Class 13: Power Sector

13 Oct 2017

Dr. M.K. Satish

Problems in Indian Power Sector
 Power Surplus and also Power Deficit
 High cost of Power
 Rural India left out- Universal coverage is a concern
 Reducing tariff at point of sale. Huge financial burden on
existing power plants.
 Studies show that power sector NPA can reach up to 2
lakh crore
Power Sector Concerns
AT&C Losses
Ageing or
Energy
inadequate
Deficits
infrastructure

High cross
Fuel
subsidies in
shortages
tariff

Low PLF of
Rural
generating
electrification
assets

Per-capita Grid
consumption Indiscipline
Financial
losses of
utilities
Some Examples
 Jyotirgram Yojana
 Bidyut Sangha (Village Electricity Committee)-Odisha
 Complaint redressal
 Revenue collection
 Regularisation of customers
 Disconnections and reconnections
 Checking power theft
 Maintaining the system
Power Statistics

Annual electricity production is 1,031 billion units (BU) expected to touch 1,900 BU by 2020
 Institutional Framework
Regulator
Generation: Public,
Distribution: Public,
Private
Private, Bulk consumers
Transmission:
Public, Private

Power Flow Market

Money Flow
6
Regulation
Renewables installed
Evolution of Electricity Policies
 The Indian Electricity Act-1910: provided the basic framework for electric supply
industry in India. Also legal framework for laying down wires etc
 The Electricity (Supply) Act 1948: mandated creation of vertically integrated state
electricity boards and required that states extend electrification all across
 The Electricity Regulation Commissions (ERCs) Act 1998: Setting up of Central and
State ERCs and distancing the state government from the tariff determination
process
 Electricity Act 2003, consolidated the laws relating to the generation, transmission,
distribution, trade and use of electricity. This Act repealed all earlier electricity laws
 Electricity Act 2003 was the constitution of the CEA (Central Electricity
Authority), ERC (Electricity Regulatory Commission)s and APTEL (Appellate
Tribunal for Electricity)
Electricity Act 2003
 Electricity Act 2003 de-licensed the generation sector
 Setting up of State Regulatory Commissions are made mandatory.
 Commissions are given authority to regulate power purchase
 Section 63 of EA makes erstwhile MoU route with state utilities invalid

UTILITIES TO PROCURE POWER THROUGH COMPETITIVE BIDDING ROUTE

 National Tariff Policy mandates that the power procurement for future requirement
should be through a transparent competitive bidding mechanism
 Competitive bidding mechanism allows for the bidder to bid on a competitive
return basis and the process is transparent
 From 2011 all public sector projects would have to participate in competitive
bidding
 Institutional framework
Central State Government Private sector –
Government Indian and
International
-Ministry of Power, Ministry -Ministry of Energy, State Generation, Transmission,
of New & Renewable Renewable Energy Agency Distribution, Trading,
Energy -Corporations: Generation, Financing, Manufacturing,
- NITI Ayog, Central Transmission, Distribution Services
Electricity Authority, Bureau -State Load Dispatch Centre
of Energy Efficiency -State Regulatory
-Corporations: Generation, Commission
Transmission, Trading,
Financing, Manufacturing
-National and Regional Load

Dispatch
-Appellate Tribunal for

Electricity and Central

Electricity Regulatory
Commission
 Institutional framework
Legal provisions (Electricity Act 2003), Policy directions such as National Electricity and
Ministry of Power
Tariff Policy, Guidelines for competitive bidding, etc

National Electricity plan, monitoring of projects, maintaining data and statistics, demand
Central Electricity
forecast, feasibility analysis of Hydro projects, etc
Authority

Subject to provisions of act, can generate power based on contracts or independently.

