Unbundling power boards not must, says tribunal
Jangveer Singh
Tribune News Service

Chandigarh, August 16
In a landmark judgement that could have a bearing on the future of the Punjab State Electricity Board, the Appellate Tribunal for Electricity, the highest dispute readdressal forum for electricity laws, has held that it is not mandatory to unbundle state electricity boards to separate distribution, generation and transmission companies.

The dispute arose when the Chhattisgarh State Power Transmission Company objected to grant of transmission licence by the State Regulatory Commission to a private company already engaged in the business of distribution.

The main objection was that a distribution company couldn’t be granted transmission licence because the Act 2003 requires separation of transmission from distribution business.

The bone of contention was that the Chhattisgarh State Electricity Board was recently unbundled because they were told by the Ministry of Power that these two activities cannot be combined but private player was being allowed to bundle their functions of generation, transmission and distribution.

The tribunal in its order recently held that the main objective of the Act did not seem to be the elimination of state electricity boards or their unbundling into separate entities of generation, transmission and trading. Unbundling of the power boards is only an enabling provision in the Act as the statement of objectives and reasons says that the core features of the previous Acts have to be maintained except for “mandatory existence” of the state electricity boards.

Thus, the boards may continue but it would not be mandatory for the entire electricity business to be handled by the state electricity board.

It was further held that as per Section 131 of the Act, the state governments have not been given the mandate for unbundling the state power boards, although the steps to be taken, if such unbundling is undertaken, have been provided for.

Sub-Section (1) of 131 of the statement of objectives and reasons states that the state governments have the option of continuing with the state power boards, which under the new scheme of things would be distribution licensee, and state transmission utilities.

Regarding an objection of the state utility that bundling of functions would hamper introduction of competition in the sector that is the core feature of the Act 2003, the tribunal held that unbundling of the power doards did not naturally lead to competition.

If the boards are unbundled into three or four companies performing different functions without there being other players in the market, newly formed companies would again become monopolies in their own fields.

Section 41 of the Act prohibits the transmission licensee from engaging in trading in electricity, but consciously omits to include the function of distribution. So all three functions of generation, transmission and distribution can be combined together by separating trading.