Electricity Regulation

Historical Background of Legislative Initiatives

The Indian Electricity Act, 1910

  • Provided basic framework for electric supply industry in India.
  • Growth of the sector through licensees. License by State Govt.
  • Provision for license for supply of electricity in a specified area.
  • Legal framework for laying down of wires and other works.
  • Provisions laying down relationship between licensee and consumer

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) across the country.
  • Main amendments to the Indian Electricity Supply Act
    • Amendment in 1975 to enable generation in Central sector.
    • Amendment to bring in commercial  viability  in  the  functioning SEBs – Section 59 amended to make the earning of a minimum return of 3% on fixed assets a statutory requirement (w.e.f 1.4.1985) .
    • Amendment  in  1991  to  open  generation  to  private  sector  a establishment of RLDCs.
    • Amendment  in  1998  to  provide  for  private  sector  participation transmission, and also provision relating to Transmission Utilities.

The Electricity Regulatory Commission Act, 1998

  • Provision  for  setting  up  of  Central  /  State  Electricity  Regulatory Commission with powers to determine tariffs.
  • Constitution of SERC optional for States.
  • Distancing of Government from tariff determination.

The Electricity Act, 2003

The Electricity Bill, 2001 was  introduced  in Lok Sabha on 30th August, 2001  and  was  subsequently  referred  to  the  Standing  Committee  on  Energy  for examination and report. The Standing Committee submitted its report on 19th December, 2002. Based on  the  recommendations of  the Standing Committee on Energy,  the Government  of  India moved  certain  amendments. The Electricity Bill,  2001 along with these amendments, was passed by Lok Sabha on 9th April, 2003.

The  Bill  as  passed  by  Lok  Sabha  was  considered  and  passed  by  Rajya Sabha on 5th May, 2003. The  Electricity  Bill,  2003  as  passed  by  both  Houses  of  the  Parliament received  President’s  assent  on  26th May,  2003  and  was  notified  in  the Gazette of India on 2nd June, 2003.The  provisions  of  the  Act  except  section  121 were  brought  into  force with effect from 10th June 2003.

Background and salient features of the Act :

  • Power  is  today  a  basic  human  need. It  is  the  critical  infrastructure  on which modern economic activity is fully dependent.  Only 55% households in India have access to electricity. Most of  those who have access do not get uninterrupted  reliable supply. The industry in India has among the highest tariffs in the world and is not assured of the quality of supply.
  • In this era of globalisation, it is essential that electricity of good quality is provided at reasonable rates for economic activity so that competitiveness increases.Being  internationally  competitive  is  now  essential  for  achieving  the  vision  of  8% GDP growth per annum, employment generation and poverty alleviation.
  • In  recent years  the  financial health of SEBs has been deteriorating.   There  is a big gap between unit cost of supply and  revenue and  the annual  losses of SEBs have been increasing and have reached unsustainable levels (over Rs. 33,000 crores).
  • In  the  last  two  Plan  periods,  barely  half  of  the  capacity  addition  planned  was achieved.    The  optimistic  expectations  from  the  IPPs  have  not  been  fulfilled  and  in retrospect  it  appears  that  the  approach  of  inviting  investments  on  the  basis  of government guarantees was perhaps not the best way.  The energy as well as peaking shortages across  the country  is a matter of concern and  the situation would have been worse but for the slowdown in manufacturing sector.
  • The Hon’ble Prime Minister and Chief Ministers have  set before  the nation  the goal of electrifying all our villages by 2007 and all our households by 2012. Access is yet to be provided  to about 80,000 villages.   Uninterrupted and reliable supply of electricity for 24 hours a day needs to become a reality for the whole country including rural areas. Enough generating capacity need  to be created  to outgrow  the situation of energy and peaking shortages and make the country free of power cuts with some spare generating capacity so that the system is also reliable.  The sector is to be made financially healthy so that the state government finances are not burdened by the losses of this sector.  The sector  should  be  able  to  attract  funds  from  the  capital  markets  without  government support.   The consumer  is paramount and he should be served well with good quality electricity at reasonable rates.
  • It is in this context that the Electricity Act, 2003 seeks to bring about a qualitative transformation of the electricity sector through a new paradigm.  The Act seeks to create liberal  framework of development  for  the power sector by distancing Government  from regulation. It replaces the three existing legislations, namely, Indian Electricity Act, 1910, the Electricity (Supply) Act, 1948 and the Electricity Regulatory Commissions Act, 1998. The  objectives  of  the  Act  are  “to  consolidate  the  laws  relating  to  generation, transmission,  distribution,  trading  and  use  of  electricity  and  generally  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  establishment  of Appellate  Tribunal and for matters connected therewith or incidental thereto.”
  • The Act strikes a balance which  takes  into account  the complex ground realities of the power sector in India with its intractable problems.

