New Challenges for the Power Sector 18 th India Power Forum On 17 th November, 2015, Hotel Imperial, New Delhi Presentation by: Shri V. S. Ailawadi – IAS (R) Fr. Chairman, Electricity Regulatory Commission

Power Sector Reforms – New Initiatives 2/3 The Electricity Act, 2003 – Comparative & progressive piece of legislation. Salient provisions-- Aimed at creating competitive and viable power sector. – Delicensing of generation – Open access – Trading – Regional/national electricity market – Independent system operator – Performance based regulation – Anti-theft – Consumer satisfaction Union cabinet approved some important amendments to the Electricity Act,2003 in December, 2014 The Electricity (Amendment) Bill, 2014 introduced in Parliament. 2

Power Sector Reform – New Initiatives 1/3 Key objectives of the Electricity (Amendment) Bill, 2014, namely; – Enhance efficiency and competition in distribution sector – Strengthen grid security and safety – Promote renewable energy and encourage open access – Rationalise tariff Paradigm changes with the proposed amendments; Separation of “carriage and content” – Creation of separate distribution licensee and multiple supply licensees to encourage competition in the retail segment of the value chain. – Protection of interests of the consumers by keeping one of the supply licensees as a government-controlled company – Existing distribution licensees to continue till expiry of their term as specified in their licensee’s conditions Promoting renewable energy with special provisions namely; – Uninterrupted OA & removal of surcharge. – Obligatory /mandatory purchase of RE 3

Power Sector Reform – New Initiatives 3/3 Implications/Impact of the proposed amendments Separation of retail business from the Distribution Licensee. Renewable energy generation obligation (RGO) for coal/lignite-based power- generating companies – No cross-subsidy if power is procured from renewable energy sources under open access open access provision for consumers with load of 1 MW or more through bilateral agreements) – Penalty clause for violating norms under the Electricity Act – Enhanced powers to regulatory commissions – Tariff Policy changes for promotion of RE Structural Reforms left untouched; – Ring Fencing of the SLDCs from the control of the State power utilities. – No road map for making SLDCs independent & autonomous. – No role for the Regulator in the timing & entry of new player(s) in the retail supply competition. – Govt role enlarged not only in policy but in certain aspects of the regulations. 4

Unviable Distribution Sector 1/2 The aggregate losses for all Distribution Utilities Rs billion (March 2014) 5 Top performing SEBs by profits StateFY12FY13FY14 Maharashtra Delhi Punjab Gujarat WB All figures in Rs. Billion(1 billion is 100 crore)

Unviable Distribution Sector 2/2 6 SEBs with big losses StateFY12FY13FY14 UP Rajasthan Tamil Nadu MP Haryana States showing improvement StateFY12FY13FY14 AP Maharashtra Bihar All figures in Rs. Billion(1 billion is 100 crore)

Efficiency – Slow Progress 7 Audited Figures for Source: Ministry of Power

3 rd Bailout Package Discom debt is de facto borrowing of states which is not counted in de jure borrowing States shall take over 75% of Discom debt as on 30 th September, 2015 Principal debt taken over will not be included in fiscal deficit of states. However, interest has to be serviced within FRBM limits State will issues non-SLR bonds (SDL) with maturity period of years with a moratorium on principal up to 5 years Debt taken over50%25% Audited Figures for Source: Ministry of Power

Thank You 9