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Q1) Why is Power a crucial issue in the list of things that are critical to a Nation's growth?

The Power or electricity sector is a key infrastructure sector and is the backbone of the Indian Economy. Like other infrastructure sectors, the power sector also has been doubling every 10-15 years. The installed power generation capacity has grown 66 times since independence.

There are around 10 crore consumer connections in the country and the total revenue of all Electricity Boards and Distribution utilities in the year 2001-02 was nearly Rs. 93,000 crores. Today Electricity plays a key role in society. In the house, office, factory or farm, electricity powers so many gadgets. Electricity is one of the most versatile forms of commercial energy. It has been a key input to economic growth and improving the quality of life.

For any growth in the Industrial activity the Power sector has to increase its output in accordance with the needs of the economic activity. Besides this the Government is proposing to extend electrification to all villages in the near future. This will require extensive growth in the power production and distribution sectors in the near future.

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Q2) Which major laws and regulations govern the power sector?

• Electricity Act 2003 (A synopsis): The Electricity Bill was passed in April 2003 and enacted in June 2003. The Electricity Act 2003 provides for increased competition in the sector by facilitating open access in the transmission and distribution grid (open access is permission to use the power lines), power trading and also allowing setting up of captive power plants without any restriction. The Act overrides all existing acts governing the power sector, and state reform acts passed earlier that contradict the Electricity Act will have to be suitable amended so that the Electricity Act will prevail.

• Energy Conservation Act 2001(A synopsis): It is primarily aimed at the intensive consumers of energy called Designated Consumers. The Energy Conservation Act has created the Bureau of Energy Efficiency (BEE) under the Ministry of Power. The BEE is has powers to direct the designated consumers to abide by energy consumption norms and to get their energy consumption audited. The Power Supply Utilities are included in the list of Designated Consumers.

• Till recently the electricity supply industry in India was governed by 3 enactment: the Indian Electricity Act 1910, the Electricity (Supply) Act 1948 and the Electricity Regulatory Commissions Act 1998 [ERC Act] .The 1910 Act gave the basic framework for the industry. It envisaged growth through private licensees and provided for licensees to supply a specified area. The 1948 Act mandated the creation of State Electricity Boards [SEBs] with the responsibility of managing electricity supply in the state. The 1998 Act created the Central Regulatory Commission and gave the legal framework for creating State Regulatory Commissions. State acts related to reform have been passed in eight states – Orissa (1996), Haryana (1997), Andhra Pradesh (1998), Uttar Pradesh (1999), Karnataka (1999), Rajasthan (1999), Delhi (2000) and Madhya Pradesh (2000). The Electricity Act 2003 replaces these laws and is said to harmonize the provisions of these through a new, comprehensive legislation meeting reform related Issues such as trading, competition etc.

For More info: http://powermin.nic.in/ Ministry of Power –Government of India

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Q3) How is the Electricity Tariff (the rate at which electricity is sold to consumers) set across the states?

The ERC Act 1998 and the Electricity Act 2003 require that the consumer tariffs are set such that reasonable costs of the utility are fully recovered through the tariff. As a result, at the consumers' end, all costs (of production, transmission and distribution) and all losses (All technical and commercial or AT&C) add up.

Then the allowed profit of each utility is added to its costs, the cost + recoverable profit is called the Annual Revenue Requirement [ARR] of the utility. This is a common term used in the regulatory process. The ARR has a direct bearing on the average tariff of consumers. In an equation form it can be written as:

Annual Revenue Requirement (ARR)= Reasonable Costs + Allowed Profit + Income Tax

Average Tariff (Rs/kWh*) = ARR (in Rs) / Total sales (in kWh)

* kWh = kilo watt hour is the unit of Energy

Q4.) How does the Power System work?

In India the Power system has 3 sub-systems and many components. The sub-systems are as follows:

• Distribution System: First Link to the Consumers (For e.g. NDPL and BSES in NCR of Delhi)

• Transmission System: These carry bulk Power from generating stations to the distribution substations (For e.g. TRANSCO in case of NCR of Delhi).

• Generation System: These are the primary production Centers and can be Coal, Gas, Hydel or Nuclear based in most cases. Sometimes renewable sources such as Wind or Solar based (For e.g. NTPC).

The 3 sub-systems should work in close co-ordination to meet the objective of the power system. That is to generate electric energy in sufficient quantities, at the most suitable location then to transmit it in bulk quantities to the load centers, and then distribute it to Individual consumers in proper form and quality at the lowest possible ecological and economic price.

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Q5.) What do we mean by Transmission and Distribution losses?

Transmission and Distribution (T&D) losses can be defined as the difference between the energy available (from generating stations and imports) and the measure of energy supplied to consumers. It is an important and by now a common index of performance efficiency of a State Electricity Board or Private Utilities (distribution companies). As per the statistics of the government, the average T&D loss of the country was 23% in 2001. Figures across individual states vary from 18% to 45%. These abysmally high figures are unacceptable by any standards.

The two major reasons why these losses occur can be classified under two heads a) Technical Loss and b) Non-technical Loss. Technical losses are experienced due to the physical characteristics of the power system and can never be completely recovered. Non- Technical losses occur due to faulty measurement (by the utility) of energy supplied to the consumers. The primary reasons for this are theft, faulty meters, wrong estimates in cases of non metered supply etc. Projects worth crores are being implemented to reduce these T&D losses across the country.