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ELECTRICITY REGULATORY COMMISSIONS ACT, 1998
14 of 1998
July 2,1998
Prefatory Note—Statement of Objects and Reasons.—India's power sector is beset by problems that impede its capacity to respond to the rapidly growing demand for energy brought about by economic liberalisation. Despite the stated desire for reform and the initial measures that have been implemented, serious problems persist. As the problems of the Power Sector deepen, reform becomes increasingly difficult underscoring the need to act decisively and without delay. It is essential that the Government implement significant reforms by focussing on the fundamental issues facing the power-sector, namely the lack of rational tariffs, the high level of cross-subsidies, poor planning and operation, inadequate capacity, the neglect of the consumer, the limited involvement of private sector skills and resources and the absence of an independent regulatory authority. Considering the paramount importance of restructuring the power sector. Government of India organized two Conferences of Chief Ministers to discuss the whole gamut of issues in the power sector and the outcome of these meetings was the adoption of the Common Minimum National Action Plan for Power (CMNAPP). 2. The CMNAPP recognised that the gap between demand and supply of power is widening and acknowledged that the financial position of Stale Electricity Boards is fast deteriorating and the future development in the power sector cannot be sustained without viable State Electricity Boards and improvement of their operational performance. The CMNAPP identified creation of regulatory Commission as a step in this direction and specifically provided for establishment of the Central Electricity Regulatory Commission (CERC) and State Electricity Regulatory Commissions (SERCs). After the finalisation of the national agenda contained in CMNAPP, the Ministry of Power assigned the task of studying the restructuring needs of the regulatory system of Administrative Staff College of India (ASCI), Hyderabad. The ASCI report strongly recommended the creation of independent Electricity Regulatory Commissions both at the Centre and the States. 3. To give effect to the aforesaid proposals, the Electricity Regulatory Commissions Bill, 1997 was introduced in the Lok Sabha on 14th August, 1997. However it could not be passed due to the dissolution of the Eleventh Lok Sabha. This has resulted in delay in establishing the Regulatory Commissions leading to confusion and misgivings in various sections about the commitment of the Government to the reforms and restructuring of the power sector.Needless to say, this has also slowed down the flow of public and private investment in power sector. Since it was considered necessary to ensure the speedy establishment of the Regulatory Commissions and as Parliament was not in session, the President promulgated the Electricity Regulatory Commissions Ordinance, 1998 on the 25th day of April, 1998. 4.The salient features of the said Ordinance are as follows :— (a) It provides for the establishment of a Central Electricity Regulatory Commission at the Central level and State Electricity Commissions at the State levels; (b) the main functions of CERC are,— (i) to regulate the tariff of generating companies owned or controlled by the Central Government; (ii) to regulate inter-State transmission including tariff of the transmission utilities; (iii) to regulate inter-State sale of power: (iv) to aid and advise the Central Government in the formulation of tariff policy. (c) the main functions of the SERC, to start with, shall be,— (i) to determine the tariff for electricity, wholesale, bulk, grid and retail; (ii) to determine the
tariff payable for use of the transmission facilities; (iii) to regulate power purchase and
procurement process of the transmission utilities, etc. (iv) subsequently, as and when each State Government notifies, other regulatory functions could also be assigned to SERCs. (d) it also aims at improving the financial health of the State Electricity Boards (SEBs) which are loosing heavily on account of irrational tariffs and lack of budgetary support from the State Governments as a result of which, the SEBs have become incapable of even proper maintenance, leave alone purposive investment. Further the lack of creditworthiness of SEBs has been a deterrent in attracting investment both from the public and private sectors. Hence, it is made mandatory for State Commissions to fix tariff in a manner that none of the consumers or class of consumers shall be charged less than fifty per cent of the average cost of supply, it enables the State Governments to exercise the option of providing subsidies to weaker sections on condition that the State Governments through a subsidy compensate the SEBs. As regards the agriculture sector, it provides that if the State Commission considers it necessary it may allow the consumers in the agricultural sector to be charged less than Fifty per cent for a maximum period of three years from the date of commencement of the Ordinance. It also empowers the State Government to reduce the tariff further but in that case it shall compensate the SEBs or its successor utility, the difference between the tariff fixed by the State Commission and the tariff proposed by the State Government by providing budgetary allocations. Therefore, it enables the State Governments to fix any tariff for agriculture and other sectors provided it gives subsidy to State Electricity Boards to meet the loss. 5. The Bill seeks to replace the said Ordinance. An Act to provide for the establishment of a Central Electricity Regulatory Commission and State Electricity Regulatory Commissions, rationalisation of electricity tariff, transparent policies regarding subsidies, promotion of efficient and environmentally benign policies and for matters connected therewith or incidental thereto. Be it enacted by Parliament in the Forty-ninth Year of the Republic of India as follows:-
SECTION 01: SHORT TITLE, EXTENT AND COMMENCEMENT
(1) This Act may be called the Electricity Regulatory Commissions Act, 1998.
