - EGI workshop Pune 2010

3. Schematic of institutional and policy structure Regulations & Orders Executive Policies P U B L I C MoP • Tariff • Capacity Addition • Consumer Service CERC E. Act Legislature SERCs Prayas - EGI workshop Pune 2010

4. Institutional framework -1 Prayas - EGI workshop Pune 2010

5. Institutional framework -2 Prayas - EGI workshop Pune 2010

6. Regulator Power Flow Money Flow Market Regulation Institutional Framework -3 Generation: Public, Private Distribution: Public, Private, Bulk consumers Transmission: Public, Private Prayas - EGI workshop Pune 2010

7. Legal & Policy Framework: Electricity Act 2003 • A Central Act • Old national Acts repealed • Indian electricity Act 1910 • Electricity (supply) Act 1948 • Electricity Regulatory Commissions Act 1998 • State reform Act provisions to be valid provided they are not inconsistent with the Electricity Act 2003  Hence, the entire Indian electricity sector will be governed by the Electricity Act 2003 Prayas - EGI workshop Pune 2010

8. Electricity Act 2003 • Emphasis on • Breaking monopoly of State Electricity Boards and promoting competition / trading • Creating economic imperative for fundamental changes • Attracting new investment • Reduction of cross-subsidy • Competition for increasing efficiency (mostly in generation) • Defines institutional and policy framework for the whole country Prayas - EGI workshop Pune 2010 8

9. Electricity Act 2003 - Key provisions • De-license Generation • Open Access in Transmission, Distribution • Promote trading and markets • De-license rural distribution • Establishes norms for transparency and public participation • Re-defined role and mandate of State Governments, Regulators and Licensees • Establishment of Consumer Grievance Redressal Forums Prayas - EGI workshop Pune 2010

10. National Polices & Programs • National Electricity Policy - February 2005 • Tariff Policy- Jan 06 (Amendment – Mar 2008) • National Rural Electrification Policy - Aug 2006 • National Electricity Plan - Aug 2007 • National Programs • Rural Electrification: RGGVY Apr 2005 • Urban Distribution: R-APDRP July 2008 Prayas - EGI workshop Pune 2010

11. National Electricity Policy -1 • Emphasises the electricity – development link: “Electricity is an essential requirement for all facets of our life. It has been recognized as a basic human need. It is a critical infrastructure on which the socio-economic development of the country depends” • Issues addressed: • Rural Electrification • Generation , Transmission, Distribution • Recovery of Cost of services & Targeted Subsidies. • Technology Development and Research and Development (R&D) • Competition aimed at Consumer Benefits • Financing Power Sector Programmes Including Private Sector Participation. • Energy Conservation , Environmental Issues • Training and Human Resource Development • Cogeneration and Non-Conventional Energy Sources • Protection of Consumer interests and Quality Standards Prayas - EGI workshop Pune 2010

12. National Electricity Policy -2 • Generation • Power-Demand to be fully met by 2012 • A part of new generating capacity (say 15%) may be sold outside long term Power Purchase Agreements (PPAs) • Transmission & Distribution • Development of National Grid • National and State level Open access to be facilitated • Demand side management Prayas - EGI workshop Pune 2010

13. National Electricity Policy - 3 • Consumers • Access to electricity for all households by 2010 • Per capita availability of electricity to be increased to over 1000 units by 2012 • Minimum lifeline consumption of 1 unit/household/day as a merit good by year 2012 • Cross subsidies to be reduced gradually • Provision of support to lifeline consumers (households below poverty line having consumption of 30 units per month) with tariff being at least 50% of average cost of supply. • Grievance Forum and Ombudsman to be set up • Government and RCs to facilitate capacity building of consumer groups. Prayas - EGI workshop Pune 2010

14. Tariff Policy -1 • Objectives • Ensure availability of electricity to consumers at reasonable and competitive rates • Ensure financial viability of the sector and attract investments; • Promote transparency, consistency and predictability in regulatory approaches across jurisdictions and minimise perceptions of regulatory risks; • Promote competition, efficiency in operations and improvement in quality of supply • Covers • General approach to tariff • Generation, Transmission, Distribution Tariff • Trade margin Prayas - EGI workshop Pune 2010

15. Tariff Policy -2 • Power purchase by DISCOMS to be based on competitive bidding (exception for public sector) • Cross subsidy surcharge is to be paid by open access consumers. This is calculated as the difference between the consumer tariff and the cost of supply • Poor consumers (consuming say less than 30 units/month) will get support through cross subsidy. Their tariff will be at least 50% the average cost of supply. SERCs will notify a roadmap to reduce cross subsidy so that by 2011, tariffs would be within +/- 20% the average cost of supply • Amendment (Mar 08) on Hydro tariff (transparent bidding, long term PPA for 60%, R&R, developmentfund etc Prayas - EGI workshop Pune 2010

16. National Rural Electrification Policy-1 • Goals • Provision of access to electricity to all households by year 2009 • Quality and reliable power supply at reasonable rates • Minimum lifeline consumption of 1 unit per household per day as a merit good by year 2012. • Covers • Approach to rural electrification; RGGVY program; Definition of electrified village; Involvement of local community; Financial assistance, Stand-alone systems, Bulk power purchase & management of rural distribution Prayas - EGI workshop Pune 2010

17. National Rural Electrification Policy -2 • Grid and off grid solutions for Household electrification and economic activities • Rural Electrification Corporation to be the nodal agency, Central support to States for RE • States to prepare RE Plan, set up District Committees, notify rural areas . SERCs to monitor • Franchisees for rural distribution Prayas - EGI workshop Pune 2010

18. National Programs • Rural Electrification: Rajiv Gandhi Grameen Vidyutikaran Yojana (RGGVY) 2005 • Village (1,25,000) and rural household (78 million) electrification • Central government to provide financial and implementation support to States • Guarantee by States for minimum 6-8 hours of power supply • Decentralised Distributed Generation (DDG) to supplement grid power • US$ 12,500 m outlay • Urban Distribution: Re-structured Accelerated Power Development and Reforms Programme (R-APDRP) 2008 • Focus on base line data creation and distribution loss reduction (urban) • US$ 2500 m for base line data and IT applications • US$ 10,000 m for distribution strengthening Prayas - EGI workshop Pune 2010

19. Schematic of institutional and policy structure TAP Regulations & Orders Executive Policies P U B L I C MoP • Tariff • Capacity Addition • Consumer Service CERC E. Act Legislature SERCs TAP Prayas - EGI workshop Pune 2010

20. Utility Contract Regulatory Commissions Political Voice Authority / policy Government / Policy makers Players and Interactions Consumers/Public Prayas - EGI workshop Pune 2010

21. Discussion • Multiple institutions, with different roles and mandates • Evolving legal and policy framework • Different drivers and different interests influencing processes and decisions • Challenges of Civil Society Groups to find their feet and push for public interest • At different levels, different times, with different actors Prayas - EGI workshop Pune 2010