Home Electricity Act 2003 Electricity regulatory commissions in India : nature, scope, and functions

Electricity Act 2003

Electricity regulatory commissions in India : nature, scope, and functions

December 19, 2020

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This article is written by Kritika Garg from National Law University, Odisha. This is an exhaustive article which deals with the electricity regulatory commissions in India: nature, scope, and functions.

Table of Contents

Introduction

The increased demand for electricity due to the economic liberalisation brought about certain fundamental issues to the power sector namely, lack of rational retail tariffs, high level of cross-subsidies, poor planning and operation, inadequate capacity, neglect of the consumer, limited involvement of private sector skills and resources and the absence of an independent regulatory authority. This not only placed the need for some urgent reforms in the power sector but also pointed towards the lack of an independent regulatory authority in the sector. Therefore, the Government of India, after discussing the whole gamut of issues in the power sector, adopted the Common Minimum National Action Plan for Power (CMNPP) which further provided for the establishment of independent regulatory authorities at both the Centre (Central Central Electricity Regulatory Commission) and the State level (State Electricity Regulatory Commissions). For the purpose of establishment of the commissions, the Central Government enacted the Electricity Regulatory Commission Ac, 1998 which was further replaced by the Electricity Act 2003 for bringing transformation in the power sector of India.

This article discusses the nature, functions, and scope of the Central Electricity Regulation Commission established for transforming the power sector and how beneficial the commission has proved to be for both the development sector as well as the customers.

History

For the purpose of bringing reform in the electricity sector nationwide, the Central Government enacted the Electricity Regulatory Commission Act in July 1998. The Act mandated the constitution of the Central Electricity Regulation Commission (CERC) for the purpose of regulating the tariff of power generating companies owned or controlled by the Central Government and other companies engaged in power generation along with interstate energy transmission. Additionally, the act provided for the establishment of the State Electricity Regulatory Commission (SERC) for states to set tariffs without requiring any separate laws.

Since 2003 the previous legislation governing the power sector in India has been replaced by the Electricity Act 2003 for the purpose of bringing transformation in the power sector of India. The CERC and the SERC are now governed as per the Electricity Act of 2003.

Central Electricity Regulatory Commission

Central Electricity Regulatory Commission (CERC) is a statutory body constituted on 24th July 1998 under the Ministry of Power’s Electricity Regulatory Commissions Act, 1998. The commission which was established and incorporated under Section 3 of the Electricity Regulatory Commission Act 1998 is now guided by Section 76 of the Electricity Act 2003. Enacted for the purpose of rationalization of electricity tariffs, formulation of transparent policies regarding subsidies, promotion of efficient and environmentally benign policies, and for matters connected to Electricity Tariff regulation, CERC functions with quasi-judicial status under the Electricity Act 2003.

Members and their qualifications

As per Section 76(5) of the Electricity Act 2003, the CERC shall comprise a chairperson and three other members who shall be appointed by the Central Government on the recommendation of the Selection Committee. The chairperson of CERC is an ex-officio chairperson as he is a member as well. The member and the chairperson shall hold the office for 5 years or till the age of 65 years, whichever is earlier.

For being a chairperson and a member of CERC, there are certain qualifications that are required to be fulfilled as per Section 77 of the Electricity Act 2003. They should have adequate knowledge with experience, or capacity to deal with issues relating to power, finance, commerce, engineering, law, or management. The members shall be appointed as follows:

One person with qualifications and experience in the field of finance;
One person with qualifications and experience in the field of engineering along with specialization in the generation, transmission, or distribution of electricity.
Two persons with qualifications and experience in the field of law, economics, commerce, or management.

The person who is, or has been a Supreme Court judge or the Chief Justice of any High Court shall be appointed as the Chairperson of the CERC.

Further, there is a commission staff which assists the members of CERC in a certain manner:

Scrutinizing and analyzing the petitions, rejoinders, and replies of the respondent;
Preparing briefs of hearing and draft orders;
Assisting the members in technical, legal, and financial aspects of the petitions;
Assisting the commission in adjudicating upon the arbitration matters;
Checking the calculation of tariff components for determining tariffs of various petitions.

Mission and objective of CERC

As per the mission statement, the CERC intends to increase the efficiency and economy of the power market, promote competition and investment in the power market, improve the quality of power supply and advise the government for removing barriers to entry in the market in order to abridge the gap between demand and supply of power. Thus, in order to attain these objectives, the CERC aims to:

Improve the functioning of the transmission systems through the Indian Electricity Grid Code, Availability Based Tariff, etc.
Improve the efficiency of the tariff mechanism.
Facilitate inter-state transmission of power.
Enhance the availability of information to the shareholders.
Upgrade the technological changes in the power plants.
Advise the government on the removal of barriers to entry and exit of capital in the market.

