Role of regulatory mechanism concerning energy sector, consumer protection, law & advocacy

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The study reflects as how on one hand the needs of market has to be catered and on the other, consumer interest has to be protected by the regulator. The study encompasses an overview of the Indian energy sector.

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International Journal of Management (IJM) Volume 8, Issue 6, Nov–Dec 2017, pp. 18–32, Article ID: IJM_08_06_003 Available online at http://www.iaeme.com/ijm/issues.asp?JType=IJM&VType=8&IType=6 Journal Impact Factor (2016): 8.1920 (Calculated by GISI) www.jifactor.com ISSN Print: 0976-6502 and ISSN Online: 0976-6510 © IAEME Publication ROLE OF REGULATORY MECHANISM CONCERNING ENERGY SECTOR, CONSUMER PROTECTION, LAW & ADVOCACY Prabhat Kishor Dimri Director Technical, Uttarakhand Electricity Regulatory Commission Shivanku Bhatt Legal Consultant, Uttarakhand Electricity Regulatory Commission ABSTRACT Demand of energy has been growing ever since its value for survival and development has been realised. As energy has become a commercial commodity in the global market, its maintenance and regulation becomes crucial. Thus, a regulatory mechanism holds significance for the sustainable growth of the energy market. The study reflects as how on one hand the needs of market has to be catered and on the other, consumer interest has to be protected by the regulator. The study encompasses an overview of the Indian energy sector. The presence of regulator, its role and importance are highlighted in the analysis. The analysis delves into the provisions of law relating to the energy sector and also dissects some of the judicial pronouncements by the Hon’ble Supreme Court of India and Hon’ble Appellate Tribunal for Electricity for conceptualising the subject in holistic light. In addition, this study attempts to give an aerial view of the regulatory mechanism prevalent in the country particularly, for Oil & Gas sector and Power Sector. It also entails an elaborate discussion with regard to issues of consumer protection, consumer law and consumer advocacy in India. Key words: Energy Sector, Consumer Protection, Law & Advocacy. Cite this Article: Prabhat Kishor Dimri and Shivanku Bhatt, Role of Regulatory Mechanism Concerning Energy Sector, Consumer Protection, Law & Advocacy. International Journal of Management, 8 (6), 2017, pp. 18–32. http://www.iaeme.com/IJM/issues.asp?JType=IJM&VType=8&IType=6 1. INTRODUCTION Energy sector in today’s world is the fastest growing sector by the virtue of its potential to generate infrastructure, socio-economic upliftment and strong military advancement. Due to its multifaceted characteristic, it is not very difficult to comprehend that generation and utilisation of energy is inevitable for the development of any country. India too has witnessed tremendous growth in this sector and now has a large dependency over it. India’s commercial http://www.iaeme.com/IJM/index.asp 18 editor@iaeme.com
Role of Regulatory Mechanism Concerning Energy Sector, Consumer Protection, Law & Advocacy energy consumption basket comprises of coal, oil, natural gas, nuclear power, hydro electricity and renewables. In terms of million tonne oil equivalent (MTOE) it has gone up from 320.8 in 2003- 04 to 595.0 MTOE in 2012-13.[1] It is therefore, an imperative on the Government to take keen interest in the development and maintenance of this sector and device better strategies and policies with every passing year to ensure the development of its market and optimum utilisation of energy by the end consumers. Time is a witness to the rapid growth that has taken place in the energy sector which has led to development of national & international energy markets compelling the countries entering into several energy conventions and treaties. This thirst of energy has also led to blood shed at many pockets of the globe. Despite of all the challenges, energy in all its forms, remains the most precious commodity in the world and consequently, making an undisputable presumption of it being the most advantageous tool of development of any country. Therefore, its generation, preservation and utilisation has to be economical viable and socially sustainable. Regulatory mechanism is one of the measures with which sustainable development of this sector is ensured, the gap between demand and supply is maintained. Therefore, the presence of a regulator becomes highly important for this sector. A regulator not only regulates the supply of energy but also disciplines the whole industry while keeping a check on the standard of performance of the entities involved in the energy business and also ensures regulatory compliances. This helps in keeping a grip on a balanced development of energy, enabling protection of interest of all those associated in the demand and supply chain of the sector. Some would question the need of having the regulator as the Government is fully empowered to regulate the sector by itself, to this, it is important to highlight that the need to have a regulator has emerged over the years after experiencing a dearth of expert attention of the Government on challenges faced by the sector in the past. It is important that management of the sector be given in the hands of people having specialised knowledge and expertise in the sector and can devote their full attention and time for enhancing the health and development of the sector. With regard to energy conservation the role of the regulator becomes important in encouraging the domestic consumers towards buying energy efficient appliances[2]. Further, the regulators can by the way of introducing time of day tariff (ToD) can lessen the peak load demand of the industrial consumer.[3] Thus, the chapter will yield an insight on the working of regulators, its effectiveness and the challenges. Primarily, there are three basic variants of utilisable energy in India; Oil & Gas, Power (Electricity) and Atomic Energy and thus, there are three regulators for each variant of these energy forms. Petroleum & Natural Gas Regulatory Board for regulating the Oil & Gas sector, Electricity Regulatory Commissions for regulating electricity industry in India and Atomic Energy Regulatory Board. However, there is no independent regulator in the upstream side of the Oil & Gas sector and atomic energy is directly under the supervision and control of Government of India and is not open to private participation and therefore, this chapter will deal in Oil & Gas and the Power sector with a special emphasis on the later. Independency of a regulator is very significant for maintaining transparency while discharging duties and preventing vested interest of any political party in power. There has been a demand to have an independent regulator, free from Government interference in the Oil & Gas sector as we have in the power sector. Even in the power sector which has envisaged to have an independent regulator, the absolute independency of power regulator has always been a topic of debate at various platforms. In a country like India where every single http://www.iaeme.com/IJM/index.asp 19 editor@iaeme.com
