The Indian Electricity Act, 1910

• Provided basic framework for electric supply industry in India.

• Growth of the sector through private licensees. License by State Govt.

• Provision for license for supply of electricity in a specified area.

• Legal framework for laying down of wires and other works.

• Provisions laying down relationship between licensee and consumer.

 After independence
Electricity defined as a concurrent subject
Both Centre and State can make laws
In case of conflict, Central Law prevails

Electricity (Supply) Act, promulgated in 1948

 The Electricity (Supply) Act, 1948
Development of the state sector;
• Mandated creation of SEBs.
• Need for the State to step in (through SEBs) to

extend electrification (so far limited to cities)

all across the country.
• Financing norms for performance of the

electricity industry; and

• Govt. as owner & regulator.
– dealt with Statutory Powers and functions of
CEA, SEBs and Generating Companies
The Electricity (Supply) Act, 1948
Main amendments to the existing Acts
•Amendment to bring in commercial viability
in the functioning of SEBs.
- Section 59 amended to make the earning of
a minimum return of 3% on fixed assets a
statutory requirement (w.e.f 1.4.1985)
• Amendment in 1991 to open generation to
private sector and establishment of RLDCs
• Amendment in 1998 to provide for private
sector participation in transmission, and also
provision relating to Transmission Utilities.
Electricity amendment ACT in 1991
Liberalisation in Power Sector started with
the Electricity Laws (Amendment) Act in
1991
 Private entities may establish, operate
and maintain power generation plants
as IPPs
 IPPs may enter into agreements with
SEBs
 Incentives to IPPs like 100% foreign
ownership
 Debt equity ratios up to 4:1 permissible
The Electricity Commissions Act, 1998 –
creation of independent regulator at
Centre and States.
Separation of ownership from regulation.
The Electricity Regulatory Commissions Act, 1998

• Provision for setting up of Central / State

Electricity Regulatory
Commission with powers to determine tariffs.

• Constitution of SERC optional for States.

• Distancing of Govt from tariff determination

 State Reform Acts
 Orissa (1995)
 Haryana (1997)
 Andhra Pradesh (1998)
 Uttar Pradesh (1999)
 Karnataka (1999)
 Rajasthan (1999)
 Delhi (2000)
 Madhya Pradesh (2000)
 Gujarat (2003) 9
 Need for the New Legislation.
Reform legislation by several States separately.
Obviating need for individual States to enact their
own reform laws.
Requirement of introducing newer concepts like
power trading, Open Access, Appellate Tribunal etc.
Special provision for the Rural areas.
How the Act evolved?
Initial several drafts - Gajendra Haldea -
NCAER
Ministry of Power draft – tabled in
Parliament
Changes in response to the
recommendations of Standing committee
on energy
Act passed by the Parliament in April 03
and came into force on June 10, 03
Amendments - effective from January
27, 2004; June 15, 2007
11
Attempt to harmonize & rationalize
existing laws
IE Act-1910
ES Act-1948
ERC Act-1998
Stimulus to the sector !
Discipline
Electricity Act, 2003 brought into
force ….w.e.f. 10.06.2003
Electricity Act 2003
Emphasis on competition
 Generation as well as distribution
 Allows power exchanges and traders
Facilitates privatisation
 Multiple licenses
 Franchisee
Strengthens regulation
Mix of public & private power utilities
regulated by independent regulator.
Legal Framework – Electricity Act, 2003

Consolidates laws of electricity

relating to generation, transmission,
distribution and trading of electricity.
Creates environment conducive for
development of electricity industry.
Constitution of Central and State
Regulatory Commissions to
rationalize electricity tariffs.

14
Structure of E- Act
18 Parts (Chapters),185 sections, 107
pages and one schedule

15
Section wise overview of the Act
Section wise overview of the Act
Section wise overview of the Act
 Electricity Act 2003 -Key Features

 Open Access to Transmission /Distribution Systems

 De-licensing of power generation
 Trading in electricity permitted
 Liberal provisions for captive power generation
 Rural generation and distribution freed from licensing
 Expanded role for the Regulatory Commissions
 Envisages unbundling of transmission and distribution.
 Regulatory Commissions to develop electricity markets.
Restructuring of SEBs
Provision for transfer scheme to create one or
more companies from SEB.
(Section 131)
Provision for continuance of SEBs
(Section 172)
Among the frontrunners were, Orissa in 1996,
Haryana (1999), Andhra Pradesh (1999) and
Karnataka (1999).
LEGISLATIVE FRAMEWORK
– ELECTRICITY ACT,2003
GENERATION LIBERALISED

 No license required to establish generating stations by

gencos for Thermal power plants
 Concurrence of State Govts. and CEA required for
setting up Hydro projects for cost exceeding Rs. 500
crores Now 1000 crores due to dam safety and interstate
issues
 Gencos free to supply electricity to any licensee or to any
consumer
 No permission required to construct, operate & maintain
captive generating plants and dedicated transmission
lines.
 Distributed generation – establishing stand-alone
systems in remote rural areas
 Generation