Nature of CERC

The CERC functions with a quasi-judicial status with powers similar to the powers of a Civil Court for the purpose of holding any inquiry or proceedings under the Electricity Act 2003. Such powers are:

To summon and enforce the attendance of any witness;
To examine any witness under the oath;
To discover and produce any document or object which is producible as evidence;
To receive evidence on affidavits;
To requisite any public record;
To examine the witnesses;
To review its directions, orders, and decisions.

Functions of CERC

The CERC has been entrusted with certain functions to perform by the Electricity Act, 2003 under Section 79. While Section 79(1) of the Act provides for mandatory functions of the CERC, Section 79(2) lays down the advisory functions. These functions are as follows:

Mandatory functions

Regulating tariffs of power generating companies owned or controlled by the Central Government;
Regulating tariffs of companies engaged in power generation along with the interstate transmission of power;
Regulating interstate power transmission and fixation of interstate trading margin, if required;
Determining tariffs for interstate transmission of power;
Issuing licenses for people to act as an electricity trader for interstate operation;
Availing information to the stakeholders;
Speedy Adjudication of disputes involving the power generating companies or transmission licensees;
Improving the operation of the regional transmission system by specifying the grid code as per the grid standards;
Specifying standards regarding the reliability, and continuity of services by the licensees.
Performing any other function that may be assigned to the commission under the act.

Advisory functions

To formulate National Electricity Policy;
To formulate National Tariff Policy;
To promote investment in the electricity industry;
To enhance the efficiency of the electricity industry;
To improve the economy of the electricity industry;
To perform any other function being assigned by the Central Government.

Further, as per Section 79(3) of the Electricity Act 2003, the commission has to ensure transparency while exercising its powers and discharging its functions. The Commission is guided by the National Electricity Policy, National Electricity Plan, and tariff policy published under Section 3 for the purpose of discharging its functions.

Benefits of CERC

Development sector

Development sectors receive certain benefits such as return on equity, incentives on completion of projects on time, incentives based on performance, etc with regards to tariff regulation.
CERC has issued guidelines for the establishment of power exchanges like Indian Energy Exchange Limited (IEX), Power Exchange India Limited (PXIL) under its short term transactions which are contributing to the market development.
CERC has facilitated open access to trading in the inter-state transmission which encourages competition in the power market.

Benefits to the customers

CERC provides open access to customers by enabling them to select their own suppliers.
CERC has provided a more stable and secure grid to the customers by enforcing strict laws in case of violation of the grid policies.
The new tariff policies have also proved to be beneficial to the customers since there have been few changes in the provisions of the tax consideration and the tax burden does not exist anymore.
The initiatives of the CERC have enhanced the efficiency of the power market and improvements are made periodically to enhance the benefits to the customers.

Other power sector bodies

Appellate Tribunal

The Central Government established an Appellate Tribunal for Electricity for those who are not satisfied with the CERC or SERC. The tribunal is empowered to overrule or amend the order passed by the CERC or SERC provided the aggrieved person approaches the tribunal within 45 days from the issue date of the order.

Central Electricity Advisor

Central Electricity Advisory (CEA) is a statutory body established under Section 3(1) of the Electricity Supply Act, 1948. However, with the introduction of the Electricity Act, 2003, the CEA is now dealt with under Section 70(1) of the Electricity Act, 2003. The CEA advises the central government, state governments, and the regulatory commissions regarding the technical matters pertaining to the generation, transmission, and distribution of electricity.

Since 1st April 1999, the task of regulating power tariffs of centrally owned companies, inter-state generating companies and the setting of inter-state transmission tariffs has been transferred from CEA to the CERC.

Since then, the CEA has two main tasks to perform:

Planning Regulation: The CEA regulates the demand and supply gap of power.
Construction Regulation: The CEA regulates the construction of thermal, hydro, and gas-based thermal power plants and systems.

Whereas, the task of tariff regulation has completely been transferred to the CERC. Further, CEA also plays a major role in the formulation of any National Electricity policy since it is done only after proper consultation of the regulating bodies of the country namely, CERC, CEA, and the state governments.

State Electricity Regulatory Commission

SERC is one of the electricity regulators of the country operating at the state level. The main function of SERC includes:

Determination of the retail tariffs to be charged from the customers;
Regulation of the intrastate transmission of power;
Setting standards for the quality, continuity, and reliability of services for the electricity industries.

Conclusion

From formulating policies for tariff regulation to handling various petitions filed against any matter pertaining to the power market, CERC has become the regulatory body of the power sector of India. The CERC has contributed to the process of making the power sector more competitive, efficient, transparent, and consumer-friendly by introducing such procedures of tariff regulations which are not only beneficial to the supplier but also to the customers. The commission has passed certain regulations that have provided a legal framework for better functioning of the industry. The commission has also enhanced the competition in the market by advising the government on the operationalization of open access in the market and other activities pertaining to the other forums of the power sector.

References

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