Power Ministers Conference - PowerPoint Presentation

1. Power Ministers Conference3rd July 2020Proposed Draft Amendments to Electricity Act 2003 Ministry of PowerGovernment of India

2. Drivers for change: Some Facts ACS-ARR gaps : 72 paise/Unit in FY19AT&C losses: 22% in FY19Net worth of State Discoms: (-) Rs 80,567 Cr (31.03.2019)Total Financial loss of Discoms: Rs 85,803 cr (FY 19)Power purchase Payable : Rs 2.27 Lac Cr (31.03.2019)Govt Department dues: Rs 60,277 Cr (31.03.2020)Govt Subsidy due: Rs 57,555 Cr (31.03.2020)2

3. Drivers for change: Some Facts Total Discom Debt: Rs 4.79 Lac CrAccumulated Losses of Discoms: Rs 4.89 Lac Cr Regulatory assets: Rs 1.4 Lac CrRetail Tariff Orders not issued for FY 21: 24/35 (As on 05.05.2020)Tariff orders not revised Tripura (22.11.2014), Telangana (27.03.2018), Ar Pradesh (31.04.2018), TN (11.08.2017), WB (04.07.2018)3

4. BackgroundDraft Electricity (Amendments) bill placed for stake holders consultations : 17th April 2020. Last date for receipt of comments : 5th June, 2020.Around 350 stake holders comments received 4

5. Focus of the Proposed Draft AmendmentsRelated to Regulatory FrameworkImproving Performance and Enhancing SustainabilityPromoting Green EnergyOther Amendments5

6. Drivers for change : Regulatory Regulatory uncertainty Increase in Nos of appeals: 262 (2005) to 2770(2019)Total no of cases pending in APTEL: 1436 (31.12.2019) Sanctity of contactsLong vacancies of members in the CommissionNo business in the commission due to vacancy of all membersConflict of interest in adjudication of disputes (Commission who frames regulations, passes orders also adjudicate on the matters)Lack of judicial power or other power to the commissionCommission should have focus on tariff determination and other technical matters rather than judicial matters. 6

7. Proposed Draft AmendmentsRelated to Regulatory Framework:Strengthening of APTELSelection Committee for Chairperson and Members of Commission Qualification for appointments of Chairperson and Members of Central and State CommissionDealing situations in case of Non Functional SERC due to vacanciesElectricity Contract Enforcement Authority (ECEA)7

8. Strengthening of APTELStrength of Members increased from 3 to 7For ensuring quick disposals of appealsMinimum number of Members is proposed to be “not less than seven, as may be prescribed by the Central Government”.Powers of TribunalFinancial and administrative powers of Chairperson, APTEL in section 119. It is also proposed to enhance the powers of APTEL under section 121 by assigning power equivalent to High Court under the provisions of the Contempt of Courts Act.Proposal8Stakeholders have supported the proposal

9. Selection Committee for Chairperson and Members of Commission To address the issues of delay in constitution and have uniformity in selection criteria and standards in appointments of chairperson and members in ERCs at Central as well as State levels and ensuring smooth functioning of regulatory commissions, it has been proposed -Single Selection Committee headed by the Judge of Supreme Court for selection Standard criteria of qualifications for appointments of Chairperson and Members of ERC. Appointments shall continue to be made by the Appropriate Governments. Proposal9Suggestion Selection Committee of SERC may be headed by the Chief Justice of High Court Equal no of representative from Centre and State may continue

10. Qualification for appointments of Chairperson and Members of Central and State Commission to be made uniformSection 84(1) has been proposed to be amended in line with proposed Section 77 (1) of the Act: “(1)The Chairperson and the Members of the State Commission shall be persons having adequate knowledge of, or experience in, or shown capacity in, dealing with, problems relating to engineering, law, economics, commerce, finance, public policy or management and shall be appointed in the following manner, namely:- (a) one person having qualifications and experience in the field of engineering with specialization in generation, transmission or distribution of electricity; (b) one person having qualifications and experience in the field of law; (c) two persons having qualifications and experience in the field of finance, economics, commerce, public policy or managementProposal10

11. Dealing situations in case of Non Functional SERC due to vacanciesIn order to ensure continuity in the functioning of State Commissions, it is proposed in Section 82(7) that if there is no chairperson and member in a State Commission to perform its functions, the Central Government may, in consultation with the state government concerned, entrust its functions to any other State Commission or Joint Commission.Proposal11

