Everyone is looking for, one, a scapegoat and, two, a Rosetta stone to help unlock the secret of making deregulation work,” comments a Californian .Independent System Operator, on deregulation.

The Government has notified the recently passed Electricity Bill to take effect starting June 10, 2003.

The Electricity Act, 2003 ("the Act") which replaces three existing legislations-the Indian Electricity Act (1910), the Electricity (Supply) Act (1948) and the Electricity Regulatory Commission Act (1998) seeks to create an electricity market that will ultimately witness competition, simplify the regulatory procedures, and ensure competitively priced quality power to the consumer resulting in a qualitative transformation of the electricity sector through a new paradigm. The Act brings back into focus the need for reforms in the power sector, an issue that has inexplicably taken a backseat for some time now.

Rather than regulate the power sector from the utilities' point of view, the legislation seeks to place the interests of the consumer

first. For instance, it proposes to allow a group of consumers to get together and exercise its choice to purchase power directly from a generating company or from such intermediaries as traders or distribution companies. Besides, the Act takes a realistic view on captive power generation - allowing industrial units going in for captive generation to sell the excess power to retail consumers through the grid, rather than to the electricity board at pre-determined uneconomical rates. It also seeks to de-licence thermal power generation, privatize participation in the transmission sector and open access to the grid infrastructure. However, hydro power plants will be under a licensing regime. '

The Confederation of Indian Industry also corroborated the enthusiasm citing prospects of ushering in a competitive electricity industry to be created through implementation of enabling provisions of the trend setting legislations. It expressed optimism that the legislation will unfold several investment opportunities in the power sector and infuse competition in a limited way across the sector's value chain, which would help in augmenting efficiency and enabling commercial viability in the sector.

The Act does not compel states to iI}troduce time bound reform and restructuring of the state electricity boards. However, introduction of provisions like mandatory commitment to undertake reforms for accessing low rate central funds will indirectly force the States to initiate and progress upon time-bound reform milestones.

It is however mandatory for States to set up electricity regulatory commissions ("SERC"). While many States have already

set up SERCs, these commissions would be empowered to fix retail power tariffs. The pessimistic view surrounding the legislation stresses on possible power sector disarray, unaffordable high levels of

power cost and ignorance of rural areas due to lesser profit margin.

The Electricity Employees Federation of India have aired their views of this Act being an unwanted legislation, contending that Ministries have used examples of regulators in USA and other countries for Central Electricity Regulatory Commission ("CERC") and SERC which are not comparable with India. Similarly countries that have surplus generating capacity have been used as examples for policies in India, which has chronic power shortages.

The reform process in Orissa failed due to the reason that the State-owned Gridco was burdened with virtually the entire past losses of the OSEB, after which it never was going to be viable. The State-owned Gridco carried this burden so that the distribution and generation parts of OSEB could be made more attractive to private bidders. The distribution companies were collecting revenue but not paying Gridco, while Gridco has to shell out the full amount'to the generators. This was described a classic case of privatising profits and nationalising losses.

An improvement over the Orissa example were seen in the reforms in Delhi. The Delhi government was to provide a comfort level to the Transco by providing a loan of Rs 2600 crore to bridge the gap between the cost of power supply and the paying capacity of the distribution companies, to be repaid along with interest after a period of three years.

Orissa privatization exercise offered some positive lessons to Delhi as also to others. First, even after the privatization of the electricity distribution business, continuous support of the law enforcing machinery for some harsh measures shall perhaps be provided. Precisely this is one of the reasons why AES of the United States (one of the CESCO shareholders in Orissa) effectively withdrew from the exercise, citing law and order problems, and lack of political support to cut off power supply to non-paying and illegal connections.

In California, reforms were started on similar lines. The push to deregulate California's electricity industry began in 1996. The idea behind the restructuring was four-fold: split up old power monopolies and open the market to healthy competition; create technology that would make electricity cheaper to generate; offer customer choice; and ultimately bring lower prices to consumers.

However, the California experience exposed that unplanned development and shortage in generation capacity can exploit

the consumers most. Increasing thefts and uncontrolled rise in project cost could result in higher tariffs for consumers.

Though long distance telephone providers and the airline industry have used the strategy successfully, the same cannot be

said for California's electricity industry.

The much-hyped propagation of the Dabhol project also invited opposition from several quarters. The experience unforgotten, perhaps the following may be looked into:

1. Time frame for constitution of the National Load Despatch Centre ("NLDC") has not been clearly outlined. Section 26 of the Act provides for constitution of the NLDC for optimum scheduling and despatch of electricity among the Regional Load Despatch Centres ("RLDC"). '

which could be revised from time to time.

Cassandras are perceived as prophets of doom who should not be taken seriously. Is it ironical that anybody foretelling disasters is still dismissed as a Cassandra? Conversely, big steps should not also be sacrificed, as a chasm cannot be crossed in two small jumps.