THE ELECTRICITY ACT 2003

(w.e.f. June 10, 2003)

(Except Section 121. But subsequently this section was
passed in the amended form on 31.12.2003)

BY
Er.K.C.Naikwadi
Managing Director
GESCOM, Gulbarga 1
 SECTION 121

“ The Chairperson of the Appellate Tribunal shall exercise

general power of super-intendance and control over
Appropriate Commission”

AMENDED SECTION 121

The Appellate Tribunal, may after hearing the Appropriate

Commission or other interested party if any, from time to
time, issue such orders, instructions or directions as it may
deem fit to any Appropriate Commission for the performance
of its statutory functions under this Act.

2
 Objectives of EA 2003
• To consolidate laws relating to generation ,
transmission ,distribution, trading and use of
electricity and development of electricity
industry.
• To promote competition, protect interest of
consumers and supply of electricity to all areas.
• Rationalisation of electricity tariff.
• Transparent policies regarding subsidies.
• To establish Central Electricity Authority,
Regulatory Commissions.
• To establish Appellate Tribunal.
Applicable to Whole of India except the state of Jammu & Kashmir 3
 E A 2003
• This Act repeals the following Acts
– The Indian Electricity Act 1910
– ( Welcome Private Sector. Licensing Act )
– The Electricity Supply Act 1948
– ( Goodbye Private Sector. Welcome Public sector. Welcome
Section – 59 )
– Electricity Regulatory Commissions Act 1998

E A 2003 comprises of
– 18 Parts
– 185 Sections
( Welcome Private Sector )
4
 Section – 59 of E. S. Act 1948

• The SEB shall carry on its operations and

adjust its tariff so as to ensure that total
revenues after meeting all expenses shall
leave such surplus as is not less than
three percent or such higher percentage
( on the value of fixed assets of SEB in
service at the beginning of each year) as
the State Govt may specify.
• Refer Section 65 of EA 2003.
5
Electricity Act 2003: New Provisions
• De-licensing of Generation except Hydro-
Generation (Section 7)
• Liberalization of Captive Power Policy
(Section 9)
• Open Access to Transmission and Distribution
Network (Sec 38, 39)
• Power Trading (Sec .12)
• Constitution of Appellate Tribunal (Sec.110)
6
 Electricity Act 2003: New Provisions
... 2
• Stand alone system for Rural Areas
• Tariff Rationalization
• Central & State Regulatory Commissions
• Compulsory Metering
• Stringent Penalties for Theft
• Privatization
These are explained in detail in Subsequent slides.

7
GoI: To Do in 6 Months

• National Electricity Policy (NEP)

• National Tariff Policy
• Rural Electrification Policy
• Parallel Distribution License Policy
• CEA to prepare National Electricity Plan in
accordance with NEP.
- once in 5 years.
8
 E A 2003
National Electricity Policy
(Announced during Feb 2005)

• To add one lakh MW by 2012.

• Create adequate reserve capacity.
• Electricity to all homes.
• Bring loss levels to international
standards by 2012.
• SCADA for all stations.
• Remove all subsidies.
• To create Rural Distribution Back Bone.
9
GENERATION OF ELECTRICITY
• Generation is de-licensed except Hydro (Sec.7)
• Captive generation is freely permitted (Sec.9)
• Generating Co. can supply to any licensee
through SERC (Sec.9).Separate license for
trading is not necessary.Generating Co. can
supply to the trader through SERC.
• Generating company can supply to any
consumer without SERC(sec.10).
• Generating Co. is free to take up distribution
through SERC.(Transmission company cannot
take up distribution).
• Captive Generating Co. will have right to open
access(Sec.9(2)) on payment of wheeling
charges. 10
Captive Generation/Consumption
• A power plant set up by any person to generate
electricity primarily for his own use and includes
a power plant set up by any co-operative society
or association of persons for generating
electricity primarily for use of members of such
co-operative society or association (Sec 2(8) )
• Any person can construct and operate Captive
Generating plants and dedicated transmission
lines (Sec.9)
• Right to open access of transmission, subject to
availability as per CTU or STU. If any disputes, to
be resolved by CERC/SERC/JERC
• Captive Generating company shall not pay
surcharge for the power for own use.
11
 Licensing

GENERATION
• Licence not required for thermal Generation.CEA
clearance required for Hydel Generation. Generation
companies do not need license for trading
TRANSMISSION
• Licence required for transmission.
DISTRIBUTION
• Licence required for Distribution. Distribution licensee
does not need license for trading.

