ELECTRICITY (AMENDMENT) RULES, 2023

February 7, 2024
Electricity Amendment Rules

By Rupin Chopra and Apalka Bareja

Introduction
In a bid to address pressing challenges in the power sector, the Electricity Amendment Rules of 2023 have emerged on the legislative horizon aiming to illuminate a path towards sustainability, competition, and enhanced consumer choice. Delving into intricacies of the proposed amendments reveal a landscape where the introduction of private players, the presence of multiple distribution companies and tariff regulations have raised concerns from various quarters. This article unravels the layers of this unfolding narrative, shedding light on the motivations behind the amendments, the implications outlined and the concerns voiced by stakeholders in the midst of evolving energy landscape. As we navigate the layers of change, a comparative perspective with the United kingdom adds a global perspective and sheds light on international best practices and enriches the dialogue surrounding this pivotal moment in India’s power sector.

The Electricity Amendment rules 2023 bring forth significant changes in the regulatory landscape, aiming to enhance efficiency and financial sustainability in the electricity distribution sector. It incentivizes investment and promotes innovation to achieve India’s target of 175 GW of installed renewable energy capacity by 2025 These rules, effective upon publication in the official gazette, introduce key amendments to Rule 15 of the electricity rules, 2005.

Key highlights

Following are the key highlights of the amendment rules 2023:

  • Subsidiary accounting and payment
    The amended rule 15 focuses on subsidiary accounting and payment procedures. Distribution licensees must adhere to standard operating procedures issued by the central government for accounting subsidy payable under section 65[1] of the act. State commissions will issue quarterly reports within 45 days, evaluating subsidy demands, actual payments, and discrepancies taking corrective actions when necessary.[2]
  • Introduction of private players
    The amendment talks about the participation of private players along with state authorized/owned power distribution companies. Given they get the license. It also says that distribution licensees can use the distribution system of other licensees in the area of supply through a system of non-discriminatory open access on payment of wheeling charges.
  • Accountability and compliance
    In case of noncompliance with subsidy related provisions the state commission is empowered to take appropriate actions against concerned officers. This emphasizes the importance of adherence to the act, rules and regulations governing subsidy accounting and payment processes.[3]
  • Framework for financial sustainability
    A new rule 20 is introduced focusing on the framework for financial sustainability. State commissions are mandatory to adopt loss reduction trajectories aligned with agreements by state government ensuring transparency in power procurement costs and permitting a reasonable return on equity. Prudent costs for power procurement and assets creation for distribution system development are considered subject to specific conditions outlined in the rules.[4]
  • Treatment of gains and losses
    The rules specify the treatment of gains and losses accrued due to devotions form approved AT&C loss reduction trajectories. Gains are shared between the distribution licensee and consumers with a significant portion passed on to consumers in tariffs. Losses are divided equally between the distribution licensee and consumers.[5]
  • Return on Equity
    The rules permit a reasonable return on equity aligning with the return on equity specified by central commission for generation and transmission. This approach considers overall risk assessments and prevailing capital costs , acknowledging the unique challenges of the distribution business.[6]

Implications and concerns

It was reported in multiple newspapers/media houses that various stakeholders expressed apprehension that the bill might grant licenses to multiple distribution companies in the same area, creating an alleged bias towards private companies and causing detriment to government discoms[7]. Another concern that the stakeholders bought forward was that the privatization of power sector will raise costs for farmers and an adverse effect on the electricity supply to agriculture regions[8]. The government on the other hand asserts that privatization will offer customer choices in selecting power distribution, promoting sustainability in the power sector. It maintains that the amendment aims to provide distribution licenses to both private and state owned entities[9].

Bridging Horizons: A Comparative Glance at Electricity Amendment Rules 2023 in India and the United Kingdom

As India embarks on refining its electricity landscape with the proposed Amendment Rules of 2023, a comparative analysis with the United Kingdom’s regulations unveils intriguing insights and potential lessons for enhancement.

Adapting best practices from the United Kingdom:

  • Market Diversification
    The UK’s approach of involving private players in electricity distribution brings forth healthy market competition. India has consider embracing similar strategy to stimulate innovation, efficiency and consumer centric services.[10]
  • Grid Management through Apex Bodies
    The establishment of the National Load Despatch Centre (NLDC) in India mirrors the UK”s sophisticated grid management. Drawing inspiration, India can further fortify its regulatory mechanisms and operational oversight, ensuring a seamless and secure power system.[11]
  • Tariff Regulation Framework
    The concept of setting a ceiling on tariffs in areas with multiple distribution licensees aligns with the UK’s tariff regulation practices. India could adopt and tailor this approach to promote fair competition while safeguarding consumer interests.[12]

India’s Compliance with International Standards

International organizations, in alignment with United Nations Sustainable Development Goals (SDGs) have set crucial norms and goals for electricity sector. These standards aim to ensure global sustainability, accessibility and reliability in the provision of electric power. Let’s explore some key benchmarks and assess India’s compliance, particularly in the context of the new Electricity amendment Rules of 2023.

