{"id":4575,"date":"2018-10-27T12:39:19","date_gmt":"2018-10-27T07:09:19","guid":{"rendered":"http:\/\/reconnectenergy.com\/blog\/?p=4575"},"modified":"2018-10-27T12:39:19","modified_gmt":"2018-10-27T07:09:19","slug":"proposed-amendments-of-electricity-act-2018","status":"publish","type":"post","link":"https:\/\/reconnectenergy.com\/proposed-amendments-of-electricity-act-2018\/","title":{"rendered":"Proposed amendments of Electricity Act, 2018"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">The Ministry of Power of India has recently announced the draft proposed amendments to the Electricity Act, 2003. The proposed amendments aim to be in line with the country\u2019s changing electricity markets and systems, with their large renewable capacities and the emergence of a smart grid network.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">The Amendment proposes important changes in renewable energy, cross-subsidy, open access, operations &amp; responsibility of ERCs, and many other changes. Some of these are discussed in brief below:<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><b><\/b><br \/>\n<b>Renewable Energy<\/b><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">The EA Amendment 2018 proposes several amendments that are favorable to the RE sector. Some of these are:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Definition of Renewable Purchase Obligation and Renewable Generation Obligation introduced.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">RPO has been separately defined. Related to this, the definition of \u201cObligated Entity\u201d has also been introduced. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">RGO means the Renewable Energy Generation capacity required to be established to be procured from Renewable Energy Sources, and sale of such energy along with the electricity generated from the coal or lignite based thermal generating station, by a generating company establishing a coal or lignite based thermal generating station.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Introduction of renewable energy service company which provides renewable energy to consumers in the form of electricity.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Introducing policies in order to support RE sector like National Renewable Energy Policy to promote smart grid, ancillary support, and decentralized distributed generation in accordance with the provisions of the Act;<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A penalty of maximum Rs. Fifty lakh for non-compliance of RGO. (Reduced from 1 Cr. to 50 Lakh, the earlier penalty was on 1 lakh.) <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">For non-compliance of RPO, an additional penalty is proposed, which shall be minimum of Rs 1 per unit with a maximum of Rs 5 per unit depending on the extent of the shortfall. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Generation and supply of renewable energy will not require any license for such generation and supply.<\/span><\/li>\n<\/ul>\n<p><b>Cross-subsidy<\/b><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">The draft EA Amendment proposes (a) time-bound reduction in cross-subsidies (CSS), and (b) CSS to be not more than 20% of the wheeling charge. These provisions are nothing new. The EA 2003 also included provisions for reduction of CSS. But these were watered down later. <\/span><br \/>\n&nbsp;<br \/>\n<span style=\"font-weight: 400;\">The proposal that CSS be 20% of wheeling charges is significant, as if implemented, it will reduce CSS significantly. Also, the provision for charging \u201cadditional surcharge\u201d is proposed to be deleted &#8211; this will also have a significant impact as in recent years states have used high additional surcharge as a tool to discourage open access.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><b>Open Access<\/b><br \/>\n<span style=\"font-weight: 400;\">The draft EA Amendment states the following with respect to open access:<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">\u201cWith effect from the commencement of the Electricity (Amendment ) Act, 2018, all consumers having a connected load of 1 Mega Watt and above with the power system, may procure at their option electricity through open access under contractual agreement from any generating company, trading licensee, or from any other source.\u201d<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">This implies automatic open access, without the need for permission from the Discom. If implemented, this will be a radical change and can potentially transform the electricity market in the country. <\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><b>Separation of Carriage and Content<\/b><b><br \/>\n<\/b><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">One of the key provisions in the previous EA amendment (proposed in 2014) was the separation of carriage and content &#8211; i.e. further breakup of the Discom into supplier and network operator, and also allowing multiple suppliers in the area of the Discom. This proposal was met with significant resistance from the state when the Standing Committee of the Parliament viewed the amendment. As a result, the current amendment, while retaining the provisions, has significantly diluted the scope of carriage and content separation by leaving it entirely to the decision of the state government.