Independent Regulatory Commission for the Union and State created to grant license for transmission, distribution, supply and trading of electricity. However, a license is not required for:
- Trading by a distribution licensee within supply and trading area of distribution.
- Transmission, distribution, and trading by any Government do not require a license because Government is deemed to be a licensee.
- An area that is specified by the State Government as a rural area. A person, in a rural area, intending to generate and distribute electricity does not need a license.
- Generation has been completely de-licensed except for nuclear & hydro projects where additional approvals are required.
Any Person which includes any company or body corporate or association or body of individuals, weather incorporated or not including artificial juridical person can generate electricity without license of the Government or any other regulatory Authority. This right is only partially limited in case of generation of electricity by Hydro Electric Station.
Captive Generating plant can be established by any person. In fact, for a captive generating plant, there is no Cross-subsidy surcharge. Open access is also available for a captive power plant.
Central Transmission Utility (CTU) and State Transmission Utility (STU) have been barred from trading (buying and selling) in electricity. This effectively segregates wires business from contents. CTU has also been barred from generation. Independent Power Transmission Company is a licensed activity.
Distribution of electricity has been opened for private participation. Distribution and supply will remain combined together for the time being. Second, Distribution License (Parallel Distribution Network) involves duplication of infrastructure at huge cost. Hence not likely to be introduced widely. However, as the SERC’s introduce open access in the distribution network. The Distribution business can be segregated from the Retail Supply business and subsequently a greater number of retail supply licensees can be inducted in the market. Interestingly UPERC has in a way assented to the system of Parallel Distribution Network in the Tronica City of Uttar Pradesh. This effectively means that competition at micro level has been introduced where consumers in Tronica area are free to receive supply from UPPCL or UPSIDC.
Trading according to the Act means “Purchase of electricity for resale therefore”. The Act recognizes trading as a separate licensed activity. There are two types of Trading (a) Physical trading (b) Financial trading. Physical trading involves actual exchange and movement of electricity whereas financial trading is trading in derivatives (secondary market).