Chapter 2(a)

Legal Framework, Policies and Regulations & Organizational Setup in India

LEGAL FRAMEWORK, POLICIES AND REGULATIONS AND ORGANIZATIONAL SET UP IN INDIA

The 1990s have seen major changes in the electricity sector. There has been a paradigm shift introduced by a process of electricity restructuring. Over the last twenty years, we find a shift from clinging to the economics of monopoly to one of competition by opening the door to private participation. Slowly but surely there is a shift from considering electricity as a basic service to be provided as a part of the States social policy to one that of a commodity like any other, to be supplied on a profit basis. Since several industrialized countries had already moved into this phase earlier it is but natural that India should be influenced by various theoretical models, empirical results and laws used by those countries. Several modifications in legislation have been made in the last decade in order to incorporate the change in policy. Here too, legislation should not be seen isolation but in conjunction with what it aims to achieve and what steps have been taken to achieve the aims set out for the purpose. 1. A Little Bit Of History: Article 246(2) of the Constitution of India has listed electricity in List 3 of the Seventh Schedule of the Indian Constitution. That means that it is a concurrent subject and that both the Central Government and the State Government can legislate on the subject of electricity. In the event of a conflict between overlapping state and federal authority, the Parliament in New Delhi can exercise preemptive power. In December 1950 about 63% of the installed capacity in the Utilities was in the private sector and about 37% was in the public sector. This position needed correction especially if the newly independent country was to increase its industrial growth and if its rural areas had to be adequately catered to. Two legislative acts, one before and another immediately following Independence, forged the development of the power industry in India. The Indian Electricity Act, 1910 (the IEA), introduced the licensing system in the electricity industry, and the Electricity Supply Act, 1948 (the ESA), provided for state involvement in the industry under the new federal constitutional system. The IEA was enacted at a time when the electricity industry was heavily fragmented, competitive and concentrated heavily in urban areas. In an attempt to impart structure on the infant industry, the IEA primarily addressed the supply and use of electricity under an ad hoc regime of private licensees. The subsequently enacted ESA moved India toward a state dominated system by laying out the statutory powers and functions of the Central Electricity Authority, powerful vertically integrated state electricity boards and state generating companies. One of the fundamental reasons for the enactment of the ESA was to use state control to achieve electrification of rural and semi-urban areas. The 1956 Amendment to the ESA increased the supervisory control of state governments over the SEBs. Unfortunately, resulting politicization of the SEBs led to massive electricity subsidies in important sectors like agriculture, and substantial operating losses among the SEBs became the norm. Due to the poor financial health of the SEBs and the widening gap between electricity demand and supply throughout India, the ESA was again amended in the 1970s to allow participation of the central government in power generation through large-scale projects that serve more than one state. Because large-scale projects were financially out of reach for the SEBs, central leadership in this area led to the creation of successful federal generating companies like the National Thermal Power Corporation (NTPC) and the National Hydro Power Corporation (NHPC), which now act as significant players in the power industry and may operate as competitors to IPPs in an open access retail regime. However, due to various reasons prominent among them being the lack of viability of the electricity boards, changes had to be made in the power sector. This was also in line with the general reform processes and opening up of the Indian economy. The first phase of reforms were thus introduced in the early ninetees with the introduction of a policy statement of October 1991, entitled Government of India Resolution- Policy on Private participation in the Power Sector. This however, did not address the question of financial health of the SEBs and in 1997 a Common Minimum National Action Plan for Power (CMNAP) was announced. This laid the seed for corporatization of the SEBs, creation of the regulators, improvement of efficiency, reduction in cross subsidization etc. Until the early ninetees, each State ran one large, vertically integrated setup that generated, transmitted and distributed power (baring a few small privately owned utilities in the south and the west of India). The overall functioning of the power sector in the country was overlooked by the Ministry of Power. The underlying principle for such a structure reflected the internationally held common belief that electricity

Chapter 2(a)

