Abstract

The Ministry of Power circulated the Draft Electricity (Rights of Consumers) Rules on 9 September, 2020 to address consumer protection in the power sector. Through these Rules, the Government intends to replace the existing legal framework surrounding the rights of electricity consumers with one that adequately represents the interests of consumers. The changes contemplated under the Rules appear to be novel considering the prevailing status of the sector. The Draft Rules call for reforms such as 24×7 power supply for all consumers, technological enablement, strict adherence to the standards of performance by distribution utilities and strengthening grievance redressal mechanisms among others. This Post seeks to highlight the extent of protection guaranteed by the proposed rules, the scope of implementation as well as the impact on the solar industry.

“The seller needs but one eye, whereas, for the buyer, a hundred eyes are never too many”

-Basque proverb

 At the centre of the power ecosystem lie consumers, who have been confined to a passive role in the sector. Most consumers do not actively participate in understanding the subtleties of electricity. They utilize electricity and pay bills. A concrete set of rights must be guaranteed by the Government to ensure that consumers benefit from minimum service standards. These rights have to be sufficient to cope with the erratic nature of the power markets. The introduction of a pro-consumer policy is a long-overdue move to finally transform the market into a fully competitive and consumer-friendly one. On 9 September, 2020, the Ministry of Power circulated the Draft Electricity (Rights of Consumers) Rules [1], addressing the rights of consumers and prosumers. The objective was to provide consumers with better services and facilities as they are the most important stakeholders in the power sector.

 

Current Legal Framework on the Protection of Electricity Consumers

Capacity building of electricity consumers is the substratum of the electricity market. The commitment of the Electricity Act to safeguard the interests of consumers can be discerned from the preamble of the Act itself. It promotes the following rights of consumers [2]: Right to information, rights related to new connections, rights related to security deposits, rights related to metering, rights pertaining to billing and payment, right to receive a notice and due process before disconnection and re-connection, rights related to standards of performance and right to grievance redressal. Specific provisions dealing with these rights include Sections 42, 43, 56, 57, 58, 59, 173 and 174. Although the legal framework for the protection of electricity consumers is enshrined in the Electricity Act [3], other statutes such as the Consumer Protection Act [4] , the Electricity Rules [5] , the National Electricity Policy [6] and the Tariff Policy [7] give flesh to the rights stipulated under the Act. Additionally, several states have Consumer Charters in place that enumerates the rights of electricity consumers.

 For ensuring stakeholder participation in the decision-making, the Act established a Central Advisory Committee and State Advisory Committees to represent the interests of industries, labour, consumers, non-governmental organisations and research bodies in the electricity sector. Apart from these committees and the Forum of Regulators, a committee is constituted in each district by the Appropriate Government to review the quality of power supply and consumer satisfaction. However, the Act does not have any provision on the composition of the district committees.

Most states have notified regulations for Consumer Grievance Redressal Forums (CGRF), Ombudsman, performance standards [8] as well as consumer rights’ statements. Some states have even implemented consumer advocacy mechanisms [9] to spread awareness about the rights and responsibilities of consumers. On the face of it, the necessary steps have been taken by the State Commissions and stakeholders towards enforcing the statutorily guaranteed rights of electricity consumers. However, most of these approaches were focused on efficiency gains alone, thereby failing to translate into benefits for consumers. Moreover, the decentralised character of the power sector derails the mandate of consumer protection as states lack consensus and uniformity in their approach in protecting consumer rights. Therefore, what needs to be grappled is the evident gap between the vision and implementation of consumer protection for electricity consumers. Through these rules, the rights and promises previously guaranteed by the Government have been regurgitated in the hopes of stricter implementation.

The Pro-Consumer aspects of the Policy

The Government has unequivocally labelled the Draft Electricity (Rights of Consumers) Rules as a ‘pro-consumer’ policy. It identifies vital services availed by consumers and prescribes the minimum service levels and standards for the performance of these services, ensuring one of the rudimentary protections of electricity consumers. Moreover, the Rules call for the introduction of corporate culture [10] in the state utilities. Corporate culture is an energy field in itself that combines the vision of the corporation and its operational style to create an identity or value for itself. This would change the way consumers perceive distribution companies (DISCOM) and foster a sphere of mutual understanding.

 The following are the key provisions under the Draft Rules:

 1. Round-the-Clock (RTC) supply of power

Electricity is crucial for the socioeconomic development of any country. Reliability of supply of power is indeed one of the prerequisites of an advanced economy. The Government of India had launched the ‘Power for All’ program [11] in 2014 with the vision of providing uninterrupted quality power to every single consumer category, except agricultural consumers by 2019. It seems that this vision has been materialised under these rules. Rule 8 of the Draft Rules states that the distribution licensee shall supply 24/7 power to all consumers. The Commission may specify lower hours of supply for categories like agricultural consumers. Furthermore, the parameters for the maintenance of the reliability of supply shall be determined by the Commission as well. Outages will be monitored by the distribution licensee with a mechanism preferably involving automated tools. 

This is indeed a historic move on the part of the Government. However, a multitude of factors come into play to provide uninterrupted quality power supply to the second most populous country in the world. Firstly, the supply chain has to maintain capacity utilisation to pave the way for a cleaner, affordable and more reliable power supply. Secondly, the development of renewable-based generation must be emphasised. Lastly, there must be effective implementation lest the rule becomes a toothless tiger. Persistent stumbling blocks such as the increased financial strains, power shortages [12], and insufficient workforce to collect payments from rural areas [13] have to be dealt with first before such promises are made by the Government. 

2. Minimum Standards of Performance

Providing minimum service standards of performance for the supply of electricity is imperative to improve the power quality of supply and ensure meaningful access. The onus placed on the DISCOMs under the Act to adhere to these standards will now be backed by a compensation mechanism under Rule 10 of the Draft Rules that assures automatic compensation to consumers. Moreover, reliability of performance will be expressed through two measures: System average interruption duration index (SAIDI) and System average interruption frequency index (SAIFI) [14].

The quality provided to the consumers in the supply of electricity results from a range of quality factors such as commercial quality standards relating to customer service, continuity of supply quality standards, reliability of electricity supply and voltage quality standards. Until now, the standards of performance reflected the preferences of licensees, rather than the preferences of consumers. Licensees had defined their quality levels which often led to cost cuts at the expense of the consumers’ dissatisfaction. With this provision, the Government has taken up the responsibility of regulating the quality of service and prescribe standards of performance for the power sector. However, the burden placed on DISCOMs by the compensation mechanism might worsen their financial health [15] as procurement costs are mostly locked into long-term contracts, and declining capacity utilisation of power plants has led to a higher unit cost of procurement for distribution utilities along with fall in demand.

 3. Technological Advancement in the Power Sector

The use of advanced technologies and the advancement of information technology have become indispensable for the power sector in the 21st century. Undoubtedly, operational technologies, along with smart technologies and advanced generation technologies, will lead to higher output in the power sector. A new consumer-centric attitude that promotes the participation of consumers can be achieved with the help of digital communication and control systems.

For the release of new connections and modification in existing connections, all the necessary details are to be displayed on the website of the distribution licensee. For the submission of application forms, a web portal and a mobile application will be created with an integrated tracking mechanism. These application forms are free to download, and hence, the payment of processing fees has been eliminated. Moreover, for new connections up to a load of 10 kW, the application form needs to be accompanied by just two documents: identity proof and proof of applicant’s ownership or occupancy, thus making the procedure time-efficient and simplified.

Rule 9 dealing with the setting up of renewable energy generation system for prosumers mandates the creation of an online portal for receiving applications for installation, interconnection and metering. Moreover, Rule 5 provides for smart pre-payment meter, which benefits consumers, DISCOMs and the Government alike. Consumers have the option to access data for checking their consumption on a real-time basis. In case the meter is inaccessible to the meter reader, the consumer can send the picture of the meter reading and date. Moreover, billing and payment have been digitalized, making it mandatory to pay bill amount of more than Rs. 1000 online.

 Certainly, digitisation of the power sector is not devoid of risks. With such extensive use of IT and digital networks, the system will be prone to cyber attacks [16]. The Rules seem silent on the promotion of cyber-security of digital systems. Considering the cascading effects on the power system and infrastructure, the Government cannot turn a blind eye to this.

4. Consumer as Prosumer

A prosumer has been defined under the Rules as a person who consumes electricity from the grid and can also inject electricity into the grid for distribution licensee, using the same point of connection. These active energy consumers dramatically change the electricity system. Various types of prosumers exist [17], from residential prosumers who produce electricity through Solar Photovoltaic (PV) panels to public institutions such as schools or hospitals.

The Draft Rules confer the same rights as general consumers to prosumers. Rule 9 states that the Commission will lay down regulations on Grid Interactive Roof Top Solar PV system as well as the limit for renewable energy capacity. A commendable point under these rules is the creation of timelines to be adhered to by the distribution licensee. In case of any delay on the part of the distribution licensee without any just cause, the licensee is liable to pay compensation to the consumer at Rs. 500 per day for each day of default.

5. Grievance Redressal and Consumer Awareness

One of the central tenets of consumer protection is grievance redressal. In line with the provisions of the Electricity Act and the policies, various steps have been taken by stakeholders towards institutionalising the mechanisms of grievance redressal, such as the Consumer Grievance Redressal Forum (CGRF) and the Ombudsman. The CGRF and Ombudsman are forums where consumers can take up individual grievances. Regulatory consultations and hearings at the state level offer a platform to raise and discuss substantive collective issues. However, there was a multitude of problems that plagued this mechanism. Firstly, there was no clarity as to the consumer experience and whether these forums provided the needed deliberative space. Secondly, there was a lack of public awareness and limited accessibility of these forums that posed as a significant hurdle to effective participation, especially in rural areas. Thirdly, the emergent institutional and regulatory architecture was ambiguous due to the variance in the structures across states.

Under the Draft Rules, CGRFs will be created at different levels. The timeline for grievance redressal will be 30 days under normal circumstances and shall not exceed 45 days. Consumers shall have the option to choose company level CGRF before appealing to the Ombudsman. DISCOMs shall send quarterly reports to the Ombudsman and the Commission on performance parameters and consumer grievances related information showing the extent to which the timeline has been followed. For common services, a 24×7 toll-free call centre shall be set up along with a Customer Relation Manager (CRM) System to get a unified view of the services requested. However, a Pan-India helpline had been set up in 2016 [18], which has been struggling with issues such as language constraints [19] and lack of capital investment by private distributors. Hence, the existing impediments must be alleviated for this initiative to be successful.

For consumer education, Rule 13(4) states that distribution licensees shall take the following measures to spread awareness: Availability of a manual for the procedure for providing common services and handling customer grievances, the publication of standards of performance along with bills, arranging due publicity to spread awareness of consumer rights, displaying necessary information on the website and creating awareness regarding new technologies.

The one area that deserves to be included under the Rules is consumer advocacy. Consumer advocacy assists in carrying out awareness and educational programs as well as analyzing data from utilities, CGRF and Ombudsman for trends and potential problems. The Rules ought to have laid down mechanisms that support advocacy for vulnerable groups and financial support for consumer advocates. If the consumer experience under these mechanisms is not up to the mark, the CGRF should be made independent of DISCOMs.

Other provisions

Several beneficial provisions have been made under the Rules. For electrified areas of a load up to 150 KW or higher, commissions are required to determine demand charges in such a manner to cover the average cost of connection and avoid delay in site inspection and estimation of demand charges for each case. Timelines have been prescribed across the Draft Rules for different purposes, from new connections to meter testing. Additionally, unnecessary fees have been eliminated. In case of delay for more than 60 days in serving the electricity bill, consumers will get a rebate of 2-5% as specified by the Commissions.

The Bitter Pill: Impact on the Solar Power Industry

While the Ministry of Power claims the Rules to be pro-consumer, this policy fails when it comes to being solar-friendly and consequently, being consumer-friendly. To promote rooftop solar installations, the rules mandate that DISCOMs will have to make all arrangements to facilitate installation of renewable energy generation capacity in the premises of the prosumers. Rule 9 further states that the Commission will lay down regulations on Grid Interactive Roof Top Solar PV system for net metering for loads up to 5 kW and for gross metering for loads above 5 kW. Typical energy usage for big households, offices and commercial shops starts from 5 kW and above. It is essential to examine the implications of both the systems to understand the underlying impact of gross metering as opposed to net metering.

