Title: Power Trading Legal Issues May 6, 2003
1Power TradingLegal IssuesMay 6, 2003
- Hemant Sahai
- Senior Partner
-
2Outline
- Concepts
- Reforms
- Existing legal and regulatory framework
- Electricity Bill
- New Business opportunities
3Concepts
- Power Trading
- Purchase of electricity for re-sale thereof
- Open Access
- Considered and adopted in a number of countries
and can either be viewed as a policy goal or a
transition mechanism on the way to introduction
of retail competition - Non-discriminatory access to the regulated
bottleneck monopoly network facilities i.e. the
transmission grid or distribution system by bulk
suppliers, consumers or generators. - The essential characteristic is that of
introducing competition in the supply of
electricity, though in a limited manner. - Better utilization of the transmission assets
- Wheeling surcharge
- Use of TD system for conveyance of electricity
on payment of charges
4Concepts
- Captive Power Plants
- Have been promoted under section 43 of the ES Act
- Main reason was the inability of SEBs to meet
demand of industrial consumers - Many states provided attractive terms for
wheeling to sister companies and for banking
electricity - In essence a form of indirect competition
- The Electricity Bill allows CPPs open access for
carrying electricity to the destination of its
use - IPPs
- Indirectly stimulated competitive conditions in
generation business, via - Performance benchmanrking with state-owned
Gencos - Providing a level playing field to IPPs though
higher rate of return incentives - The Bill allows setting up of generating stations
without obtaining licence
5Reforms
6Existing Legal Regulatory Framework
- Union Laws - The Indian Electricity Act 1910,
The Electricity (Supply) Act 1948, The
Electricity Regulatory Commissions Act 1998
(ERCA) - State Laws -State Electricity Reform Acts
- Orissa,
- Haryana,
- Andhra Pradesh
- Uttar Pradesh
- Karnataka
- Rajasthan
- Delhi
- Madhya Pradesh
- Currently, generating companies have to sell
power to SEBs under section 43 of the ES Act or
any other person with consent of competent
government.
7Existing Legal Regulatory Framework
- GoI guidelines, 1992 - utilities to either buy
the electricity generated by such generators at a
reasonable price or allow third party sale by
charging a reasonable wheeling tariff. The
implementation of the guidelines was however left
to the discretion of the States. - Some evidence of third party sales having being
examined by a few of the State Electricity
Regulatory Commissions. - Section 22 (1) (d), the ERC Act for the first
time explicitly recognised competition as a
policy instrument for achieving economic
efficiency - Electricity Bill 2003 translates the stated
policy goal of competition into explicit
provisions in an intended legislation.
8Electricity Bill
Bill to consolidate the laws relating to
transmission, distribution, trading and use of
electricity and generally for taking measures
conducive to development of electricity industry,
rationalization of electricity tariff, ensuring
transparent policies regarding subsidies,
promotion of efficient and environmentally benign
policies constitution of Central Electricity
Authority, Regulatory Commissions and
establishment of Appellate Tribunal and for
matters connected therewith or incidental
thereto Ref LOK SABHA REVISED LIST OF
BUSINESS MONDAY, APRIL 7,2003/CHAITRA
17,1925(SAKA) Matters under Rule 377
Legislative Business Bills for consideration and
passing
9Electricity Bill
- Some important definitions
- Electricity Trader - person who has been granted
a licence to undertake trading under Section 12
2(26) - Person - a company or body corporate or
association or body of individuals whether
incorporated or not or artificial juridical
person 2(49) - Open Access - the non-discriminatory provision
for the use of transmission lines or distribution
system or associated facilities with such lines
or system by any licensee or consumer or a person
engaged in generation in accordance with the
regulations specified by the Appropriate
Commission 2(47) - Trading - purchase of electricity for resale
thereof and the expression "trade" shall be
construed accordingly 2(71)
10Electricity Bill
- Wheeling -the operation whereby the distribution
system and associated facilities of a
transmission licensee or distribution licensee,
as the case may be, are used by another person
for the conveyance of electricity on payment of
charges to be determined under section 622(76) - Licensed Activity No person shall undertake
trading unless authorised by a licence issued
under section 14, or exemption under section
1312 - Licensing Appropriate Commission empowered to
grant license for undertaking trading Discom
licensee does not require license to undertake
trading 13 - Excluded Categories not permitted to engage in
Trading - NLDC, RLDC SLDC are not empowered to engage in
Trading 26,27 32 - CTU, STU Transmission Licensee 38,39 41
11Electricity Bill
- Some Notable provisions
- Development of market Appropriate Commission
under a duty to endeavour to promote the
development of a market (including trading) in
power in such manner as may be specified 66 - Power to make Regulations Central Commission
State Commission empowered to regulate the
development of market in power including trading
(specified under section 66) 173 176 - Electricity Trader Appropriate Commission
empowered to specify the technical requirement,
capital adequacy requirement credit worthiness
electricity trader is under a duty to discharge
duties as specified 52 - Market domination- Consumer Interest Appropriate
Commission empowered to issue directions to
licensee or a generating company if any
adverse effect on competition in electricity
industry is caused by - any agreement
- Abuse of dominant position
- any combination 60
12Electricity Bill
- Captive Plants Right to open access for the
purposes of carrying electricity to the
destination of use, subject to availability of
adequate transmission facility as determined by
CTU or STU 9 - CTU STU Obliged to provide non
discriminatory open access to their systems to
Licensee, Genco or Consumer 38 39 - Distribution Licensee
- Obliged to provide non discriminatory open
access to its system - Person situated within area of supply would be
able to take supply from Genco or any other
licensee, other than Distributin Licensee - Open access to be introduced in phases subject
to conditions viz. cross subsidies operational
constraints specified by State Commission - Open access may be allowed before elimination of
cross subsidies on payment of surcharge ( in
addition to wheeling charge ) 42
13New Business Opportunities
- There is thus a clear trend evident in the policy
framework, which has gradually evolved from
monopoly generation and supply to permitting
competition in these activities. - The wires business in the monopoly vertically
integrated supplier model, other functions,
including generation and supply are amenable to
existence of multiple players
14