12. Electricity Contract Enforcement Authority (ECEA) New section 109 A to 109 N in Part X-ATo address issues related to performance of electricity contractproposed Authority shall be headed by retired Judge of the High Court with such powers including but not limited to powers of attachment and sale of property, arrest and detention in prison etc.ECEA shall consist of a Chairperson; two or more Judicial Members and three or more Technical Members, as may be prescribed by the Central Government from time to timeOrders of the ECEA shall be executable as a decree of civil court. Appeal against orders of the ECEA shall be heard by APTEL. Proposal12Suggestion: All disputes related to electricity be dealt by the new organisation in order to resolve the issues related to jurisdiction and conflict of interest. Section 79(f), 86 (f) etc may be deleted and functions assigned to new organisation

13. Proposed Draft AmendmentsImproving Performance and Enhancing SustainabilitySub Distribution Licensee / FranchiseePayment Security MechanismCost reflective Tariff SubsidyCross subsidy13

14. Drivers for change High tariff: disincentive to the industries (less job creation)Increased dependence on import as domestic industries are not able to compete.Affecting Make in India programme: Aatma Nirbhar BharatTariffs not reflective of costsHigh level of cross subsidy Drying of investment in the power sectorSelf sustainability of DiscomsSignificant increase in cash flow problemsState Government Department dues mountingPayables to GENCOs and TRANSCOs mountingRequirement to build the Infrastructure in distribution for supply of reliable and quality power to consumers 14

15. Distribution Sub-Licensee / Franchisee an option to distribution licensees to authorize a person to distribute electricity in a particular area.Permission of the Commission required. A Distribution sub-licensee (section 2 clause 17a) shall have all the powers, responsibilities and functions as given to a Distribution Licensee including the responsibility to supply electricity.An alternative to the Franchisee model Franchisee also given wider role (Clause 27 of section 2 amended)Proposal15Suggestion Merge the two concepts.

16. Payment Security MechanismEstablishment of adequate Payment Security Mechanism for scheduling of electricity - It is proposed to empower load dispatch centre to oversee the payment security mechanism before scheduling dispatch of electricity and to be made mandatory considering sanctity of the existing contracts unless it is waived by the parties to contract themselves. Empowering RLDC/SLDC to ensure adequate Payment Security Mechanism : To ensure security of payments to the generators, it is proposed under section 28 and 32 of the Act that RLDC/SLDC must ensure establishment of adequate payment security mechanism, as agreed by the parties to the contract, before scheduling of that electricity.Proposal16

17. Cost reflective Tariffs Regulatory Assets not to be created and Commissions to determine cost reflective tariff (section 61(g) is proposed to be amended).It is proposed to provide that the Commissions shall determine tariffs that are reflective of cost of supply of electricity so as to enable distribution licensees to recover their costs.Proposal17

18. SubsidyState Governments can continue to grant subsidies to the needy classes of consumers. The subsidy will be given directly by the State Government to the consumers. (Tariff policy: in the account of the consumers with the Discoms)The financial liquidity of some distribution licensees gets impacted due to non-release of subsidy by State Governments. While retaining the right of State Governments to provide subsidy to consumers, sections 62 and 65 are being amended to it provide that tariff will be determined by Commissions without taking into account subsidy It will increase transparency and better targeting of subsidy.Proposal18

19. Cross Subsidy (Section 42) Cross Subsidies in Tariff to be reduced progressively in the manner as provided in the Tariff Policy.Proposal is not to eliminate cross subsidies, but to reduce it to the levels as per the Tariff Policy.It will increase competitiveness of the Industries, promoting “ Atma Nirbhar Bharat”.Proposal19The limits of 20 % is already provided in the existing Tariff Policy 2016 Tariff Policy 2020 (proposed) give a time period of 5 years to achieve this.