(2) It extends to the whole of India except the State of Jammu and Kashmir.
(3) It shall be deemed to have come into force on the 25th day of April, 1998.
SECTION 02: DEFINITIONS
-In this Act, unless the context otherwise requires,-
(a) "Central Commission" means the Central Electricity Regulatory Commission established under sub-section (1) of Section 3-;
(b) "Chairperson" means the Chairperson of the Commission;
(c) "Commission" means the Central Commission 2["or the State Commission or the Joint
Electricity Regulatory Commission”], as the case may be;
(d) "High Court" means-
(i) the High Court within the jurisdiction of which the aggrieved party ordinarily resides or carries on business or personally works for gain; and
(ii) where the Central Government is the aggrieved party, the High Court within the jurisdiction of which the respondent, or in a case where there are more than one respondent, any of the respondents ordinarily resides or carries on business or personally works for gain;
(e) "inter-State transmission" includes-
(i) the conveyance of energy by means of a main transmission line from the territory of one State to the territory of another State;
(ii) the conveyance of energy across the territory of an intervening State as well as conveyance within the State which is incidental to such inter-State transmission of energy;
(iii) the transmission of energy within the territory on a system built, owned, operated, maintained or controlled by a central transmission utility or by any person under the supervision and control of a central transmission utility;
3[(ea) "Joint Electricity Regulatory Commission" means "the Joint Electricity Regulatory
Commission constituted under Section 21-A;'.]
(f) "licensee" means a person licensed underPart II of the Indian Electricity Act, 1910 (9 of 1910)-to supply energy or a person who has obtained sanction under Section 28-of that Act to engage in the business of supplying energy (but does not include the Board or a Generating company);
(g) "Member" means the Member of the Commission and includes the Chairperson but does not include a Member, ex officio;
(h) "prescribed" means prescribed by rules made under this Act;
(i) "regulations" means regulations made under this Act;
(j) "State Commission" means the State Electricity Regulatory Commission established under sub-section (1) ofSection 17-;
(k) "transmission utility" means any generating company. Board, licensee or other person
engaged in the transmission of energy;
(l) "utility" means any person or entity engaged in the generation, transmission, sale, distribution or supply, as the case may be, of energy;
(m) words and expressions used and not defined in this Act but defined in the Electricity
(Supply) Act, 1948 (54 of 1948)-or the Indian Electricity Act, 1910 (9 of 1910)-shall have the meanings respectively assigned to them in those Acts.
SECTION 03: ESTABLISHMENT AND INCORPORATION OF CENTRAL COMMISSION
(1) The Central Government shall, within three months from the date of the commencement of this Act by notification in the Official Gazette, establish a body to be known as the Central Electricity Regulatory Commission to exercise the powers conferred on, and the functions assigned to, it under this Act.
(2) The Central Commission shall be a body corporate by the name aforesaid, having perpetual succession and a common seal with power to acquire, hold and dispose of property, both movable and immovable, and to contract and shall, by the said name, sue or be sued.
(3) The head office of the Central Commission shall be at such place as the Central
Government may, by notification in the Official Gazette, specify.
(4) The Central Commission shall consist of the following Members, namely:-
(a) a Chairperson and three other Members;
(b) the Chairman of the Central Electricity Authority appointed under sub-section (3) of Section 3 of the Electricity (Supply) Act, 1948 (54 of 1948)-, who shall be the Member, ex officio.
(5) The Chairperson and the other Members of the Central Commission shall be appointed by the Central Government on the recommendation of the Selection Committee referred to in Section 5-: Provided that nothing contained in this sub-section shall apply to the appointment of a person as the Chairperson, where such person is or has been a Judge of the Supreme Court or the Chief Justice of a High Court.
SECTION 04: QUALIFICATIONS FOR APPOINTMENT OF CHAIRPERSON AND OTHER MEMBERS OF CENTRAL COMMISSION
(1) The Chairperson and the Members of the Central Commission shall be persons having adequate knowledge, experience or shown capacity in dealing with problems relating to engineering, law, economics, commerce, finance or management and shall be appointed in the following manner, namely :-
(a) one person having qualification and experience in the field of engineering with specialisation in generation, transmission or distribution of electricity;
(b) one person having qualification and experience in the field of finance; and
(c) two persons having qualification and experience in the field of economics, commerce, law or management: Provided that not more than one Member shall be appointed under the same category under clause (c).
