Write Short notes on Indian Electricity Act 2003.

Indian Electricity Act 2003

The Electricity Act, 2003 is an Act of the Parliament of India enacted to transform the power sector in India.
The act covers major issues involving generation, distribution, transmission and trading in power. Before
Electricity Act, 2003, the Indian Electricity sector was guided by The Indian Electricity Act, 1910 and The
Electricity (Supply) Act, 1948 and the Electricity Regulatory Commission Act, 1998. The generation, distribution
and transmission were carried out mainly by the State Electricity Boards in various States The Electricity
Regulatory Commissions Act was enacted in 1998. So as to reform electricity sector further by participation of
private sector and to bring in competition, Electricity Act was enacted in 2003. With effect from 2 June 2003
India has adopted a new legislation called the Electricity Act 2003, to replace some age-old existing legislation
operating in the country. An act to consolidate the laws relating to generation, transmission, distribution, trading
and use of electricity for taking measures conducive to development of electricity industry, promoting
competition therein, protecting interest of consumers and supply of electricity to all areas, rationalization of
electricity tariff, ensuring transparent policies regarding subsidies, promotion of efficient and environmentally
benign policies, constitution of Central Electricity Authority Regulatory Commissions and establishments of
Appellate Tribunal for matters therewith or incident thereto.
Generation
The Act delicenses power generation completely. Electricity generation has been made a non-licensed activity
and the techno-economic clearance from the Central Electricity Authority (CEA) has been done away with for
any power plant, except for hydro-electric power stations above a certain amount of capital investment. The
generators can sell electricity to any licensees or where allowed by the state regulatory commissions, to
consumers directly. The provision of direct sale of electricity by the generators, when and where allowed, would
promote more IPP participation in the power generation, as these consumers are more creditworthy and
bankable compared to many SEBs. However the act provides for imposition of a surcharge by the regulatory
body to compensate for some loss in cross-subsidy revenue to the SEBs due to this direct sale of electricity by
generators to the consumers.
Distribution
The Act delicenses distribution in rural areas and brings in a licensing administration for distribution in urban
areas.
2. List the Salient Features of Indian Electricity Act 2003.
The Electricity Act, 2003 is an Act of the Parliament of India enacted to transform the power sector in
India.The act covers major issues involving generation, distribution, transmission and trading in power. With
effect from 2 June 2003 India has adopted a new legislation called the Electricity Act 2003, to replace some
age-old existing legislation operating in the country.
The main features of the act are as follows:
1. Generation is being de-licensed and captive generation freely permitted, i.e. any generating company
may establish, operate and maintain a generating station without obtaining a license under this Act

with the only exception that it should comply with the technical standards relating to connectivity with
the grid .
2. No person shall
(a)transmit electricity; or (b)distribute electricity; or (c)undertake trading in electricity,
unless he is authorised to do so by a licence issued.
3. Central Government may, make region-wise separation of the country, and, from time to time, make
such modifications therein as it may consider necessary for the efficient, economical and integrated
transmission and supply of electricity.
4. Particularly to facilitate voluntary inter-connections and co-ordination of facilities for the inter-State,
regional and inter-regional generation and transmission of electricity.
5. Transmission utility at the central and state level to be a government company with responsibility of
planning and coordinating the development of transmission network.
6. Open access in transmission with provision for surcharge for taking care of current level of crosssubsidy, with the surcharge being gradually phased out.
7. The state governments are required to unbundle State Electricity Boards. However they may continue
with them as distribution licensees and state transmission utilities.
8. Setting up State Electricity Regulatory Commission (SERC) has been made mandatory.
9. An appellate tribunal to hear appeals against the decision of (CERC's) and SERC's.
10. Metering of electricity supplied made mandatory.
11. Provisions related to thefts of electricity made more strict.
12. Trading as a distinct activity recognized with the safeguard of Regulatory commissions being
authorized to fix ceiling on trading margins.
13. For rural and remote areas, stand-alone system for generation and distribution is permitted.
14. Thrust to complete rural electrification and provide for management of rural distribution by panchayat,
cooperative societies, NGOs, franchisees etc.
15. Central government to prepare National Electricity Policy and Tariff Policy.
16. Central Electricity Authority (CEA) to prepare National Electricity Plan.

3.What is TSO?
A transmission system operator (TSO) is an entity entrusted with transporting energy in the form
of electrical power on a national or regional level, using fixed infrastructure. TSO is an operator
that transmits electrical power from generation plants over the electrical grid to regional or local electricity
distribution operators.
4.Explain the mechanism Of ABT and day scheduling process.
Availability Based Tariff (ABT) is a frequency based pricing mechanism applicable in India for unscheduled
electric power transactions. The ABT falls under electricity market mechanisms to charge and regulate power
to achieve short term and long term network stability as well as incentives and dis-incentives to grid participants
against deviations in committed supplies as the case may be.
ABT Mechanism in Electricity sector in India is adopted since the year 2000 and in a few other countries for
pricing bulk power across various stakeholders. ABT concerns itself with the tariff structure for bulk power and
is aimed at bringing about more responsibility and accountability in power generation and consumption through
a scheme of incentives and disincentives. As per the notification, ABT was initially made applicable to only
central generating stations having more than one SEB/State/Union Territory as its beneficiary. Through this
scheme, the Central Electricity Regulatory Commission (CERC) looks forward to improve the quality of power
and curtail the following disruptive trends in power sector:

Unacceptably rapid and high frequency deviations (from 50 Hz) causing damage and disruption to
large scale industrial consumers.