Generation company
Needs to abide by Load Dispatch directions for scheduling its generation

Transmission
Builds and operates the transmission network and infrastructure
Company
Distributes electricity to consumers, in charge of maintaining and building distribution
Distribution company
network, metering, billing and collection from consumers

Statutory autonomous body entrusted with scheduling and accounting of power at state
Load Dispatch
level. Responsible for maintaining grid stability and discipline

Regulates all players in the sector, decides tariff, approves capital expenditure, monitors
Regulatory
supply and service quality and ensure implementation of various provisions of Electricity
Commission
Act 2003

Market Operator Electricity traders who buy & sell power; Electricity Exchanges
Electricity Act 2003
 Developers now have option to invest in mega power projects, facilitated by
government through a tariff based competitive bidding process
 Centre or state facilitates these projects
 Procurer are state utilities and location, technology and fuel is specified by the
procurer
 Tariff for 25 years are to be quoted in the the bid
 Selection is based on lowest tariff
Transmission and Distribution
Transmission and Distribution
TRANSMISSION
 Decision on transmission projects to be awarded through IPTC route decided by
empowered committee
 Formation of SPV, route survey and bid process management conducted by Bid
Process Coordinators-mainly REC and PFC
 Transfer of SPV to winning bidder on BOOM (Build, Own, Operate and Maintain)
basis
The Electricity (Amendment) Bill, 2014
The Electricity (Amendment) Bill, 2014
The Electricity Bill 2014-Obejctives
 Enhance efficiency and competition in distribution sector
 Strengthen grid security and safety
 Promote renewable and encourage open access
 Rationalize tariff
The Electricity (Amendment) Bill, 2014-Key
Features
The Electricity (Amendment) Bill, 2014-Key
Features
 The Bill amends the Electricity Act, 2003. It seeks to segregate the distribution network
business and the electricity supply business, and introduce multiple supply licensees in the
market
 The Bill introduces a supply licensee who will supply electricity to consumers. The distribution
licensee will maintain the distribution network and enable the supply of electricity for the
supply licensee
 The State Electricity Regulatory Commissions will grant supply licenses. Consumers can
choose to buy electricity from any of the supply licensees in a given area of supply
 If a supply licensee ceases to be a supply licensee, or is suspended, electricity will be supplied
by a provider of last resort (POLR). The POLR will be a supply licensee designated by the
State Electricity Regulatory Commission
 The Bill defines renewable energy and provides for a National Renewable Energy Policy. It
requires coal and lignite based thermal generators to produce 10% of thermal power installed
capacity as renewable energy
The Electricity (Amendment) Bill, 2014-Key
Issues
 The Bill requires the presence of a government company as a supply licensee in an area of
supply. This may affect competition. Currently, state distribution companies often keep tariffs
lower than the cost of electricity
 If this behaviour by a government owned supply licensee continues, it may drive out other
supply licensees. This could defeat the objective of increasing competition
 The Bill states that all revenue deficits in the electricity sector prior to the enforcement of
the Bill will be recovered
 The deficits were a result of several factors such as
 state distribution companies not revising tariffs in a timely manner
 an inefficient tariff structure and cross-subsidisation by high paying consumers
 high aggregate technical and commercial losses because of low investment, theft, pilferage, lack of
metering and poor billing system
 Becoming a provider of last resort (POLR) may have financial implications on a supply
licensee. However, the Bill does not envisage any financial support for these supply licensees
Ujwal DISCOM Assurance Yojana (UDAY)
 It is the financial turnaround and revival package for electricity distribution
companies of India (DISCOMs) with the intent to find a permanent solution to the
financial mess that the power distribution .
 The scheme comprises four initiatives
 improving operational efficiencies of discoms
 reduction of cost of power
 reduction in interest cost of discoms and enforcing financial discipline on discoms
 It allows state governments, which own the discoms, to take over 75 percent of their debt as of
September 30, 2015, and pay back lenders by selling bonds
 Discoms are expected to issue bonds for the remaining 25 percent of their debt
Rural Electrification
 Electricity Act (2003) mandated universal service obligation for the first time
 National Electricity Policy (2005)
 All HH to have access to electricity by 2010
 Per Capita availability of electricity to be increased to over 1000 kwh by 2012
 Minimum lifeline consumption of 1kwh/household/day to be made available as a merit good
 NEP identified Rural Electrification Corporation (REC) as the nodal agency
 NEP also provides for off-grid solutions to supply electricity to households in
remote locations
 The Rajiv Gandhi Gram Vidyutikaran Yojana (RGGVY) involves extending the
transmission grid to electrified villages, setting up of distribution infrastructure and
giving free connections to BPL Households
 2009 Remote Village Electrification (RVE) programme of Ministry of New and
Renewable Energy provides financial assistance for electrification of remote
locations through renewable energy
Thank You