Over six years since the path-breaking Electricity Act promised to usher in a free market for power, reforms in the sector remain stymied as most States are stubbornly refusing to play ball.
Private investments in the power generation sector, especially in large-size projects such as the Ultra Mega Power Projects, could take a hit if States are allowed to continue blocking out efforts by units to sell power outside their boundaries.
Cautioning the Union Government, the Central Electricity Regulatory Commission (CERC) has said that if left unchallenged, the precedent could be “disastrous” to the efforts being made by the Centre to mobilise increased private sector participation.Asking the Union Government to “take urgent steps” for moving the Supreme Court against moves made by States such as Karnataka to stymie “open access,” the CERC has warned that if extraordinary powers delegated to States are misused to direct supply of power and force a breach of existing contracts for supply, the whole scheme of open access would collapse.
The issue threatens to snowball into a Centre versus States battle, especially in the wake of a specific instance of the Karnataka Government invoking Section 11 of the Electricity Act 2003 to prevent export of power outside the State, an order that was upheld by the Karnataka High Court.
“This ruling by the Karnataka High Court has created an environment of huge uncertainty to the generating companies in the country because now various State Governments can, and in fact are passing, orders under Section 11 to prohibit open access to the generators and thereby taking away the statutory right available under Section 10(2),” the CERC has said in a communication to the Centre. Section 10(2) of the Electricity Act gives a statutory right to generating companies to choose buyer of its electricity.
CERC has filed Special Leave Petitions in the Supreme Court against the judgment of the Karnataka High Court, which is listed for hearing later this month. It has, however, sought a separate intervention by the Power Ministry in the matter.
States refusal
Apart from Karnataka, Andhra Pradesh, Tamil Nadu, Maharashtra, Orissa and Rajasthan all the others have issued orders invoking emergency provisions under the Electricity Act to stymie open access, which goes against the very spirit of the reformist legislation. The provision of open access enables power generators to handpick consumers while allowing users to migrate to power suppliers of their choice.
A majority of these States have issued restrictive orders to prevent captive units and private plants from selling electricity outside the State on the grounds that there is a power deficit. The curbs on wheeling of power outside the State have mostly been invoked under Section 11 and 108 of the Act.
Affected entities
GMR Energy's naphtha-fired 220 MW barge-mounted plant in Mangalore district of Karnataka is among those affected by the State Government invoking Section 11 to ban exports late last year.
Other instances of open access rights being clamped by State utilities over the last five years include Tata Steel-subsidiary Jamshedpur Utility and Services Company Ltd's plans to wheel surplus power from its captive unit to another plant in Jharkhand.
SAIL-subsidiary Durgapur Steel plant's proposal for wheeling of surplus power using Damodar Valley Corporation's transmission network was stymied while Haldia Petrochemicals Ltd had been disallowed from wheeling surplus power to other companies interested in purchasing electricity, with the State administration citing capacity constraints in its transmission grid.
The Electricity Act has given powers to the State Governments under “extraordinary circumstances” to give directions to the generating stations to clamp supplies outside the state. These include “circumstances arising out of threat to the security of the state, public order or a natural calamity or such circumstances arising in public interest.”
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