The salient features of the Act are:

1. Generation has been delicensed and captive generation freely permitted.i.e. Any generating company may establish, operate and maintain a generating station without obtaining a licence under this Act with only exception that it should comply with the technical standards relating to connectivity with the grid referred to in clause (b) of section 73.

Note: Hydro-projects would however need concurrence from Central Electricity Authority

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, exceptions informed by authorised commissions through notifications

3. No license required for generation and distribution in rural India

4. Central Government may, make region- wise demarcation 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, and in particular to facilitate voluntary inter-connections and co-ordination of facilities for the inter-State, regional and inter-regional generation and transmission of electricity.

Transmission utility at the central and state level to be a government company-with responsibility of planned and coordinated development of transmission network

5. Open access in transmission with provision for surcharge for taking care of current level of cross subsidy, with the surcharge being gradually phased out.

6. The state government required to unbuldle State Electricity boards. However they may continue with them as distribution licensees and state transmisison utilities

7. Setting up state electricity regulatory commission (SERC) made mandatory

8. An appellate tribunal to hear appeals against the decision of (CERC’s) and SERC’s

9. Metering of electricity supplied made mandatory

10. Provisions related to thefts of electricity made more stringent

11. Trading as, a distinct activity recognised with the safeguard of Regulatory commissions being authorised to fix ceiling on trading margins

12. For rural and remote areas stand alone system for generation and distribution permitted

13. Thrust to complete rural electrification and provide for management of rural distribution by panchayat, cooporative societies,    NGOs, franchises etc.

14. Central government to prepare National Electricity Policy and tariff Policy

15. Central electricity authority to prepare National electricity plan.

The Electricity (Amendment) Bill, 2005

  • The Electricity (Amendment) Bill, 2005 was introduced in  the Lok Sabha  on   December 23,2005 to amend the Electricity Act, 2003.  The Bill was referred to the Parliamentary Standing Committee on Energy (Chairperson: Shri Gurudas Kamat), which  was scheduled to submit its  report on March 23, 2006.
  • The Bill proposes to amend the Act by deleting the  provision for ‘elimination’ of cross subsidies.  It , however, retains the provision for reduction of cross subsidies.  The  provision was deleted taking into concern the fact that it  might not be possible to eliminate cross subsidies in the near future.
  • The Bill seeks to provide that both the Central Government and State Government would jointly attempt to supply electricity to all areas including villages and hamlets through rural electricity infrastructure and electrification of households.  In the Act, the onus of rural electrification was solely on the State Government.

The offences relating to theft  of electricity, electric lines, and interference with meters are cognizable offences.  There was concern that the Act stood as a barrier to investigation of these offences by the police.  The Bill seeks to amend the section in the following manner:

It emphasizes that a person cannot be prosecuted for any offence punishable under the Act without the permission of the Central Government or Appropriate Commission or a Chief Electrical Inspector or an Electrical Inspector or licensee or the generating company.  An Appropriate Commission could be the Central Regulatory Commission or State Regulatory Commission or Joint Commission.

It clarifies that the police have the power to investigate cognizable offences under the Act.

In order to facilitate speedy trials, it provides that a Special Court (the state government can constitute any number of Special Courts for such areas as may be specified, to facilitate speedy trials of offences) shall be competent to take cognizance of an offence without the accused being committed to it for trial.


The Financial Memorandum of the Bill estimates that the Rajiv Gandhi Grameen Vidyutikaran Yojana (with an outlay of Rs 16,225 crore) would have a subsidy  component of Rs 14,750 crore to be funded from the Consolidated Fund of India in two phases.  Phase 1 of the scheme has begun from the financial year 2005-2006 with a sanction of Rs 5,000 crore of subsidy from the Consolidated Fund of India.  No other expenditure, recurring and non recurring, from Consolidated Fund of India would be involved.

11 Responses to Electricity Regulation

  1. chunduru.sudheer says:

    sir,in India so many people not paying electricity bills it may cause heavy burden to government and citizens who pay regularly. to prevent that I am having an advice which the electricity meter providing from department it should be programmed in soft ware based which can be automatically cut the power if person miss manage or not paying dues to the department.in this way we are having so many benifits,like man power management ,and system under control .

    • IndianPowerSector.com says:

      Well you Idea is good, but in a country where till now we have not able to provide electricity to all , I don’t think so that implementing high cost software that complex will solve the problem.

