Protecting Consumer Rights

Implications of the MoP’s draft electricity rules

In a move aimed at introducing a corporate culture in discoms, the Ministry of Power (MoP) has issued the draft Electricity (Rights of Consumers) Rules, 2020, specifying the standards of performance for distribution licensees. The draft rules specify the key performance indicators (KPIs) for discoms to improve customer satisfaction with regard to electricity supply, among other things. The ministry made the draft public last month and invited stakeholder comments on it. Industry experts share their views on the draft rules and their expected impact. Excerpts…

What are your views on the draft Electricity (Rights of Consumers) Rules, 2020? What are some of its key positives? What will be its expected impact on the sector?

Ajay Mahajan, Managing Director and Chief Executive Officer, CARE Ratings

Ajay Mahajan

In September 2020, the MoP released the draft Electricity (Rights of Consumers) Rules, 2020 for public comments. They are expected to be finalised after considering all the suggestions received from various stakeholders. The rules specify performance standards for power distribution companies to provide consumers with better services and facilities in order to improve customer satisfaction. Currently, certain provisions of the proposed draft are already mandated by various state electricity regulatory commissions (SERCs) and are part of consumer grievance redressal forum regulations. The proposed rules will provide the much-needed uniformity across the states and is a welcome step for recognising the rights of consumers, the most important stakeholder in the power value chain.

The draft rules have attempted to increase promptness, accuracy, transparency and fairness in the entire power distribution life cycle, starting from application for a connection, metering, meter reading, billing, payment, lodging of complaint and resolution including creation of a consumer grievance redressal forum (CGRF) to disconnection. Digital means and channels are focused on strengthening each part of this life cycle. Some of the key positives of these draft rules are push for digital payments, focus on reliability of power, compensation by discoms for non-compliance, among others. The rules are also prosumer (consumers who also produce power, say solar, rooftop power producers) friendly in terms of ease of the application process, timely completion of feasibility study and metering. From a discom perspective, the implementation of guidelines related to mandatory metering, meter testing, replacement, reading and electronic payment are expected to improve the billing and collection efficiency of the discoms.

The draft rules are laudable and just like any other government policy or plan, there is a need to watch out for their implementation. The states and discoms will need to spend considerably on both physical and digital infrastructure. They will have to bring about a fundamental shift in their working culture with the ultimate focus on customer service. In the current scenario, there exists a substantial gap between the service levels of private and state-owned discoms, leading to a general public support for discom privatisation. If followed in letter and spirit, the rules have the potential to completely transform the way customers perceive the discoms and thus may reduce the need for privatisation. While most of the aspects of the draft rules are positive, the imposition of gross metering rules (instead of net metering) for larger rooftop capacities can be disadvantageous to the pace of rooftop solar capacity addition in India, that has already moderated in the past few quarters.

Manabika Mandal, Research Associate, Prayas (Energy Group)

Manabika Mandal

The draft Electricity (Rights of Consumers) Rules, 2020 are a welcome step given that so many consumers have received new electricity connections, but many of the provisions already exist in the rules and regulations framed by various states. The state-level regulations provide similar performance benchmarks for various indicators such as release of new connections, replacement of defective meters and the timeline for the resolution of grievances. Thus, the rules need to clarify that the licensees should observe those benchmarks, which are better of the two, to ensure that existing benchmarks are not diluted.

Some rules such as tracking new connections, streamlining the application process for prosumers, and the introduction of automatic compensation mechanisms are welcome steps. However, the provision for automatic compensation should clearly mention that consumers will not have to claim compensation. Rule 10 (3) (e) mentions that consumers need to claim the compensation amount. This provision defeats the purpose of automating the process. Consumers should have to register a claim only if such compensation is not credited to them automatically in the first place. While automatic compensation can only be made for certain parameters, there is a need for technology and network integration going forward.

There are some concerns regarding net metering for rooftop solar as well as regarding smart metering. The proposed rule of limiting net metering only up to 5 kW would be very regressive. Instead, encouraging net metering of systems for 5 kW and above will help meet the solar rooftop PV targets. In addition, different approaches such as time-of-day tariffs, grid support charges and banking fees could be considered to address the adverse impact of net metering on discom finances.

