India?s electric power sector has grown substantially since independence from 1 362 MW (megawatt) in 1947 to 1 23 668 MW as on 31st January 2006, representing a CAGR (cumulative annual growth rate) of 7.9%. Despite growth in the installed capacity, the per capita consumption of electricity in India is 606 kWh ( kilowatt per hour ), as compared to the world average of 2 429 kWh per capita. As of January 2006, the government (central and state) together accounted for about 89% of the total installed generation capacity with private sector accounting for the remaining 11%.

Over the years, the transmission system has witnessed growth, both in terms of physical network as well as in the introduction of higher voltages and new technologies for bulk power transmission. The bulk transfer of electricity at voltages over 132 kV (kilo volt) has increased from 3 708 ckm (circuit kilometer) in 1950 to more than 2 65 000 ckm in 2006. In terms of ownership, a major portion of India?s high voltage transmission lines are owned and operated by the central government.

Apart from an extensive transmission system that has been developed to transfer power from the generating stations to the grid, a vast network of sub-transmission and distribution system has also been built for supply of power to the end consumers. As on March 2004, the total energy sales to end-users were estimated at 360 937.2 GWh ( giga watt hour). Trading is generally considered an important step towards introducing competition in the electricity sector. Till March 2004, the trading volume of electricity was estimated at 11 billion kilowatt hours, which was about 3.0% of the total electricity generated.

Electricity sector in India is under the concurrent list of the constitution and is administered both by the central and the state governments. The constitution has, however, given supremacy to central legislation, so that if there is conflict between a central act and the provisions of a state legislation, then the law made by the Parliament would prevail and the inconsistent provisions of the state legislation would be void.

Reforms and Restructuring

Since the early nineties, the power sector in India has been going through a process of reforms and restructuring. In the first phase of reforms beginning 1991, the focus of reforms was on the induction of private investment and the government opened up the Indian power sector by an amendment to the Electricity (Supply) Act, 1948, thereby promoting the entry of IPPs (Independent Power Producers). A number of private players had then evinced interest in power generation, but till date only few projects have come on ground.

The second phase of reforms began in the mid 1990s when there was widespread realisation that more comprehensive reforms were required including changes in the regulatory set up to tackle the problems faced by the power sector in India. This paved the way for chartering a new policy. Thus in December 1996, CMNAPP (Common Minimum Action Plan for Power) was charted out, whose primary agenda was setting up of Regulatory Commissions at the state and central level..

Orissa was the first state in the country to embark on a major reforms process from 1996, following the enactment of the Orissa Electricity Reforms Act, 1995. The reforms programme has gained momentum since the enactment of ERC (Electricity Regulatory Commissions) Act, 1998. Under the provisions of this Act, the central government constituted the independent electricity regulator at the central level ? the CERC (Central Electricity Regulatory Commission) to regulate the operations/businesses relating to the central and inter state issues. The CERC regulates the tariff of generating companies-owned or controlled by the Government of India (GoI)- any other generating company that have a composite scheme for generation, and the inter-state transmission of energy including tariff of the transmission utilities.

A number of states followed suit in creation of their own state regulatory commissions either through the enabling provision of the central Act or their respective state Acts. At present, twenty-four states namely Andhra Pradesh, Assam, Bihar, Chhattisgarh, Delhi, Goa, Gujarat, Haryana, Himachal Pradesh, Jammu and Kashmir, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Sikkim, Tamil Nadu, Tripura, Uttaranchal, Uttar Pradesh, and West Bengal have either constituted or notified the constitution of the SERCs (State Eletricity Regulatory Commission). The Joint Electricity Regulatory Commission has been notified for Mizoram and Manipur. The constitution of Joint Regulatory Commission for union territories is also under process.

Eighteen SERCs namely, Andhra Pradesh, Assam, Delhi, Gujarat, Haryana, Himachal Pradesh, Jharkhand, Karnataka, Kerala, Madhya Pradesh, Maharashtra, Orissa, Punjab, Rajasthan, Tamil Nadu, Uttaranchal, Uttar Pradesh, and West Bengal have already issued their first tariff orders in the direction of rationalizing tariffs.

The EA Electricity Act) 2003 is currently the overarching legislation governing the Indian electricity sector. Until the enactment of EA 2003, a series of legislations have regulated the sector. Some of these regulations were the Indian Electricity Act 1910, the Electricity (Supply) Act 1948 and the Electricity Regulatory Commissions Act 1998. The EA 2003 has repealed these acts. Besides EA 2003, the eight state level reform acts provide for the current legislative and regulatory framework to the extent that they do not contravene the provisions of the EA 2003.