Generation from Non-Conventional Sources /

Co-generation to be promoted. Minimum
percentage of purchase of power from
renewables may be prescribed by Regulatory
Commissions.
States have come up with RPS regulations.
LEGISLATIVE FRAMEWORK
– ELECTRICITY ACT,2003 … contd
 Non-discriminatory open access to Gencos,
licensees & consumers in transmission &
distribution.
 Open access enables non-discriminatory
sale/purchase of electric power/energy between
two parties utilizing the system of an in-between
(third party), and latter not blocking it on
unreasonable grounds.
 Surcharge in addition to wheeling charge initially.
Surcharge to be reasonable and not discourage
open access ( National Tariff Policy )
 Transmission

 Transmission Utility at the Center and in the States to

undertake planning/development of transmission system.
 Regional Load Despatch Centers to ensure integrated
operation of the power system.
 Flexibility regarding keeping Transmission Utility and load
despatch together or separating them.
 The Load Despatch Centre/ Transmission
Utility/Transmission Licensee not to trade in power.

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Transmission …2
Transmission Utility Functions
 Build, own and operate transmission lines
 Undertake Transmission planning & co-ordination
 Provide ‘non-discriminatory open access’ to transmission
network on payment of fees by licensees, generating
companies, ‘open access’ consumers.
Private, public sector companies also allowed as
‘Transmission Licensees’ with similar functions except
planning and co-ordination

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 Distribution

 Distribution, a licensed activity.

 Retail tariff to be determined by SERC.
 Provision for suspension/revocation of licence by Regulatory
Commission as it is an essential service which can not be
allowed to collapse.

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Distribution
There can be more than one
distribution licensee in same area (2nd
or parallel licensee)
Each D. Licensee has universal supply
obligation i.e. duty to supply on
demand
Connection to be provided within
one month of application (S 43)
Distribution licensee subjected to
28 regulation by ERCs
Distribution
Within 2 years all consumers should be
metered (this period may be extended
by the SERC) (S. 55)
Licensees can appoint franchisees

29
Rural Electrification

Appropriate Govt. to endeavor to

extend supply of electricity to all
villages/hamlets. (Section 6)

No requirement of licence if a person

intends to generate and distribute
power in rural area. (Section 14)
Licensing …1
License required for
 Transmission
 Distribution
 Trading
ERC’s to issue license and fix license
conditions
 CERC for inter-state transmission and
trading
 SERCs for intra-state transmission, trading
and distribution
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Licensing …2
All license for 25 years
ERC’s have authority to
 Grant license
 Amend license
 Suspend license
 Revoke license
 Appoint administrator
 Sale utility of a licensee to other licensee
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Trading and Market Development.
Trading distinct activity permitted with licensing
(Section 12)
Regulatory Commission may fix ceiling on trading
margin to avoid artificial price volatility.

(Section 79(1)(j) and 86(1)(j))

CERC has put a trading margin of 4 paise/kWh.
Regulatory Commission to promote development of
market including trading
Two Power Exchange permitted by CERC
The volume of power, traded in India of about 15
billion units, equivalent to 2 to 3% of electricity
generation.
Development of Electricity
market
Broad guidelines for setting up of Power
Exchange issued by CERC
Reliable and effective and impartial
management
Ring fencing between ownership,
management and participation
Transparency in operation and decision
making
Development of Electricity
market
Computerised and clearing system
Efficient clearing and Guarantee system
Efficient trade information
dissemination system
The first power Exchange became
operational in July 2008
National Electricity Policy and Plan

• Central Govt. to prepare National Electricity Policy

and Tariff Policy in consultation with State Govt. and
Central Electricity Authority. (Clause 3(1)).
• National Electricity Plan for a period of 5 years to be
issued by Authority in accordance with National
Electricity Policy (Clause 3(4)).
• National Policy on rural electrification including
stand alone systems to be issued by Central
Government in consultation with State Government
(Clause 4 & 5).
 Role of the Central
Government
Central Govt. has to formulate :
National Electricity policy
National tariff policy
Rural Electrification policy
National Polices
National Electricity Policy - Feb 05
National Tariff Policy- Jan 06
(Amendment – Mar 08) Amendment in
2016
National Rural Electrification Policy -
Aug 06
National Electricity Plan - Aug 07

38
CENTRAL ELECTRICTY AUTHROTY

CEA established under Section 3 of

Electricity (Supply) Act 1948 & section 70 of
Electricity Act 2003

Responsible for overall planning &

development of power sector in the country
 Main Functions of CEA

1. To Advise Central Government on

the matters relating to National
Electricity Policy and formulation of
National Electricity Plan covering
short term and Perspective Plan.
2. To promote and assist in timely
completion of schemes and
projects.

