Electricity (Amendment) Bill, 2021 – UPSC GS2

Aims of the bill:
  • To de-license power supply to increase competitiveness.
  • Allows multiple distributors in the same area
  • Gives consumers the option to switch power suppliers.
  • The bill also proposes appointing a member with a legal background in every electricity regulatory commission and strengthening the Appellate Tribunal for Electricity (Aptel).
  • It also spells out penalties for any failure by power distribution companies to meet renewable purchase obligations. DISCOMs are required to buy a fixed amount of renewable energy to reduce their reliance on fossil fuels.
  • In addition, the Electricity (Amendment) Bill also lays down the rights and duties of electricity consumers.
What needs to be done further to improve the electricity market?
  • Apart from the above-said reforms, issues related to high levels of cross-subsidy, losses, and poor infrastructure will also need to be resolved.
  • The success of de-licensing or retail competition will critically depend on its ability to address the core issues relating to:
    • the high level of cross-subsidies in retail tariffs;
    • inefficiencies in the form of T&D (transmission and distribution)/ AT&C (aggregate technical and commercial) losses; and
    • poor state of T&D infrastructure
  • Imposition of restrictions to address existing tariff distortions or imposition of universal supply obligation on new suppliers would defeat the objective of creating a market-driven industry structure.

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