powermin-releases-revised-draft-of-electricity-amendment-bill-2020

Context: The power Ministry has released a revised draft of the Electricity Amendment Bill 2020.

Background:

  • The govt. wants to ensure that renewable energy tariffs are not changed by the states after execution of contracts, and electricity regulatory commissions have more teeth to enforce power purchase agreements between projects and distribution companies (discom).
  • The proposal comes after the new governments in Andhra Pradesh and Maharashtra refused to honour power purchase agreements, leaving investors jittery.

About the draft 

  • It seeks privatisation of discoms (distribution companies) by way of sub-licensing & franchisees.
  • It calls for the creation of an Electricity Contract Enforcement Authority (ECEA), proposes a National Renewable Energy Policy and mandates payment security as necessary for Scheduling of Electricity and facilitates cross border electricity trade. 
  • According to the draft, state commissions will determine tariff for retail sale of electricity without any subsidy under Section 65 of the Act and the tariff should reflect the cost of supply of electricity and cross-subsidies to be reduced.
  • It proposes that the ECEA would adjudicate on matters regarding performance of obligations under a contract related to sale, purchase or transmission of electricity. 
  • It proposes to empower load dispatch centres to oversee the payment security mechanism before scheduling dispatch of electricity, and suggested a National Renewable Energy Policy for the promotion of generation of electricity from renewable sources.

Electricity Act 2003 

  • It is an Act to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity.
  • For taking measures conducive to development of the electricity industry, promoting competition therein, protecting the interest of consumers and supply of electricity to all areas, rationalization of electricity tariff.
  • Ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies.
  • It provides for constitution of Central Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto.

About Discoms

  • Power distribution companies collect payments from consumers against their energy supplies (purchased from generators) to provide necessary cash flows to the generation and transmission sectors to operate.
  • The Discoms have to purchase and distribute power to fulfil their Universal Supply Obligation (USO) as defined in the Electricity Act 2003 or borrow for capital expenditure to meet load augmentation and growth requirements.
Image Source: Economic Times