Legal Framework, Policies and Regulations & Organizational Setup in India

is a natural monopoly and a public good. Between early 1990s and 2000 several ideas flowed through the Ministry of Power that culminated in the Indian Electricity Act, 2003. 2. Earlier Organizational Logic The earlier understanding was that the electricity sector is a natural monopoly. For instance, it makes sense to lay one set of transmission and distribution lines. This monopoly is legally supported by the State. Vertical integration and central co-ordination were considered necessary. Also because of economies of scale and the need for coordinated operation to ensure reliability, efficient plant operation and dispatch including coordination of generation and transmission, a central unit was necessary. Public ownership was also considered necessary for a central control. Policies prior to reform: 1. Meeting the requirements of commercially viable candidates- commercial and industrial users, metropolitan households: 2. Serving underprivileged consumers- agricultural sector through subsidized connectivity programmes and prices 3. Generating surplus for supporting other social programmes: This goal was a complete failure. Cross-subsidies as well as state government subsidies were needed to provide electricity to underprivileged and remotely located consumers. This policy had some success as by 2000, 87 per cent of Indian villages had some access to electricity. 3. Modified Organizational Logic In the last two decades, this entire organizational logic has been turned on its head. Monopsony and monopoly have gained importance. Scale economics are no longer considered important due to emergence of small, cheap and modular gas turbine based electricity generation. It is perceived that coordination can be better done by the market. Eventually market should run with very little regulation through performance incentives. Since the investors are at risk the consumers are expected to do efficient consumption. In this changed scenario there can be public, private and public-private ownership. 4. Steps Towards Restructuring Of Existing Utilities The dismantling and restructuring of the state electricity boards has been the most visible form of reform. The earlier vertically integrated utilities consisting of generation, transmission and distribution under one umbrella were vertically unbundled to create separate generation, transmission and distribution entities. This was followed by horizontal unbundling to create multiple and competing entities in each market segment. Parallel set of management changes such as commercialization and corporatization had to be introduced followed by possible ownership changes that included privatization. Since the number of entities created by such vertical and horizontal splitting may not be sufficient to ensure competition, liberalization of the sector was also thought of. This allowed free entry to other players. Finally, major changes in the technical systems had to be envisaged. Development of critical market and technical system coordinating institutions, such as spot markets and system operators are required to manage co-ordination tasks. There is a renewed emphasis on rural electrification and hence decentralized generation. Change in the manner of functioning of the electricity sector, have evolved around the following: 1. De-integration into generation, transmission and distribution. 2. Further de-integration of each of the above units. 3. Changing the ownership from publically owned assets. This may or may not involve privatization. For instance, small distribution companies may be given to a municipality or a co-operative. Sweden for example has de-integrated the sector but ownership largely remains with the municipalities. In India just as elsewhere in the developing world politisized pricing and subsidization, managerial inefficiency and politicized unions are hallmarks of retail electricity supply. It is widely believed that private sector is more efficient than the public sector. 4. Introduction of Regulation parallel to re-organizing the sector. In the absence of competition immediately- regulation is a surrogate for competition. Regulation is however costly and the obvious starting point is to introduce competition. This has to be accompanied by adequate generation and

Chapter 2(a)

Legal Framework, Policies and Regulations & Organizational Setup in India

transmission capacity and efficient trading markets. The much hoped for light hand of regulation has proved elusive world wide. Indias electric sector reform was expected to include all the above. It has somehow stuttered along very much as before. In The States: In each of the States, the monolithic state electricity boards have been broken down into separate utilities for ensuring generation, transmission and distribution. This has been done with varying degrees of autonomy been given to each of the utilities. For instance, in Tamil Nadu the state electricity board still continues as a single body. In Karnataka, the generation, transmission and distribution companies are absolutely independent of each other. In Rajasthan and Uttar Pradesh, the Transmission Company continues to function as a holding company for distribution companies. In several states generation projects of substantial sizes have come up in the private sector, quite independent of the state governments. However, transmission and distribution remains to a very large extent in the public sector. In The Centre: The Central Government is the overall policy maker for the entire country and operates through the Ministry of Power. The Electricity Act, 1948 has created a Central Electricity Authority that provides policy directions and specifies technical standards for the country. The Central has set up large financial institutions such as the Power Finance Corporation and Rural Electrification Corporation for financing of projects in the states and through the Central Government. All Nuclear power plants are owned by the Nuclear Power Corporation.. 5. Legislation The first major changes in legislation commenced in 1990. The 1991 amendments were specifically aimed to attract foreign investment through Independent Power Producers (IPPs). Concurrent reform legislation also lowered custom duties on imported capital goods, and in some cases import tariffs were eliminated (for example, on large scale power generation equipment such as turbines). The 1991 Amendments adopted a cost-plusapproach to Indias newly created IPP program, providing for a guaranteed return on equity of at least 16 percent, a five-year tax exemption, and other attractive investment incentives. Under the 1991 Amendments, IPPs were granted attractive terms to set up power stations and sell electricity to the vertically integrated SEBs through long-term power purchase agreements (PPAs). Because project promoters had to work with State Electricity Boards (SEBs), they tended to converge on the better performing SEBs. Particular interest was shown in India by American and British Companies and Government of India provided support to Enron, Cogentrix, AES. Another big change in 1998 was the introduction of the Regulatory Commissions Act. According to this Act independent Regulatory Commissions were created at the Central and the State levels. 6. Electricity Act, 2003 The changes sought for during 1990-2000 culminated in The Electricity Act, 2003. This Act has ushered in major changes in the sector. The Act has made good use of emerging technologies and markets and has sought to encourage competition and efficiencies. This Act has replaced the Indian Electricity Act, 1910, the Electricity Supply Act, 1948 and the Electricity Regulatory Commission Act, 1998. The Electricity Act,2003 has laid emphasis on competition in the electricity sector. In this one aspect alone it is very different from its preceding Acts. The Act has attempted to increase the number of participants in generating and distributing of electricity. The Act has envisaged major changes to take care of changed policies. These generally include: (a) Generation has been delicensed and captive generation is being actively permitted. (b) Transmission utility at the Central and State level. Transmission will be government owned. The load dispatch function could be kept with the Transmission utility or separated. In case of separation, Load dispatch will be kept with the state government. (c) Provision made for private transmission licensees. (d) There would be open access in transmission from the outset with provision for surcharge for taking care of current level of cross subsidy with the surcharge being gradually phased out.