Frequent grid disturbances resulting in generators tripping, power outages and power grid
disintegration.

The power generation or grid capacity has increased substantially in last fifteen years particularly after
the Electricity Act 2003 by introduction of competition and unbundling of vertically integrated utilities (SEBs) into
separate entities in charge of electricity generation, electricity transmission, and electricity distribution.
Deregulation and competition has facilitated participation of private sector on large scale in electricity
generation, transmission and distribution. Indian electricity sector is transforming from perennial deficit to
surplus electricity availability. The volume of purchased electricity that could not be transmitted to the buyers
due to transmission lines congestion is only 0.3% of the total electricity consumed in the financial year 201314. It means that the actual power deficit in India is less than 1% excluding non-price related (under priced)
electricity demand. ABT/DSM mechanism needs improvements to address the requirements of all stake
holders (including final electricity consumers) for encouraging least cost electricity generation / tariff based on
demand verses availability in the grid. There is a need of well represented Electric Reliability Organization to
involve all the grid participants for framing guidelines for power system operation and accreditation which is
presently looked after by the CEA.

Scheduling

Each day of 24 hrs starting from 00.00 hours be divided into 96 time blocks of 15 minutes each.

Each generating station is to make advance declaration of its capacity for generation in terms of MWh
delivery ex-bus for each time block of the next day. In addition, the total ex-bus MWh which can actually be
delivered during the day will also be declared in case of hydro stations. These shall constitute the basis of
generation scheduling.

While declaring the capability, the generator should ensure that the capability during peak hours is not
less than that during other hours.

The Scheduling as referred to above should be in accordance with the operating procedures in force.

Based on the above declaration, the Regional Load Dispatch Centre(RLDC) shall communicate to the
various beneficiaries their respective shares of the available capability.

After the beneficiaries give their requisition for power based on the generation schedules, the RLDC
shall prepare the generation schedules and drawal schedules for each time block after taking into account
technical limitations and transmission constraints.

The schedule of actual generation shall be quantified on ex-bus basis, whereas for beneficiaries,
scheduled drawals shall be quantified at their respective receiving points.

For calculating the drawal schedule for beneficiaries, the transmission losses shall be apportioned in
proportion to their drawals.

In case of any forced outage of a unit, or in case of any transmission bottleneck, RLDC will revise the
schedules. The revised schedules will become effective from the 4th time block, counting the time block in
which the revision is advised by the generator, to be the 1st one.

It is also permissible for the generators and the beneficiaries to revise their schedules during a day, but
any such revisions shall be effective only from the 6th time block reckoned in the manner as already
stated.

Features of ABT

ABT brings about enhanced grid discipline

Economically feasible power with right pricing

Promote competition and efficiency

Encourage use of Merit Order Dispatch / Economic Dispatch in India.

Addressing grid disturbance issues

Gaming and avoiding the same

Requires special meters, remote metering with open protocols and communication mechanisms to
read meters timely

Software that is comprehensive to do calculations, address regulatory issues and modifications as per
different Regulatory Commission requirements.

Interface options to various stakeholders in the ABT mechanism on line to enable effective
implementation and benefits to all. Capability of power producers to be able to control their cost of
production as well as flexibility in operations

Drawbacks of ABT

As per Unscheduled Interchange procedure, the incentives and penalty to the grid participants are
charged based on the average grid frequency in a time block of 15 minutes duration. During a time
block, it is normal that frequency goes above rated 50 Hz frequency and comes down below rated
frequency as the number of frequency excursions above 50 Hz are more than 100 in a day. Thus the
average frequency in a time block remains close to the 50 Hz without giving much benefit in the
applicable UI tariff for a Discom who is consuming the surplus power available in the grid or a
generators with valid scheduling who is reducing the generation when frequency is above 50 Hz.
Similarly, the generators and Discoms who are not adhering to grid discipline are not penalized with UI
tariff in excess of normal tariff when average grid frequency in a time block is used for fixing UI
charges.

Whenever distribution feeders from a substation are switched on after a break down or scheduled
power cut, it should be done only when grid frequency is above 50 Hz such that it does not lead to
steep drop in the frequency . The total numbers of feeders switching on, in a day are substantial at
national level to cause load ( 500 MW) increase on the grid to cause wide fluctuations.

