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Electricity Bill 2022- A vehicle for privatisation and not for reforms

PUNJAB NEWS EXPRESS | September 05, 2022 12:47 AM

By V.K.Gupta
Electricity Amendment Bill 2022 introduced in Parliament on August 8 is a vehicle for privatisation of the power sector and not for reforming it.

Amid protests by the opposition parties and protests by lakhs of power sector employees and engineers across the country, the bill has been referred to the Standing Committee for wider consultations.
The emphasis of the government that the bill will give a choice of the service provider to electricity consumers” is not relevant as the number of consumers who do not pay the “cost to serve” is very large. Consumers want cheap and round-the-clock supply at affordable rates.

Under the pretext of preserving the financial viability of Discoms, the only aim of the bill is to bring corporates and private companies into the power sector and privatise the whole power distribution system. Bill seeks to centralise almost all functions of the distribution companies as well as the state regulatory commissions and changes the character of the electricity supply industry and the federal structure of the constitution.

The Electricity Amendment Bill, 2022 aimed at giving multiple players open access to distribution networks of power suppliers and also allow consumers to choose any service provider along the lines of telecom.
The emphasis on “choice to consumers” in the bill is highly misleading and irrelevant As per studies, more than 80% of domestic consumers do not pay the cost to serve and almost all agricultural consumers do not pay the cost to serve.

These consumers want only a regular power supply and not the choice to select a company. There can be no comparison between mobile phones and electricity distribution. Mobile is a wireless system, and electricity distribution is a wired system.

In the case of mobile phones, all consumers pay the cost to serve, unlike electrical distribution. As per the bill, the state governments will be bound to act on the directions of the center as these will be binding on them.

Thus the amendments will have severe repercussions on the federal structure of the country.

As per the bill, only government discoms will have a universal power supply obligation therefore private licensees will prefer to supply the electricity to industrial and commercial consumers leaving the underprivileged and marginalised communities without access to power.

The Bill prescribes that private players will use the infrastructure of state Discoms developed at the cost of taxpayers, by paying only wheeling charges to discom for the flow of electricity to the tune of 20-25 paise per unit. Since any increase in wheeling charges would increase the tariff, the wheeling charges would have to be kept down and that would not enable the public sector Discoms to even recover the interest charges on the huge investment made in building the distribution network.

The wheeling charges along with universal supply obligations will make state sector companies financially insolvent over a short time period. The private company will acquire the complete assets of Discoms whenever put on sale in due course of time.

The government of India or central agency would issue regulations determining the “ceiling” and “floor” tariff. This would be an encroachment on the role of the state and the state regulators. There is a need to discriminate between areas and consumers who are backward and areas and consumers who can afford
to pay.
Electricity is a concurrent subject and both central and state governments have powers to make laws on it. Any legislation on electricity should be in consultation with the state government. However, no consultation was done before introducing the bill. The electricity bill 2022 usurps the powers of the states against the spirit of federalism.

Once the Bill becomes law it would be illegal to set tariffs that do not recover all prudent costs and reduce cross-subsidies. Additionally, the law requires that the tariff would have to ensure reasonable returns on investment that would ensure the financial stability of the licensees.

With the Central Electricity Regulatory Commission (CERC) issuing registration for multi-state distribution companies, the role of State Electricity Regulatory Commissions (SERCs) will get drastically reduced while the responsibility of operation and maintenance of the distribution network would remain with the state.
The proposed draft prohibits regional and state load despatch centers from dispatching electricity if an adequate payment mechanism has not been provided by the distribution licensee. Imposing a “payment security mechanism” on electricity flow to state utilities by load dispatch centres implies that no electricity would be scheduled and supplied to a utility unless fully paid upfront and can have dangerous
consequences for the states and consumers.

The function of load dispatch centers relates primarily to grid operation and the security and safety of the grid on a national basis. The function of a payment security mechanism is unrelated to grid operation. It is a commercial issue that needs to be settled and should not be given to load dispatch centers.

Sharing of PPAs between multiple distribution licenses would result in a lot of litigation because the PPAs contain provisions such as having high tariffs or payment of fixed costs even when there is no draw of electricity. Attempts by state governments to renegotiate the PPAs have been stopped by the Government of
India and/ or the courts. Unless and until many of these issues are resolved, it will be very difficult for the incumbent distribution licensee to accept sharing of the PPAs.

The Bill mandates compulsory absorption of solar and other renewable forms of energy by the State utilities, irrespective of the costs, which implies that a state power utility would be precluded from drawing less expensive forms of energy, merely to comply with such an externally imposed mandate, to
the cost of their own finances and to the detriment of the consumers' interests.

In case the farmers are billed as per company;s tariff plan, they may not be able to get full refund of electricity charges in a fixed time frame committed by the state government.It is fact that a number of state governments are not paying full subsidy amount to power utilities despite orders by the state regulator.

In short, the Electricity Amendment Bill 2022 would weaken the finances of state Discoms, have an adverse impact on utility employees, and impose a heavy cost burden on the subsidized consumers. Privatisation of the power sector, mooted through the Bill, will prove expensive for the public while being a boon for a few industrial houses.

V K Gupta
All India Power Engineers Federation

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