Draft Electricity Amendment Bill, 2025 Issued for Comments

To enhance industrial competitiveness, increase the share of non-fossil electricity generation, and strengthen regulatory accountability, the draft Electricity (Amendment) Bill, 2025 proposes major changes to the Electricity Act, 2003.

Key highlights of the proposed changes are:

1. Financial Viability of Distribution Companies

The draft Bill seeks to address persistent financial stress on distribution companies—primarily due to a mismatch between tariffs and actual cost of supply, as highlighted by the Supreme Court. To ensure timely cost recovery and financial discipline, it proposes:

• • Allowing Regulatory Commissions to determine cost-reflective tariffs suo motu if licensees fail to file petitions on time.
  • Mandating that such tariffs come into effect from April 1 each financial year.
  • Amendments are proposed to Sections 61(g), 64(1), and 66.

2. Promoting Economic Competitiveness

To improve industrial competitiveness, particularly for MSMEs, the draft Bill aims to rationalize tariffs, unlock demand, and reduce cost burdens through the following proposals:

• • Exemption from Universal Service Obligation (USO):
    State Commissions, in consultation with State Governments, may exempt distribution licensees from the USO for consumers eligible for open access (i.e. with demand above 1 MW). However, a designated licensee would be responsible for providing supply at a premium rate if alternate arrangements fail.
    → Amendment to Section 42(1) and insertion of a new Section 43(4).
  • Cross-Subsidy Reform:
    The draft proposes to fully eliminate cross-subsidies for Manufacturing Enterprises, Railways, and Metro Railways within five years from the commencement of the amendment.
  • Captive Generation Rules:
    It empowers the Central and State Governments to frame rules regarding eligibility for captive generation.
    → A new definition of “manufacturing enterprise” is proposed under Section 2(42a), with enabling provisions added to Sections 9(1) and 176(2).

3. Facilitating the Energy Transition

To support India’s non-fossil and renewable energy goals, the draft Bill proposes:

• • Empowering the Central Electricity Regulatory Commission (CERC) to introduce and regulate innovative, market-based instruments and products.
  • Introducing enforceable non-fossil energy consumption obligations, in line with mechanisms under the Energy Conservation Act, 2001.
  • Related provisions include:
    • Definition of “Energy Storage System” under Section 2(26a).
    • Amendments to Section 86(1)(e) to include non-fossil energy obligations.
    • Insertion of Section 142(2) to enable penal provisions for non-compliance with Renewable Purchase Obligations (RPOs).

4. Ease of Living and Doing Business

The draft Bill includes provisions aimed at simplifying procedures, protecting consumers, and ensuring consistent service standards:

• • Service Standards:
    It proposes to empower the Central Government to prescribe minimum service benchmarks nationwide, with State regulations not allowed to fall below this threshold.
    → Proviso to be inserted in Section 58.
  • Assessment and Appeals:
    • Caps the period for assessment of unauthorized electricity use at one year prior to inspection, to limit discretion and ensure proportionality.
    • Reduces the mandatory deposit for appeals from 50% to 33%, and empowers the appellate authority to waive or reduce the amount in cases of undue hardship.
      → Amendments to Sections 126(5) and 127(2).
  • Licensing Flexibility:
    Proposes to delete the requirement for a “no objection” certificate from the Central Government for granting licenses in areas that include defence establishments.
    → Deletion of clauses under Sections 15(2)(ii) and 18(2)(b).

5. Strengthening Regulatory Governance

To enhance accountability and efficiency of regulatory bodies, the draft Bill proposes the following:

• • Allowing Central and State Governments to refer complaints against members of the CERC and SERCs for failure to perform their duties.
  • Expanding grounds for removal to include wilful violation of statutory provisions or gross negligence.
  • Introducing a 120-day timeline for disposal of adjudicatory matters by regulatory commissions.
    → Amendment to Section 90(2) and insertion of Section 92(6).
  • Increasing the number of members in the Appellate Tribunal for Electricity (APTEL) from three to seven to enhance capacity.
    → Amendment to Section 112(1).

6. Other Key Reforms Proposed

• • Electric Infrastructure and Land Use:
    • Introduces the definition of “Electric Line Authority” under Section 2(20a).
    • Proposes a new proviso under Section 25, empowering the Appropriate Government to prescribe the manner for approval and implementation of intra- and inter-state transmission systems.
    • Substitutes Section 164 to provide a framework for placing electric lines, ensuring fair land compensation, and allowing appeals to the District Judge in case of disputes.
  • Cybersecurity in Power Systems:
    Proposes to empower the Central Electricity Authority (CEA) to frame regulations for cybersecurity of integrated power system operations.
    → New provisions under Sections 73 (ca) and 177.
  • Shared Network Use by Licensees:
    Proposes to allow distribution licensees to supply electricity through their own or shared networks, under regulatory supervision and subject to applicable charges.
    → Amendment to Section 14 and insertion of additional clauses under Section 181(2) to establish the regulatory framework.
  • Expanded Rule-Making Powers:
    The draft seeks to expand the rule-making powers of the Central Government under Section 180, enabling it to frame rules on:
    • Eligibility criteria for captive generation,
    • Implementation mechanisms for transmission systems,
    • Standards for laying electric lines and handling related disputes.
  • Electricity Council:
    Proposes to establish a high-level institutional mechanism called the Electricity Council, comprising Union and State Power Ministers to enable cooperative decision-making.
    → Insertion of Section 166(1A).

News reports indicate that one of the key objections to the proposed Electricity Council is that it is viewed as a mechanism for centralising authority and eroding state autonomy. Critics argue that this dilution of federal balance would shift decision‐making power over electricity policy and licensing from states to a central body, undermining local control over power governance.