12
Licensing ….2
TRADING
• Licence required for trading. Traders are not
required to own Generation or Transmission or
Distribution assets.
GENERAL
• SERC can grant licence to 2 or more persons in
the same area. In such a case SERC will fix only
maximum ceiling of tariff for retail sale of
electricity.
• Licence for a period of 25 years.
13
REVOCATION OF LICENCE
• Appropriate commission to give Three
months notice before revocation.
• Licensee may sell his utility to any person
who is found eligible by the commission for
grant of license . OR
• Commission shall invite applications for
acquiring the utility of the licensee on the
basis of highest and best price.
• As an interim arrangement commission may
appoint an Administrator.

14
Transmission of Electricity

• Load Dispatch Centre CANNOT do Trading (Sec 31)

• CTU CANNOT engage in Generation or Trading (Sec
38)
• STU CANNOT engage in Trading (Sec 39)
• CTU and STU shall provide Open Access to Licensee
on payment of Transmission Charges (Sec 38 & 39)
• CTU and STU shall provide Open Access to any
consumer on payment of Transmission Charges and
Cross Subsidy Surcharge (Sec 38 & 39)

15
Transmission of Electricity …..2

• Planning and Co-ordination relating to

intra-State transmission shall be done by
STU (Sec.39).

• Transmission system will continue to be

Govt. owned , although provision is made
for licensed private transmission.
16
Open Access & Market Development
• CTU or STU or Transmission licensees should
allow non - discriminatory open access to any
generator or any licensee for wheeling power
on payment of
– Transmission Charges ONLY for Captive
Generators/ Captive Consumers
– Transmission Charges and CROSS-SUBSIDY
SURCHARGE, as specified by CERC (in case of
CTU) and SERC (in case of STU)

17
Open Access & Market Development
….2

• Cross-Subsidy Surcharge to meet

the current level of Cross-Subsidy
• Cross-Subsidy Surcharge will be
reduced and eliminated over time
as specified by CERC

18
Distribution Open Access
• SERC shall introduce open access in such
phases and subject to such conditions within 5
year from the appointed date by GoI ( Sec.42)

• SERC shall permit a consumer or class of

consumers to receive supply from a person other
than Distribution licensee, provided such
consumers pay an Additional Surcharge over and
above the Wheeling Charge to meet the fixed cost
of the licensee arising out of its Supply
Obligation.

19
 Karnataka – Open Access
(KERC Regulation 2004)
• Open access shall be allowed to consumers by
transmission licensee and / or distribution licensee in the
following phases.

Phase 1 - All HT Installations - From 10-

6-2005
with CD of 15MW & above
with 66 KV & above.
Phase 2 - All HT Installations - From 1-04-2006
with CD of 5MW & above
with 33 KV & above.

20
 Karnataka – Open Access
KERC Regulation 2004) …… 2

Phase 3 - All HT Installations - From 1-

04-2007
with CD of 3MW & above
with 11 KV & above.

Phase 4 - All HT Installations - From 10-

6-2008
with CD of 1MW & above

21
 Karnataka – Open Access
KERC Regulation 2004) …… 3
• Categorization of Open access:
Short term open access - For less than 5
years.
Long term open access - For equal to or
more than 5 years.
• Allotment of Priority shall be decided on following
criteria.
First - Distribution Licensee for Long term.
Next - Open access Customers for Long term.
Next - Distribution Licensee for Short term.
Next - Open access Customers for Short term.
22
 Karnataka – Open Access
KERC Regulation 2004) …… 4

• For Open access Nodal Agencies are as under:

For Long term open access - STU
For other cases - DISCOMS.
• Open access charges - as determined by
commission by
Postage stamp method

23
 Karnataka – Open Access
(KERC Regulation 2004) …… 5

• Charges required for strengthening the system

shall be borne by open access customer.
• In case of curtailment - Short term First,
Next Long term.
• SLDC will give open access information on its
website.
• Disputes Resolution by SLDC. Appeal can be made
to the Commission.
• Energy Meters shall be installed by open access
customers.
• Nodal Agency shall collect and disburse charges.
• Power to amend Regulations, rests with the
24
Commission.
DISTRIBUTION OF ELECTRICITY

• SERC to decide Wheeling Charges (Sec 42(2))

• Distribution licensee shall give power supply to an
applicant within 1 month. In case of extension of
Distribution lines, within 6 months. If the Company
fails to supply within the specified period, Penalty of
Rs 1,000 per day (Sec 43 (3))
• Distribution licensee shall pay interest on Security
Deposit of the Consumers
• Distribution licensee may engage in other
businesses(e.g.,Generation)
25
DISTRIBUTION OF ELECTRICITY ….2

• SERC shall publish Electricity supply code.

