Government versus regulatory: The Centre must maintain the balance of power

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November 11, 2020 6:15 AM

Instead of intruding into state matters, the Centre must focus on aspects such as availability of round-the-clock affordable power supply to consumers without any load-shedding

The Ministry of Power must refrain from overstepping its jurisdiction and interfering in state electricity mattersThe Ministry of Power must refrain from overstepping its jurisdiction and interfering in state electricity matters

We are well-versed of the fact that power is a Concurrent subject under the Constitution. The Electricity Act of 2003 clearly defines the functions of the government and the regulators under the various statutes of the legislation. Under the Act, all state-specific rules and reforms have to be undertaken by the state electricity regulatory commissions (SERCs) after taking into account their own state’s specificities. Unfortunately, today, the central government, by invoking Section 176 of the Electricity Act, is dictating terms on issues related to power supply and interfering in the matters of states. This overstepping of jurisdiction by the government, I suspect, might not be tenable in the court of law.

The latest example in this regard is the draft Electricity (Rights of Consumers) Rules 2020 issued recently by the Ministry of Power. It proposes prescriptive rules and duties of SERCs, distribution utilities and consumers in the matter of electricity supply such as metering, billing, connection, disconnection, reconnection, reliability of supply, etc. The draft also recognises an emerging category of consumers known as ‘prosumers’ who would have the right to produce electricity for self-use and inject excess in the grid. Distribution utilities will have to facilitate the setting up of renewable generation system at the prosumer’s premises and facilitate robust compliance to ensure success of prosumers.

Adhere to the Electricity Act 2003 construct

The draft Electricity (Rights of Consumers) Rules 2020 propose specific rules and duties of SERCs, distribution utilities and consumers in the matter of electricity supply. The states, under the Electricity Act, have the discretion to implement or not implement these rules. Instead of intruding into state matters, the Centre must, indeed, focus on broader and critical aspects such as availability of round-the-clock affordable power supply to consumers without any load-shedding, adherence to merit order despatch, respecting must-run status and absorbing renewable energy without curtailment, distribution reforms, regulatory reforms and de-politicisation of the power sector. The Ministry of Power must not overstep into making rules on the subject vested with another body or authority which is against the letter and spirit of the Electricity Act of 2003. The Ministry of Power must refrain from framing rules under Section 176 unless it is relatable to power provided under the Act. Instead of prescribing such specific rules, the central government should, instead, issue key guidelines for states, allowing them to come up with their own rules and framework applicable at the respective state level. The Electricity Act of 2003 entrusts states to create prescriptive rules in the areas of power generation, supply, distribution and markets. The central government must also invest efforts to promote a fair and healthy competition in the power sector.

Guide regulatory reforms and competition in the right direction

Today, equipped with more than two decades of regulatory experience in the power sector, we have a strong case for undertaking regulatory reforms basis the experience gathered and the future structure and construct we aspire to create. In fact, the reforms have now become a prerequisite to building an efficient and sustainable energy sector. A key reform that could be an ideal one would be to amend the Constitution and removing electricity out of the Concurrent List, as in the case of sectors like telecommunications, minerals, coal, hydrocarbons and many other infrastructure areas. This reform could be high resisted to by states and could, thus, confront great deal of implementation challenges.

Autonomy, independence and accountability of the regulators is another critical regulatory reform that we must undertake and expeditiously. First and foremost, we must refrain from political interference in regulatory appointments. We must build independent regulatory commissions where candidates are not preferably from government background, are below 55 years of age, with independent thinking and expertise in finance, law, management and the subject matter. This will ensure that the regulators act independently and do not become the extended arm of state governments. To create greater accountability on the part of the state regulators, the Appellate Tribunal for Electricity (APTEL) should be granted powers to issue guiding principles for state commissions and have powers to review their functioning. The Electricity Act of 2003 should be amended to give the APTEL a supervisory role to ensure fulfil their roles and responsibilities prescribed under the Act.

For the regulatory and policy reforms to have a large-scale and transformational impact, we must also build and nurture competition. Robust competition across all aspects of the supply chain is imperative. Building a healthy ‘competition’ across energy value chain can offer a win-win proposition for the customer, business and market development, as well as build an energy economy that is efficient and sustainable. A free, fair and healthy competition, indeed, also acts as a self-regulating mechanism. The advent of competition in industries such as telecommunication, retail, travel, e-commerce, aviation, etc, has brought a paradigm shift and enormous benefits to industries, consumer choice and overall economic welfare. In 2003, the Competition Commission of India was set up as a statutory body to ensure that all citizens have access to the broadest range of goods and services at the most competitive prices in a transparent manner. Hence, the focus ahead should be on the continued shift from the cost- and-negotiation-based models to a competitive market model across the economic landscape.

The author is member, Advisory Board, Competition Commission of India, and former chairperson, Central Electricity Regulatory Commission

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