1. 5/22/2003Luthra & Luthra, Law offices1 ELECTRICITY BILL, 2003 Presented by Mohit Saraf Partner Luthra & Luthra Law Offices May 22, 2003

2. 5/22/2003Luthra & Luthra, Law offices2 Background Power Sector Reform began 12 years ago –Generation “Centric” –Exclusive off-taker being bankrupt SEBs – Lenders Centric –Distribution Centric –Piece-meal legislation –New Comprehensive legislation : Electricity Bill, 2003 –Better late than never!

3. 5/22/2003Luthra & Luthra, Law offices3 Highlights of Electricity Bill, 2003 Generation – Delicense Competition and choice First time Recognition of Non-discriminatory Open Access Compulsory Metering Independent Regulatory Body Commission has power, both for granting license and tariff fixation. Transco cannot engage in Trading Excessive Tariff Regulation

4. 5/22/2003Luthra & Luthra, Law offices4 Highlights of Electricity Bill, 2003 (cont’d.) Special Courts – Theft/Consumer Reorganize Electricity Industry on modern principles Setting up of Standards of performance Consumer Protection CEA Role Streamline

5. 5/22/2003Luthra & Luthra, Law offices5 Open Access Competition & Choice Non-discriminatory Open Access to the wires network (Gas) Principle: Allow producer to sell directly to Bulk Consumers by wheeling power through the existing transmission lines on payment of surcharge Recognition of Open Access as “panacea” and “key” to power reforms: Standing Committee

6. 5/22/2003Luthra & Luthra, Law offices6 Open Access (cont’d.) Request for Open Access within a “definite” and “mandated” time frame not considered. Open Access at the sole discretion of Regulatory Commissions –Is it excessive & unguided delegation? –Success would depend on the “independence” and “maturity” of Regulatory Commission –State is an interested Party

7. 5/22/2003Luthra & Luthra, Law offices7 Open Access (cont’d.) Absence of Open Access means limited private investment in capacity addition. Absence of Open Access also means perpetuating monopolies; leading to high tariffs and not so improved service for consumers.

8. 5/22/2003Luthra & Luthra, Law offices8 Regulatory Commissions Timing of Open Access: Regulatory Commission to decide The bar on re-employment of Commission members by the same State Government has been removed.

9. 5/22/2003Luthra & Luthra, Law offices9 Regulatory Commissions (cont’d.) Removal of the Commission member by the Government upon enquiry by a retired judge Vs. removal by the Governor/ president, upon enquiry by HC/SC In light of these provision, can Regulatory Commission work independent of Government?

10. 5/22/2003Luthra & Luthra, Law offices10 Appellate Tribunal All Commissions will be placed under the Administrative Control of a retired judge (chairperson of Appellate Tribunal) The Centre to appoint the retired judge for a term of 3 years - he can be reappointed if the Centre so wishes – thus amenable to pressure Infringes the independence of the Regulatory Commission and bring them to a subordinate position

11. 5/22/2003Luthra & Luthra, Law offices11 Cross Ownership Vs. Unbundling Despite the Committee’s recommendations, allows private companies to own transmission along with generation and distribution – the reverse of unbundling in the public sector Can this ensure “non-discriminatory Open Access”?

12. 5/22/2003Luthra & Luthra, Law offices12 Second License Competition & Choice Empowers the Centre to impose restrictions (like networth, capital adequacy) on grant of a second distribution license 12 existing Laws/Bills (Electricity Act, 1910, 8 State Reform Acts and 3 Bills) allow multiple licenses If the said criteria are met, license cannot be denied on the ground that there already exist a licensee in the same area for the same purpose

13. 5/22/2003Luthra & Luthra, Law offices13 Second License (cont’d.) BSES & TEL supply to Bulk Consumers in the same area in Mumbai Grant of Second License for Transmission have been omitted Telecom Experience

14. 5/22/2003Luthra & Luthra, Law offices14 Will SEBs/Discoms survive the Electricity Bill? Industrial unit and other bulk consumers will be able to form association and acquire shares in a generating company, thereby securing the right to Open Access without payment of surcharge in lieu of cross subsidy High chance of migration of HT Consumers of SEB/Discom Will deprive SEBs/Discoms of Best Customers who presently cross-subsidise Definitely, it may put burden on Consumers. But surely make Industry more competitive

15. 5/22/2003Luthra & Luthra, Law offices15 Superseding State Laws 8 States are implementing reforms as per their respective Reforms Acts; 3 more ready to enact their laws The State laws were enacted during the past five years with Centre’s concurrence State laws should not be superseded- Standing Committee Is there a justification? Uniformity!

16. 5/22/2003Luthra & Luthra, Law offices16 Conclusion Beginning of long awaited Step Real success would depend on introduction of Open Access Leading to competition & choice Otherwise private monopolies may perpetuate and consumer interest be compromised. Success of Bill depends on “maturity” and “independence” of Regulatory Commission.