20. Proposed Draft AmendmentsPromoting Renewable EnergyNational Renewable Energy PolicyRenewable Power Purchase Obligation/ Hydro Power Purchase Obligation20

21. National Renewable Energy PolicyIntroduction of National Renewable Energy Policy: The Central Government shall formulate a National Renewable Energy Policy to promote green energy, and prescribe a minimum percentage of purchase of electricity from renewable and hydro sources of energy, a new section 3A is proposed to be inserted in the Act. “ The Central Government may, from time to time, after such consultation with the State Governments, as may be considered necessary, prepare and notify a National Renewable Energy Policy for the promotion of generation of electricity from renewable sources of energy and prescribe a minimum percentage of purchase of electricity from renewable and hydro sources of energy.” Proposal21

22. Promoting Hydro and Renewable sources of energyRenewable Power Obligation/ Hydro Power ObligationIn view of the importance of electricity from hydro sources of energy for balancing and peaking requirements, it is proposed to empower the Central Government to prescribe a minimum percentage of purchase of electricity from hydro sources of energy.Further, a new sub-section is proposed to be inserted in section 142 to provide for penalties in case the minimum purchase requirements of electricity from renewable and hydro sources of energy are not met.Proposal22

23. Proposed Draft AmendmentsOther Amendments:PenaltiesEmpowering NLDCCross Border Trade of ElectricityDeemed adoption of Tariff discovered through competitive Bid23

24. PenaltiesIn order to ensure strict compliance of the provisions of the Electricity Act and orders of the commission, the penalty amount under section 142 and 146 is proposed to be revised.Proposal24SectionDescriptionExistingProposed142 : Punishment for non-compliance of directions by Appropriate Commission.PenaltyPenalty shall not exceed one lakh rupees for each contraventionPenalty shall not exceed one Crore rupees for each contraventionAdditional Penaltysix thousand rupees for every day Upto One lakh rupees146: Punishment for non-compliance of orders or directions.Finewhich may extend to one lakh rupeeswhich may extend to one crore rupeesAdditional fine which may extend to five thousand rupees for every daywhich may extend to one lakh rupees for every day

25. Related to NLDC (Section 26) To explicitly provide for the functions, responsibilities and powers of NLDCNLDC shall be responsible for optimum scheduling and despatch of electricity between different regions and RLDC Powers which are being given to the NLDC are similar to the powers given to the RLDC within its regionEvery RLDC,SLDC, licensee, generating company, generating station, sub-station and any other person connected with the operation of the power system shall comply with the directions issued by the NLDC Proposal25Requirement due to one synchronous national grid and also interconnected to Bhutan, Bangladesh, Nepal and Myanmar

26. Cross Border Trade of Electricity“Cross border trade of electricity” has been defined in Section 2 (15a) as “ transactions involving import or export of electricity between India and any other country and includes transactions related to passage of electricity through our country in transit between two other countries;”In view of the emerging requirement to regulate the cross border transactions of electricity with other countries, a new section 49A is proposed to be inserted to facilitate Cross Border Trade of Electricity.The Central Commission has been empowered to oversee the cross border transactions. Proposal26

27. Deemed adoption of Competitively discovered TariffAmendments are proposed for time-bound adoption of competitively discovered tariff by the Commission under Section 63.It is proposed in Sec 63 (2) that : “The Appropriate Commission shall, after receipt of application complete in all respects, adopt the tariff so determined under sub-section (1), in a timely manner but not later than sixty days from the date of application: Provided that on expiry of sixty days from the date of application, if it is not decided by the Appropriate Commission, the tariff shall be deemed to have been adopted by the Appropriate Commission.”. Proposal27

28. Way Forward..State Governments / State power utilities comments have been received.Based on comments of all stakeholders the draft proposed amendments shall be modified suitably.The proposed amendments in the Electricity Act will help in building a resilient, reliable and efficient power sector in the country.Cooperation solicited from the states 28

29. Thank You..29

30. Distribution Franchisees30Franchisee AreaStateDistribution FranchiseeStart of Operation (Year)Input Based Distribution FranchiseeBhiwandiMaharashtraTorrent Power2006AgraUttar PradeshTorrent Power2009AjmerRajasthanTata Power2017BikanerRajasthanCESC2016BharatpurRajasthanCESC2016KotaRajasthanCESC2016MalegaonMaharashtraCESC2020Shil, Mumbra and KalwaMaharashtraTorrent Power2020Mawkyrawat, Mawsynram, Phulbari, NangalbibraMeghalayaFEDCO2019Incremental Revenue Sharing ModelKhurda, Nayagarh, Puri, BalugaonOdishaFEDCO2013Dhenkanal, Angul, Talcher, Kendrapada, JagatsinghpurOdishaEnzen Global2012Nimapada, Cuttack, SalipurOdishaRiverside Utilities2012Additionally, FEDCO has received LOA for distribution franchisee operations in 4 divisions of Tripura in May 2020