Prabhat Kishor Dimri and Shivanku Bhatt thing is politically motivated, it is very important to provide few cost intensive sectors full autonomy and independency. Since energy is a market entity, it is valuable to both, the supplier and to the end consumer, which is why role of regulator becomes even more important as the institution has to look after protection of the consumer as well. The study will highlight the legal protection provided to the consumers of energy and the remedies available to them in times of distress. There are various provisions in the Electricity Act, 2003 and the PNGRB Act, 2006 which determines the rights of the consumers and ensures protection to them. Infact, in the preamble of both the legislations, consumer interests have been given due weightage. There have been several judicial pronouncement which clarify upon confusion concerning which forum to approach to, as there are district forums under the Consumer Protection Act and Grievance redressal forums established under the Electricity Act. This has been highlighted and discuss in the course of this study. The legislations governing energy sector, their relevance and redundancy has also been highlighted in this study. Further, the chapter encompasses the position of law with respect to the various issues that are currently faced by the entities involved in the energy business and are relevant to address and discuss. Overall, the chapter attempts to addresses the demand of the topic and features the issues that are of paramount importance such as the effectiveness of regulators and its functioning together with examining the issues faced by it in legal parlance of the energy sector. 2. ROLE OF GOVERNMENT There are different Ministries for different forms of energy. At the government level, policy and decision making is distributed among different ministries such as, Ministry of Petroleum & Natural Gas (MoPNG), the Ministry of Coal, the Ministry of New & Renewable Energy (MNRE), the Ministry of Environment and Forests, the Ministry of Atomic Energy and the Ministry of Power. These ministries are responsible for shaping the energy sector in the country by making policies, issuing notifications & directives and specifying plans. Except for power, all the other forms of energy are dealt by the government. From generation of power to its usage by the end consumer the regulation of the same is bestowed with the Central Electricity Authority and the Electricity Regulatory Commissions, which are independent authorities and have full autonomy in practicing its power and functions under the Electricity Act, 2003. The government is only responsible for specifying the National Electricity Plan with the assistance of CEA, National Tariff Policy, issuing model agreements and nominating the officials for the authorities. 3. OIL & GAS SECTOR Accounting for nearly 40% of the country’s energy demand, the petroleum and natural gas sector forms a major source of energy in India.[4] The oil and gas sector in India is a critical component of the country’s economy, accounting for 15 per cent of the country’s gross domestic product (GDP). [5]It is one of the most crucial sources of energy and mostly caters to country’s transportation sector. 4. ROLE OF REGULATOR: DIRECTORATE GENERAL OF HYDROCARBONS (DGH) During 1990s the government felt a need to have an appropriate agency to regulate and oversee upstream activities in petroleum exploration and production sector and with that effect, various Committees headed by experts recommended for the creation of an http://www.iaeme.com/IJM/index.asp 20 editor@iaeme.com
Role of Regulatory Mechanism Concerning Energy Sector, Consumer Protection, Law & Advocacy autonomous conservation board and an independent regulatory body for the sound management of hydrocarbon resources in the country. Accordingly, the Government of India set up Directorate General of Hydrocarbons which is the technical arm of the MoPNG vide a government resolution dated 8 April 1993.[6] However, the Director General of Hydrocarbons (DGH) only under the administrative control of the Ministry of PNG, is responsible for the environmental, safety, technological, and economic activities related to the oil and gas industry. Among other things, the DGH facilitates E&P activities through regulation as well as research. In unexplored or poorly explored areas, the DGH conducts studies, surveys, information drilling, and other related activities. The DGH reviews the exploration programs and reservoir production of companies for adequacy and advises the Union Govt. on such activities. Further, the DGH oversees matters concerning production sharing contracts for discovered field and exploration blocks. To ensure compliance with Ministry of Defence guidelines, DGH scientists remain onboard all of the seismic vessels and deep water drilling rigs during operation. However, DGH only acts as an administrative body and is an aid to the MoPNG. It is unfortunate that the upstream business of the sector suffers regulatory deficit. Since the administrative control over DGH is of the MoPNG and due to absence of any statutory status limits its power and effectiveness over its functioning. Moreover, questions have been raised time and again over the independence of the DGH as the members of it are appointed on deputation from the oil and gas companies which are under the purview of the DGH and therefore, this dilutes its effectiveness as this may tend to raise conflict of interest between DGH objectives and the companies running in the sector. The urge to have an independent Regulator in oil & gas sector kept emerging over the years, the latest being the Chawla Committee Report (Cabinet Secretariat 2011)[7], however, the suggestions made in the report were turn down by the MoPNG stating that the government is the owner of the natural resources and has a major role to play in their management and development and therefore, establishing an independent regulatory may not be tenable. [8] It is observed that sectors which involve consumer interest and rapid market development needs to be regulated under an independent regulatory regime where government intervention should be negligible, only then can the sector attain what it truly deserve to compete with the markets in the globe. Contrary to the intent of various committees propounding to establish an independent regulator in the sector the government came up with the establishment of DGH which is not a regulator but rather a technical support wing of the MoPNG. In 2016, the Justice A.P. Shah committee, appointed by MoPNG, recommended stronger regulations for India's upstream sector, pointing out that DGH needed technical, commercial, and functional efficiency improvements.