      We have to change the mindset of people and also of the Government who uses electricity as tool to woo voters.


  2. Amber Sethy says:


    I want to know if a person wants to sell electricity to the Government (Grid) what is the legal requirement and process

  3. Student says:

    Hi! I would like to know the legislative intent behind enacting section 65 of the electricity act 2003. I’m unable to find the standing committee report on the same. Kindly help me.

  4. ankurkumar says:

    The Indian Telegraph Act 1885 must not be invoked in power sector through article 164 of EA 2003 but must be kept limited to telephone lines only because the size of footing for towers is quite substantial and 01 katha or 02 katha of land is permanently occupied by the tower with no further commercial activity possible. Besides, even cultivation is quite a problem inside the tower footing area. There is an urgent requirement of proper law to avoid the currently going on disputes and conflicts with the land owners and the executing agencies.

  5. ankurkumar says:

    Enact Proper legal framework for compensation to land owners in transmission line construction. It is necessary to assess the compensation to cultivator/share cropper/tenant as well while disbursing the crop compensation. Moreover, the data regarding yield and rate of crops must be put on internet for every block/district. The rates should be subject to revision every 06 months so that actual compensation is paid. There should be separate treatment of the land owner with tower footing and the farmers surrounding to have distinction.

  6. Ankur Kumar says:

    The transmission line construction works are hampered by lack of laws pertaining to compensation and ROW problems. The basic problem is that there is no framework/guidelines for negotiation with the land owners/sharecroppers and so on which means the matter is dealt on case to case basis and it leads to lack of confidence in the personnel involved in construction works. The payment of crop compensation is very unclear and confusing issue as the land owner and cultivator may be different and both want some compensation. The forum may spread awareness among the readers so that some proper legislation is evolved for the transmission sector

  7. P.Easwaran says:


    P.Easwaran, s/o E.P.Palaioh
    Door No – 157, Perumal Kovil Street
    Seelathikulam, Samugarengapuram – PO
    Tirunelvelli- Dist
    Pin – 627112

    The Indian Power Sector
    Government of India

    Subject: Suggestion – India Generating the Electricity. We are wasting the generated Electricity without consuming. But, we are saying Shortage of Electricity in India.
    Dear Sir
    For above Subject we are introducing with bellow example.
    (The Government is providing water supply to your houses. The Government will record your water consumption through Main Meter from the delivery point to your house.
    But in your house lot of water wastages are happening through pipe line leakages, tank overflow etc.
    So, the wasted water not coming in to your utilizations.
    Now, you tell me that your consumptions of water should be billed by the Government adding the Wastages of water or not adding?
    Your Consumption should be billed from the Main meter from the delivery point.

    Because wastages are negligence of Consumers, so the Government should bill to consumers only from the main meter not from consumer utilized quantity.
    But in TNEB not happening, TNEB not billing the Wasted Electricity, why? Due to that all are suffering badly. This Engineering mistake is happening in all state of the India but Delhi implemented the bellow suggestion on year 2002.
    THE GOD will bless always to you all and your family for making the Green Revelation in India.

    Why Electricity Shortage and Tariff Hike in India?
    The main reason is that in India all states Electricity boards are generating the Electricity, but consumers are wasting the Generated Electricity without Consumption.
    We are explaining here very simply from the Electrical Engineering Subject.

    To understand the Wastages of Electricity and Tariff Hike, it is helpful to understand the three different types of Power in Electrical Systems.

    1. Real Power is the power that is actually converted into useful work for creating heat, light and motion. Real power is measured in kilowatts (kW) and is totalized by the electric billing meter in kilowatt-hours (kWH).

    2. Reactive Power is the power used to sustain the electromagnetic field in inductive and capacitive equipment. It is the nonworking power component. Reactive power is measured in kilovolt-amperes reactive (kVAR).

    3. Total Power or Apparent power is the combination of Real Power and Reactive power.

    Total Power (KVAH) = Real Power (KWH) + Reactive Power (KVARH)

    Total power is measured in kilovolt-amperes (kVA) and is totalized by the electric billing meter in kilovolt-ampere-hours (kVAH).

    When any consumer is using Electricity to operate the inductive load equipment’s like Fluorescent lights, Air Conditioner, Induction Motors, Arc welding machine and Transformers, this equipment’s are destroying the Reactive Power (KVAR).
    So recover the above type KVAR losses, the Electrical Engineering Subjects and all states Electricity Regulatory Commission are asking to the Consumers to fix the Capacitors near to their Induction load equipment’s and for recover the KVAR losses.

