The act covers major issues involving generation, distribution, transmission and trading in power.
For the purpose of distancing state governments from tariff determination, The Electricity Regulatory Commissions Act was enacted in 1998.
The new act consolidates the position for existing laws and aims to provide for measures conducive to the development of electricity industry in the country.
The act has attempted to address certain issues that have slowed reform in the country and consequently has generated new hopes for the electricity industry.
This paper reviews the Electricity Act 2003, to highlight how the new features are different from the existing legal provisions and whether these measures have economic rationale.
The generators can sell electricity to any licensees or where allowed by the state regulatory commissions, to consumers directly.
However the act provides for imposition of a surcharge by the regulatory body to compensate for some loss in cross-subsidy revenue to the SEB's due to this direct sale of electricity by generators to the consumers.
The concept of dividing the country in to regions by clubbing few states, emerged in seventies to envisage pit head super thermal power stations nearer to coal mines and to supply the generated power to far flung areas by high voltage transmission lines.
Moreover, the electricity generation from other sources such as natural gas, hydro, nuclear, wind, solar, imported coal, etc.
has increased substantially and country has achieved decentralisation and diversification with respect to electricity generation and its consumption.
Each state should be considered as one administrative entity/region/area for power transmission and its losses accounting and its commercial settlement as a part of national grid.