• Distribution licensee shall establish within 6
months a Forrum for redressal of grievences of
consumers, if they are not satisfied they can
approach ombuds man.
• SERC shall appoint OMBUDSMAN to redress
Consumer Grievances(Sec 42 (6))
• No licensee shall supply electricity without
meter after the expiry of 2 years. However
commission may extend his period for a class or
classes of persons. 26
 Electricity Trading
• Electricity Trading is indicated as a distinct activity
( S. 12(C) ). Licence from Appropriate Commission is
required for trading.
• Appropriate Commission may specify the technical
requirements , Capital adequacy and credit worthiness
for being an Electricity trader ( S. 52 (1) ).
• Every Electricity trader shall discharge such duties, in
relation to supply and trading in Electricity, as may be
specified by Appropriate Commission.(S.52(2) ).
______________________________________________
Following Companies have applied to CERC for
trading Licence.
1. Reliance Industries. 4. Koila Energy
2. Essar Energy 5. Trans Power Ltd.
27
3. Power Trading Corporation. 6. Adani Group.
 Tariff
• GoI will publish National Tariff Policy (Sec 3)
• Multi-Year Tariff Principles are approved (Sec 61)
• Existing Tariff will continue for 1 year from appointed
date (Sec 61)
• SERC shall be guided by principles and methodologies
specified by CERC for Tariff determination for Generating
Companies and Transmission licensees (Sec 61(a))
• Tariff amendment not more than once in a year.
• In case of distribution of electricity in the same area by
two or more licensees , SERC shall fix only maximum
ceiling of tariff for retail Sale of electricity.
28
 Tariff Determination
• SERCs will be guided by the following major
principles, while determining Tariffs (Sec. 61 to
66)
– National Electricity Policy & Plan
– Principles & methodologies to be specified by
CERC
– Multi-Year Tariff Principles
– Tariffs progressively reflecting Cost of Supply
and also, reducing & eliminating Cross-
Subsidies within the period to be specified by
SERC

29
Tariff Determination ….3

• However, if tariffs are determined through a

transparent process of BIDDING in accordance
with GoI Guidelines, SERC/CERC shall adopt
the same, overruling the above mentioned
sections

• In case of inter - state supply/wheeling of

power, the SERC under whose jurisdiction the
supply licensee is situated will determine the
tariff 30
Subsidy Administration
• State Government has to pay in advance
the subsidy amount and in the manner as
specified by SERC to the affected licensee,
in case the State Government requires the
licensee to subsidize the tariffs determined
by the State Commission. (Sec.65)
– In case of payment failure, the Tariffs
fixed by the SERC will be applicable

31
CENTRAL ELECTRICITY AUTHORITY

• CEA shall consist of not more than

14 members including chairperson
of whom not more than Eight will
be full time members(See-70(3).

• Functions and Duties ( See – 73).

32
 CERC

• Existing CERC to continue (Sec 76). One

chair person and three members.
• Selection Committee to recommend
selection of members
• Functions:
– Tariff determination, Grid Code, Trading
Margin
– Advise GoI on Policies and promotion of
33
Competition etc
CERC …..2

• CERC fund will be created to receive

funds and incur expenditure

• On Policy matters, GoI decision is

FINAL 34
SERC

• Every State will constitute SERC

within 6 months from appointed date
(Sec 82)
• SERC shall consist of not more than
3 Members
• Selection Committee will recommend
for selection of Members
35
SERC …..2

• Functions (Sec. 86)

– To determine Tariff
– Open Access within 1 year
– State Grid Code
– Advise State Govt on Promotion of
Competition, Investment

