The Electricity Act, 2003
| Electricity Act, 2003 | |
|---|---|
 |
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| Parliament of India | |
| An Act 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. | |
| Citation | Act No. 36 of 2003 |
| Territorial extent | India |
| Date assented to | 26 May 2003 |
| Date commenced | 10 June 2003 |
| Amendments | |
| 2003 and 2007 | |
| Status: In force | |
The Electricity Act, 2003 is an Act of the Parliament of India enacted to transform the power sector in India.
The act covers major issues involving generation, distribution, transmission and trading in power. While some of the sections have already been enacted and are yielding benefits, there are a few other sections that are yet to be fully enforced till date.
Before Electricity Act, 2003, the Indian Electricity sector was guided by The Indian Electricity Act, 1910 and The Electricity (Supply) Act, 1948 and the Electricity Regulatory Commission Act, 1998. The generation, distribution and transmission were carried out mainly by the State Electricity Boards in various States. Due to politico-economic situation, the cross-subsidies reached at an unsustainable level. For the purpose of distancing state governments from tariff determination, The Electricity Regulatory Commissions Act was enacted in 1998. So as to reform electricity sector further by participation of private sector and to bring in competition, Electricity Act was enacted in 2003.
With effect from 2 June 2003 India has adopted a new legislation called the Electricity Act 2003, to replace some age-old existing legislation operating in the country. The new act consolidates the position for existing laws and aims to provide for measures conducive to the development of electricity industry in the country. The act has attempted to address certain issues that have slowed down the reform process in the country and consequently has generated new hopes for the electricity industry. This paper reviews the Electricity Act 2003, to highlight how the new features are different from the existing legal provisions and whether these measures have economic rationale.
An act to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas, rationalisation of electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, constitution of Central Electricity Authority Regulatory Commissions and establishments of Appellate Tribunal for matters therewith or incident thereto.
The Act delicenses power generation completely (except for hydro-power projects over a certain size) As per the Act, 10 per cent of the power supplied by suppliers and distributors to the consumers has to be generated using renewable and non-conventional sources of energy so that the energy is reliable.
Electricity generation has been made a non-licensed activity and the techno-economic clearance from the Central Electricity Authority (CEA) has been done away with for any power plant, except for hydro-electric power stations above a certain amount of capital investment. This has been provided in section 7 and 8 of the Electricity Act 2003. The generators can sell electricity to any licensees or where allowed by the state regulatory commissions, to consumers directly. The provision of direct sale of electricity by the generators, when and where allowed, would promote more IPP participation in the power generation, as these consumers are more creditworthy and bankable compared to many SEB’s. However the act provides for imposition of a surcharge by the regulatory body to compensate for some loss in cross-subsidy revenue to the SEB’s due to this direct sale of electricity by generators to the consumers.
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