    Next, all states the Electricity Regulatory Commissions are ordering to the Government Electricity Board to fix the Capacitors with Automatic Power factor Controller system to maintain ZERO level KVAR losses in the following areas.
    A) Distribution transformer end
    B) Substation end of 11/22KV distribution feeders
    C) Substation
    D) Generating Stations

    But in Practical, the Consumers and Government Electricity Board are not following fully as per Electrical Engineering Subject instructions and Electricity Regulatory Commission order because the Government Electricity Board is asking to minimize the KVAR losses only to the HT consumers but not to other all type of Consumers. Next, the Government Electricity boards also not able maintain the ZERO level KVAR losses in their all Sub Stations due to heavy major level KVAR losses in HT Consumers and other all type of Consumers (Except HT Consumers).
    To calculate and identify the KVAR losses in the TNEB KVAH Units, the TNEB is using the Electrical Engineering Formula is as follows:
    Power Factor = KWH/KVAH (The Measure of Electrical Efficiency is known as Power Factor)
    The Highlight notice to all is that the above said formula is officially demanded by Government only to the HT Consumers for measure their made KVAR losses. And this formula is not applied through Government Order (GO) to other all type of consumers for measure their made KVAR losses.
    In HT Consumer also Government required Power Factor is 0.9, i.e. 10% KVAR loss.
    Once we see the 1. HT Consumers made their KVAR losses and 2. All type of other Consumers made their KVAR losses to the Government (Government Generated Units loss and Generated Unit Cost losses) automatically we all will come out from the dark to lights for taking actions on these losses.
    Understanding the fact and figure, we have made the Example from the Tamilnadu Electricity Board Published consumers consumed report for the financial year 2011 – 2012.
    Note: Knowing the losses of Energy and Cost the data’s are used for calculation purpose but it may vary in real.

    We are giving the fact and figure of the above said 1.UNIT LOSSES and 2.UNIT COST LOSSES from the Tamilnadu Electricity Board published Consumer Consumption report for the Financial Year 2011 – 12.
    SL. No. HT Consumers
    KWH Units -
    TNEB Supplied KVAH Units

    1 HT Industries, Railways 19438 20409.9 TNEB supplied KVAH Units arrived from 5% of KWH Units. Note: TNEB approved KVAR loss is 10% but we made less 5% Unity Power Factor Consumers
    2 Educational, Institution Etc.(HT) 1064 1117.2
    3 Places of public Workshop 4 4.2
    4 Commercial and Other HT 1844 1936.2
    5 Lift irrigation and co – ops (HT) 14 14.7
    6 Pondicherry HT 471 494.55
    7 HT others 0 0
    Total 22835 23976.75
    All Other Type Consumers Except HT
    8 Domestic 15578 17914.7 TNEB supplied KVAH Units are arrived from 15% of KWH Units. Note: Maximum level KVAR loss is above 25% but we made less 10% for considering lights & heating non inductive loads

    9 Huts 243 279.45
    10 Defense Colonies etc 5 5.75
    11 Public lighting & water works 1111 1277.65
    12 Recognized Education Institution 620 713
    13 Places of public Workshop (LT) 83 95.45
    14 Cottage, Tiny 610 701.5
    15 Power loom 779 895.85
    16 Industries 4902 5637.3
    17 Agriculture & Govt. Seed Farm 14116 16233.4
    18 Commercial and Other LT 4728 5437.2
    Total 42775 49191.25
    Grand Total
    (HT & Other type consumers consumption) 65610 73168

    TNEB total generated Units (KVAH) for F/Y 2011 -12 = 73168mu
    TNEB billed Units (KWH) to Consumers for F/Y 2011 – 12 = 65610mu
    TNEB not billed Units (KVAR) to the Consumers for F/Y 2011– 12 = 7558million units loss to TNEB
    TNEB not collected money from not billed U nits for F/Y 2011 – 12 = 46481.7 million rupees loss to TNEB
    (7558mu x RS 6.15 per unit cost = 46481.7 million rupees.)
    “Highest demand met so far in the grid was 10859 MW on 19.07.2011”
    By Considering HT KVAR loss 5% and other type Consumers KVAR loss 15% means total loss is 20%.
    The 20% from the 10859 MW is 2171.8 MW. The 2171.8 MW demand is loss to the TNEB and it is more than Kudankulam 2nos Atomic Power Plants and its capital investment Cost is RS: 13500/- Crores.
    Above mentioned three losses are
    1. UNIT LOSS – 7558 million units
    2. UNIT COST LOSS – 46481.7 million rupees
    3. DEMAND LOSS – 2171.8 MW
    If we going to consider this as a average data’s for 28 states and 7 union territories (28+7 = 35)
    1. The Unit loss to the India – 7558million x 35 = 264530 Million Units
    2. Unit Cost loss to the India – 46481.7 x 35 = 1626859.1 Million Rupees
    3. Demand loss to the India – 2171.8 MW x 35 = 76013 MW

