Power and People: How the change in Electricity Rules will shift the power from Utilities to Consumers?

The Electricity rules serve to “empower” consumers with rights that would allow them to access continuous supply of quality, reliable electricity. The proposed Rules, aimed at protecting rights of consumers, come at an appropriate time when many states have moved away from sustained shortages and have witnessed addition of many new consumers due to the concerted efforts of electrification drives across the country.  Some Rules such as tracking new connections, streamlining application process for prosumers, and introduction of automatic compensation mechanisms are welcome steps. The new rules attempt to address this issue by putting in place a structure to make discoms more accountable to the end consumer, placing him at the centre of the regulations.

Hence, the implementation as per the rules will bring in new challenges and opportunities to consumers and distribution companies as well. So, it augers well to come up with the impact analysis of the change in electricity rules. Mr. Sumit Sethi (Associate Consultant, R&C Division) will address the current dynamics of distribution utilities infrastructure and Mr. Abhay Pathania (Associate Consultant, R&C Division) will look into the detailed impact analysis of the changes brought in by the new Electricity Rules on distribution utilities and consumers.

Current Realities of Distribution Infrastructure in India

India’s power sector is saddled with various issues, including electricity demand slowing due to economic slowdown aggravated by the impact of COVID-19 in 2020. The absence of competition, unsustainable cross-subsidies, economically inefficient tariff setting processes, dishonouring the PPAs, and a lack of modern technology and infrastructure development are adding to discoms’ losses. Consequently, there exist lack of the quality services and round the clock electricity to the consumers. Discoms continue to incur huge financial losses, a clear reflection of massive subsidies, largely unfunded by the state governments. Consequently, the discoms are unable to improve upon distribution infrastructure. For example, the mass rollout of the smart metering deployment is still at the nascent stage even multiple schemes are active. Hence to reduce the gap between power companies and the consumers keeping consumers at the centre, the government announced changes in electricity (Change in Consumer) Rules, 2020 make the distribution companies more accountable to consumers, thus reducing their monopolies and giving consumers more alternatives.

The absence of competition, unsustainable cross-subsidies, economically inefficient tariff setting processes, dishonouring the PPAs, and a lack of modern technology and infrastructure development are adding to discoms’ losses.