Chapter 2(a) (e) (f) (g) (h) (i)

Legal Framework, Policies and Regulations & Organizational Setup in India

Distribution companies can take up generation and vice-versa. For rural and remote areas stand alone systems for generation and transmission and distribution will be permitted. Decentralized management of distribution through panchayats, user associations, co-operatives or franchisees would be permitted. Trading is recognized as a distinct activity. The State Electricity Regulatory Commission is a mandatory requirement.

Some of the more prominent provisions of the Act are discussed below: Sec 11: The Appropriate Government may specify that a generating company shall, in extraordinary circumstances operate and maintain any generating station in accordance with the direction of that government. In the explanation provided extraordinary circumstances means circumstances arising out of threat to the security of the State, public order or a natural calamity or such other circumstances arising in the public interest. The explanation provided for Sec 11 has been interpreted by at least one state to prevent open access to generators within the state. Sec 65 of the Act on subsidy is an extremely important sec for all electricity boards because they are all dependent on subsidy from the State governments. According to this section, the appropriate Commission should first determine the tariff without subsidy and then the tariff could be reduced depending on the subsidy promised by the government. The subsidy so calculated must be paid to the electricity company. The Act has recognized theft of electricity as a major problem that needs to be addressed and has further amended Sec 135 and 150 on Theft of electricity and abetment to steal electricity. Subsequent to the passing of the Electricity Act, three major policies have been announced: (a) (b) (c) National Electricity Policy 12.2.2005 National Tariff Policy 6.1.2006 Rural Electrification Policy on 23.8.2006

The Central Electricity Authority under sec 177, the Central Electricity Regulatory Commission (sec 178) and the State Electricity Regulatory Commissions (sec 181)have been permitted to issue guidelines and Regulations The Energy Conservation Act, 2001 is another important Act through which is useful for enabling efficiency in use of energy by the electricity utilities.The Act provides the much-needed legal framework and institutional arrangement for embarking on an energy efficiency drive. Under the provisions of the Act, Bureau of Energy Efficiency has been established with effect from 1st March, 2002. The Bureau is responsible for implementation of policy, programmes and coordination of energy conservation activities in the country. 7. National Electricity Policy: The Central Government announced the National Electricity Policy in compliance with Sec 3 of the Electricity Act, 2003. This policy has the following wish list: (a) Access to electricity- available for all household in the next five years (b) Availability of power-demand to be fully met by 2012. All shortages to be overcome and a spinning reserve to be made available (c) Supply of reliable and quality power (d) Per capita availability to be enhanced by 2012 (e) Minimum life line consumption to be enhanced (f) Financial turnaround and commercial viability of the sector (g) Protection of consumer interest To a large extent the Policy is a reiteration of the various sections of the Electricity Act, 2003.