    - Above losses to India for the financial year 2011 -12 and the said losses are increasing every year and for all three losses the basic reason is ONE. i.e.
    Government Electricity Board is giving the Electricity to the Consumers is in the formulation of KVAH, But billing to consumers and Collecting money from Consumers from their KWAH consumption.
    So, then who will recover the NOT BILLED KVAR Units losses to the Government? And who will pay the not CLAIMED generated Units Cost to Government?
    Government is putting all above losses in their accounts.
    So recover the todays Electricity Shortage in India and reduce the Tariff hike to Consumers, The Central Electricity Regulatory Commission should come front for taking action strongly for giving benefit to the Publics and Government.

    Due to not maintaining the Proper Power Factor in HT Consumers, Commercial Consumers and Government Generation plant, Government Sub Stations and Government Distribution Stations Gene, the poor residential peoples of non-inductive load users are penalized by Power Cut and Tariff hike. Is it justified? This is total failures of the Electrical Engineers.
    Our Suggestion to the Central Electricity Regulatory Commission is that:
    First level required Implementation:
    1. To HT Consumers:-
    All new HT Consumers Electrical drawings should be approved by CEIG (Chief Electrical Inspector to Government) against the available proper Capacitors and Automatic Power Factor Controller in their Electrical systems for maintaining ZERO level KVAR losses (Maintaining Unity Power Factor).
    All Existing HT Consumers if not maintain the Unity Power Factor, they should be implemented by adequate Capacitors with Automatic Power Factor Controller in their electrical systems for maintaining ZERO level KVAR losses (Maintaining Unity Power Factor) within three months period time..
    All HT consumers’ consumptions should be billed through KVAH Units not by KWH Units.
    2. All Type Other Consumers:- (Except HT Consumers) –
    All new Consumers connection to be given based on available Capacitors for induction loads equipment and KVAH meters to be fixed for billing their consumptions. Then automatically their consumption will come less and they will not blame to the Government.
    All Existing Other Type Consumers should be instructed officially by the Government that present induction loads to be converted in to non-inductive load or Capacitors should be connected within three months period time if any inductive loads in their electrical systems. During that time period Government should remove the existing KWH meters and to be fixed KVAH meters. After three months KVAH meter billing system should be adopted in entire states of India for all type of consumers except non inductive load consumers of residential and for them not required to replace KWH meters immediately.

    Second level required Implementation to the Government Sub Stations-
    Maintaining the Zero level KVAR losses (Unity Power Factor) in the TNEB Sub Stations are based on the minimum level/Zero level KVAR losses in the Consumer side. Without Consumer support, Government Substations alone cannot maintain Good Power Factor.
    First the KVAR losses to be minimized fully in the consumer end and from the recovered units cost financial support all the Government Sub Stations should be strengthened by adding capacitors and connecting Automatic Power Factor Controller systems.

    Third level required Implementation to the Government Electricity Board -
    Government generated electricity wastage is equivalent to the power theft. So, need separately one Department and team in the Government for Monitoring the KVAR losses and maintaining the Unity Power Factor in the Consumers end.
    Kindly try to consider our suggestion of “Remove the KWH billing systems and adopt KVAH billing systems to all type consumers” in all states Electricity board in India.
    “THE GOD” will bless to you all by implementing said Suggestion in INDIA.
    My sincere thanks and regards to “THE GOD” for giving opportunity to write this letter to you all.
    Thanking You
    With Regards

    P.Easwaran, s/o E.P.Palaioh
    Samugarengapuram – PO
    Tirunelvelli – Dist
    Tamil Nadu
    Pin – 627112

    • shivanshtyagi says:

      Dear Mr. P.Easwaran,

      I want to inform you that we are not a government authority but just, website run by Power managers. However, we like to share your thoughts with all.

      Please send me your comment as an article or open letter to government. We will like to publish it, on our home page.

      Shivansh Tyagi

  8. raj says:

    ERC all over Indian has defeated the purpose of reforms by framing rules which have introduced draconian power by side doors

Leave a Reply

Your email address will not be published. Required fields are marked *


You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>



Lost Password


Please contact the administrator.