Electricity Act

2003
Some Important Features
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Table of Contents
1. Background ................................................................................................................. 2
1.1 The Indian Electricity Act, 1910 ............................................................................. 2
1.2 The Electricity (Supply) Act, 1948 .......................................................................... 2
1.3 The Electricity Regulatory Commissions Act, 1998 ............................................... 3
2. Electricity Act 2003 ...................................................................................................... 3
2.1 Need for EA 2003 .................................................................................................. 3
3. Role of Government .................................................................................................... 4
4. Rural Electrification ..................................................................................................... 4
5. Generation .................................................................................................................. 4
6. Transmission ............................................................................................................... 5
7. Distribution .................................................................................................................. 6
8. Consumer Protection ................................................................................................... 6
9. Trading / Market Development .................................................................................... 7
10. Regulatory Commission / Appellate Tribunal ............................................................ 8
11. Tariff Principles.......................................................................................................... 8
12. CEA (Central Electricity Authority) ............................................................................. 9
13. Measures against Theft of Electricity ......................................................................... 9
14. Restructuring of SEBs ............................................................................................. 10








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The Electricity Act 2003 came into force on 10 June, 2003. It consists of 185 sections.
On 30 December, 2003, the Act was amended. The Electricity (Amendment) Act 2003
came into force on 27 January, 2004. The Act was again amended on 28 May, 2007
and came into force on 15 June, 2007.
1. Background
Before Electricity Act, 2003 came into force; there were three main erstwhile Acts that
regulated the electricity sector in India.
1. The Indian Electricity Act, 1910
2. The Electricity (Supply) Act, 1948
3. The Electricity Regulatory Commissions Act, 1998
1.1 The Indian Electricity Act, 1910
The Indian Electricity Act of 1910 provided basic framework for electric supply industry
in India. It emphasized on the growth of the sector through private licensees. Licenses
were issued by the State Governments. The provision for license was for supply of
electricity in a specified area. The act also laid legal framework for lying down of wires
and other works. Additionally, there were provisions laying down relationship between
licensee and consumer.
1.2 The Electricity (Supply) Act, 1948
The Electricity (Supply) Act of 1948 mandated creation of State Electricity Boards. At
that time, there was need for the States to step in (through SEBs) to extend
electrification all across the country.
Main amendments to the existing Acts were:
- Amendment in 1975 to enable generation in the Central sector
- Amendment to bring in commercial viability in the functioning of SEBs
- Section 59 was amended to make the earning of a minimum return of 3% on
fixed assets a statutory requirement (with effect from 1 April, 1985)
- Amendment in 1991 to open generation to private sector and establishment of
RLDCs
- Amendment in 1998 to provide for private sector participation in transmission,
and also provision relating to the Transmission Utilities.
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1.3 The Electricity Regulatory Commissions Act, 1998
The Electricity Regulatory Commissions Act of 1988 provided provision for setting up of
Central and State Electricity Regulatory Commissions with powers to determine tariffs.
Constitution of SERC was optional for the States. The government distanced itself from
tariff determination.
2. Electricity Act 2003
Electricity Act 2003 is an Act to consolidate the laws relating to generation,
transmission, distribution, trading and use of electricity and generally for taking
measures conducive to development of electricity industry, promoting competition
therein, protecting interest of consumers and supply of electricity to all areas,
rationalization of electricity tariff, ensuring transparent policies regarding subsidies,
promotion of efficient and environmentally benign policies constitution of Central
Electricity Authority, Regulatory Commissions and establishment of Appellate Tribunal.
2.1 Need for EA 2003
The Electricity Act 2003 was required to harmonize and rationalize the provisions in the
existing laws to
- Create competitive environment for benchmark competition which will result in
enhancing quality and reliability of service to consumer.
- Distance regulatory responsibilities of the Government.
- Reform legislation by several States separately.
- Obviate the need for individual States to enact their own reform laws.
- Introduce newer concepts like power trading, open access, and Appellate
Tribunal.
- Provide special provision for the rural areas.