[9] 5. OBJECTIVES OF DGH The prime objective of the DGH is to manage and promote the Oil & Gas resources which inter alia includes,  • Offering technical advice to MoPNG on issues relevant to exploration and optimal exploitation of oil and gas reserves in India and abroad.  • Reviewing and advising about the adequacy of exploration programs in the country.  • Reassessment of hydrocarbon resource discoveries.  • Advising the government regarding exploration acreage offerings and relinquishment.  • Reviewing and assessing field development plans to advise the government. http://www.iaeme.com/IJM/index.asp 21 editor@iaeme.com
Prabhat Kishor Dimri and Shivanku Bhatt  • Reviewing and auditing reservoir management programs.  • Regulating data preservation and storage, including samples pertaining to petroleum exploration, drilling, and production. It is unfortunate that the DGH does not have any constitutional or statutory power to regulate the sector. Its administrative powers are in line with the 1959 Petroleum and Natural Gas Rule. In comparison to the other sectors where sector specific regulators are established such as the Telecom Regulatory Authority of India established in 1997, the Securities and Exchange Board of India (1992), and the Insurance Regulatory and Development Authority of India (1999), one can argue that DGH does not in fact regulate India's upstream oil and gas sector. DGH does not generate revenue through fees or other resources which is one of the significant aspect for its autonomy which is a crucial aspect for its smooth and independent functioning. DGH does not have enough manpower which impacts its functioning negatively. It is an imperative on the government to look into these areas for improving the present condition of the regulatory regime in oil & gas sector. 6. CONSUMER PROTECTION The downstream sector of the oil & gas includes oil refineries, petrochemical plants, petroleum product distribution, retail outlets and natural gas distribution companies. The downstream industry touches consumers through thousands of products such as petrol, diesel, jet fuel, heating oil, asphalt, lubricants, synthetic rubber, plastics, fertilizers, antifreeze, pesticides, natural gas and Propane[10]. In such case it becomes really important to safeguard the rights and interests of the consumers of petroleum & petroleum products. Supplementing this, the Hydrocarbons Vision 2025 set by the government lays down the framework which would guide the policies relating to the hydrocarbons sector for the next 25 year wherein, issues such as E&P, refining, marketing, external policy, oil security, tariff and pricing, and restructuring and disinvestment are addressed to ensure that an optimal mix of energy resources are made available to the consumer at the right price. As has been stated before the preamble of the PNGRB Act emphasises upon the protection of the consumers. The very first function of the board specified at section 11 of the PNGRB Act stipulates that, “(a) protect the interest of consumers by fostering fair trade and competition amongst the entities; “[11] Under section 20 of the PNGRB Act, regarding laying down the distribution network, the said section emphasises on protecting the interest of consumers while undertaking the said works. Further, section 22 of the PNGRB Act elaborates upon protecting the interest of the consumer while determining the transportation tariff. These sections reflects the intent of the Act to protect the interest of the consumer however, the implementation of the same and to review the compliance of these provisions of the PNGRB Act, is debatable. Furthermore, with regard to protecting the interest of the consumers section 25 stipulates that, “25. Filing of complaints:- A complaint may be filed before the Board by any person in respect of matters relating to entities or between entities on any matter arising out of the provisions of this Act: Provided http://www.iaeme.com/IJM/index.asp 22 editor@iaeme.com
Role of Regulatory Mechanism Concerning Energy Sector, Consumer Protection, Law & Advocacy that the complaints of individual consumers maintainable before a consumer disputes redress forum under the Consumer Protection Act, 1986 (68 of 1986) shall not be taken up by the Board but shall be heard and disposed of by such forum. Explanation.-For the purposes of this sub-section, the expression "consumer disputes redress forum" shall mean the district forum, State Commission or, the National Commission, as the case may be, constituted under the provisions of the Consumer Protection Act, 1986 (68 of 1986).” [12] Thus, from reading the above it becomes amply clear that if any individual has any complaint regarding the goods/products/services provided corresponding to the oil & gas shall be dealt as per the provisions of the Consumer Protection Act, 1986. 7. LEGAL POSITION The regulation and development of oilfields and mineral oil resources, petroleum and petroleum products, and other liquids and substances declared under law (Article 246) falls under the Union List as entry 53, Seventh Schedule. The Governing body at the Central level in the Oil & Gas sector is the MoPNG and at the State level there are departments and directorates that regulate activities in petroleum and natural gas in onshore fields. Understanding the significance of the sector the government of India have enacted and implemented many laws and policy to regulate this sector which are enumerated below:  The Petroleum Act 1934 The Act was to control issues relating to import, transport, storage, production, refining and blending of petroleum. The powers to regulate the same was then primarily with the Central Government.  