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Electricity (Amendment) Bill 2022

Context:

Recently, The gazette notification on the Electricity (Amendment) Rules, 2022, came out. Kerala had fiercely objected to Rule 14.

Relevance:

GS II- Polity and Governance

Dimensions of the Article:

  1. Rule 14 of Electricity (Amendment) Rules, 2022
  2. What has been Kerala’s stand?
  3. What does the amendment Bill propose?
  4. What are the Protestor’s Arguments Against the Bill?

Rule 14 of Electricity (Amendment) Rules, 2022:

  • Rule 14 of the Rules requires the State electricity regulatory commission to specify a price adjustment formula for automatically passing on the costs through the consumer tariff on a monthly basis.
    • “Fuel and power purchase adjustment surcharges shall be calculated and billed to consumers, automatically, without going through the regulatory approval process, on a monthly basis, according to the formula, prescribed by the respective State Commission,’’.
What has been Kerala’s stand?
  • The State government has argued that giving Discoms the freedom to automatically pass on the aforementioned costs through the electricity bill endangers consumer interests.
  • The amendment spawns an “unstable pricing situation’’ in the power sector, akin to that of petrol and diesel prices.
  • Consumers would be subjected, quite unfairly, to frequent price fluctuations.
  • It further observed that the crucial role played by the State Electricity Commission in fixing the surcharge would get diluted.

What does the amendment Bill propose?

The Bill seeks to amend Electricity Act 2003:

  • For consumers, the Bill, has proposed to amend Sections 42 and 14 of the Electricity Act, thus, enabling competition in retail distribution of power by offering the customers the option to choose electricity suppliers, just like they can choose telephone or internet service providers.
  • The amended Section 14, the Bill says, will “facilitate the use of distribution networks by all licensees under provisions of non-discriminatory open access”, while Section 42 will be ameded to “facilitate non-discriminatory open access to the distribution network of a distribution licensee”.
  • The Bill, with the amendment of Section 62 of the Act, makes provision for “mandatory” fixing of minimum as well as maximum tariff ceilings by the “appropriate commission” to avoid predatory pricing by power distribution companies and to protect consumers.
  • Also, the amendment Bill has several provisions to ensure graded and timely tariff revisions that will help provide state power utilities enough cash to be able to make timely payments to power producers.
    • This move is aimed at addressing the recurrent problem of default by distribution companies in payment to generation companies.
  • The bill through amendments in Section 166 of the Act also seeks to strengthen payment security mechanisms and give more powers to regulators.

What are the Protestor’s Arguments Against the Bill?

  • The Constitution lists ‘Electricity’ as Item 38 of List III (Concurrent) of the Seventh Schedule, so both the Central and state governments have the power to make laws on this subject.
    • With the proposed amendments, the federal structure of Indian polity, a part of the ‘basic structure’ of the Constitution of India, is being violated.
  • Free power for farmers and Below Poverty Line population will go away eventually.
  • Only government discoms or distribution companies will have universal power supply obligations.
    • Therefore, it is likely that private licensees will prefer to supply the electricity in profit-making areas – to industrial and commercial consumers.
    • Once this happens, profit-making areas will be snatched from government discoms and they will become loss-making companies.

-Source: The Hindu


February 2023
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