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3. Role of Government
Section 3
Central Government has to prepare National Electricity Policy and Tariff Policy.
Section 4
Central Government has to notify a National Policy for rural areas permitting stand-
alone systems based on renewable and non-conventional energy sources in
consultation with States.
Section 5
Central Government has to formulate a National Policy in consultation with the
concerned State Governments for bulk purchase of power and management of local
distribution through Users Association, Cooperatives, Franchisees and Panchayat
Institutions.
4. Rural Electrification
Section 6
Appropriate Government has to endeavor to extend supply of electricity to all villages, or
hamlets.
Section 14
No requirement of license if a person intends to generate and distribute power in rural
area.
5. Generation
Section 7
Generation of electricity has been freed from licensing. Also, requirement of TEC for
non-hydro generation has been done away with.
Section 9
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Captive Generation is free from controls. Open access to captive generating plants is
subject to the availability of transmission facility.
Section 8
Clearance of CEA for hydro projects is required. It is necessary due to concern of dam
safety and inter-State issues.
Section 61
Generation from Non-Conventional Sources and Co-generation has to be promoted.
Regulatory Commissions may prescribe minimum percentage of purchase of power
from renewables.
6. Transmission
Section 38 & 39
There would be transmission utility at the Centre and in the States to undertake
planning & development of the transmission system.
Sections 26, 27, 31, 38 & 39
Load despatch is to be in the hands of a government company or organization. Load
despatch function is critical for grid stability and neutrality vis--vis generators and
distributors.
Sections 15 (5) (b)
Transmission companies has to be licensed by the Appropriate Commission after giving
due consideration to the views of the Transmission Utility.
Sections 27, 31, 38, 39 & 41
The Load Despatch Centre, Transmission Utility and Transmission Licensee are not
allowed to trade in power.
Sections 38 & 40
Open access to the transmission lines is to be provided to distribution licensees,
generating companies. This would generate competitive pressures and lead to gradual
cost reduction.
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7. Distribution
Sections 7 & 12
Distribution has to be licensed by SERCs. Distribution licensees are free to take up
generation and generating companies are free to take up distribution license. This
would facilitate private sector participation without government guarantee.
Section 62
Retail tariff is to be determined by the Regulatory Commission.
Section 55
Metering has been made mandatory.
Sections 19 & 24
There is provision for suspension/revocation of license by Regulatory Commission as it
is an essential service which cannot be allowed to collapse.
Section 42
Open access in distribution is to be allowed by SERC in phases.
In addition to the wheeling charges, there is provision for surcharge if open access is
allowed before elimination of cross subsidies. This is to take care of current level of
cross subsidy and licensees obligation to supply.
8. Consumer Protection
Section 43
Consumer has to be given electricity connection within stipulated time. There is penalty
in the event of failure to give connection.
Section 47
The distribution licensee has to pay interest on security deposit.
Section 50
Regulatory commission has to specify Electricity supply code to be followed by the
licensees.
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Section 56 (2)
No sum due from consumers recoverable after a period of two years unless the same
was shown recoverable continuously.
Section 42
Distribution licensee has to establish redressal forum for redressal of grievances of
consumers, to be appointed by every distribution licensee within six months.
Standards of performance
Licensees are required to meet standards of performance specified by the Regulatory
Commission.
Section 57
Licensee has to furnish to the Commission periodical information on standards of
performance.
Section 166 (5)
Appropriate government has to constitute a district level committee to coordinate &
review extension of electrification in each district and to review quality of power supply
and consumer satisfaction.
9. Trading / Market Development
Section 12
Power trading has been considered as distinct activity permitted with licensing.
Sections 79 (2) (b) & 86 (2) (b)
Regulatory Commission may fix ceiling on trading margin to avoid artificial price
volatility.
Section 66
The Regulatory Commission are to promote development of market including trading.
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10. Regulatory Commission /
Appellate Tribunal
Section 82
State Electricity Regulatory Commission (SERC) has to be constituted within six
months.
Section 83
There is provision for Joint Commission by more than one State/UT.
Section 110, 111 & 112
There is provision for constitution of Appellate Tribunal consisting of Chairman and
three Members. The functions of Appellate Tribunal are to hear appeals against the
orders of CERC/SERC, and also to exercise general supervision and control over the
Central/State Commissions.
Section 125
Appeal against the orders of Appellate Tribunal lies before the Supreme Court.
Appellate Tribunal is considered necessary to reduce litigation and delay in decisions
through High Court and provide technical expertise in decision on appeals.
11. Tariff Principles
Section 62
Regulatory Commission has to determine tariff for supply of electricity by generating
companies on long or medium term contracts.
However, if tariff is determined through competitive bidding or where consumers, on
being allowed open access enter into agreement with generators/traders, no tariff
fixation by regulatory commission.
Section 61 (g), (h)
Consumer tariff should progressively reduce cross subsidies and move towards actual
cost of supply.
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Section 65
State Government may provide subsidy in advance through the budget for specified
target groups if it requires the tariff to be lower than that determined by the Regulatory
Commission.
Section 61 (e), (f)
Regulatory Commissions may undertake regulation including determination of multi-
year tariff principles, which rewards efficiency and is based on commercial principles.
Section 62 (2)
Regulatory Commissions are required to look at the costs of generation, transmission
and distribution separately.
12. CEA (Central Electricity
Authority)
Section 70
CEA will continue as the main technical Advisor of the Government of India and State
Government with the responsibility of overall planning.
Section 73
CEA has to specify the technical standards for electrical plants and electrical lines. It is
the technical adviser to CERC as well as SERCs.
Section 53
CEA has to specify the safety standards.
13. Measures against Theft of
Electricity
Sections 126 & 135
The focus should be on revenue realization rather than criminal proceedings.
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Section 135
Penalties are linked to the connected load and quantum of energy and financial gain
involved in theft.
Section 152
There are provisions for compounding of offences.
Section 126
Assessment of electricity charges for unauthorized use of electricity by the assessing
officer designated by the State Government.

14. Restructuring of SEBs
Section 131
This section provides provision for transfer scheme to create one or more companies
from SEB.
Section 172
This section provides provision for continuance of State Electricity Boards. States are
given flexibility to adopt reform model, or path.
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