ACTS RELATED TO TARIFF

⚫Group Number: 8
⚫Siddhesh Kulkarni
⚫Aditya Ullas
⚫Aaditya Mankar
⚫Niranjan Taware
The Electricity Act 2003
The Electricity Act, 2003 is an Act of the Parliament of
India enacted to transform the power sector in India. The
act covers major issues involving generation, distribution,
transmission and trading in power. While some of the
sections have already been enacted and are yielding
benefits, there are a few other sections that are yet to be
fully enforced till date.
What is Tariff ?
In simple language tariff is a term used to denote the cost
of a service, which the user has to pay to avail that service.
For example when a person wants to travel he has to buy a
ticket. The cost of the ticket represents tariff. In relation to
electricity service, tariff consists of two parts i.e. Fixed
Cost and Variable Cost. It is also called as Two Part
Tariff.
What is Tariff ?
Fixed cost consists of financing cost - interest,
depreciation, return on equity (profit) and tax liabilities of
power generation, transmission and distribution network.
The Variable cost consists of fuel cost, operation and
maintenance cost, cost of electricity purchased from other
utilities, cost of power lost in transmission & distribution
and State levies such as surcharge, tax etc.
Section 61: Tariff Regulations
The Appropriate Commission shall, subject to the
provisions of this Act, specify the terms and
conditions for the determination of tariff, and in
doing so, shall be guided by the following,
namely:--
a. the principles and methodologies specified by the
Central Commission for determination of the tariff
applicable to generating companies and
transmission licensees;
Section 61: Tariff Regulations
b. the generation, transmission, distribution and supply of
electricity are conducted on commercial principles;
c. the factors which would encourage competition,
efficiency, economical use of the resources, good
performance and optimum investments;
d. safeguarding of consumers' interest and at the same time,
recovery of the cost of electricity in a reasonable manner;
Section 61: Tariff Regulations
e. the principles rewarding efficiency in performance;
f. multiyear tariff principles;
g. that the tariff progressively reflects the cost of supply of
electricity and also reduces cross-subsidies in the manner
specified by the Appropriate Commission;.
h. the promotion of co-generation and generation of
electricity from renewable sources of energy;
Section 62: Determination of Tariff
1. The Appropriate Commission shall determine the tariff in
accordance with the provisions of this Act for–
a. supply of electricity by a generating company to a
distribution licensee:
Provided that the Appropriate Commission may, in case
of shortage of supply of electricity, fix the minimum and
maximum ceiling of tariff for sale or purchase of
electricity in pursuance of an agreement, entered into
between a generating company and a licensee or between
licensees, for a period not exceeding one year to ensure
reasonable prices of electricity;
Section 62: Determination of Tariff
b. transmission of electricity;
c. wheeling of electricity;
d. retail sale of electricity:
Provided that in case of distribution of electricity in the
same area by two or more distribution licensees, the
Appropriate Commission may, for the promoting
competition among distribution licensees, fix only
maximum ceiling of tariff for retail sale of electricity.
Section 62: Determination of Tariff
2. The Appropriate Commission may require a licensee or a
generating company to furnish separate details, as may be
specified in respect of generation, transmission and
distribution for determination of tariff.
3. The Appropriate Commission shall not, while
determining the tariff under this Act, show undue
preference to any consumer of electricity but may
differentiate according to the consumer's load factor,
power factor, voltage,
Section 62: Determination of Tariff
total consumption of electricity during any specified
period or the time at which the supply is required or the
geographical position of any area, the nature of supply and
the purpose for which the supply is required.
4. No tariff or part of any tariff may ordinarily be amended,
more frequently than once in any financial year, except in
respect of any changes expressly permitted under the
terms of any fuel surcharge formula as may be specified.
Section 62: Determination of Tariff
5. The Commission may require a licensee or a generating
company to comply with such procedure as may be
specified for calculating the expected revenues from the
tariff and charges which he or it is permitted to recover.
6. If any licensee or a generating company recovers a price
or charge exceeding the tariff determined under this
section, the excess amount shall be recoverable by the
person who has paid such price or charge along with
interest equivalent to the bank rate without prejudice to
any other liability incurred by the licensee.
Section 63: Determination of Tariff
by bidding process
⚫Notwithstanding anything contained in section 62, the
Appropriate Commission shall adopt the tariff if such
tariff has been determined through transparent process of
bidding in accordance with the guidelines issued by the
Central Government.
● Promote competitive procurement of transmission
services of electricity so as to have competitive tariffs.
● Encourage private investment in transmission lines.
● Facilitate transparency and fairness in procurement
processes;
● Facilitate reduction of information asymmetries for
various bidders;
● Protect consumer interests by facilitating competitive
conditions in procurement of transmission services of
electricity;
● Enhance standardization and reduce ambiguity and
hence time for materialization of projects;
Section 64: Procedure for Tariff
order
1. An application for determination of tariff under section
62 shall be made by a generating company or licensee in
such manner and accompanied by such fee, as may be
determined by regulations.
2. Every applicant shall publish the application, in such
abridged form and manner, as may be specified by the
Appropriate Commission.
Section 64: Procedure for Tariff
order
3. The Appropriate Commission shall, within one hundred and
twenty days from receipt of an application under sub-section
(1) and after considering all suggestions and objections
received from the public,--
⚫ a. issue a tariff order accepting the application with such
modifications or such conditions as may be specified in that
order;
⚫ b. reject the application for reasons to be recorded in writing
if such application is not in accordance with the provisions of
this Act and the rules and regulations made there under or the
provisions of any other law for the time being in force:
Provided that an applicant shall be given a reasonable
opportunity of being heard before rejecting his application.
Section 64: Procedure for Tariff
order
4. The Appropriate Commission shall, within seven days of
making the order, send a copy of the order to the
Appropriate Government, the Authority, and the
concerned licensees and to the person concerned.
5. Notwithstanding anything contained in Part X, the tariff
for any inter-State supply, transmission or wheeling of
electricity, as the case may be, involving the territories of
two States may, upon application made to it by the parties
intending to undertake such supply, transmission or
wheeling, be determined under this section by the
Section 64: Procedure for Tariff
order
State Commission having jurisdiction in respect of the
licensee who intends to distribute electricity and make
payment there for.
6. A tariff order shall, unless amended or revoked, continue
to be in force for such period as may be specified in the
tariff order.
Section 65: Provision of Subsidy by
State Government
⚫If the State Government requires the grant of any subsidy
to any consumer or class of consumers in the tariff
determined by the State Commission under section 62, the
State Government shall, notwithstanding any direction
which may be given under section 108, pay, in advance
and in such manner as may be specified, the amount to
compensate the person affected by the grant of subsidy in
the manner the State Commission may direct, as a
condition for the license or any
Section 65: Provision of Subsidy by
State Government
other person concerned to implement the subsidy
Provided for by the State Government:
Provided that no such direction of the State
Government shall be operative if the payment is not
made in accordance with the provisions contained in
this section and the tariff fixed by the State
Commission shall be applicable from the date of issue
of orders by the Commission in this regard.
Section 66: Development of
market
⚫The Appropriate Commission shall endeavour to promote
the development of a market (including trading) in power
in such manner as may be specified and shall be guided by
the National Electricity Policy referred to in section 3 in
this regard.