Suggested Changes in Electricity Act-2003 in Respect to Segregation of Wires and Supply Business

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Suggested Changes in Electricity Act-2003 in Respect to Segregation of Wires and Supply Business

In continuation to the recent post "Segregation of Wires & Supply: Way Forward to Promote Competition in Distribution Sector", the segregation scheme would require certain amendments in the existing Electricity Act-2003. The suggested changes in the EA-2003 are presented below for your reference. Please note that these recommendations and suggestionsa are made by the advisory committee of MoP.




This can be done in two ways:
  1. Carrying out clause wise changes in the E-Act 2003 or
  2. By introducing a chapter in the E-Act which will describe the proposal and responsibilities of Wires and Retail Supply Licensee and authorizing appropriate Commission to Issue detailed regulations elaborating the scheme in detail.
    • By introducing a chapter, the advantages are as follows:
      • Minimizes the probability of missing any change which may later be a cause of dispute
      • Few provisions may be required under certain situations such as cases where no Retail Supply Licensee shows interest in small areas/ rural areas
    • For the purpose of changes in E-Act, Wires Licensee has been termed as Distribution Network Licensee, so as to provide ample clarity about its role and minimize the changes required in the E-Act.
    Key Steps
    • Initiating consultations with state government to make them understand the benefits of the scheme
      • Choice to consumers
      • Infusing Competition
      • Infusing operational efficiency in the wires
      • Improved customer service
    • National Distribution Policy will be framed in consultation with the stakeholders i.e. state governments, Incumbent Licensees, CEA, CERC, SERCs etc.
    • As the scheme is proposed to be implemented through National Distribution Policy, the Policy would be required to be issued preferably along with the Amendments of the E-Act.
Part VIA (New chapter in E-Act 2003)
Reorganization of Distribution Business
Provisions with respect to distribution network and retail supply of electricity
60A. Applicability
  1. Notwithstanding anything contained in this Act, in respect of any area of supply notified by the state government, the retail sale of electricity to consumers by using any distribution system shall be carried out in accordance with the provisions of this Part.
  2. The state government shall, within 2 years from the appointed date, notify the entire area within the state under this Part.
60B. Definitions - In this Act, unless the context otherwise requires
"distribution network licensee" means a licensee authorized to operate and maintain a distribution system which shall be utilized for supplying electricity to the consumers in his network area;
"retail supply licensee" means a licensee authorized to supply electricity to the consumers in his retail supply area;
"network area" means the area within which a distribution network licensee is authorized by his license to operate;
"retail supply area" means the area within which a retail supply licensee is authorized by his license to supply electricity;

60C. Bifurcation and vesting of property and business of distribution licensee.
  1. The state government, in consultation with the distribution licensee, shall draw up a transfer scheme to bifurcate and vest the property, interest in property, rights and liabilities which have been vested in such distribution licensee, with effect from the appointed date, in the transferee, being a distribution network licensee and one or more retail supply licensees, and publish such scheme as statutory transfer scheme under this Act.
  2. The provisions of section 131 shall apply in so far as may be necessary for the purposes of drawing up a transfer scheme under sub-section (1) and the notification thereof.
  3. The transferee companies referred to in sub-section shall be deemed to be distribution network license and retail supply license with effect from the appointed date.
  4. Within five years from the appointed date or such earlier date that may be determined by the Appropriate Commission by regulations, the distribution network licensee will cease to have any direct or indirect interest in retail supply business.
60D. License.
  1. No person shall carry on business as a distribution network licensee or a retail supply licensee, unless he is authorized to do so by a license granted by the Appropriate Commission for such purpose.
  2. An application for grant of license under sub-section (1) may be made in accordance with section 15.
  3. Save for a license issued under sub-section (3) of section 60C, an application for grant of a license under this Part shall be made after the date determined by the Appropriate Commission under sub-section (4) of section 60C.
  4. PROVIDED that a person granted a distribution network license pursuant to an application made under Section 15 shall not be eligible for the grant of a retail supply license in the same network area.
60E. Saving.
  1. All provisions of the Act that are applicable to a distribution licensee shall apply, mutatis mutandis, to a distribution network licensee or a retail supply licensee or both, as may be specified by the Appropriate Commission in the license or by regulations after the notification of this part.
  2. While specifying the duties under sub-section (1), the Appropriate Commission shall provide the following: the distribution network licensee is obligated to develop and maintain an efficient, co-ordinated and economical distribution system in his network area and to provide connection to any premises on an application being made by the owner or occupier of such premises; the distribution network licensee will provide, if required, electric plant or electric line for giving electric supply to any premises by a retail supply licensee; the distribution network licensee shall allow mandatory and non-discriminatory open access to retail supply licensees in its network area to supply electricity to ail consumers on payment of wheeling charges; the distribution network licensee is obligated to provide, non-discriminatory open access in its network area under sub-sections (2) and (3) of section 42 for supply of electricity by persons other than retail supply licensees; subject to availability of distribution system and payment of necessary charges, a retail supply licensee shall supply electricity to any consumer who makes an application for such supply; obligation of a retail supply licensee to purchase of electricity from renewable sources of energy; the retail supply licensee will act as the sole interface with the consumers, both in respect of supply and connection; disconnection of any electric supply line or other works shall be the responsibility of the distribution network licensee.
60F. National Distribution Policy.
  1. The Central Government shall notify the National Distribution Policy to provide for separation of distribution network and retail supply business, to provide for optimum and cost effective utilization of the distribution system and assets, to bring in competition in retail supply of electricity and to provide choice to consumers. In discharging its functions the Appropriate Commission shall implement the provisions of National Distribution Policy.
  2. The Central Government may, from time to time, in consultation with the state governments and the Authority, review or revise, the National Distribution Policy referred to in sub-section (1).
Source: Cerebral Business Research Pvt. Ltd

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