(2) Notwithstanding anything contained in sub-section (1), the Central Government may appoint any person as the Chairperson from amongst persons who is or has been a Judge of the Supreme Court or the Chief Justice of a High Court: Provided that no appointment under this sub-section shall be made except after consultation with the Chief Justice of India.
(3) The Chairperson or any other Member of the Central Commission shall not hold any other office.
(4) The Chairperson shall be the Chief Executive of the Central Commission.
SECTION 05: CONSTITUTION OF SELECTION COMMITTEE TO RECOMMEND MEMBERS
(1) The Central Government shall, for the purpose of sub-section (5) of Section 3-, constitute a Selection Committee consisting of-
(a) Member of the Planning Commission in charge of the - Chairperson; energy sector
(b) Secretary-in-charge of the Ministry of the Central - Member; Government dealing with the Department of Legal Affairs
(c) Chairman of the Public Enterprises Selection Board - Member;
(d) a person to be nominated by the Central Government in - Member; accordance with sub-section (2)
(e) a person to be nominated by the Central Government in - Member; accordance with sub-section (3)
(f) Secretary-in-charge of the Ministry of the Central - Member; Government dealing with power
(2) For the purposes of clause (d) of sub-section (1), the Central Government shall nominate from amongst persons holding the post of Chairman or Managing Director, by whatever name called, of any public financial institution specified in Section 4-A of the Companies Act, 1956 (1 of 1956)-.
(3) For the purposes of clause (e) of sub-section (1), the Central Government shall nominate from amongst persons holding the post of Director or the head of the institution, by whatever name called, of any research, technical or management institution notified by the Central Government in the Official Gazette for this purpose.
(4) Secretary-in-charge of the Ministry of the Central Government dealing with power shall be the Convener of the Selection Committee.
(5) The Central Government shall, within one month from the date of occurrence of any vacancy by reason of death, resignation or removal of the Chairperson or a Member and six months before the superannuation or end of tenure of any Chairperson or Member, make a reference to the Selection Committee for filling up of the vacancy.
(6) The Selection Committee shall finalise the selection of the Chairperson and Members within one month from the date on which the reference is made to it.
(7) The Selection Committee shall recommend a panel of two names for every vacancy referred to it. Constitution of Selection Committee to recommend Members Page 2 of 2
(8) Before recommending any person for appointment as a Chairperson or other Member of the Central Commission, the Selection Committee shall satisfy itself that such person does not have any financial or other interest which is likely to affect prejudicially his functions as a Member.
(9) No appointment of the Chairperson or other Member shall be invalid merely by reasons of any vacancy in the Selection Committee.
SECTION 06: TERM OF OFFICE, SALARY AND ALLOWANCES AND OTHER CONDITIONS OF SERVICE OF CHAIRPERSON AND MEMBERS
(1) The Chairperson or other Member shall hold office as such for a term of five years from the date on which he enters upon his office, but shall not be eligible for reappointment: Provided that no Chairperson or other Member shall hold office as such after he has attained,-
(a) in the case of the Chairperson, the age of sixty-five years; and
(b) in the case of any other Member, the age of sixty-two years.
(2) The salary and allowances payable to, and the other terms and conditions of service of, the Chairperson and other Members shall be such as may be prescribed.
(3) The salary, allowances and other conditions of service of the Chairperson and other
Members shall not be varied to their disadvantage after appointment.
(4) The Chairperson and every Member shall, before entering upon his office, make and subscribe to an oath of office and of secrecy in such form and in such manner and before such authority as may be prescribed.
(5) Notwithstanding anything contained in sub-section (1), the Chairperson or any Member may-
(a) relinquish his office by giving in writing to the President notice of not less than three months; or
(b) be removed from his office in accordance with the provisions ofSection 7-.
(6) The Chairperson or any Member ceasing to hold office as such shall-
(a) be ineligible for further employment under the Central Government or any State Government for a period of two years from the date he ceases to hold such office;
(b) not accept any commercial employment for a period of two years from the date he ceases to hold such office; and
(c) not represent any person before the Central Commission or a State Commission in any manner. Explanation.-For the purposes of this sub-section,- (i) "employment under the Central Government or the State Government" includes employment under any local or other authority within the territory of India or under the control of the Central Government or State Government or under any corporation or society owned or controlled by the Government. (ii) "commercial employment" means employment in any capacity under, or agency of, a person engaged in trading, commercial, industrial or financial business in the electricity industry and includes also a director of a company or partner of Term of office, salary and allowances and other conditions of service of Chairperson and .. a firm and it also includes setting up practice either independently or as partner of a firm or as an adviser or a consultant.
