“While the amendments do talk about sublicensing and relaxing the licensing norms for franchisees, it is not clear if this would mean multiple suppliers within a given region,” Ivaturi said
New Delhi: The draft bill for the amendment of Electricity Act ensures financial independence of power discoms but must also provide more choices to consumers through increased privatisation in the distribution sector, consulting firm EY has said.
“The direct benefit transfer of subsidies to the beneficiaries, allowing sub-licensees and franchisees and giving more teeth to the regulators through an independent selection panel will ensure the financial independence of discoms,” said Rajesh Ivaturi, Partner, Power and Utilities at EY India, adding that the draft needs to be more bolder in terms of privatisation of distribution sector and allowing more choices to the consumers.
“While the amendments do talk about sublicensing and relaxing the licensing norms for franchisees, it is not clear if this would mean multiple suppliers within a given region,” Ivaturi said.
On the constitution of the Electricity Contract Enforcement Authority, EY has said that this newly created entity would sit under the Appellate Tribunal but would primarily focus on issues related to contracts. “This could send a good signal to the investors, especially overseas investors in the renewable sector and could help in bringing in more private capital to the sector,” it said.
The draft amendments propose cross-border transactions which could open up new revenue opportunities for generation and transmission companies. It has also been recommended that no electricity shall be scheduled unless the discoms provide adequate payment security to the gencos, providing much needed relief to stranded assets in the power sector.
The EA amendment mandates the states to transfer power subsidies directly to the consumers to reduce the financial burden on the distribution utilities. While this is a welcome move, the metering and measurement of agricultural consumption which is one of the largest recipients of subsidies is sub-optimal in many of the states and needs to be addressed, said EY.
According to EY, there are also a few key misses which need to be addressed in the draft amendment. There are no clear guidelines on sun-set dates for all cross subsidies in the system, especially on the cross subsidy surcharges which have been a bane for free power procurement by large consumers, said EY.
It added that no penalty on poor quality of power supply and service norms have been prescribed in the amendments and also there are no stringent guidelines on loss reduction and efficiency improvement.