Chapter 2(a)

Legal Framework, Policies and Regulations & Organizational Setup in India

Unlike in earlier years there is a focus on assessment of demand. Instead of groping in the dark, clear directives are provided in para 3.1 and 3.2 to the Central Electricity Authority to set up a National Electricity Plan once in 5 years while giving a long term perspective for 15 years. Further reference is invited to Sec 73(a) of the Act that requires formulation of short term and perspective plans for development of the electricity system and co-ordinating activities of various planning agencies for optimal utilization of resources. The Policy pays tremendous importance to rural electrification. As a matter of fact, the Ministry of Power web-site has a separate head for Rural electrification. While in general the policy has reiterated the importance of electricity in rural areas and hence the need for household electrification on demand and the presence of distributed generation, one of the major policy shifts is seen in para 5.1.6 of the Policy according to which the responsibility of operation and maintenance and cost recovery of the rural infrastructure could be discharged by utilities through appropriate arrangements with the Panchayats, local authorities, NGOs and other franchisees. The Central Government has provided large quantities of funding in accordance with this Policy through programmes such as the RGGVY, under which electricity distribution infrastructure is envisaged to establish Rural Electricity Distribution Backbone (REDB) with at least a 33/11KV sub-station, Village Electrification Infrastructure (VEI) with at least a Distribution Transformer in a village or hamlet, and standalone grids with generation where grid supply is not feasible For the first time energy conservation and environmental issues have been highlighted. (Para 5.9 and 5.10). Para 5.9 talks about Demand side management, improved agricultural pumpsets and a voluntary approach to energy conservation. The Policy has emphasized the importance of flattening of the load curve by reducing the demand during peak periods by adoption of suitable load management techniques. The Policy concludes by entrusted the responsibility of attaining the objectives of the Electricity Policy to the Regulators. The Regulators have also been entrusted with a development role whose fulfillment would need a less formal and a consultative process. The Regulatory Commissions are not expected to follow a formal judicial approach. On the other hand implementation of the Electricity Policy is expected to be through a consultative process. Thus, while the intentions of the government in improvement in the electricity sector are laudable, the Policy does not quite say how this objective is to be achieved. 8. Independence Of Load Dispatch Centers: With the Act emphasizing Open access, the role of the load dispatch centers has become very important. Since the entire monitoring of the power system is done through the load dispatch centers, it is essential that the LDCs are able to do a real time monitoring of all systems- generation, transmission and distribution. It is a back-breaking 24/7 exercise and has to be done with no hiccups. Hence, new technologies such as the SCADA systems have been introduced. Nevertheless, the LDCs have to function independently. With private sector being permitted to enter transmission as well (in the form of public-private partnerships) there is a move to make the LDCs as separate ring fenced organizations. The Electricity Policy had desired that the Central Government would examine the independence of the Load Dispatch Centers was to be examined by the Central Government by Dec 2005. A committee was set up under the Chairmanship of Shri Grireesh B Pradhan to look into the Ring fencing of the Load dispatch centers. (Report Aug 2008). The spirit of the Act is to ensure independence for System Operation. Under the reform process pursued by the Government of India, the Electricity Supply Industry (ESI) in India is developing at a fast pace. The committee perceives load despatchingin the 21st century as a mission critical activity for uninterrupted and reliable power supply; a facilitator for an efficient electricity market; an optimizer of precious power generating resources; an instrument for equitable and fair use of the available transmission infrastructure and an indispensable link between the managers, administrators, planners and regulators on one end and the physical system on the other end. LDCs would also play a major role in facilitation and deployment of renewable energy sources and consider minimizing emission despatch as an objective function. Thus strengthening of Load Despatch Centres in India would yield substantial gains to all stakeholders. In the rapidly changing scenario, the credibility of the ESI in India is in large measure in the hands of the System Operators at the Load Despatch Centres. They have to be neutral, fair, transparent, and accountable in discharging their duties. The factors that influence the performance

Chapter 2(a)