Oil Fields (Regulation and Development) Act 1948 The objective of enactment of this Act was to develop and regulate the oilfields and mineral resources in the interest of public. It is a basic enabling statute for licensing and leasing of petroleum and gas blocks by appropriate government. It covers mineral oils which is defines as including natural gas and petroleum under section 3 (c) of the said Act. Mining lease is defined exhaustively to cover all forms of exploring and exploiting minerals oils and all purposes connected thereto at section 3 (d) of the Act. Further, the Act empowers the Central Government to make rules with regard to mining leases under section 5 of the Act and also empowers the Central Government to make rules for the development of mineral oil under section 6 of the Act. New Exploration Licensing Policy (NELP) was conceptualised by the Government of India, during 1997-98 to provide an equal platform to both Public and Private sector companies in exploration and production of hydrocarbons and its enabling provisions are: o Power to vary royalty or exempt it altogether [S.6A] o PSC additional terms and conditions to PEL [S.12]  Petroleum and Natural Gas Rules, 1959  Under section 6 of the Oil Fields (Regulation and Development) Act 1948, the Central Government has power to make rules for the development of mineral oil under section 6 of the aforesaid Act[13]. The said rules basically provide a framework for the grant of exploration licenses and mining lease.  Petroleum and Mineral Pipeline Act, 1962 This legislation provides for provisions relating accusation and utilisation of land for laying pipe lines. The Act also provides for compensation in case of any damage to any http://www.iaeme.com/IJM/index.asp 23 editor@iaeme.com
Prabhat Kishor Dimri and Shivanku Bhatt person interested in the land where the pipe line is either proposed to be laid or has been laid by the appropriate government or corporations.  Oil Industry Development Act 1974 The Oil Industry (Development) Act, 1974 was enacted following successive and steep increase in the international prices of crude oil and petroleum products since early 1973, when the need of progressive self-reliance in petroleum and petroleum based industrial raw materials assumed more importance. Under the said Act the Oil Industry Development Board was established on 13th January, 1975 to promote self-reliance in oil and gas sector. The Board collects oil industry development cess and extends its financial assistance to companies in the sector.  Petroleum and Natural Gas Regulatory Board (PNGRB) Act, 2006 The Petroleum and Natural Gas Regulatory Board has been established under this Act to regulate the refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas, excluding production of crude oil and natural gas. Section 12 of the PNGRB Act specifies the power of the PNGRB wherein, the Board has following power, “12.Powers regarding complaints and resolutions of disputes by the Board :- (1) The Board shall have jurisdiction to- (a) adjudicate upon and decide any dispute or matter arising amongst entities or between an entity and any other person on issues relating to refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas according to the provisions of Chapter V, unless the parties have agreed for arbitration; (b) receive any complaint from any person and conduct any inquiry and investigation connected with the activities relating to petroleum, petroleum products and natural gas on contravention of- (i) retail service obligations; (ii) marketing service obligations; (iii) display of retail price at retail outlets; (iv) terms and conditions subject to which a pipeline has been declared as common carrier or contract carrier or access for other entities was allowed to a city or local natural gas distribution network, or authorisation has been granted to an entity for laying, building, expanding or operating a pipeline as common carrier or contract carrier or authorisation has been granted to an entity for laying, building, expanding or operating a city or local natural gas distribution network; (v) any other provision of this Act or the rules or the regulations or orders made there under. (2) While deciding a complaint under sub-section (1), the Board may pass such orders and issue such directions as it deems fit or refer the matter for investigation according to the provisions of Chapter V.”[14] Thus from the above section the Boards draws it adjudicatory powers, however, in cases where a person is not satisfied by the decision of the Board, appeals in those cases are preferred before the Appellate Tribunal of Electricity under section 33 of the PNGRB Act. Under section 37 of the PNGRB Act, appeal can further be made to the Hon’ble Supreme Court of India. The procedure for filing an appeal has been clearly specified in the act without any confusion. http://www.iaeme.com/IJM/index.asp 24 editor@iaeme.com
Role of Regulatory Mechanism Concerning Energy Sector, Consumer Protection, Law & Advocacy 8. POWER SECTOR Electricity is one of the key inputs for the socio-economic development of any country. Electricity has been one of most demanded commodity of the 19th century. India too like the other developing/developed courtiers has witnessed the growing demand of the power as the same in required in every sector of the society. India saw a total capacity addition of approximately 54,000 MW during the 11th Five Year plan, of which approximately 47 per cent was contributed by the central government, 34 per cent from the state government, and a little over 19 per cent from the private sector.[15] Not only in agriculture or industrial development but also in households electricity plays a pivotal role in every day survival of humans. Thus, it is necessary that its generation and supply should be addressed is pure commercial terms so that the parties involved in generation, transmission and distribution are benefitted and this cycle of generation, supply and consumption is maintained. Therefore, for the swift rolling of this cyclic order a strong regulatory management has to be in place which should not only maintains this order but also ensures disciplines over the organisation involved in the business. India has introduced electricity regulator since 1998 with the enactment of The Regulatory Commission Act, 1998 however, the same was repealed by The Electricity Act, 2003 wherein, the regulator is provided with additional powers and functions and ensured its independent existence and functioning. Independent regulation of electricity in India started in Orissa.