Companies and industry experts commended the proposed amendments for creation of Electricity Contract Enforcement Authority with powers of the civil court, the single selection committee for appointments to the appellate tribunal and regulatory commissions and ensuring payment security mechanism in the sector
April 22, 2020. By News Bureau
The Power ministry's recommended revisions to the Electricity Act of 2003 have established a sanction from the industry with players welcoming the proposed push for cost reflective tariff, simplification of tariff structure and reduction of cross subsidies.
Companies and industry experts commended the proposed amendments for creation of Electricity Contract Enforcement Authority with powers of civil court, single selection committee for appointments to appellate tribunal and regulatory commissions and ensuring payment security mechanism in the sector.
Ashok Khurana, Director General, Association of Power Producers said the proposed amendments are progressive, transformative and formulated with the objective to remove the regulatory impediments and shortcomings that were being experienced in sectoral functioning.
"Noteworthy changes are creation of Electricity Contract Enforcement Authority with power of civil court, including arrest, attachment of property, enforcement of decree etc. This will help to instill discipline amongst the contracting parties to adhere to their contractual obligations," he said.
Khurana added empowering Load Despatch centres to oversee the payment security mechanism and giving power to National Load Dispatch Centre (NLDC) to direct any power system body including SLDC will provide necessary legal cover to linking power drawls to payment and will help to resolve the chronic problem of receivables in the sector.
"Tariff fixation powers of state commissions have been curtailed and these bodies have been mandated to determine tariff without subsidy and strictly follow the guidelines regarding cross subsidy. This will make tariff cost reflective and states will have to provide any additional subsidy to any class of consumer directly through Direct Benefit Transfer (DBT)," he said.
Remarking on the draft amendments, Sanjay Banga, President, Transmission and Distribution, TATA Power said: "The draft amendment is a very positive step which will enforce distribution utilities to perform better, will promote industrial growth with a largely uniform industrial tariff structure and with the payment security mechanism, the generation sector will also be getting out of the stress."
In the existing system, each state has its own rule on defining Renewable Purchase Obligations (RPO) targets but now SERCs will not be deciding authorities and there will be an upcoming National Renewable Energy Policy to be prepared in consultation with all states and to which all the states have to abide, Banga said.
According to Pratik Agarwal, Managing Director, Sterlite Power, the power sector has an urgent need for reform and the draft amendments are an attempt in that direction by allowing sub-distribution to be unlicensed. "This could bring much needed private investments to the sector which will ultimately reduce losses and increase efficiency. Also various measures have been included to ensure timely payments and also to ensure that burden of tariff subsidies is not imposed on distribution companies," said Agarwal.
In the draft amendment, the power ministry has also proposed provisions to restrict the creation of ‘regulatory assets’. Regulatory assets are expenses of power discoms that are recoverable in future power tariff hikes but the SERCs do not take them into consideration while calculating current electricity tariffs. "Most of the discoms are having financial stress due to 'Regulatory Assets' amortisation, and several matter pending in litigation at various forums," said Alekhya Datta, fellow and area convenor, Electricity and Fuels Division, TERI
He added there is a need for strong direction to ensure that regulatory assets issues get resolved within a time bound manner, banks should have a favourable approach to discoms in particular and there should be no discrimination against private sector discoms for availing any benefits from state and central sponsored schemes, as they also work under the same regulatory mechanisms as any state-owned discom.
According to Khurana, in order to avoid any jurisdictional issues between CERC and the new Electricity Contract Enforcement Authority, bifurcation of their functions should be spelt out clearly.
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