Allow open access to power: panel

The Advisory Group constituted for Integrated Development of Power, Coal and Renewable Energy, has recommended “restricting the authority of the State governments to issue directive to prevent open access,” according to a press release of the Ministry of Power.

State governments have used Section 11 of the Electricity Act, 2003, to order that power generating stations in the State should not supply the electricity they generate to consumers outside the State. The ‘prohibition’ under Section 11 is currently in vogue, for example, in Tamil Nadu.

But the wording of the Section is not so explicit. It says that a State government may specify that “in extraordinary circumstances” ask an electricity generation company in the State to “operate and maintain any generating station in accordance with the directions of the (State) government.” It also clarifies that ‘extraordinary circumstances’ mean “circumstances arising out of threat to security of the State, public order or a natural calamity or other circumstances arising in public interest”.

Various States have used Section 11 to restrict sales of electricity during periods of power shortage, much to the chagrin of power companies who want freedom to sell their electricity for the best price in an open market.

Now, the Advisory Group, headed by Suresh Prabhu, Union Minister for Railways, has recommended that the Section 11 should go.

Sources in the Ministry say that the government briefly toyed with the idea of abolishing this section through the amendments to the Electricity Act by inserting a proviso that “no such direction shall be issued by the Appropriate Government to prevent open access”.

But in a meeting of the Central Electricity Authority held on November 22, it was decided to drop this proviso.

Clearly, the government is wary of doing anything that would impinge on the powers of the State governments.

In a letter to the Prime Minister, Tamil Nadu Chief Minister O Paneerselvam noted that the proposed amendments “without considering the views of the State governments was totally against the federal spirit of the Indian Constitution and co-operative federalism”.

However, the view that the legislation works against free markets, has been debated for long.

For example, in a 2010 letter to the Power Secretary, the then Chairman of the Central Electricity Regulatory Commission (CERC) noted that the Electricity Act “is built on the foundation of open access” and accordingly the Act gives a statutory right to generating companies to choose their buyers”.

“Section 11 only provides for directions regarding operation and maintenance of generating stations in extraordinary circumstances. If these powers are allowed to be used to direct supply of power and in that process, forcing breach of existing contracts for supply, the whole scheme of open access would collapse and it would disastrous for the efforts being made to mobilize private investment in the power sector,” Pramod Deo, the then Chairman of CERC, said in the letter.

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