THE ELECTRICITY ACT, 2003

BACKGROUND
Three erstwhile Acts that regulated the electricity sector:
The Indian Electricity Act, 1910
The Electricity (Supply) Act, 1948
The Electricity Regulatory Commissions Act, 1998

THE INDIAN ELECTRICITY ACT, 1910

It created basic framework for electric supply industry in India.

It envisaged growth of the sector through private licensees.

Licence by State Govt.
It provided for licence for supply of electricity in a specified area.

It created legal framework for laying down of wires and other

works relating to supply of electricity

THE ELECTRICITY (SUPPLY) ACT, 1948

Mandated creation of SEBs.

Need for the State to step in (through SEBs) to extend

electrification (so far limited to cities) all across the country.

THE ELECTRICITY REGULATORY COMMISSIONS

ACT, 1998
Background
Over a period of time, the performance of SEB has deteriorated.
For Example:

Power to fix tariffs rests with SEBs. However, they are unable
to take decisions on tariffs in a professional and independent
manner and practically tariff fixation has been done by State
Governments

Cross subsidies have reached unsustainable levels.

To address the above issues, and to provide for distancing of

Governments from determination of tariffs, ECR Act was enacted in

1998.

It created the CERC and has an enabling provision through which

State Governments can create a SERC

So far sixteen states have notified/created SERC either under

the central Act or under their own reform Act.

Electricity Bill, 2001

Background:

To

encourage

private

sector

participation

in

generation,

transmission and distribution.

Objective

of

distancing

the

regulatory

responsibilities

from

Government to regulatory commissions.

For the above, the following needs arised:

Harmonising and rationalising the provisions in Electricity Act

1910, 1948, ERC act 1998.

To provide for newer concepts like power trading and open access.

To get rid off the requirement of each State Government to pass its

own reforms act.

ELECTRICITY BILL, 2001

MAIN FEATURES:

Generation delicensed.
Captive generation freely permitted.
Hydro projects need approval of State Government and
clearance from CEA
(Reasons: Dam safety, optimal utilisation of water resources)

Transmission utility at Central and State level which would be

a Government company.
Provision for private transmission licensees.
Open access in transmission with provision for surcharge to
take care of cross subsidy.

ELECTRICITY BILL, 2001

Main features (contd):
Distribution licensees free to undertake generation and generation
companies free to take up transmission licensees.
Stand alone systems for generation and distribution permitted for
rural and remote areas.

Trading recognised with the safeguard of ERC authorised to fix

ceiling on trading margins, if necessary.
Where there is direct commercial relationship between a consumers
and a generating company or a trader, the price of power would
not be regulated and only the transmission and wheeling charges with
surcharge would be regulated.

ELECTRICITY BILL, 2001

Main features (contd):
State Governments have the option of continuing with SEBs
which under the new scheme of things would be a distribution
licensee and State transmission utility which would also be
owning generation assets.
An Appellate Tribunal has been created for disposal of appeals
against the decision of CERC and SERC. SERC is a mandatory
requirements.
Provisions relating to theft of electricity have a revenue focus.
Act 36 of 2003
The electricity bill having been passed by both the houses of
Parliament received the assent of the President on 25th May 2003.
It came on the Statute Book as Electricity Act, 2003.