Power distribution: govt to look at separating carriage, content

After coming out with a mechanism to clean up the balance sheets of electricity distribution utilities, next on the agenda for the Ministry of Power is legislative reforms.

The government hopes to get amendment to the Electricity Act cleared, which has been pending for clearance in Parliament since December last year, during the current session of Parliament.

One of the key changes proposed is the separation of carriage and content in the distribution sector which has been picked up from developed markets.

Such a move will facilitate giving the choice to consumers for electricity supply, as it would introduce the concept of multiple supply licensees. This was a promise made by Prime Minister Narendra Modi.

While the Government expects such a move will achieve the objectives of efficiency and protect the interest of consumers, the industry has been unsure about the proposal.

Producers’ view Segregation of carriage and content is what the industry also wants but only after all possible complexities and contractual issues have been sorted out, said the Independent Power Producers Association of India.

The association members had also wanted the amendments to provide the private sector a fair and level playing field to participate in electricity supply to consumers.

Meanwhile, the workers in the power distribution sector represented by the All India Power Engineers Federation (AIPEF) are of the view that retail supply is the critical link for distribution utilities and segregation of carriage and content would leave such utilities to cater to only subsidised consumers.

With the Ujwal Discom Assurance Yojana, the Government has given an option for taking care of the financial distress of distribution utilities. However, the AIPEF feels that by introducing multiple supply licensees, the existing infrastructure of the discoms will be used without proper compensation.

But opposing the amendments can also cause harm to the whole discom reform process. Apart from the segregation of carriage and content, the amendments also provide for stricter monitoring of electricity regulatory commissions and improving their accountability.

A peer group monitoring will be done to ensure tariff orders are rational and do not suppress electricity rates artificially which are a major cause of financial distress for distribution utilities.

The amendments to the Electricity Act are also keenly awaited by the renewable energy industry. The proposed changes to the existing legislation gives a major thrust on renewable energy.

If the changes are approved, thermal power generators would mandatorily be required to set up renewable energy generation capacity under the Renewable Generation Obligation. Renewable energy could also be exempt from open access surcharge and distribution utilities can face stiffer penalties for non-compliance of Renewable Purchase Obligations.

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