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">In our opinion, this is a pragmatic approach, as it may allow the passage of the EA Amendment act without significant resistance from the states. However, the flip side of this approach is that such a reform will take a long time to be realized on the ground, and there will be significant differences between states. The EA2003 has heralded the break-up of Electricity Boards into Genco, Transco and Discom\u2019s. Fifteen years on, the separation is still only partially effective in most states.<\/span><br \/>\n<b>Others<\/b><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Subsidy to be provided only through \u201cDirect Benefit Transfer\u201d. This can be a potential game-changer for the Discoms, and even for the entire sector. Today, subsidies are paid through the Discom, which, even though is a commercial entity, often works as a government arm. If DBT is introduced, it can pave the way for genuine Discom reforms on commercial principles. <\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Every proceeding before the Appropriate Commission shall be decided efficiently. Matters related to passing through in tariff on account of change in law\/duties\/taxes etc shall be decided in a maximum of 30 days. All other matters will be disposed of within 90 days. Regulatory Commission shall have all the powers of a civil court.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Development of market: Another important change has been the mandate to promote forward and futures contracts in electricity.<\/span><\/li>\n<\/ul>\n<p style=\"padding-left: 30px;\"><b>Conclusion<\/b><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">We believe that the proposed changes will have a wide and deep impact on the electricity sector. The promotion of RE and removal of roadblocks for development of RE and of open access in the country is a welcome step and one that was long overdue.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">The separation of distribution and supply function also signifies a fundamental shift in the way electricity is distributed in the country. However, by watering down the provisions for the same and giving states the choice to implement is a pragmatic way the government has adopted to allow the passage of EA Amendment. In any case, this change is likely to take a long time to start showing on the ground.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">Another radical change proposed is of paying subsidies through \u201cDirect Benefit Transfer\u201d only. This can be a potential game-changer for the sector and can pave the way for genuine Discom reforms on commercial principles.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><\/p>\n<p><a href=\"http:\/\/44.224.164.21\/new__w\/wp-content\/uploads\/2018\/10\/EA-2003-amendments.png\"><img loading=\"lazy\" class=\"aligncenter size-full wp-image-4576\" src=\"http:\/\/44.224.164.21\/new__w\/wp-content\/uploads\/2018\/10\/EA-2003-amendments.png\" alt=\"\" width=\"581\" height=\"363\" srcset=\"https:\/\/reconnectenergy.com\/wp-content\/uploads\/2018\/10\/EA-2003-amendments.png 581w, https:\/\/reconnectenergy.com\/wp-content\/uploads\/2018\/10\/EA-2003-amendments-300x187.png 300w\" sizes=\"(max-width: 581px) 100vw, 581px\" \/><\/a><\/p>\n<p style=\"padding-left: 30px;\"><span style=\"font-weight: 400;\">The Infogra<\/span><span style=\"font-weight: 400;\">phic displayed above analyses the extent of usage of certain keywords in Electricity Act 2003, Draft EA amendment bill 2014 and the latest Draft Electricity Act 2018. The graph is prepared to understand how the government\u2019s priority has evolved over the years from only conventional power to renewable energy as well. <\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><span style=\"font-weight: 400;\">The word \u2018Renewable\u2019 is used 22 times in Draft EA 2018, 23 times in Draft EA bill 2014 and just 4 times in EA 2003. Similarly, Open Access is used 20 times in EA 2003, 32 times in Draft EA bill 2014 and 23 times in Draft EA 2018. <\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><\/p>\n<p style=\"padding-left: 30px;\"><span style=\"font-weight: 400;\">Terms like RPO and Smart Grid have no mention in EA 2003, while in Draft EA bill 2014 RPO was used once &amp; smart grid 7 times whereas Draft EA 2018 smart grid was used 5 times and Franchisee was used the highest 8 times in Draft EA 2018. The term Cross Subsidy is used the least in Draft EA 2018 just once and 3 times in both EA 2003 and Draft EA bill 2014.<\/span><span style=\"font-weight: 400;\"><br \/>\n<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The Ministry of Power of India has recently announced the draft proposed amendments to the Electricity Act, 2003. The proposed amendments aim to be in line with the country\u2019s changing electricity markets and systems, with their large renewable capacities and [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[503,195,527,870],"tags":[921,297,871],"_links":{"self":[{"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/posts\/4575"}],"collection":[{"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/comments?post=4575"}],"version-history":[{"count":0,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/posts\/4575\/revisions"}],"wp:attachment":[{"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/media?parent=4575"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/categories?post=4575"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/reconnectenergy.com\/wp-json\/wp\/v2\/tags?post=4575"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}