Empower Consumers: Plug Loopholes in the Electricity Bill

Gajendra Haldea (The author is chief advisor, NCAER, and author of the draft Electricity Bill. The views expressed here are personal. Courtesy Times of India 16-4-2003 )

The government is to be congratulated for getting the Electricity Bill passed in the Lok Sabha. However, the fine print offers cause for concern, especially if the goal of making power supply available to the common man at reasonable prices is to be achieved.

The Bill was introduced in the Lok Sabha in August 2001 and was referred to the standing committee on energy. The committee’s 45 members, representing all the major political parties, presented their report in December 2002. Unfortunately, most of the committee’s critical recommendations were not accepted by the government.

The committee proclaimed open access as the ‘‘panacea for ushering in power sector reforms, especially for private sector participation’’. It unambiguously stated, ‘‘It is imperative that transmission and distribution are unshackled from restrictive use’’, and recommended that they should ‘‘be subjected to non-discriminatory open access within a mandated time-frame’’.

The rationale for telecom and power reforms has arisen from introduction of competition and choice. Presently, the state-owned electricity boards are monopolies and all producers of power must sell to these boards alone. Introduction of open access will allow producers to sell directly to bulk consumers and distribution companies by wheeling power through the existing transmission lines on payment of regulated charges. This will increase supply, improve efficiency and cut tariffs.

Yet, the Bill leaves the introduction of open access entirely to state regulatory commissions. They will declare within one year as to when and how they propose to introduce open access in their respective states. This amounts to excessive and unguided delegation. The commissions could well be persuaded by incumbent players to postpone open access for several years. For example, the Delhi state government believes that open access may take 10 years to arrive.

Freedom of trade and business is a fundamental right under the Constitution and allowing the commissions to deny open access for several years will abrogate this right, perpetuate private monopolies and harm consumers. Delay in introducing open access means delaying competition and private investment. Shortages will continue and consumers will have to rely on the public sector, which does not have the resources for meeting the entire demand. This seems a sure recipe for power shortages and high tariffs.

The regulatory commissions are another area of concern. At present, nine laws provide for independent regulatory commissions — the Electricity Regulatory Commissions Act, 1998 (Central Act) and eight state reform Acts. The Electricity Bill contains many significant departures from the existing laws and the standing committee’s recommendations.

All commissions will now be placed under the administrative control and supervision of a retired judge, to be appointed by the Centre as chairperson of the appellate tribunal. The states have opposed this provision and the standing committee recommended its deletion. Yet it remains in the Bill.

The committee recommended that these commissions be made answerable to the Parliament/state assemblies. This is eminently justified as the commissions perform licensing and regulatory functions that affect every walk of life. The recommendation has been rejected.

All the nine existing laws require the expenses of these commissions to be met out of the respective consolidated funds. This ensures transparency, accountability and thrift. Even the Supreme Court and high courts meet their expenses from the consolidated funds. Despite strong representations from several states as well as the recommendation of the standing committee, the Bill proposes an independent fund for each commission. This may encourage profligacy, misuse of funds and lack of accountability, leading to loss of public confidence in these commissions.

Under the nine existing laws, members of the commissions can be removed only by the president or the respective governors, upon enquiry by the Supreme Court or high court, as the case may be. The Bill provides for their removal by the minister/chief minister upon enquiry by a retired judge, acting as chairperson of the appellate tribunal. The standing committee’s recommendation to retain existing provisions has been rejected.

Contrary to the provisions contained in the nine existing laws, members of these commissions will become eligible for re-employment by the same government, thereby infringing on their impartiality. Here again, the recommendations of the standing committee have been overlooked. These measures will tend to make the regulatory commissions less independent and more pliable. Appointments to these commissions in the past are already a matter of public criticism. Such commissions may fail to guard public interest and end up serving vested interests.

With postponement of open access coupled with pliable regulatory commissions, the fate of power reforms may hang in the balance. Worse, the Bill proposes to supersede all state reform Acts, despite strong protests. In any case, rejection of the recommendations of an all-party standing committee does not stand to reason. It is still not too late to make amends.