A leading commentator has expressed scepticism over the objectives of the Electricity (Amendment) Bill 2014 and doubted its capacity to instil intended competition in the power sector. The most important changes proposed relate to restructuring of the distribution wing, according to P Parameswaran, former member (technical), Kerala State Electricity Regulatory Commission.
Parameswaran has also been a former State electricity ombudsman, Kerala, and former chief engineer (system operation), Kerala State Electricity Board.
The distribution wing has two main components. One is the network business: building, operating and maintaining the network of the required capacity including providing connectivity to the needed.
The second is the supply business: contracting power from the generating companies or traders to meet demand, transferring to required delivery points and meeting the dynamic demand, metering, and billing.
These two have often been referred to as 'carriage' and 'content' functions respectively. Amendments to the existing Electricity Act, 2003, propose to segregate the carriage (distribution) from content (supply).
This is sought to be done by introducing multiple supply licensees based on market principles while persisting with carriage as a regulated activity.
Proponents of the amendments aim to inject the dynamics of the free market to this 'weakest link' of the power sector through restructuring. But experts do not generally advocate the segregation of carriage and content in such a hasty fashion.
Scandinavian and California models are sought to be copied without considering the realities of this country and its economy.
"One will be excused for criticising the 'second generation' of reforms in the sector as untimely and dangerously immature. Some people believe that at best it can be termed as a prescription for chaos," Parameswaran said.
The very prospect of allowing market forces into the sector, as is intended, is challenging given the unique features about electricity – it can be transmitted only through wire and cannot be stored.
Reforms culminating in the Electricity Act 2003 have failed to impress observers since the country has not been able to hold a healthy debated on their impact on the sector.
In any case, symptoms of a deeper crisis are already visible. While huge capacities remain underutilised in some zones, power would not flow to some others due to perpetual constraints of linkages.