Tuesday, December 16, 2014

New Electricity Act

The amendments to the Act are likely to change the business dynamics for distribution companies (discoms).

It will provide small consumers a choice of suppliers and allow distribution companies (discoms) to procure power from their own renewable energy plants to meet their renewable purchase obligation.

The Union Cabinet on Wednesday cleared changes in the Act. Union Power Minister Piyush Goyal earlier this week said the Bill would be tabled in Parliament soon.

Aimed at creating a competitive market for retail buyers, open access will allow consumers of less than one Mw to choose their supplier.

  • Open access for over 1 Mw allowed – enabling inter-state transmission from surplus to deficit points
  • Power supply business separate from setting infrastructure for supply – opens the market for ancillary business, increases competition
  • Choice to consumer to select his power supplier – market driven tariffs, better supply and open ground for competition
  • Time-bound distribution licence – pressure on discom to perform better
  • RGO along with RPO – promotion of clean energy and its adoption

In the Electricity Act-2003, consumers of more than one Mw can change their distribution company.  

Power generators, too, will be allowed to sell their surplus outside a state. “Opening the sector will make sure the supply of power is in line with market realities,” said an executive in a distribution company.

Currently, state governments can appeal to the regulator to stop such sales in extraordinary circumstances. Distribution companies in other states are unable to freely procure such power.

 “We end up scheduling costly power, which has pushed us to the wall. Banks have also withdrawn any support from the discoms,” said a senior executive with a Delhi-based private power distribution utility.

The distribution industry owes Rs 13,000 crore to power plants.

A big relief for the distribution sector is the separation of the content and carriage businesses. Building infrastructure for power supply and the supply of power will be two different business entities. Besides, any power supplier can use the infrastructure.

The bill also has an important insertion imposing a “duty to connect, supply to request”, where the last-mile supply will keep in mind the economics and viability.

“In most developed markets, the carriage business is controlled by the regulator and content, that is power supply, is market driven within a price band,” said the executive.

As a separate business, the onus of development of the network will rest with the carriage provider.

Distribution companies from across the country have written to the ministry of power seeking a clear demarcation of duties and responsibilities for content and carriage.

The distribution companies, which have repeatedly pointed to their financial stress as the reason for not complying with the renewable purchase obligation, have now been asked to generate renewable power to meet their targets.

The Act proposes a National Renewable Energy Policy and a new Renewable Generation Obligation.

The head of oneof the  distribution companies said the sentiment among Indian consumers was that power should be cheap.

“All consumers think they are burdened with costly power, whereas the discoms struggle with recovering their cost. In a situation like this, an unbundled distribution sector helps all,” said the executive.

Source: http://www.business-standard.com/article/economy-policy/next-gen-power-distribution-era-to-emerge-with-new-electricity-act-114121200892_1.html

No comments: