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Regulators v/s Adjudicators: To Be or Not To Be

An article highlighting why the contradistinction between the regulatory and adjudicatory body, as suggested by the Electricity (Amendment) Bill, 2020 might not work as is being planned.

By: Shimoni Sinha, III BALLB (ILS Law College)

The Electricity Act, 2003 (hereinafter “Act”) has been the statutory paradigm which has governed the laws regarding the generation, distribution, transmission, trading and use of electricity. It keeps in mind the interests of the state and central departments, producers and consumers of electricity and accordingly sets rules and regulations. It acts as a regulatory authority to govern the power sector. The provisions of this Act, however, had become archaic and were in dire need of an upgrade. Consequently, to address the various issues which have been highlighted by the industry and to further reform the power sector, the Ministry of Power released the draft Electricity (Amendment) Bill, 2020 on April 17, 2020 to amend the Electricity Act. The resultant suggestions were structural as well as procedural in nature and if incorporated, hold the potential to lash out big changes in this sector. Why, you ask, is this important to you, the taxpayer?  It is important because in the month of May, the Finance Minister infused around INR 90,000 crore of taxpayer’s money into this industry in order to provide temporary relief to power distribution companies in order to clear their liabilities towards central public sector enterprises generation and transmission companies. 

Consequently, to address the various issues which have been highlighted by the industry and to further reform the power sector, the Ministry of Power released the draft Electricity (Amendment) Bill, 2020 on April 17, 2020 to amend the Electricity Act. The resultant suggestions were structural as well as procedural in nature and if incorporated, hold the potential to lash out big changes in this sector.

The Bill suggested multiple amendments amidst which, the most crucial one is regarding the proposed amendment to create a novel dispute resolution forum. If the Electricity Amendment Bill 2020 is passed, the regulation and adjudication functions in the power sector would largely be separated through the creation of a new agency — Electricity Contract Enforcement Authority (ECEA). The ECEA shall have all the powers of a civil court. Its jurisdiction will include adjudication “upon matters regarding performance of obligations under a contract related to sale, purchase or transmission of electricity,” — functions that previously rested with the electricity regulatory commissions (ERCs). The change suggests a contradistinction between the regulating agency and the adjudicating agency along with the centralization of the selection process of the above. The intention of the Bill is thus, to create separate chambers for operations for the Electricity Regulatory Commission and Electricity Contract Enforcement Authority. The focus of the proposed amendment is that separate and distinct institutions should function for framing regulations and to ensure implementation thereof. The aim of this is to ensure that one legislates while the other adjudicates.

The change suggests a contradistinction between the regulating agency and the adjudicating agency along with the centralization of the selection process of the above. The intention of the Bill is thus, to create separate chambers for operations for the Electricity Regulatory Commission and Electricity Contract Enforcement Authority.

This, however, entails a few issues:

  • One of the major concerns surrounding the creation of the ECEA is the lack of clarity in dividing responsibilities between these two bodies. The Bill reads that the ECEA shall have all the powers of a civil court. Its jurisdiction would include adjudication “upon matters regarding performance of obligations under a contract related to sale, purchase or transmission of electricity,” — functions that previously rested with the Electricity Regulatory Commissions (ERCs). However, the ERCs will continue to have jurisdiction over determination of tariffs and several other matters. Almost all electricity disputes can be said to have an angle that relates to tariffs. This would give rise to power clashes between the two authorities. The areas of dispute that would arise out of matters related to regulation or determination of tariff may lead to possible overlap of jurisdictions between ERCs and ECEA. Such situations may require determination of supremacy amongst ECEA and ERCs qua such disputes. 
  • The Appointing Committee of both the forums would be the same. This brings one to question the necessity of a separate Enforcement Authority when the mere strengthening of the Regulatory Authority (theoretically) seems potent to do the job. 
  • The Centralised Appointing Committee has simply shifted the power of selection from the hands of the State Government to that of the Central Government.  This technically, doesn’t impose itself as a hindrance since Electricity belongs to the Concurrent List. However, it would now be mandatory to set up a body that analyses issues of separate States which otherwise, would be overlooked. 
  • The proposed amendments do not abandon the ERCs of their authority to adjudicate disputes among stakeholders. For adjudication of disputes, the fields left out of the jurisdiction of the ECEA are still available with ERCs. This jurisdictional divide is provider under proposed section 109 A (2), which reads as under:

“Notwithstanding anything contained in this Act or any other law in force, the Electricity Contract Enforcement Authority shall have the sole authority and jurisdiction to adjudicate upon matters regarding performance of obligations under a contract related to sale, purchase or transmission of electricity, provided that it shall not have any jurisdiction over any matter related to regulation or determination of tariff or any dispute involving tariff.”

Institutional and power changes set aside, the Amendment if passed, would require infrastructural changes as well. Passing the Bill of 2020 without simultaneously creating an appropriate and well-planned pan-India infrastructure for various regional benches of ECEA would ultimately lead to an impasse.

Institutional and power changes set aside, the Amendment if passed, would require infrastructural changes as well. Passing the Bill of 2020 without simultaneously creating an appropriate and well-planned pan-India infrastructure for various regional benches of ECEA would ultimately lead to an impasse. This would, as a result, affect the entire industry and power sector on the whole due to the coagulation of cases. 

In conclusion, the Legislation needs to do some more thorough and intricate forethinking instead of hastening the process of passing the Bill. 

References taken from:

  1. Accelerating India’s Energy Transition through Electricity Act: A CEEW Blog Series, accessible at: https://www.ceew.in/news/accelerating-indias-energy-transition-through-electricity-act-ceew-blog-series
  2. Regulator Vs. Adjudicator: Electricity Act, 2003 and Proposed Amendments- Bill of 2020 by Sandeep Pathak, accessible at: https://www.indialegallive.com/top-news-of-the-day/news/regulator-vs-adjudicator-electricity-act-2003-and-proposed-amendments-bill-of-2020

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