  1. United Nations Sustainable Development Goals (SDGs):
    • Norms: affordable and clean energy for all (SDG 7)
    • Compliance Assessment: India with its focus on renewable energy and ambitious target of achieving 175GW of installed renewable energy capacity by 2025, aligns well with SDG 7’s objectives[13]
  2. International Electro-technical Commission:
    • Goals: enhancing interoperability and efficiency in power systems
    • Compliance Assessment: the Electricity Amendment Rules 2023, with its emphasis on sustainability and competition addresses key aspects of IEC standards[14]
  3. International Energy Agency:
    • Goals: promoting clean energy technology and efficiency measures.
    • Compliance Assessment: India’s push for renewable energy sources as outlined in the new rules, resonates with IEA goals, contributing to a more sustainable energy mix.[15]
  4. World Energy Council (WEC)
    • Goals: assessing the energy trilemma-sustainability, affordability, reliability
    • Compliance Assessment: the amendments, by fostering financial sustainability and innovation, contribute positively to the WEC Energy Trilemma index.[16]

Conclusion

In conclusion the Electricity Amendment rules 2023 presents a comprehensive framework addressing various aspects of subsidy management financial sustainability and operational; norms aiming to propel the electricity distribution sector towards efficiency and innovation.

Furthermore, in the pursuit of evolving electricity regulations, India has the opportunity to glean valuable insights from United Kingdom’s experiences. By adapting successful practices and aligning goals with the global energy efficiency benchmarks, India can steer its energy sector towards a more sustainable and resilient future.

As India strives to meet its energy demands and contribute to global sustainability, the Electricity Amendment Rules 2023 represent a step towards aligning with international electricity goals and norms. The emphasis on renewable energy, competition and efficiency reflects a commitment to both national priorities and global benchmarks. Continuous monitoring and adaptability will be essential to ensure sustained compliance with evolving international standards.

[1] Section 65 , The Electricity (Supply) Act, 2003

[2] Goverment of India, Ministry of Power (no date) Ministry of Power. Available at: https://powermin.gov.in/ (Accessed: 21 December 2023).

[3] Goverment of India, Ministry of Power (no date) Ministry of Power. Available at: https://powermin.gov.in/ (Accessed: 21 December 2023).

[4] https://solarquarter.com/2023/09/05/ministry-of-power-announces-electricity-third-amendments-rules-2023/#:~:text=India’s%20New%20Electricity%20Rules%20To,captive%20and%20bulk%20power%20consumers

[5] Goverment of India, Ministry of Power (no date) Ministry of Power. Available at: https://powermin.gov.in/ (Accessed: 21 December 2023).

[6] Goverment of India, Ministry of Power (no date) Ministry of Power. Available at: https://powermin.gov.in/ (Accessed: 21 December 2023).

[7] Bureau, T.H. (2023) Activists to stage protest against Electricity (Amendment) bill in Kalaburagi on October 30, The Hindu. Available at: https://www.thehindu.com/news/national/karnataka/activists-to-stage-protest-against-electricity-amendment-bill-in-kalaburagi-on-october-30/article67458479.ece (Accessed: 21 December 2023).

[8] Baruah, R. (2022) 2.7 million power engineers to protest against Electricity Amendment Bill, mint. Available at: https://www.livemint.com/industry/energy/27-million-power-engineers-to-protest-against-electricity-amendment-bill-11659886493602.html (Accessed: 21 December 2023).

[9] Jagga, R. (2022) Explained: Why has the Electricity Amendment Bill led to protests in Punjab?, The Indian Express. Available at: https://indianexpress.com/article/explained/explained-why-has-the-electricity-amendment-bill-led-to-protests-in-punjab-8078836/ (Accessed: 21 December 2023).

[10] Electrical standards and approved codes of Practice (no date) Electrical standards and approved codes of practice – Electrical safety. Available at: https://www.hse.gov.uk/electricity/standards.htm (Accessed: 21 December 2023).

[11] Electrical standards and approved codes of Practice (no date) Electrical standards and approved codes of practice – Electrical safety. Available at: https://www.hse.gov.uk/electricity/standards.htm (Accessed: 21 December 2023).

[12] Electrical standards and approved codes of Practice (no date) Electrical standards and approved codes of practice – Electrical safety. Available at: https://www.hse.gov.uk/electricity/standards.htm (Accessed: 21 December 2023).

[13] Goal 7 | Department of Economic and Social Affairs (no date) United Nations. Available at: https://sdgs.un.org/goals/goal7 (Accessed: 21 December 2023).

[14] 2023-12-21 et al. (2023) Homepage. Available at: https://www.iec.ch/homepage (Accessed: 21 December 2023).

[15] Humanising Energy (no date) World Energy Council. Available at: https://www.worldenergy.org/ (Accessed: 21 December 2023).

[16] Humanising Energy (no date) World Energy Council. Available at: https://www.worldenergy.org/ (Accessed: 21 December 2023).

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