36
SERC ….3

• SERC may establish Advisory Committee

• Chairperson & Members to hold office for
5 years
• Not Eligible for re-appointment in the
same capacity
• Age limit: 65 years
• SERC fund will be created to receive funds
and meet expenditures
• On Policy Matters, State Government
Decision is FINAL
37
Re-organization of SEBs
• SEBs will continue as Transmission Utility
and a distribution licensee for one year
(S.172)
• Period of one year may be extended as may
be mutually decided by the Central Govt. and
State Govt. ( S.172 (a) ).
• In case of re-organization
– First Transfer from SEB to State Govt
– Second Transfer from State Govt to Government
Compan(y)/(ies)
• Value of assets to be transferred will be
based on revenue potential of such assets 38
Re-organization of SEBs …..2
• Proceeds of Sale or transfer shall be
utilized in the priority of:
– To pay dues (including retirement benefits) to
officers and employees
– To pay debts and other liabilities
• Upon transfer, service conditions shall not
in any way be less favourable
• Transferred employees shall not be
entitled to any compensation save as
provided in transfer scheme
39
Consumers’ Non-Payment, Disconnection, Recovery
• Licensees cannot supply electricity to consumers
without installation of correct meters, after expiry of
2 years from the appointed date of GoI or after expiry of
such extended period as may be decided by SERC
(Sec.55)
• Licensee can disconnect electrical connections on non-
payment of charges, by providing 15 days notice.
– However, supply cannot be cut off if he pays,
under protest, the amount equal to sum
claimed or electricity charges calculated on
the basis of average charge paid by him for
the past 6 months, whichever is less, pending
disposal of dispute (Sec.56). 40
Consumers’ Non-Payment, Disconnection,
Recovery …..2

• Not withstanding anything contained in

any law, No dues can be recoverable
from consumers after 2 years from the
due date, unless
– The Sum is shown continuously as
recoverable arrears (AND)
– Licensee shall not cut off the supply of
electricity (Sec. 56).

41
Anti-Theft: Investigation and Enforcement

• Assessing Officer: Officer of GoK or

Board or licensee, designated by GoK
• On inspection of the premises, if the
Assessing officer comes to conclusion
that there is unauthorised
use of electricity, then
– Provisional assessment of use of
electricity by the officer
• Domestic & Agriculture: 3 months
preceding the date of inspection
42
Anti-Theft: Investigation and Enforcement
…..2

• Other Categories: 6 months preceding the

date of inspection
• Charges: 1.5 times of the applicable tariffs
Appeal before the assessing officer
– Final Assessment Order by the officer after
hearing
– Appeal before Appellate Authority as may be
described along with 1/3rd of assessed amount
deposited in cash or bank draft
– Order of Appellate authority is FINAL
– Default in payment attracts 16% p.a. Half-
yearly compounded
43
Offences & Penalties

• Theft of Electricity is punishable as

under:
– For less than 10 kW
• On first conviction 3 times the financial gain
• On second and subsequent convictions 6
times the financial gain
– For more than 10 kW
• On first conviction 3 times the financial gain
• On second and subsequent convictions 6
times the financial gain and imprisonment
upto 6 months
44
Offences & Penalties …..2
• Compounding of offences per kW(LT) / per kVA (HT)
– Industrial service Rs 20,000
– Commercial ServiceRs 10,000
– Agriculture Service Rs 2,000
– Other Services Rs 4,000
• On payment of Compounded money, person in
custody shall be set at liberty and no proceedings
shall be continued Compounding shall be allowed
only once for any person or consumers
• No Civil Court shall have jurisdiction to entertain any
suit in such matters
• Whoever abets an offence is also punishable
45
Offences & Penalties …..3

• Section 126 : Unauthorized use of Power.

Assessment and recovery. 3
months assessment for
domestic and agriculture
installations and 6 months
assessment for others.
Assessment of one and half
times the tariff.
( Explaination given is not
correct).

46
Offences & Penalties …..4

• Section 151 : Engineer can lodge a

complaint in the
Court. Police cannot lodge
a theft – complaint in the
court.
• Section 135 : Theft of Electricity.
Cognizable offence
punishable with
imprisonment or fine or
both.