The draft rules state that all new meters will be smart meters. Such decisions should be taken only after a thorough assessment of technological developments and cost optimisation. If all new meters are smart meters, it needs to be specified that meter charges paid by the consumer will not be raised. For new smart meter installations, meter charges should be kept comparable to non-smart meters if the cost recovery is proposed to be via savings. Further, any standard to deter failures in smart meter functioning and operation should be covered in the SERCs’ standards of performance regulations and large-scale roll-out plans need to be approved by these commissions.

While there is an urgent need to focus on supply and service quality, and provisions already exist in various state-level rules and regulations, concerted efforts are required to ensure proper implementation. Further, while central-level guiding benchmarks are welcome, the rules should not be binding on the states given the varied state-level realities.

To ensure effective implementation and monitoring, steps such as hosting lists of pending applications for new connections on discoms’ websites and on a national portal; publishing interruption data on websites; and conducting periodic consumer satisfaction surveys could be taken. Further, commissions could conduct regulatory proceedings and public hearings on the issue of quality of supply to hold discoms accountable.

Professor S.L. Rao, Member, Advisory Board, Competition Commission of India, Former Chairperson, Central Electricity Regulatory Commission

Professor S.L. Rao

The draft Electricity Rights of Consumer Rules, 2020, issued by the MoP, propose prescriptive rules and duties of SERCs, distribution utilities and consumers in matters of electricity supply such as metering, billing, connection, disconnection, reconnection and reliability of supply. The draft also recognises an emerging category of consumers known as prosumers, who have the right to produce electricity for self-use and inject the excess into the grid. Distribution utilities will have to facilitate the setting up of renewable generation systems at prosumers’ premises and facilitate robust compliance to ensure the success of prosumers.

We are cognisant of the fact that power is a concurrent subject under the Indian constitution. In my view, the central government is overstepping its jurisdiction with such specific prescription in the form of the Electricity (Rights of Consumers) Rules, 2020. The Electricity Act, 2003 clearly defines the functions of the governments and the regulators under the various statutes of the legislation. Under the act, it is the state’s jurisdiction to prescribe such prescriptive rules. So, the central government, by invoking Section 176 of the Electricity Act and dictating terms on issues related to power supply, is interfering in the matters of the states, which might not be even tenable in the court of law.

Instead of prescribing such specific rules, the MoP should issue broad guidelines, allowing the states to come up with their own rules. Under the Electricity Act, 2003, the states have the discretion to create prescriptive rules in various areas of power generation, supply, distribution and markets. Instead of intruding in state matters, the central government should focus on specifying broader guidelines on matters such as ensuring 24×7 power supply to all consumers, maintaining fair and healthy competition, protecting the rights of consumers, and promoting renewables, prosumers and must-run status for renewable power. The central government should invest efforts in ensuring power for all on a round-the-clock basis, no load shedding, distribution reforms, regulatory reforms and depoliticising the power sector.

Building healthy competition in the power sector value chain is a win-win proposition for business and customers, as well as for market development. It can help create a sustainable and efficient economy at large. Free, fair and healthy competition also acts as a self-regulating mechanism. Competition has brought in immense value and enormous benefits to industries such as telecom, retail, travel, e-commerce and aviation, contributing to the industry, consumer choice and economic welfare. In a competitive environment, businesses and utilities are pushed and strive their absolute best in an endeavour to stay ahead in the game, offer innovative products and services, which translate into building a competitive and efficient marketplace. In this bargain, consumers ultimately get the best deal in terms of choice, price and quality.