[16] It spreaded nationwide after formation of Central Electricity Regulatory Commission in1998. 9. LEGAL POSITION Electricity falls under entry 53 of the State list and entry 38 of the Union list of Article 246 of the Constitution of India. This implies that Electricity is a concurrent subject as per Constitution of India i.e. both Centre and States can legislate it however, in case of repugnancy, Central legislation prevails. Since pre independence law relating to electricity existed. After the realising the commercial potential of electricity the erstwhile British government came up with the Indian Electricity Act, 1910 which provided the basic framework of the supply industry in power sector. Thereafter, came the Electricity (Supply) Act 1948 with which the State Electricity Boards came to existence. However, due to heavy losses incurred by the utilities as the regulation of the sector was with the utilities itself led to corrupt practices ultimately leading to losses. Therefore, the government came up with the Electricity Regulatory Commission Act, 1998 wherein, the electricity regulator commission were established with them having the powers to determine tariff for electricity. Finally in the year 2003 the government enacted the Electricity Act, 2003 unbundling the utilities, de-licensing generation, introducing trading and introducing Open Access. Giving the utilities an independent status brought up disputes among the utilities which were never highlighted before as they were part of the same family but after segregating the accounts, balance sheets etc, fight for rights and survival sparked which made the role of regulatory commission even more important as the same is an adjudicator in cases of disputes among the utilities under section 86(1)(f) of the Electricity Act. Appeal against the judgements of the commission is placed before the Hon’ble Appellate Tribunal for Electricity under section 111 of the Electricity Act within a period of 45 days from the date of judgement of the commission and the Tribunal shall dispose of the matter within 180 days as far as possible. http://www.iaeme.com/IJM/index.asp 25 editor@iaeme.com
Prabhat Kishor Dimri and Shivanku Bhatt Further, appeal against the judgement of the APTEL lies before the Hon’ble Supreme Court of India under section 125 of the Electricity Act. It is clear that the APTEL has power to review the judgment of the commission however, questions have been raised whether the APTEL has power to interfere with the provisions of regulations specified by the commission? In this regard the APTEL has held that, “The Central Commission or any State Electricity Regulatory Commission or this Appellate Tribunal has no jurisdiction or power to add, substitute or delete any word in any of the provisions of the Electricity Act, 2003 or Regulations for Electricity or any State Regulations. This Appellate Tribunal is not competent and empowered to quash or set-aside or declare or decide the validity of any of the provisions of the Electricity Act, 2003, Central Commission or State Regulations. It can only interpret the provisions as the facts and circumstances of any particular case warrant.”[17] Further, with regard to the cases of unauthorised use of electricity (section 126 of Electricity Act) and theft of electricity (section 135 of Electricity Act) neither the commissions nor the APTEL have jurisdiction to deal in such matters. These matters are dealt by special courts established under section 153 of the Electricity Act. 10. ROLE OF THE REGULATOR Power sector is one of the few sectors to have an independent regulatory which means its functioning is not to be interfered by the government or any political forces, it does not rely on the government for its funding and the regulator does not have to report to any authority. It is a fully autonomous body constituted under the provisions of The Electricity Act, 2003. As referred above the electricity regulatory commissions were earlier constituted under the Regulatory Commission Act, 1998 however, with the advent of The Electricity Act, 2003 the same was repealed. As per the Act and in line with the federal structure of our constitution, there is a regulatory commission at the central level and one at the state level. The jurisdiction and purview of both the central and state commissions have been specified in the Electricity Act. Part X of the Electricity Act talks about the constitution, powers and functions of the Central and State commission. Under section 76 of the Act, Central commission is constituted and under section 82 of the Act State commissions are constituted. Section 83 talks about constitution of the Joint commissions. Electricity regulatory commission is a quasi-judicial body i.e it looks after both its judicial as well as administrative functions. The functions and powers of the commission is reproduced below:- (1) The State Commission shall discharge the following functions, namely: - determine the tariff for generation, supply, transmission and wheeling of electricity, wholesale, bulk or retail, as the case may be, within the State: (b) regulate electricity purchase and procurement process of distribution licensees including the price at which electricity shall be procured from the generating companies or licensees or from other sources through agreements for purchase of power for distribution and supply within the State; (c) facilitate intra-State transmission and wheeling of electricity; (d) issue licences to persons seeking to act as transmission licensees, distribution licensees and electricity traders with respect to their operations within the State; http://www.iaeme.com/IJM/index.asp 26 editor@iaeme.com