Legal Framework, Policies and Regulations & Organizational Setup in India

at the LDC are the external business environment, internal work environment, clarity of goals, operating aids to perform, motivation to perform and skills and knowledge of the individuals. Strategic interventions in all the above would enhance the performance of the Load Despatch Centres. The committee constituted by the Government of India went into the details of the functioning of Load Despatch Centres and has arrived at its recommendations in this report. All efforts need to be made to create an environment where the Load Despatch Centres have functional autonomy, independent and sustainable revenue streams and are adequately staffed with people having the right skills, equipment and incentives to deliver. The recommendations of the Report on Ring Fencing of the LDCs has been accepted and directions have been issued on 13th Oct 2008 to implement the Report. Several recommendations have been given. However, the states have not moved much on the subject of ring-fencing the Load dispatch centres. The National Load Despatch Centre (NLDC) has been constituted in accordance with sec 26 of the Electricity Act, as per Ministry of Power (MOP) Notification ,New Delhi dated 2nd March 2005 and is the apex body to ensure integrated operation of the national power system. Sec 176(2)(d) has permitted the Central Government to make rules for the functioning of the NLDC. The National Load Despatch Center(NLDC) was inaugurated on 25th February, 2009. The main functions assigned to NLDC are: Supervision Over the Regional Load Despatch Centres. (a) Scheduling and dispatch of electricity over the inter-regional links in accordance with grid standards specified by the authority and grid code specified by Central Commission in coordination with Regional Load Despatch Centres. (b) Coordination with Regional Load Despatch Centres for achieving maximum economy and efficiency in the operation of National Grid. Monitoring of operations and grid security of the National Grid. (c) Supervision and control over the inter-regional links as may be required for ensuring stability of the power system under its control. (d) Coordination with Regional Power Committees for regional outage schedule in the national perspective to ensure optimal utilization of power resources. Coordination with Regional Load Despatch Centres for the energy accounting of inter-regional exchange of power. (e) Coordination for restoration of synchronous operation of national grid with Regional Load Despatch Centres. (f) Coordination for trans-national exchange of power. (g) Providing Operational feedback for national grid planning to the Authority and Central Transmission Utility. (h) Levy and collection of such fee and charges from the generating companies or licensees involved in the power system, as may be specified by the Central Commission. (i) 10.Dissemination Of information relating to operations of transmission system in accordance with directions or regulations issued by Central Government from time to time. The Power Systems Operation Corporation (POSOCO) has been set up as a wholly owned subsidiary of Power grid. POSOCO is a fully owned subsidiary of POWERGRID. Now these Regional Load Despatch Centres (RLDCs) and National Load Despatch Center(NLDC) are under a separate organisation named POSOCO (Power system Operation Corporation). 9. Overview Of The Act: The question that has to be addressed is whether the new Electricity Act of 2003 been effective and has the electricity sector improved in the last ten years. If not, is it because of bad legislation or just unwillingness to implement the Policy and the Act. Some important references made to the Electricity Act in the Electricity Policy include sec 3(1) and 3(4)to formulate and revise a Electricity Policy, 6 on obligation to supply electricity to rural areas and sec 42(2) on open access. 10. National Tariff Policy:

Chapter 2(a)

Legal Framework, Policies and Regulations & Organizational Setup in India

This Policy was introduced on 6.1.2006 in continuation of the National Electricity Policy, 2005. The aim of this policy is to attract adequate investment for fulfilling the aim of the Electricity Policy to add a generation of 1 million MW during the 10th and 11th Plan period and to have per capita availability of 1000units per year and to have a spinning reserve of 5% in the system. For this proper user charges need to be determined and paid. Proper regulation for this purpose also needs to be developed. Sec 3 (1) of the Act empowers the central the central government to formulate the Tariff Policy. Sec 61 of the Act also requires that the CERC and the SERCs should be guided by the Tariff Policy while discharging their functions. A forum of Regulators has been constituted by the Central Government so that there is consistency in approach especially in the area of distribution. In keeping in line with the Act, emphasis is on competition. All future requirement of power should be through a process of competitive bidding and not through the earlier Memorandum of Understanding route. This would be applicable to public sector units as well. The Policy expresses the need to have a balance between the rate of return on a project and the interests of the consumer. It has permitted a debt:equity ratio of 70:30 but there could be a higher contribution of equity. Rates of depreciation are to be notified, debt management is highlighted and foreign exchange risk is not allowed to be a pass through (hedging and swapping are permitted). The concerned SERCs are expected to lay down operating norms. Renovation and modernization are to be encouraged. An important aspect of the Policy is the introduction of Multi-Year Tariff from 1.4.2006. The framework should feature a five year control period. Benchmarking studies should be conducted. Regulation of outputs is to be monitored and a comprehensive review of performance may be taken up by the concerned Regulatory Commission. Tariff fixation for all electricity generation projects should take into account benefits obtained from Clean Development Mechanisms (CDM). Para 6 of the Policy requires that a Two-Part Tariff structure be fixed so that Merit Order dispatch can be followed. According to the Electricity Policy an Availability Based Tariff should be introduced by April 2006. ABT has become one of the success stories of the new Tariff Policy though intra-state ABT is still a distant possibility is several States. Adequate security mechanism must be in place for power generators. Encouragement has to be provided to harnessing Captive Generation and captive generators should be encouraged to connect to the grid. Firm supplies may be bought from the captive plants using guidelines issued under sec 63 of the Act. A minimum amount of non-conventional energy has to be bought, The appropriate Commission shall fix the quantum in accordance with sec 86(1)(e)of the Act. Issues relating to transmission are dealt with under sec 7. Here too the emphasis is on attracting investment in the sector. The Tariff Policy directs that in accordance with the National Tariff Policy, there should be a national tariff framework and that this framework should be sensitive to distance and direction and should be related to the quantum of power flow. Investment by agencies other than the state transmission utilities have been made possible. However, these investments shall be through a system of competitive bidding. There are several far reaching policies made in the Tariff Policy on distribution. Most importantly, all power purchase costs are to be considered as legitimate ( sec 8.2.1) unless it has been established that merit order dispatch has not been followed or that the price of power was exorbitant. Aggregate Technical and Commercial Losses need to be brought down. Sec 65 of the Act on payment of subsidy to the Electricity distribution companies has been reiterated. The Policy also allows creation of a Regulatory asset (sec 8.2.2) only as an exemption and that to under certain specific circumstances. In no event should the creation of a regulatory asset be a repetitive exercise. In accordance with sec 61(g) of the Act, attention needs to be paid to recoupment of cost of service through the Tariff. Certain principles have been laid down for the purpose of allowing crosssubsidization in tariff. For instance persons below poverty line may be given cheaper electricity .But the Tariff to this category cannot be less than 50 % of the average cost of supply. Sec 62(3) of the Act