47
Appellate Tribunal

• To hear appeals against the Orders

of Appropriate Commissions(Sec
110)
• Appeal within 45 days (Sec 111(2))
• Tribunal shall consist of a Chairman
& 3 Other Members (S 112)

48
Appellate Tribunal …..2

• Term of Office:
– 3 Years
– Eligible for re-appointment
– Age limit
• 70 years for Chairman
• 65 years for Members
• Appeal to Supreme Court in 60 days

49
 Central Electricity Authority

• CEA shall prepare National Electricity Plan (Sec 3)

• CEA shall publish the draft plan and invite
suggestions from licensees, generating companies
and Public (Sec 3)
• CEA shall consist of not more than 14 members
including Chairperson of whom not more than 8 shall
be full time members (Sec 70(3))
• Functioning of CEA – Technical Standards, Grid Code
Standards etc (Sec 73)

50
Miscellaneous Provisions
• GoI shall constitute
– Central Co-ordination Forum for smooth and
co-ordinated development of power system in
country
• CERC Chairperson & Members, CEA
Chairperson, Representatives of
Generating, Transmission Companies
– Forum of Regulators
• CERC Chairperson and Chairpersons of all
SERCs/JERCsState Government shall
constitute
51
Miscellaneous Provisions …..2
– State Co-ordination Forum for smooth and co-
ordinated development of power system in
country
• SERC Chairperson & Members, Representatives
of Generating, Transmission Companies
– District Committee in each district to review and
co-ordinate
• Extension of Electrification
• Quality of power supply and Customer
Satisfaction
• Promote energy efficiency and conservation
• (Structure not indicated. Left to appropriate
Govt.)
52
Miscellaneous Provisions ….3

– All licenses, authorisations, approvals,

clearances granted under the repealed laws will
be applicable for 1 year or such earlier period as
may be notified by the appropriate Government,
after which the provisions of this Act shall apply
(Sec. 172 b).
• State Government, by notification, shall
declare that any or all provisions of this Act
shall not apply for such period, not
exceeding 6 months from the appointed
date

53
 Miscellaneous Provisions …..4

• In case of any inconsistency in laws, this Act

will prevail GoI has powers to make rules on
varied areas (Sec.176).
• CEA, CERC, State Governments and
SERCs have powers to make rules and
regulations (Sec. 177,178,180,181).

54
The Schedule
• Following Acts are saved, if NOT
INCONSISTENT WITH THIS ACT
– The Orissa Electricity Reforms Act, 1995
– The Haryana Electricity Reforms Act, 1997
– The Andhra Pradesh Electricity Reforms Act, 1998
– The UP Electricity Reforms Act, 1999
– The Karnataka Electricity Reforms Act, 1999
– The Rajasthan Electricity Reforms Act, 1999
– The Delhi Electricity Reforms Act, 2000
– The MP Vidyut Sudhar Adhiniyam, 2000
– Gujrat Electricity Industry Act, 2003 55
The Schedule …..2

• Note: As TRANSCOs in these states

cannot do Trading, these states will
have to create “State Power Trading
Corporations”

56
 ISSUES
(1)WHO WILL COMPENSATE CROSS-SUBSIDY?
(a) EA 2003 says cross-Subsidy to be gradually phased
out. It means gradually it will be charged to the
consumers who are now subsidised. Can we
recover from farmers ? Probably not.
(b) Further, Act allows Private Operators to set up
generation and distribution and sell power at
mutually agreed price to the Consumers.This means
major industries will have their own generation
and will sell to nearby Industries. They will move away
from SEBS.
This will end provision of Cross-Subsidisation.
Then Govt. will have to bear subsidy and Cross-
Subsidy. 57
ISSUES …..2
(C)Andhra Pradesh Govt. pays every year
Rs.1732.30 Crore as subsidy and cross-
Subsidisationamount is Rs.1658.58 Crore
which will have to be paid as additional
subsidy. Chief Minister A.P has
demanded that this Rs.1658.58 Crore
should be compensated by Central
Govt..If all state Govts demand like
this,new burden on the Central Govt. will
be about Rs.20,000 Crore. Can centre
agree to this?.
58
ISSUES …...3
(2) OPEN ACCESS – CAN IT BE REALITY IN
ONE YEAR?
(a) EA 2003 says, SERCs will pursue to see that
open access is available without discrimination
in one year.
(b) But at present almost all lines in different
states are over loaded. Hence Open Access
may not become reality.
(c) The Generating Companies may have to lay
down their own transmission lines.In that case
the cost per unit will become double and may
not be comparable with present tariff.
59
ISSUES …..4
(3) APPELLATE TRIBUNAL
a) Under section 112 (2) chair person can
create benches consisting of 2 members,
out of whom one should be a technical
member. But section 113 does not make it
compulsory to nominate technical member.
b) Hence, out of four members, one should
be Electrical Engineer.
c) The number of members may be
increased to five.
60