Role of Regulatory Mechanism Concerning Energy Sector, Consumer Protection, Law & Advocacy (e) promote co-generation and generation of electricity from renewable sources of energy. (f) adjudicate upon the disputes between the licensees, and generating companies and to refer any dispute for arbitration; (g) levy fee for the purposes of this Act; (h) specify State Grid Code consistent with the Grid Code. (i) specify or enforce standards with respect to quality, continuity and reliability of service by licensees; (j) fix the trading margin in the intra-State trading of electricity, (k) discharge such other functions as may be assigned to it under this Act. (2) The State Commission shall advise the State Government on all or any of the following matters, namely :-. (i) promotion of competition, efficiency and economy in activities of the electricity industry; (ii) promotion of investment in electricity industry; (iii) reorganization and restructuring of electricity industry in the State; (iv) matters concerning generation, transmission , distribution and trading of electricity or any other matter referred to the State Commission by that Government. (3) The State Commission shall ensure transparency while exercising its powers and discharging its functions. (4) In discharge of its functions, the State Commission shall be guided by the National Electricity Policy, National Electricity Plan and tariff. “[18] Beside the above, the regulatory commission specifies regulations under section 178 and section 181 of the Electricity Act. This implies that the Commission has both legislative and well as judicial powers. Further, the Commission also has powers of a Civil Court for the purposes of inquiry or proceedings under the Act (Section 94) and powers to impose penalty for non-compliance of direction of Regulatory Commissions and violation of Act/Rules/Regulations under section 142, 146 & 149 of the Electricity Act. 11. CONSUMER PROTECTION As stated before, the Electricity Act, through its various provisions protect the interests of the consumers. Moreover, it obligates the utilities as well as the regulatory commission to take action in order to ensure protection to the interest of the consumers. This approach of consumer protection is necessary as power sector is a monopoly driven market as of now and in such situation consumers become prone to exploitation by the monopolistic market entities. Therefore, role of the regulator becomes very significant. In this regard it is important to quote the preamble of the Electricity Act which states that, “An Act to consolidate the laws relating to generation, transmission, distribution, trading and use of electricity and generally for taking measures conducive to development of electricity industry, promoting competition therein, protecting interest of consumers and supply of electricity to all areas…” [19] The Electricity Act empowers the commissions to take appropriate action to safeguard the interest of the consumers and empowers it to specify regulations in this behalf. Under section 181 of the Act, the commissions are required to specify the Standard of Performance regulations, Release of New Low Tensions and High Tension regulations, the Supply Code regulations, the Consumer Grievance Redressal forum regulations and the Ombudsman http://www.iaeme.com/IJM/index.asp 27 editor@iaeme.com
Prabhat Kishor Dimri and Shivanku Bhatt regulations. Although there are number of other regulations specified by the commissions but the aforesaid are for the direct reference of the consumers. The aforesaid regulations specifies the timelines under which the licensee has to provide its services failing which invites penalty to the licensee and compensation to the consumer. The regulations details about the procedures of filing an application to the licensee and complaints at the CGRF and appeal before the Ombudsman. These regulations are specified after inviting comments from the public and stake holders. Therefore, timelines specified in these regulations are specified keeping in view the practical possibilities for commencing any work by the licensee. However, despite of having these regulations it is observed that the lower staff of the licensee which are in direct contact with the consumers are either unaware of the existence of these regulations or do not follow the timelines specified therein. This ultimately results in inconvenience to the consumers and a loss to the licensee as there is no accountability for their actions. Even the higher officials of the licensees donot bother to inspect the issues and challenges at the field level. In the event of not being satisfied with the services of the discom. a complaint redrssal mechanism has been established under the Electricity Act for the consumers to approach. Section 42(5) and 42(6) of the Act provides for an establishment of Consumer Grievance Redressal Forum and Ombudsman respectively for redressal of the complaints of the consumer in case the consumers are not satisfied by the services of the discom. These consumers forum can be as many as decided by the State commissions. These forums are required to have one independent member, one judicial member and one technical member to listen to the complaints of the consumers and accordingly allow compensation to the consumers specified by the commissions through regulations in cases where the discoms. are found to be defaulters. If the complainant is not satisfied by the decision of the forum, the complainant can approach the Ombudsman whose decision shall be final in the matter. More number of consumer complaints is a sign of awareness among the public and such complaints help in putting accountability on the staff of the discom. also. A complaint can initially be lodged at the distribution licensee’s office and if the redressal is not made in time the complaint can further be filed before the Forum. There have been questions as to whether a regulatory commission can entertain a complaint of an individual consumer? In this regard there are numerous decisions of the Hon’ble Appellate Tribunal for Electricity and even the Honble Supreme Court of India. However, the commission had jurisdiction to entertain the complaints before it uptill 10th June 2004 as was held in In the matter of Awadh Wood Products Vs. UP Power Corporation Limited & othrs.[20] With regard to the power of Commission to entertain individual complaint the Hon’ble Supreme Court of India has held that, “In this connection, we may also refer to Section 86 of the Act which lays down the functions of the State Commission. Sub-Section (1) (f) of the said Section lays down the adjudicatory function of the State Commission which does not encompass within its domain complaints of individual consumers. It only provides that the Commission can adjudicate upon the disputes between the licensees and generating companies and to refer any such dispute for arbitration. This does not include in it an individual consumer. The proper forum for that is Section 42(5)and thereafter Section 42(6) read with Regulations of 2003 as referred to hereinabove.”[21] Thus from the above it becomes amply clear that the consumer should exhaust the remedy immediately available to it under the Electricity Act. http://www.iaeme.com/IJM/index.asp 28 editor@iaeme.com
