Indian Electricity Act

Electricity Act, 2003 seeks to bring about a qualitative transformation of the electricity sector through a new paradigm. The objectives of the Act are “to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry, promoting competition therein, protecting 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, constitution of Central
Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal and for matters connected therewith or incidental thereto.”

The salient features of the Act are:

  • The Central Government to prepare a National Electricity Policy in consultation with State Governments. (Section 3)
  • Thrust to complete the rural electrification and provide for management of rural distribution by Panchayats, Cooperative Societies, non-Government organisations,     franchisees etc. (Sections 4, 5 & 6)
  • Provision for license free generation and distribution in the rural areas. (Section 14)
  • Generation being delicensed and captive generation being freely permitted. Hydro projects would, need clearance from the Central Electricity Authority.(Sections 7, 8 & 9)
  • Transmission Utility at the Central as well as State level, to be a Government company – with responsibility for planned and coordinated development of transmission network. (Sections 38 & 39)
  • Provision for private licensees in transmission and entry in distribution through an independent network, (Section 14)
  • Open access in transmission from the outset. (Sections 38-40)
  • Open access in distribution to be introduced in phases with surcharge for current level of cross subsidy to be gradually phased out along with cross subsidies and     obligation to supply. SERCs to frame regulations within one year regarding phasing of open access. (Section 42)
  • Distribution licensees would be free to undertake generation and generating companies would be free to take up distribution businesses. (Sections 7, 12)
  • The State Electricity Regulatory Commission is a mandatory requirement. (Section 82)
  • Provision for payment of subsidy through budget. (Section 65)
  • Trading, a distinct activity is being recognised with the safeguard of the Regulatory Commissions being authorised to fix ceilings on trading margins, if   necessary.     (Sections 12, 79 & 86)
  • Provision for reorganisation or continuance of SEBs. (Sections 131 & 172)
  • Metering of all electricity supplied made mandatory. (Section 55)
  • An Appellate Tribunal to hear appeals against the decision of the CERC and SERCs. (Section 111)
        Provisions relating to theft of electricity made more stringent. (Section 135-150)
  • Provisions safeguarding consumer interests. (Sections 57-59, 166) Ombudsman scheme (Section 42) for consumer grievance redressal.

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