With the net metering system [20], energy is sent to the household first, after which the excess energy is sent back into the grid. Here, the solar energy that is unused by the consumer is sent to the grid, and the consumer will receive a payment/feed-in tariff for the excess energy generated. Under the gross metering system [21], the total energy generated is sent to the grid. Hence, the consumer pays for the energy consumed from the grid and receives a payment for the solar energy generated by the system separately. The problem here is that, generally, if the feed-in tariff is lower than the price paid for electricity under the gross metering system, the consumer will suffer a loss in the long run. Since the consumer is only paying for the extra energy consumption from the grid, net metering may lower final electricity bills. 

As one of the primary sources of renewable energy, solar power generation has been a priority for India. With an ambitious target of installing 175 GW of renewable energy capacity by 2022 [22], which includes 100 GW from solar power, such a provision has no place in the rules. Implementing gross metering systems will steer consumers away from utilizing solar power. With the 5kW cap, consumers will restrict their project size below the limit or not opt for solar altogether, thereby drastically affecting the MNRE Phase II of the grid-connected rooftop solar programme [23]. Indeed, the provision stands to provide DISCOMs with a revenue protection measure considering the massive outstanding debts and financial instability [24]. However, it is unfair that the consumers have to get the short end of the stick.

A Long Way Ahead: Concluding Remarks

Although this is a laudable step by the Government, the question that arises is whether the draft stands true to the expectations it lays down. With the economic slowdown, lower demand for electricity from the industrial Sector and financial inability of power distribution companies [25] to purchase power, it would take a miracle for the effective implementation of these provisions, especially in the wake of the pandemic.

It is indeed an excellent triumph for India to have provided electricity to 95% of the population [26]. However, providing access to electricity is merely a stepping stone. In large parts of rural India, access to reliable and affordable electricity continues to pose challenges [27]. In these areas, electricity is crucial to support income-generating activities and to allow the utilisation of modern appliances and agricultural equipment. It is only through timely provision of subsidies [28], collection efficiencies, metering practices [29] and healthy sales and revenue distribution that consumer protection can become a reality in the electricity sector.

With the plethora of policy changes and proposed amendments in the electricity sector, DISCOMs and consumers alike are facing several issues. For consumers, one such issue is the introduction of the Direct Benefit Transfer Scheme (DBT), which will increase upfront costs [30]. On the other hand, DISCOMs are struggling to bring their infrastructure, operational technologies and contractual obligations under power purchase agreements (PPA) in tune with these changes. Moreover, protests against the privatization of DISCOMs [31] have raised concerns regarding the interruption of power supply. The Government must tackle the prevailing hornets’ nest before bringing forth initiatives that would be laxly implemented.

Reforms in the electricity sector have to ultimately create a competitive market where all the stakeholders gain. Consumers need to be able to reap the benefits of competition, transparent offers, reliable information on the options available and clear information on billing, consumption and costs. They require effective means for the redressal of grievances without delay. DISCOMs have to ensure uninterrupted, affordable and renewable power, based on a set of performance standards, to every single category of consumers, ranging from MSMEs to rural households.

About the Authors

Tariq Khan is a Principal Associate at Advani & Co. and was the Youngest Recipient of Business World’s 40 Under 40 (Legal – India) Award

Hamna Viriyam is a 3rd Year Law Student at the National University of Advanced Legal Studies (NUALS), Kochi and is an Associate Editor at IJPIEL

© 2020 Advani & Co| All Rights Reserved

© 2020 National University of Advanced Legal Studies| All Rights Reserved

Editorial Team

Managing Editor: Naman Anand

Editor-in-Chief: Akanksha Goel

Senior Editor: Kanak Mishra

Associate Editor: Hamna Viriyam

Junior Editor: Swadha Sharma

Preferred Method of Citation – Tariq Khan & Hamna Viriyam, ‘Where the Wires Crossed: An Analysis of the Draft Electricity (Rights of Consumers) Rules, 2020’ (IJPIEL, 19 October 2020)