SECTION 07: REMOVAL OF MEMBERS
(1) Subject to the provisions of sub-section (3), any Member of the Central Commission shall only be removed from his office by order of the President on the ground of proved
misbehaviour after the Supreme Court, on reference being made to it by the President, has, on an inquiry, held in accordance with the procedure prescribed in this behalf by the Supreme Court, reported that the Member ought on any such ground to be removed.
(2) The President may suspend any Member of the Central Commission in respect of whom a reference has been made to the Supreme Court under sub-section (1) until the President has passed an order on receipt of the report of the Supreme Court.
(3) Notwithstanding anything contained in sub-section (1), the President may by order remove from office the Chairperson or any other Member, if the Chairperson or such other Member, as the case may be,-
(a) has been adjudged an insolvent: or
(b) has been convicted of an offence which, in the opinion of the Central Government, involves moral turpitude; or
(c) has become physically or mentally incapable of acting as a Member; or
(d) has acquired such financial or other interest as is likely to affect prejudicially his functions as a Member: or
(e) has so abused his position as to render his continuance in office prejudicial to the public interest.
(4) Notwithstanding anything contained in sub-section (3), no Member shall be removed from his office on the ground specified in clause (d) or clause (e) of that sub-section unless the Supreme Court, on a reference being made to it in this behalf by the President, has, on an inquiry, held by it in accordance with such procedure as prescribed in this behalf by the Supreme Court, reported that the Member ought on such ground or grounds to be removed,
SECTION 08: OFFICERS OF CENTRAL COMMISSION AND OTHER STAFF
(1) The Central Commission may appoint a Secretary to exercise and perform under the control of the Chairperson such powers and duties as may be specified by regulations made by the Central Commission.
(2) The Central Commission may, with the approval of the Central Government, determine the number, nature and categories of other officers and employees required to assist the Central Commission in the discharge of its functions.
(3) The salaries and allowances payable to, and other conditions of service of, the Secretary, officers and other employees shall be such as may be determined with the approval of the Central Government, by regulations.
(4) The Central Commission may appoint consultants required to assist the Central
Commission in the discharge of its functions on the terms and conditions as may be determined by regulations made by the Central Commission.
SECTION 09: PROCEEDINGS OF CENTRAL COMMISSION
(1) The Central Commission shall meet at the head office or any of its offices at such time as the Chairperson may direct, and shall observe such rules of procedure in regard to the transaction of business at its meetings (including the quorum at its meetings) as may be determined by regulations.
(2) The Chairperson or. if he is unable to attend a meeting of the Central Commission, any other Member nominated by the Chairperson in this behalf and, in the absence of such nomination or where there is no Chairperson, any Member chosen by the Members present from among themselves, shall preside at the meeting.
(3) All questions which come up before any meeting of the Central Commission shall be
decided by a majority of votes of the Members (including the Member, ex officio) present and voting, and in the event of an equality of votes, the Chairperson or the person presiding shall have the right to exercise a second or casting vote.
(4) Save as otherwise provided in sub-section (3), every Member shall have one vote.
(5) All orders and decisions of the Central Commission shall be authenticated by the Secretary or any other officer of the Central Commission duly authorised by the Chairperson in this behalf.
.
SECTION 10: VACANCIES, ETC., NOT TO INVALIDATE PROCEEDINGS OF CENTRAL COMMISSION
No act or proceedings of the Central Commission shall be questioned or shall be invalidated merely on the ground of existence of any vacancy or defect in the constitution of the Central Commission.
SECTION 11: EXPENSES OF CENTRAL COMMISSION TO BE CHARGED UPON CONSOLIDATED FUND OF INDIA
The expenses of the Central Commission including all salaries and allowances payable to, or in respect of, the Chairperson and the Members of the Central Commission shall be charged upon the Consolidated Fund of India.
SECTION 12: POWERS OF CENTRAL COMMISSION
The Central Commission, shall, for the purposes of any inquiry or proceedings under this Act have the powers as are vested in a civil court under the Code of Civil Procedure, 1908 (5 of 1908)-, in respect of the following matters, namely:-
(a) the summoning and enforcing the attendance of any witness and examining him on oath;
(b) the discovery and production of any document or other material object producible as evidence; 4s
(c) the reception of evidence on affidavits;
(d) the requisition of any public record;
(e) the issue of commission for examination of witnesses;
(f) review its decisions, directions and orders;
(g) any other matter which may be prescribed.
