A jolt to national energy security

Context: The recent proposal for Electricity (Amendment) Bill 2020, will erode the concurrent status of Electricity and increase burden on states.

Persisting problems in Electricity Sector

• Effect of Privatization : The two-part tariff policy introduced at the behest of World Bank in 1990s pushes for long term power purchase agreements (PPA) irrespective of distribution companies (DISCOMS) requirement.

• Over-optimistic projections : In power demand estimates by Central Electricity Authority leading to high all-India plant load factor of coal power plants.

• Renewable Energy thrust:

• Mandatory Renewable Purchase Obligations leading to increase in idle fixed costs payable by DISCOMS.
• Absence of viable storage for power delivery after sunset.
• Ambitious target of 175 GW power by 2022 aggravates the  burden on DISCOMS.

Issues with proposals in the Electricity Act 2020.

• Fewer Profitable Areas: The law is silent on whether private sub-franchise would be required to buy expensive power from DISCOMS or buy cheaper power from power exchanges.
• Greater concession to Renewable developers: leads to cascading effect on idling fixed charges.
• Eliminates cross subsidy: Each consumer category would be charged what it costs to service that category. This may hurt rural consumers. 
• Selection of State Regulators: Appointed by a central selection committee jeopardizes regulatory autonomy and concurrent status of electricity sector.
• Centralised Electricity Contract Enforcement Authority: Whose members and chairman are selected by the centre, created to adjudicate disputes relating to contracts. This will ensure states to fulfil their RPA despite already high-priced PPAs.

Conclusion: Electricity Bill 2020 tries to transfer burden of the ill designed policies of the Centre on to hapless states. This might have serious consequences for Federalism and energy security if India.