Role of Regulatory Mechanism Concerning Energy Sector, Consumer Protection, Law & Advocacy It is relevant to understand here the position of the Consumer Protection Act 1986. In this regard section 173 of the Electricity Act stipulates that, “Nothing contained in this Act or any rule or regulation made thereunder or any instrument having effect by virtue of this Act, rule or regulation shall have effect in so far as it is inconsistent with any other provisions of the Consumer Protection Act, 1986 or the Atomic Energy Act, 1962 or the Railways Act, 1989.”[22] Supplementing the above and in order to bring more clarity to the subject, it is relevant to reproduce an extract from the judgment of the Hon’ble Supreme Court wherein it was held that, “ (i) In case of inconsistency between the Electricity Act, 2003 and the Consumer Protection Act, 1986, the provisions of Consumer Protection Act will prevail, but ipso facto it will not vest the Consumer Forum with the power to redress any dispute with regard to the matters which do not come within the meaning of “service” as defined under Section 2(1)(o) or “complaint” as defined under Section 2(1)(c) of the Consumer Protection Act, 1986. (ii) A “complaint” against the assessment made by assessing officer under Section 126or against the offences committed under Sections 135 to 140 of the Electricity Act, 2003 is not maintainable before a Consumer Forum. (iii) The Electricity Act, 2003 and the Consumer Protection Act, 1986 runs parallel for giving redressal to any person, who falls within the meaning of "consumer" under Section 2(1)(d) of the Consumer Protection Act, 1986 or the Central Government or the State Government or association of consumers but it is limited to the dispute relating to "unfair trade practice" or a "restrictive trade practice adopted by the service provider"; or “if the consumer suffers from deficiency in service”; or “hazardous service”; or “the service provider has charged a price in excess of the price fixed by or under any law”.[23] Thus from the above, the position law is amply clear w.r.t the jurisdictional issue of Consumer Protection Act 1986 and Forums established under the Electricity Act. 12. EFFECTIVENESS OF THE ELECTRICITY REGULATOR Despite stringent provisions in the Act/Regulations the power sector is not as efficient as expected to be. There are major challenges that the sector is facing despite the dedicated regulator. This has led to the hinder the development of the power sector in the pace that is expected to meet the current market demand. Despite various attempts of tariff reforms some of the crucial aspects of tariff setting is not in the hand of the power regulator. There is no coordination of major fuels price increase which are used in generating thermal power in India, namely, coal and gas. However, these fall under different Ministries at the Center. Price coordination between the Power Ministry and others is poor and largely ineffective. Power regulators have no opportunity to regulate the price increase. The government should devise a way to eradicate this problem. One of the key functions of the electricity regulator is to check the standard of performance of the licensee under section 57, 58 and 59 of the Electricity Act, however, it has been observed that various state regulators are failing to keep a check on the performance of the distribution licensee. For a healthy and efficient supply network and supply of quality power the regulator has to act very tough to ensure that the utilities are complying all the regulation specified w.r.t the services being provided by the licensee. It has been noticed that in most of the states there is a monopoly of a single public distribution utility which does not pay much attention to its services, depleting the financial health of the utility as well as http://www.iaeme.com/IJM/index.asp 29 editor@iaeme.com
Prabhat Kishor Dimri and Shivanku Bhatt making inconvenience to the end consumers. According to the preamble of the Act with regard to consumer protection and various other provisions made in that behalf the state commissions have to monitor the actions of the licensee in order to ensure that the consumers of electricity are not being harassed by the distribution licensee. It is opined that the regulator must take keen interest in monitoring the action of licensee and accordingly penalize them from violations of Act/Regulations. Further, section 43 (1) of the Electricity Act makes it obligatory for the licensee to supply electricity to an applicant with a period of 30 days and section 43(3) provides that failure to supply electricity within 30 days will call for an amount of penalty of Rs.1000 per day. However, any state commission has taken a stand in accordance with this section and has levied a penalty for delay in release of connection barring the state regulator of Uttarakhand. It has been observed that the staff/officials of the discom. does not provide the electricity connection on time harassing the applicant of a new connection. The regulators also do not monitor such delays which they should and thus, leaving the consumers at the mercy of the defiant officials of the discom. Forum of regulators at various occasions emphasized that the regulator must penalize the discom. for delay in release of connection as per section 43(3) of the Electricity Act and that personal penalty be imposed to streamline the lethargic attitude of the errant officials of discom. Under section 142 and section 146 of the Electricity Act, the commissions has power to issue notice and punish any person who violates the provisions of the Act/Rules/Regulations however, this again is a very unutilized provision of the Act. The state commissions hesitate in using these provisions leaving the utilities unaccountable for their negligent behavior. One of a basic reason for having a weak regulatory management is lack of human resource. Most of the regulatory commissions do not have enough manpower which leads to delay in issuing judgments and thus pending litigations, lack of monitoring of the licensees, outdated regulatory norms and delay in investment approvals to the utilities. Not only in the regulatory set up but the shortage of manpower can be seen in the utilities also which adds to their incompetences to discharge