Lastly, the regulatory reforms are a pre-requisite for building a credible power sector. The regulatory reforms have two key dimensions. First, ensuring there is no political interference in the appointment of regulators, and this is relevant not only for power but for all cross-sections of the economy. An independent commission on the lines of the UPSC should be appointed by industry regulators. Candidates should preferably not be from a government background, must be below 55 years of age, with independent thinking and expertise in finance, law, management and the subject matter. Second, ensuring autonomy and independence of the regulator. With these two reform measures we can construct a credible sector in alignment with the legislative framework. Reforms and competition are thus two key pillars to protect the interests of consumers as well as to build an efficient and credible power sector. For reforms to have a sustainable impact, competition is a prerequisite, and it must be ensured, protected and nurtured in all aspects.

Sanjeev Seth, Chief Executive Officer, T&D Business, India Power Corporation Limited

Sanjeev Seth

The notification of the draft Electricity (Rights of Consumers) Rules, 2020 is a positive step towards the consolidation of the rights of consumers with respect to the electricity sector. Although different state commissions have their own standard of performance regulations and a few discoms also publish their consumer charter listing out the rights and obligations of their respective electricity consumers, the draft Electricity (Rights of Consumers) Rules, 2020 have included the rights of prosumers as well.

One of the key positives of draft rules is the consideration of the rights of prosumers, which is currently lacking in the applicable regulations across states. This will help in boosting the morale of consumers who have the required intention for setting up rooftop solar PV. The other key positive for consumers is the automation of the compensation mechanism, which will now help consumers to automatically obtain compensation for parameters that can be monitored remotely.

The expected impact on the power distribution sector is that it will keep the discoms on their toes and help keep their various operating parameters up to date. In the long term, this will be beneficial for the discoms too in terms of reliable services, strong network and sustainable business. Further, a common benchmark for parameters across states can be worked out based on the best of targets specified in both the central rules and state regulations. The promotion of rooftop solar PV is also expected subject to the resolution of issues in net and gross metering.

Dr Rahul Tongia, Rajasekhar D. and Nikhil Tyagi

Overlap issues abound

The first thing that is striking in the draft Electricity (Rights of Consumers) Rules, 2020 is that they do not include any explanatory memorandum, which ideally could have spelt out their background and genesis. Alternatively, these rules could have included an objective and scope to clarify their intent, focus and purpose, thereby removing ambiguity in the process of implementation. This is key given the overlap between the new draft rules and the existing rules and responsibilities. The areas of overlap with the existing rules like the Electricity Act, 2003 include:

  • Standards of performance (Sections 57, 58 and 59),
  • Metering (Section 55), disconnection (Section 56),
  • Consumer grievance redressal (Section 42),
  • Theft of electricity (Section 135).
Dr Rahul Tongia, Senior Fellow, Centre for Social and Economic Progress

The Forum of Regulators, a body comprising chairpersons of the CERC and all SERCs/JERCs (constituted as per Section 166 of the Electricity Act, 2003), also took up the issue of protection of consumer interests.

The fundamental question is – were the states failing? Instead of seeking simply “equality” across states per se, we suggest a common set of national rules to strengthen the existing mechanisms and very clearly spell out, where required, the minimum standards to strengthen a “floor”, below which any regulator cannot issue rulings or regulations. But otherwise we should enable if not embrace some heterogeneity, especially in higher KPIs. Some of these aspects are…

Metering and connectivity

Nikhil Tyagi, Research Analyst, Centre for Social and Economic Progres

The state regulators have indicated procedures for new or modified connections, including the one-time charge/ application fee/demand charge at the time of submission of the application and also charges of additional length of cable (from the nearest pole to the premises). The state regulators are better placed to understand and appreciate the ground realities.

One of the critical challenges consumers face is of paperwork, especially for tenants or subleases. Without delving into the legality of property rights, the rules could specify that at the time of grant of new electricity connections or modification of existing connections, the sanction letter should clearly indicate that such sanctions cannot be construed as valid claims for the ownership of the property by the consumer.

The proposed rules mandate prepaid metering, but there is no clarity on whether they apply to agricultural connections or not. A vast majority of agricultural connections are unmetered. Assuming that the conditions apply to the new connections, the rules are likely to create an imbalance between existing and new consumers, which might also deter people from taking formal connections, thus encouraging bypassed and illegal connections. The intent to promote prepaid metering is not clear. Ideally, the decision to avail of a prepaid or post-paid connection should be left to the consumer. It is also difficult to follow a new norm for all new connections, the costs (and functionality limitations) may not add up.