Contd……
 Main Functions of CEA
3. Concurrence to new hydro-electric
schemes involving a capital
expenditure exceeding such sum as
may be fixed by the Central
Government from time to time.
4. To advise Central Government,
State Government, Licensees or
Generating Companies and
Regulatory Commissions.
Contd……
 Main Functions of CEA
5. To collect and record Data and to make
public from time to time the information
and provide for publication of reports
and investigation.
6. To specify Technical standards and
safety requirements for construction and
O&M of Electrical plants and Electric
lines, conditions for installation of meters
and grid standards for connectivity and
O&M of transmission lines
 Functions of Central Commission

• regulate the tariff of generating companies owned or

controlled by the central government and inter-state
IPPs (Clause 79(1)(a)(b)).
• regulate the inter-state transmission of electricity
including the tariff of transmission licensee and to
specify grid code (Clause 79(1)(c)(d)(h)).
• fix trading margin for inter-state trading of
electricity (Clause 79(1)(j)).
• issue licenses to persons to function as transmission
licensee and electricity trader with respect to their
inter-state operations (Clause 79(1)(e)).
43
• adjudicate upon disputes involving generating
companies or transmission companies and refer any
dispute for arbitration (Clause 79(f)).
aid and advise the Central Government on (Clause 79(2))–
• formulation of National Power Policy and Tariff
Policy.
• promote competition, efficiency and economy in the
activities of the electricity industry.
• promotion of investment in the electricity industry
etc.
• In discharge of its functions, the Central Commission shall
be guided by the National Electricity Policy, National
Electricity Plan and tariff policy (Clause 79(4))..

44
 Functions of State Commission
• determine the tariff for generation, supply, transmission
and wheeling of electricity, wholesale, bulk or retail, as
the case may be, within the State (Clause 86(1)(a)) :
• where open access has been permitted to a category of
consumers the State Commission shall determine only the
wheeling charges and surcharge thereon, if any, for the
said category of consumers;
• regulate electricity purchase and procurement process of
distribution licensees including the price at which
electricity shall be procured from the generating
companies or licensees (Clause 86(1)(b))

45
• facilitate intra-state transmission and wheeling
of electricity (Clause 86(1)(c));
• issue licences to persons seeking to act as
transmission licensees, distribution licensees and
electricity traders with respect to their
operations within the State (Clause 86(1)(d));
• In discharge of its functions, the State
Commission shall be guided by the National
Electricity Policy (Clause 86(4)).

46
 Section 142 Punishment for non-compliance of
directions by Appropriate Commission
- In case any complaint is filed before the
Appropriate Commission by any person or if
that Commission is satisfied that any person
has contravened any provisions of this Act
or rules or regulations made thereunder or
any direction issued by the Commission, the
Appropriate Commission may after giving
such person an opportunity of being heard
in the matter
 Section 142 Punishment for non-compliance of
directions by Appropriate Commission
- by order in writing direct that without
prejudice to any other penalty to which he
may be liable under the Act, such person
shall pay, by way of penalty which shall not
exceed one lakh rupees for each
contravention and in case of a continuing
failure with an additional penalty which may
extend to six thousand rupees for every day
during which the failure continues after
contravention of the first such direction.
 Consumer Protection
 Regulatory Commissions to set and monitor standards of
performance of Licensees.
 Regulatory Commissions to award compensation to consumer
by licensee Failing to comply with the standards.
 State Commissions to appoint Ombudsmen for redressal of
grievances.

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 Consumer grieviance Redressal Forum

(Section 42 sub-section (5))

Redressal forum for redressal of grievances of
consumers, to be appointed by every distribution
licensee within six months. from the appointed date or
date of grant of license, whichever is earlier, in
accordance with the guidelines as may be specified by
the State Commission.
Ombudsman

• Any consumer, who is aggrieved by non-redressal

of his grievances under sub-section (5), may make
a representation for the redressal of his grievance
to an authority to be known as Ombudsman to be
appointed or designated by the State Commission.

• The Ombudsman shall settle the grievance of the

consumer within such time and in such manner as
may be specified by the State Commission.
 Special Courts
Constitution of Special Courts.
The State Government may, for the purposes
of providing speedy trial of offences referred to
in sections 135 to 139, by notification in the
Official Gazette, constitute as many Special
Courts as may be necessary
Special Court shall consist of a single Judge
who shall be appointed by the State
Government with the concurrence of the High
Court.
A person shall not be qualified for appointment
as a Judge of a Special Court unless he was,
immediately before such appointment, an
Additional District and Sessions Judge.
 Special Courts
Every offence punishable under sections 135 to 139
shall be triable only by the Special Court within
whose jurisdiction such offence has been
committed.
The Special Court may determine the civil liability
against a consumer or a person in terms of money
for theft of energy which shall not be less than an
amount equivalent to two times of the tariff rate
applicable for a period of twelve months preceding
the date of detection of theft of energy or the exact
period of theft if determined which ever is less
The amount of civil liability so determined shall be
recovered as if it were a decree of civil court
Appellate Tribunal
Appellate Tribunal to hear appeals
against the orders of CERC/SERC, and
also to exercise general supervision and
control over the Central/State
Commissions. (Section 111)
Appellate Tribunal considered necessary
to-
 Reduce litigation and delay in decisions
through High Court.
 Provide technical expertise in decision on
appeals.
Thank you