their duties. Under section 62 of the Electricity Act, the appropriate commission shall, within one hundred and twenty days from receipt of an application for tariff determination under sub- section (1) of section 62 of the Electricity Act, and after considering all suggestions and objections received from the public, issue a tariff order. Contrarary to the said provision of the Act, the State commissions delay in issuing their tariff order which adds to the financial loss to the utility. The regulators must follow the guidelines to ensure that the Orders and judgments are issued on time. Further, it is observed that there are no timelines for disposal of matters placed before the commissions. The legislation is silent on this aspect which has given much leniency to the regulator and thus leaving pendency. The Parliament must bring amendment and specify a timeline for disposal of petitions before the commissions. It is a major concern that the role of the regulator under the Electricity Act is very limited w.r.t the energy conservation. The Act only talks about taking efficient measures for supply of electricity but nowhere in the Act obligates or enables the Commission to take action for conservation of Energy. Although, there is a dedicated legislation specified for energy conservation however, the regulators also need to be empowered in this domain. [24] http://www.iaeme.com/IJM/index.asp 30 editor@iaeme.com
Role of Regulatory Mechanism Concerning Energy Sector, Consumer Protection, Law & Advocacy 13. CONCLUSIONS Role of regulatory mechanism in energy sector draws its significance from the very fact that it is a specialized sector which requires expert knowledge in the sector with minimum government interference. Where power regulator has been given autonomy to regulate the sector, Oil & Gas industry still battles against the whims and fancies of the changing government. As observed in the study detailed above, despite of having all legislations in place, there are gaps in policy formation and strategy development. It is opined that the government must establish an independent regulator for the upstream side of the Oil & Gas sector. Deputing officials from the Oil & Gas companies to work at PNGRB must be avoided, in all circumstances, this dilutes the effectiveness of the regulator and raises question on its sanctity as a disciplinary body. Since Oil & Gas is a commodity for global market, its authorities should create a sense of trust and certainty among the foreign investors. It is further observed that to have an independent regulator is not the final solution for all worries. The power regulator must evoke the penal provisions of the Act to ensure compliances by the utilities. A regulator has to maintain a constant balance between the investor and buyers for the sustainable growth of the sector for which it has to monitor the compliance and should seek reports from the utilities involved in the business. A regulator must be efficient and must not be influenced by any political pressure. More awareness programme regarding the rights and powers of the consumer can lead to less harassment of the consumer and will help the industry to be accountable for its actions. Services can be improved when the consumer becomes more aware of its rights. It is unfortunate that the consumers are unaware of the forums to approach. Therefore, the government, the regulator and the utilities should initiate consumer awareness campaign for consumer protection. India is emerging as a global power, the country needs to fill the gaps and seedup its momentum. There is a lot to be done with sincere efforts and good industrial practices has to be put in place. REFERENCES [1] Dr. Ahindra Chakrabarty , Overview of Energy Sector In India, Institute of Management, Gurgaon, Energetica India, Pg, 4 (July 2015) [2] David Nichols, “The Role of Regulators: Energy Efficiency”, Vol 18, Issue 2 Summer 2001, Pace Environmental Law Review, Pg 2 (June 2001) [3] Omkar S. Pawaksar and Prof. Mrs. Swati. S. More, “Time of Day Tariff Structure”, available at: http://www.bvucoepune.edu.in/pdf%27s/Research%20and%20Publication/Research%20P ublications_2007-08/National%20Conference_2007- 08/Time%20of%20Day%20Prof%20%20Mrs%20S%20S%20More.pdf (last visited on 10.08.2017) [4] Anmol Soni, Anomitro Chatterjee, “Governance of Petroleum and Natural Gas Sector in India: A Status Note”, Pg. 1 (The Energy and Resource Institute, TERI-NFA Working Paper Series No. 15, March 2014). [5] Neeraj Arya, “Indian Oil & Gas Sector: Recent Developments, Growth & Prospects”, India Brand Equity Foundation, https://www.ibef.org/download/Oil-Gas-Sector- 040213.pdf http://www.iaeme.com/IJM/index.asp 31 editor@iaeme.com
Prabhat Kishor Dimri and Shivanku Bhatt [6] Government of India, Policy for Geo-Scientific Data Generation for Hydrocarbons in Indian Sedimentary Basins (Ministry of Petroleum & Natural Gas, 2014) [7] Government of India, Report: Allocation of Natural Resources (Chawala Committee Report, 2011) [8] Supra Note 1 at Pg, 10 [9] Justice A.P. Shah Committee, "Report Of The Committee On Dispute Regarding Oil And Gas Blocks In KG Basin," Aug. 29, 2016. [10] Sakshi Parashar, Legal Aspect of Oil & Gas Sector, available at http://www.manupatrafast.com/articles/PopOpenArticle.aspx?ID=3b9928f3-1807-4916- b783-33b3c38992db&txtsearch=Subject:%20Oil%20And%20Gas (Visited on Aug 10, 2017). [11] The Petroleum And Natural Gas Regulatory Board Act, 2006 (19 of 2006 ) [12] Ibid [13] The Oil Fields (Regulation and Development) Act 1948 (53 of 1948) [14] Supra Note 9 [15] Janika Tuteja, “Power Sector in India- An Overview available”, available at: http://ideasmakemarket.com/2013/06/power-sector-in-india-an-overview.html (last visited 14.08.2017) [16] S.L Rao, “Electricity Regulatory Mechanism”, Indian Resident Policy Brief Series No. 7, (2006) [17] GRIDCO Limited. Vs Bhusan Power & Steel Limited., APTEL (Appeal No. 169 of 2013) [18] The Electricity Act, 2003 (36 of 2003), s 86 [19] The Electricity Act, 2003 (36 of 2003), Preamble [20] M/s Awadh Wood Products Vs. UP Power Corporation Limited & othrs. Appeal No. 110 of 2011, Dated : 26th July, 2011, APTEL [21] MSEDC Vs. Lloyd Steel Industries Ltd. (AIR 2008 SC 1042) [22] The Electricity Act, 2003 (36 of 2003) [23] U.P power Corporation Ltd. & Ors. Vs. Anis Ahmad, Civil Appeal No. 5466 of 2012 [24] Prayas (Energy Group), “Substantial comments on Draft National Energy Policy, 2017”, Pg, 4 (July 2017) http://www.iaeme.com/IJM/index.asp 32 editor@iaeme.com