We are working on a new Electricity Act, says Power Minister RK Singh
October 6 | The Hindu | India
By Richa Mishra, Twesh Mishra
‘We cannot have a sustainable power system if we run into huge losses’
The Electricity Act of the country must be a legislation which provides for the rights of all stakeholders, says RK Singh, Minister of State (Independent Charge) of Power and New and Renewable Energy. Keeping this mind, Singh and his team in the Power Ministry are working on a new Act.
“The main focus of the new law would be enhancing the rights of all the stakeholders,” he said.
Singh, who is also formulating a new tariff policy, in his second stint as Power Minister, is by now well versed with the challenges including negotiating with the State governments. In conversation with BusinessLine, he said “Discoms cannot pass on their inefficiencies to consumers by levying higher tariffs. The cross subsidy needs to come down.” Excerpts:
By when can we expect the tariff policy and what was the trigger for it?
It is awaiting Cabinet nod.
We need to have a reliable, sustainable power system to be a developed country. We also need to put in a different orientation for consumers in the Statute books. Under the proposal the consumer has rights and they have to be listed out with the remedies a consumer can have.
Also the system has to be sustainable. We cannot be sustainable if we run huge losses, if investments do not come, and if there is no ease of doing business. The investor’s first concern is payments. We have addressed this by enforcing the letter of credits before power dispatch.
The second is, suppose the coal price goes up and the project does not get a pass through for ages, the investor ends up making a loss. So, to ensure ease of doing business the pass through has to happen in a specific period. These will all be a part of the tariff policy.
To enforce fairness, the policy will not let the Discom to pass on the inefficiencies to consumers. If you are inefficient, you deal with it differently and the State government will have to give a grant. But, you cannot burden consumer with higher tariffs because of inefficiencies. The cross subsidy needs to come down.
Did you face opposition from the producers and distributors on the proposed changes in the tariff policy?
Discoms would find it uncomfortable, but they cannot argue against it. You have signed a contract for supply and you have to abide by it. More so because it is a monopoly and the consumer does not have a choice.
This is another thing which needs to be addressed — giving consumers a choice. There should be three-four suppliers serving the same area. The distribution system will remain with the Discom, but the supply business will have to be given to multiple licensees serving one area so that there is choice, similar to telecom services.
This means more privatisation…
I am talking about giving consumers a choice — having multiple licensees at the supply end.
Will a bidding mechanism also be worked out for this (more players on the supply side)? Can we hope for the change to come soon?
Yes, a bidding mechanism will be worked out and this is going to be the biggest change since 2003. It will be coming very soon. Things are going to be more transparent. Beginning from generation, you will have a right to set up a generating plant anywhere. It is unlicensed. We are also working with the Coal Ministry to establish a system for easy availability of fuel. And you can sell power openly through the nationwide grid.
We have given the States nearly ₹80,000 crore for improving their distribution system. This money is for buying transformers, setting up substations, buying poles, meters. We are also working on switching the entire system to pre-paid concept. This removes the hassle of billing and allows the poor be connected depending on convenience and purchasing power of the consumer. The Discom gets paid upfront so that there is no hassle of disconnecting for non-payments.
We have proposed three years for pre-paid metering. The regulations are being changed to provide for them.
At the generation end, the letter of credit will assure payment for power generation. Regarding pass through, the tariff policy will mandate a pass through within 45 days.
Some Discoms did not raise tariffs and filed appeals to frustrate the order, despite the regulator passing an order to allow the pass through. This will be addressed in the new Electricity Act.
How different will the refreshed Electricity Act be from the existing one? Will there be overlaps between the tariff policy and the Act?
We are bringing a new Electricity Act because there were about 75 amendments to the old Act. We decided that instead of many these many changes, we will come out with a new Act.
We are going to make regulators more autonomous so that the law is implemented. The main focus of the amended law would be enhancing the rights of all the stakeholders — which is the running theme. So, open access will become a right for consumers with a demand above 1 MW. There should be a choice for industrial consumers to buy power from X or from Y. We are again laying down time limits for adjudication so that applications are decided quickly. Appeals will be allowed but the appellant has to deposit 50 per cent so that frivolous appealing is stopped and pass through is ensured.
We are also going to give more teeth to the renewable purchase obligation. The focus on renewable energy will get legal support from the Act. It will also more explicitly provide a choice to consumers as far as suppliers are concerned.
There will be no overlaps with the tariff policy as we know what we have proposed in the policy.
Has the Andhra Pradesh experience impacted investments?
I think now Andhra Pradesh Chief Minister (Jagan Reddy) will have to back track because the courts have also ruled that what he has done is illegal. But, what happened did scare overseas investors. The damage has been done to an extent. We are clear that all contracts (Power Purchase Agreements) signed will be honoured. And now I don’t think any other State will do this because the courts have set it aside.
There have been complaints from some developers that they (Andhra Pradesh) are trying to reduce the quantum of power they are drawing. This is despite renewable energy being a must run. We have asked the Regional Load Dispatch Centre for the data.
Besides, we are now going to have a system where investments will come and competition will determine prices. The merit order dispatch has been in place, so if the cost of power is high, it will not get scheduled. This along with liberty to NTPC to supply power from more efficient generating stations will bring down the cost of power.
By and large States have been supporting these moves because they realise that they are also making money. The earlier systems and investments would get upgraded due to investments from the State and Centre, but they would eventually get run down again because the losses will continue.
This cycle has to be disrupted and we are coming out with a scheme where the investments are combined with the loss reduction trajectory. And if you don’t follow that trajectory, the investments will not be made by the government, loans from PFC and REC will also not be given.
We heard that UDAY 2 is also being planned? Did things go wrong in UDAY 1?
The scheme, which will enforce these investment regulations, is UDAY 2. It is in the final drafting stages. It’s a comprehensive scheme — UDAY 2 plus investments.
UDAY 1 had ambitious targets. When the scheme was launched, the overall losses in the country were 21-22 per cent (in financial year 2015-16, loss was at 20.81 per cent), today it’s around 18 per cent (18.19 per cent in 2018-19) on an average. So, it has made a huge contribution and we carry it forward from here.
How has the Saubhagya Scheme performed?
The power demand is 6.7 per cent higher in the first quarter of this year year-on-year. Saubhagya was a resounding success as no other country has had 26.5 million consumers connected in a span of 16 months. The International Energy Agency called this the largest ever expansion of consumer base in the world.
The good thing is we are adding renewables. Today our established capacity is 82,190 MW renewable energy capacity minus hydropower. And after taking into account under installation capacity, the total comes close to 112,000 MW. We’ve bid out almost 30,000 MW. If you add everything up, 157,000 MW is either installed or under installation out of our target of 175,000 MW.
Apart from the expansion of solar and wind, expansion of hydro power projects has also started.