The Kerala State Electricity Board Officers’ Association (KSEBOA) has said the amendment proposed to the Electricity Act of 2003 by the Union Ministry of Power and placed before the stakeholders for eliciting their views will impact almost all aspects of the Act and give a new dimension to the power sector reforms in the country.
“The proposals would have serious implications to the electricity industry, consumers, and employees [of power utilities]. The effort of the Ministry is to further strengthen the power market operations in the country and fast track commercialisation of the sector through removal of entry barriers for private sector in the retail supply of electricity,” KSEBOA president B. Pradeep said in a statement here on Thursday.
The amendment seeks mandatory unbundling of the distribution sector and creation of exclusive licencees to handle the retail supply business, with full liberty to indulge in “cherry picking.” It is also intended to grab for the Central government whatever little power the State governments have in the electricity distribution sector, he alleged.
The stipulations under Section 11 of the Act had given discretionary powers to the State to curtail the sale of power generated by the private sector (using the State’s resources) outside the State during times of acute power shortage within the State. This section is proposed to be amended to help the private sector.
Also, the functioning of State regulators are to be more vigorously scrutinised by the Centre to ensure that they do not fall in line with the policy of the State government concerned. If necessary, the appointment rights of the regulators will be taken over by the Central government.
“The amendment in Electricity (Supply) Act, 1948 during 1991 to allow private investment in power generation, which lead to the Enron episode and the liquid fuel (Naphtha/Diesel/LSHS) policy that followed (aimed at reducing entry barriers for private capital), had bankrupted many of the electricity boards in the first decade due to abnormal increase in power purchase cost (which obviously could not be directly passed on to consumers). The second decade saw the market reforms through implementation of Electricity Act, 2003. The flawed market model introduced by the Act ensured that the power purchase cost of distribution utilities ballooned to the benefit of captive and merchant power plants set up mostly by beneficiaries of coal gate. Analysis of data thrown up by high level panel chaired by V.K. Shunglu will reveal that the losses sustained by distribution utilities are almost equal to the undue benefit gained by power market players,’’ he said.