The proposed grid code envisages a penalty 3-4 times the state utilities' dues. ``Currently we are conducting discussions with state utilities for the purpose. Once it becomes a law, the violation of the act will attract severe action,'' CERC chairman SL Rao said.

Addressing a conference on best practices in power generation conducted by the Karnataka Power Corporation (KPCL) here on Monday, Rao said The Union government has formed a forum for regulators and the state level electricity regulatory commissions (SERCs) will come up without further delay.''

McKinsey & Company official Shirish Sankhe, who spoke on ``gearing up for generation deregulation'' said state power generating companies should take a four-pronged strategy to bring down cost of generation by 10-20 per cent to cop with the new century.

Sankhe said the new strategyshould be based on pro-active regulatory management, operational efficiency improvement, capital-efficiency and high performance organisation. ``Operational cost reduction and purchasing cost reduction will have a positive impact on finalising the power price,'' he added.

In a country like India the main focus would be on distribution regulation. The US is divided into states, similar to India. ``If America can succeed with their power reforms, India should try to adopt the US standards,'' he said.