India Updates Electricity Rules: Optimizes Surplus Usage, Introduces 120% Price Cap on Sales

In a significant move to enhance the reliability of power supply across the country, the Government of India has amended the Electricity (Late Payment Surcharge and Related Matters) Rules of 2022. Announced by Shri R. K. Singh, the Union Minister for Power and New & Renewable Energy, these amendments are set to optimize the utilization of available power resources and ensure an adequate supply of electricity to meet the nation’s growing demand.

A pivotal change introduced by the amendments addresses the issue of surplus power within the declared generation capacity that remains unutilized due to non-requisition by distribution companies. Previously, some power generators withheld this surplus from the market, leading to unused capacity at a national level. To counter this, the new rule mandates that generators failing to offer their surplus power will be ineligible to claim capacity or fixed charges for the unoffered quantum. Moreover, any surplus electricity now must be sold at a price no higher than 120% of the energy charge plus applicable transmission charges. This adjustment aims to increase the purchase and utilization of surplus electricity, thereby enhancing the efficiency of power distribution.

Further amendments align the rules with statutory provisions related to accessing the national power grid, aiding distribution companies that face access curtailment due to payment defaults. These companies can now expect quicker restoration of access to the grid upon settling their outstanding dues, facilitating smoother operations and reliability in power supply.

The amendments are a continuation of the government’s efforts to address cash flow challenges within the power sector, particularly affecting generation and transmission companies. Since the introduction of the Electricity (Late Payment Surcharge and Related Matters) Rules in 2022, there has been noteworthy progress in the recovery of outstanding dues, with most distribution companies now adhering to regular payment schedules. This has led to a substantial reduction in unpaid bills, from approximately Rs. 1.4 lakh crores in June 2022 to around Rs. 48,000 crores in February 2024, marking a significant achievement in the sector’s financial health and operational efficiency.