Rajasekhar Devaguptapu, Senior Consultant, Centre for Social and Economic Progress

Non-smart prepaid meters are often inconvenient for consumers, and also problematic for the utility. Also, these meters cannot easily make updates to tariffs. Prepaid metering (along with net metering) should be viewed as an option within smart metering, which would be rolled out as per discom/state plans.

Consumers are charged a security deposit at the time of grant of a new connection or modification of the existing connection. This is meant to protect the discom from non-payment of bills by the consumer. However, with the changing tariff schedules and the connected load thereof, the security deposit needs to be revised at regular intervals and the additional payment should be collected from the consumer from time to time. Some states do this better than others. This should be a mandate across India.

While consumers may pay for the meter, they have no technical ability to maintain it – and quality issues (inaccurate readings) are distinct from consumer malice. It should be the discom’s job to prove any tampering, else the costs should remain with the utility, including those for meter testing. Only if the test proves consumer responsibility should the consumer pay. The same logic applies to errors in meter reading. Unless any tampering takes place, errors in meter reading or meter deficiency should not be attributable to the consumer. Further, the delivery of bills is the responsibility of discoms and in case of any delay in the delivery of bills, the consumer should automatically be provided with an extended due date for the payment of the bill, equivalent to the period of delay. In any case, the consumer should get a clear 21 days to pay the bills.

In case of non-payment, if disconnection is the choice as per the regulatory process, a smart system allows discoms to choose the timing. We suggest that disconnection should not be done after, say, 2 p.m., allowing consumers several hours to pay the bills physically if desired, and this should not be chosen on the eve of a working holiday. In addition, the rules should encourage more nimble frameworks that regulators. For example, with a smart meter, consumers can curtail instead of fully disconnecting in the first instance so that consumers can get a lifeline supply for a short period as well.

Quality of supply

The draft rules include the system average interruption duration index (SAIDI)/system average interruption frequency index (SAIFI) as the measures to ensure the reliability of supply. But these parameters are provided at the discom level or regional/zonal level, which helps improve the poor supply in specific pockets or regions only, thereby providing a skewed result. Therefore, as a first step towards ensuring reliability of supply, distribution transformer-wise/feeder-wise SAIDI/SAIFI/ momentary average interruption frequency index, technical losses and commercial losses should be measured and uploaded on the website of the discom for the information of all stakeholders. There should be a minimum data granularity across India, which is feeder level. In urban areas, wherever feasible, DT-level granularity must be achieved and disseminated. In addition, these parameters must be extended to include load shedding, which is missing from the technical parameters of faults. It can be a separate KPI, one that is calculated feeder-wise.

Net metering

The draft rules specify the limit for net metering up to 5 kW, without any clear reasoning. This will impact C&I users more than others. Every unit of power has two crucial measures, cost of power and value of power. As such, net metering distorts the value of power and allows many consumers to indulge in an unwritten agreement with discoms for banking of power. While it is a policy choice as to whether to allow gross versus net metering, this decision cannot be imposed top down and must be based on granular cost data (which includes time-of-day differences, which are key for solar), and discom-specific calculations that capture the system-level implications based on the sources of power.

Grievances

The draft rules provide for the constitution of the CGRF to be headed by an employee of the discom itself. The proposed rules undermine the independence of the CGRF in handling complaints. The discoms may have an internal mechanism to address the grievances, and the CGRF should not be made a part of the discom. The SERCs/ JERCs in their regulations have established a credible structure for the independent functioning of CGRFs and hence the inclusion of a consumer representative on the forum would not allow the CGRF to maintain an arm’s-length distance from the discom.

Educating electricity consumers and providing advocacy assistance to them are critical for their empowerment. However, the draft rules miss out on consumer advocacy as a service to be made available by the SERCs/JERCs. Hence, a segment on consumer advocacy could be included in the rules.

 

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