The incentives and disincentives are prefixed (annually/periodically) by the electricity regulator (CERC)
for the variation in the grid frequency which may not reflect the actual situation temporally and spatially
on day-to-day basis. There is a need to decide the electricity tariff by the grid participants (generators,
discoms, transcos & final consumers) on day-to-day basis for achieving further fine tuning.

The ABT mechanism aims to maintain grid frequency at 50 Hz but does not permit the grid participants
to decide the optimum frequency within the permitted frequency band (say 49.20 to 50.80 Hz) on dayto-day basis. This is required not to impose additional load shedding/power cuts when frequency is
within the safe variation limits.

ABT mechanism is suitable in an electricity grid suffering from perennial power shortages to prevent
overdrwals but it is not suitable for the grid with surplus electricity generation with non-discriminatory
responsibility.

Every state is conducting independently load management to avoid overdrawal from other states by
using mix of generation sources (ex: hydro power or peaking power plants) to adhere to their power
drawal commitments on 15 minutes period basis in ABT mechanism. TSO is responsible to ensure the
provision of reserves that will allow for sudden contingencies by determining the optimal combination
of generating stations and reserve providers for each grid trading period.

What are captive generating plant?

Captive generating plant includes a power plant set up by any co-operative
society or association of persons for generating electricity primarily for use of
members of such co-operative society or association.
Unscheduled Interchange(UI)
Unscheduled Interchange (UI) is a frequency linked mechanism that
accomplishes the following,

Frequency management in the Grid through commercial signals for

overdrawal and under-drawal

Balancing of demand and supply within the permissible frequency

band

Real time trading of energy through a pooling mechanism

Variation from scheduled generation and drawal is charged at the

rates defined by CERC AF-Mercados EMI

Charges are payable for

* Over-drawal by the buyer or the beneficiary
*under-injection by the generating station or the seller
Charges are receivable for
* Under-drawal by the buyer or the beneficiary and
* Over injection by the generating station or the seller
Each 0.02 Hz step is equivalent to 15.5 paise/kWh in the 50.2-49.7 Hz frequency
range and 47.0 Paise/kWh in the 49.7-49.50 Hz frequency range.
UI rate
Here 15 minute scheduling cycle followed for charging. In this two sets of
accounts are generated.
One as per schedule and the other As per deviations from schedules (or
unscheduled AF-Mercados EMI interchange).
Similar payments to the loads for deviations from scheduled drawals
Original UI pool a zero sum operation. Settled weekly

Indian Electricity Act 1910

It provided the basic framework for electricity supply in India.

It increased the growth of the sector through private licenses. The license were provided
by state government.

It provided the provision for license for supply of electricity in a specified area.

This act provided the legal framework for laying down of wires and other work.

This act provided the provision for laying down a relationship between licensee and
consumers.

Indian Electricity Act 1948

This act mandate the creation of state electricity boards.It enhanced the need for state to step in through
SEBs to extend electrification all across the country.
Ammendment to Existing Acts

Amendment 1975 to enable generation in as a central sector.

it brought the amendments to bring in the commercial viability in the functioning of SEBs.

Amendment 1991 made open the generation sector open to private sector and establish RLDC.

Ammendment 1998

was to provide for private sector participation in transmission and also for

providing provision relating transmission utilities.

Indian Electricity Regulatory commission Act 1998

It provided the provision for setting up of the central and state electricity regulatory commission to
determine the tariffs .It was given the power to determine the tariffs of their states.

According to this act of constitution the state electricity regulatory act is optional for states.

It provides for the establishment of a Central Electricity Regulatory Commission at the Central level
and State Electricity Commissions at the State levels-,

The main functions of CERC are: (i)

To regulate the tariff of generating companies owned or controlled by the Central

(ii)
(iii)
(iv)

Government;
To regulate inter-State transmission including tariff of the transmission utilities;
To regulate inter-State sale of power;
To aid and advise the Central Government in the formulation of tariff policy.

The main functions of the SERC, to start with, shall be: (i) To determine the tariff for electricity, wholesale, bulk, grid and retail;
(ii) To determine the tariff payable for use of the transmission facilities;
(iii) To regulate power purchase the procurement process of the transmission utilities; and
(iv) Subsequently, as and when each State Government notifies, other regulatory functions could
also be assigned to SERCS.
State wise reform Acts

The world bank played a major role in forming the fundamental reforms for the SEB. Orissa was the first state
to initiate the reform in 1995 , followed by Haryana , Andra pradesh , Uttar Pradesh, Karnataka, Rajasthan,
Delhi , Madhya pradesh in 1997,1998,1999,2000,2000,&2003.
Following are the reformation made in the states:

Unbundling generation, transmission and distribution.

Allowing private participation in generation, transmission and distribution.
Establishing an autonomous regulatory agencies.
Reforming tariffs at a Bulk electricity , transmission and retail levels.
Privatizing external thermal generation and distribution utilities.