Chapter 2(a)

Legal Framework, Policies and Regulations & Organizational Setup in India

allows for differential tariff in agriculture based on geographic location and ground water table. Free electricity is not to be encouraged and metering should be ensured. The Act encourages Open access. Therefore the Tariff Policy has been designed to allow reasonable surcharge on open access so that generating units who chose to provide power through the grid are able to compete. Some of the provisions of the Electricity Act on which the Tariff Policy is based include: Sec 3(1) on the right of the Central Government to formulate a Tariff Policy and review it. Sec 61, 63 and 86 (1)(e) on generation policies. Sec 57, 61,62 and 65 on distribution related policies.

11. Rural Electricfication Policy: This policy has been enunciated under section 4 and 5 of the Act. Under the Common Minimum Programme, electricity to all households has been envisaged in 5 years. In order to achieve this the Rajiv Gandhi Viduytikaran Yogna has been launched. Schemes for Rural Electricity Infrastructure and Household Development. The purpose of these schemes is to provide a rural electricity distribution backbone (REDB), creation of village electrification infrastructure (VEI) and decentralized distributed generation and supply(DDB). All these schemes are expected to aid in overall rural development in agriculture, small and medium industries, khadi and village industries, development of cold chains, health care and IT. Para 6 of the Policy requires local involvement in rural electrification pursuant to sec 166(5) of the Electricity Act. Para 9 of the Policy and sec 5 of the Act highlight the need to implement Article 243(g) in the eleventh Schedule of the Constitution of India according to which local level institutions have been empowered to undertake the business of electricity distribution. Section 13 of the Act is the enabling provision in this connection. Relevant provisions in the Act that are required for the Rural Electrification Policy are sec 2(63), sec 4, sec 5, sec 6, sec 13 and sec 14. 12. Regulations Framed By The Central Electricity Regulators And The State Electricity Regulators: Sec 178 of the Electricity Act had allowed the Central electricity regulators to issue regulations with respect to the functioning of the electricity sector. These regulations have sometimes been difficult to implement. For example, recently the CERC has issued the CERC ( Sharing of inter-state transmission charges and losses) Regulations on 16.6.2010.While the Government has demonstrated its intention of segregating distribution from transmission of electricity, this Regulation now seeks to make the Central Transmission utility collect transmission charges from the distribution companies on behalf of other transmission utilities. Similarly the State transmission utility is expected to collect transmission charges payable to the Central Transmission Utility or any other transmission utility from the distribution companies and pass it on to the CTU. Part XI, section 110 of the Act has set up an Appellate Tribunal for Electricity to hear appeals against the orders of Commission or an adjudicating officer under the Act. 13. Conclusions: It is quite evident that several legislative changes have taken place over the last two decade in particular. Some of these modifications have been too fast for the sector to cope up with and some of them are difficult to adhere to.