Kerala has strongly opposed the move to de-license power distribution, stating that it scarcely is the way to achieve the objective of ensuring efficient and cost-effective electricity supply to the citizens.
In a March 15 letter to the Union Power Ministry setting down its policy opinion on the amendments planned in the Electricity Act, 2003, the State Government argued that the proposal to open up the distribution business — purportedly with the aim of giving consumers a wider choice of power suppliers — will imperil the ordinary electricity consumer if adequate safeguards are not in place.
Citing the Kerala State Electricity Board (KSEB) as a robust State-run model for efficient and cost-effective power distribution, the government pointed out that even in developed economies, multiple distribution companies (Discoms) have created ''complexities'' for the smaller power consumers who constitute the bulk of the consumer population. ''Unless the reform is designed scrupulously, taking into account ground realities, the well-intended objective of 'choice to consumers' may not be fulfilled,'' the letter noted.
Liberty for roadmaps
If the Centre indeed opts to pursue with the proposal in the draft Electricity (Amendment) Bill, 2021, the States should be given the liberty to draw up roadmaps for the introduction of multiple power distribution licensees and prescribe areas where they can operate, ''taking into account proper consumer mix, network adequacy and technology maturity,'' the letter said.
In a February 5 note seeking comments on the draft from the States, the Union Power Ministry noted: ''It is proposed to de-license distribution. The present distribution companies will continue operating as they are now, but other distribution companies also can come in and compete. Consumers shall have the opportunity to select their service provider.''
In its letter, the State government has demanded safeguards against the possibility of predatory pricing and ''cherry-picking'' of consumers by private players in the de-licensed environment. To avoid such consequences, measures should be in place to ensure that the Universal Service Obligation Fund (USOF) is adequately financed.
Penal provisions
''To ensure this, mandatory contributions of entire cross-subsidy to the USOF is to be statutorily provided, without leaving loopholes. The Act should have explicit penal provisions, including de-registration, for checking default in payment of USOF, which is necessary to avoid predatory pricing and cherry-picking of consumers,'' the letter said.
Discoms should also share the cost of network development in the service area, in proportion to their estimated power demand. They should also have a cap on consumer addition, based on this cost-sharing mechanism, the government said.
Further, the government has demanded a re-look at certain proposals in the draft bill, which places crucial decisions within the realm of the Centre, thereby tending to ''violate the principles of federalism.''
