PIB: Focus

PIB: Focus

The Electricity Regulatory Commissions Bill, 1997

The Government introduced the Central Electricity Regulatory Commission Bill, 1997 in the Lok Sabha, on Thursday, Details:

2. The Electricity Regulatory Commission Bill, 1997 seeks to establish a statutory Central Electricity Regulatory Commission (CERC) and vested with regulatory functions partly being performed currently by the Central Electricity Authority. The Bill also envisages creation of State Regulatory Commission (SERC). The Bill contains details of composition, powers, functions and responsibilities assigned to these Commissions. This is a direct fall out of the Common Minimum National Action Plan for Power (CMNPP) finalized by the Government after two Conferences with Chief Ministers held on 16th October, 1996 and 3rd December, 1996. The creation of CERC and SERC are one of the decisions taken during these meetings which forms part of the CMNPP. During the meetings, many Chief Ministers had urged that the CERC/SERC be constituted at the earliest. The Ministry of Power also assigned the task of studying the restructuring needs of the regulatory system to a consultant viz Administrative Staff College of India (ASCI), Hyderabad. Based on the recommendations of the ASCI Report, the comments of the other Ministries and several rounds of discussions with experts in the field, the Electricity Regulatory Commission Bill, 1997 was drafted.

3. The existing Regulatory system has certain shortcomings. For instance, it does not provide for the regulation of tariff nor are there any mandatory provisions of consultation with consumer groups for tariff setting. Regulation also does not adequately addresses issues like reasonableness of prices, quality of power supply, consumer protection and viability of the State Electricity Boards. There is no regulatory functionary to regulate the functions of the SEBs or to penalise the excess of any agency. The entire regulatory system of the regional grid is now managed by administrative arrangements which are not sanctified in any legal provisions. The other new development in the power sector is the entry of the private sector, thus creating a multi- operator situation involving competition. Therefore, in order to make arrangements for protection and promotion of consumer interest, fair competition, transparency and providing level playing field for all the players in the sector, there is a pressing need for an independent Central Electricity Regulatory Commissions at the Center and independent State Electricity Regulatory Commission in the States for regulation of the Electricity Services and the planned and healthy growth of power sector utilities.

4. The Electricity Regulatory Commissions Bill, 1997, if enacted, would enable the Government to set up and independent Central Electricity Regulatory Commission at the Center and State Electricity Regulatory Commissions in the States as statutory bodies with well defined functions, responsibility and powers for regulation of the power sector in an effective manner.

5. The salient features of the Electricity Regulatory Commissions Bill, 1997 are:

a. The CERC shall consist of a chairperson and four members of which one shall be Chairman, Central Electricity Authority (CEA) ex-officio and others shall be appointed by the Central Government from persons selected by the Selection Committee constituted for the purpose.

b. It is provided that the chairperson and members shall hold office for a period of five years or until the age of 62 years whichever is earlier and shall not be eligible for re-appointment at any time after the expiry of his term of appointment.

c. No member of the CERC including Chairperson shall be removed from the office until a sitting Judge of the Supreme Court has carried out an investigation and forwarded a report to the President of India who may remove from office the chairperson or members of CERC.

d. The expenses of the Central Commission including salaries, allowances and pensions payable to or in respect of Chairperson and Members shall be charged on the Consolidated Fund of India.

e. CERC shall have powers as are vested in a Civil Court under the Code of Civil Procedure, 1908 (5 of 1908) while trying a suit.

f. The functions of Central Commission which, inter- alia, shall be:

I. to regulate the tariff of generating companies owned by Central Government in public sector or private sector catering to more than one State;

ii. to promote competition, efficiency and economy and safety in the activities of electrical industry;

iii. to adjudicate upon disputes and differences between the units and undertakings controlled by the Central Government, IPPs and licensees or any other matter referred to it by the Government.

g. Any person aggrieved by any decision or order of the Central Commission shall appeal to the High Court.

h. The SERC shall consist of maximum of three members to be appointed by the State Government from persons selected by the selection committee constituted for the purpose. The clause also provides for the conditions for appointment as members of the State Commission. The chairperson and members shall be persons of adequate knowledge or experience in the fields of law, economics, commerce, finance, accountancy, administration or engineering (relating to generation, transmission or distribution of electricity).

I. The functions of State Commission which, inter-alia, shall be:

I. to regulate the bulk tariff of generating and transmission entities functioning within the State;

ii. determination of retail tariffs, including wheeling charges etc., for SEBs and licensees.

provided that these would be decided by SERCs such that a minimum overall 3% rate of return to each utility will be ensured with immediate effect. Cross subsidization between categories of consumers may be allowed by SERCs. No sector shall, however, pay less than 50% of the average cost of supply. Tariffs for agriculture sector will not be less than 50 paise per Kwh. to be brought to 50% of the average cost in not more than 3 years.

In discharge of its functions the State Commission shall be guided by the decisions and orders passed by the Central Commission. More functions could be assigned to SERCs subsequently.

j. Any person aggrieved by any decision or order of the State Commission shall appeal to the CERC.

6. The introduction of the Bill is a significant step towards development of an independent impartial and transparent regulatory system in the power sector to enable the Electricity Boards to function in a competitive, efficient and viable manner thereby benefitting the consumer. By introducing this Bill, the United Front Government has kept up one its promises to reform and restructure the Electricity Sector in India