SECTION 13: FUNCTIONS OF CENTRAL COMMISSION
The Central Commission shall discharge all or any of the following functions, namely:-
(a) to regulate the tariff of generating companies owned or controlled by the Central
Government;
(b) to regulate the tariff of generating companies, other than those owned or controlled by the Central Government specified in clause (a), if such generating companies enter into or otherwise have a composite scheme for generation and sale of electricity in more than one State;
(c) to regulate the inter-State transmission of energy including tariff of the transmission utilities;
(d) to promote competition, efficiency and economy in the activities of the electricity industry;
(e) to aid and advise the Central Government in the formulation of tariff policy which shall be-
(i) fair to the consumers; and
(ii) facilitate mobilisation of adequate resources for the power sector;
(f) to associate with the environmental regulatory agencies to develop appropriate policies and procedures for environmental regulation of the power sector;
(g) to frame guidelines in matters relating to electricity tariff;
(h) to arbitrate or adjudicate upon disputes involving generating companies or transmission utilities in regard to matters connected with clauses (a) to (c) above;
(i) to aid and advise the Central Government on any other matter referred to the Central Commission by that Government.
SECTION 14: CENTRAL ADVISORY COMMITTEE
(1) The Central Commission may, by notification, establish with effect from such date as it may specify in such notification, a Committee to be known as the Central Advisory Committee.
(2) The Central Advisory Committee shall consist of not more than thirty-one members to represent the interests of commerce, industry, transport, agriculture, labour, consumers, nongovernmental organisations and academic and research bodies in the energy sector.
(3) The Chairperson and Members of the Central Commission shall be the ex officio
Chairperson and ex officio Members of the Central Advisory Committee.
SECTION 15: OBJECTS OF CENTRAL ADVISORY COMMITTEE
The objects of the Central Advisory Committee shall be to advise the Central Commission on,-
(i) major questions of policy;
(ii) matters relating to quality, continuity and extent of service provided by the licensees;
(iii) compliance by the licensees with the conditions and requirements of their licence;
(iv) protection of consumer interest; and
(v) energy supply and overall standards of performance by utilities.
SECTION 16: APPEAL TO HIGH COURT IN CERTAIN CASES
(1) Any person aggrieved by any decision or order of the Central Commission may file an appeal to the High Court.
(2) Except as aforesaid, no appeal or revision shall lie to any court from any decision or order of the Central Commission.
(3) Every appeal under this section shall be preferred within sixty days from the date of
communication of the decision or order of the Central Commission to the person aggrieved by the said decision or order: Provided that the High Court may entertain an appeal after the expiry of the said period of sixty days if it is satisfied that the aggrieved person had sufficient cause for not preferring the appeal within the period of sixty days.
SECTION 17: Establishment and incorporation of State Commission
(1) The State Government may, if it deems Fit, by notification in the Official Gazette, establish, for the purposes of this Act, a Commission for the State to be known as the (name of the State) Electricity Regulatory Commission.
(2) The State Commission shall be a body corporate by the name aforesaid, having perpetual succession and a common seal, with power to acquire, hold and dispose of property, both movable and immovable, and to contract and shall, by the said name, sue or be sued.
(3) The head office of the State Commission shall be at such place as the State Government may, by notification in the Official Gazette, specify.
(4) The State Commission shall consist of not more than three Members including the Chairperson.
(5) The Chairperson and the Members of the State Commission shall be persons of ability, integrity and standing who have adequate knowledge of, and have shown capacity in dealing with problems relating to engineering, finance, commerce, economics, law or management.
(6) The Chairperson and the Members of the State Commission shall be appointed by the State Government on the recommendation of a Selection Committee referred to in Section 18-.
(7) Notwithstanding anything contained in sub-section (5) or sub-section (6), the State
Government may appoint any person as the Chairperson from amongst persons who is or has been a Judge of a High Court: Provided that no appointment under this sub-section shall be made except after consultation with the Chief Justice of that High Court.
(8) The Chairperson shall be the Chief Executive of the State Commission.
(9) The Chairperson or any other Member of the State Commission shall not hold any other office.
SECTION 18: CONSTITUTION OF SELECTION COMMITTEE BY STATE GOVERNMENT
(1) The State Government shall, for the purposes of selecting the Members of the State
Electricity Commission, constitute a Selection Committee consisting of-(a) a person who has been a Judge of the High Court - Chairperson; (b) the Chief Secretary of the concerned State - Member; (c) the Chairperson or a Mem
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