<https://ijpiel.com/index.php/2020/10/19/where-the-wires-crossed-an-analysis-of-the-draft-electricity-rights-of-consumers-rules-2020/>

Endnotes

[1] https://www.powermin.nic.in/sites/default/files/webform/notices/Draft_Electricity_Rights_of_Consumers_Rules_2020.pdf

[2] https://cuts-ccier.org/pdf/cbec-consumer-rights-and-responsibilities.pdf

[3] http://www.cercind.gov.in/Act-with-amendment.pdf

[4] http://egazette.nic.in/WriteReadData/2019/210422.pdf

[5] http://www.apserc.nic.in/pdf/electricity-rules-2005.pdf

[6] https://www.cea.nic.in/reports/committee/nep/nep_jan_2018.pdf

[7] http://www.cercind.gov.in/2018/whatsnew/Tariff_Policy-Resolution_Dated_28012016.pdf

[8] https://cuts-ccier.org/pdf/Consumer_Participation_and_Protection_in_Electricity_Regulation-A_Study_of_Five_States_in_India.pdf

[9] http://www.forumofregulators.gov.in/Data/HomePage/FOR%20Report%20on%20Protection%20of%20Consumer%20Interest-11.11.2008.pdf

[10] https://economictimes.indiatimes.com/industry/energy/power/electricity-rights-of-consumers-rules-2020-consumer-rights-rules-to-be-notified-soon/articleshow/78024746.cms?from=mdr

[11] https://www.recindia.nic.in/power-for-all

[12] https://www.business-standard.com/article/economy-policy/how-low-power-prices-prevent-india-from-supplying-24×7-power-to-all-homes-119061700071_1.html

[13] https://energy.economictimes.indiatimes.com/energy-speak/how-to-get-rural-indian-households-to-pay-for-electricity/3818

[14] https://npp.gov.in/glossary

[15] https://energy.economictimes.indiatimes.com/news/power/how-the-economic-slowdown-has-dented-indias-power-sector/73083261

[16] https://energy.economictimes.indiatimes.com/energy-speak/risks-and-rewards-of-digital-transformation-in-the-energy-sector/4060

[17] https://thecsrjournal.in/prosumers-in-india/

[18] https://www.ndtv.com/india-news/1912-the-new-helpline-for-pan-india-electricity-complaints-1420688

[19] https://www.hindustantimes.com/gurgaon/english-constraints-for-power-discom-call-centre/story-wZ2ET0bCm84Mvch3A5TkCI.html

[20] https://economictimes.indiatimes.com/small-biz/productline/power-generation/what-is-net-metering-method-of-billing-and-its-advantages/articleshow/74669293.cms?from=mdr

[21] https://cef.ceew.in/masterclass/explains/difference-between-gross-metering-and-net-metering

[22] https://energy.economictimes.indiatimes.com/news/renewable/india-to-invest-rs-4-lakh-cr-to-meet-175-gw-renewable-energy-target-by-2022-r-k-singh/72475254

[23] https://mnre.gov.in/img/documents/uploads/file_f-1580897365608.pdf

[24] http://www.hindustanpowerprojects.com/media/media-coverage/indias-power-sector-five-key-challenges-solutions/

[25] https://energy.economictimes.indiatimes.com/news/power/how-the-economic-slowdown-has-dented-indias-power-sector/73083261

[26] https://trackingsdg7.esmap.org/country/india

[27] https://sun-connect-news.org/fileadmin/DATEIEN/Dateien/New/wtp-report-2017.pdf

[28] https://www.thehindubusinessline.com/opinion/indias-energy-challenges-for-the-decade/article30608650.ece

[29] Supra 27

[30] https://www.thehindubusinessline.com/economy/policy/proposed-electricity-act-may-rework-slabs-for-residential-consumers/article31395464.ece

[31] https://energy.economictimes.indiatimes.com/news/power/up-power-employees-go-on-indefinite-strike/78492817