Abstract:
The deregulation of electricity markets began in the early nineties when the UK Government privatized the electricity supply industry in England and Wales. This process has been subsequently followed in many other countries. In most cases, the restructuring involves separating the electricity generation and retail from the natural monopoly functions of transmission and distribution. This, in turn, leads to the establishment of a wholesale electricity market for electricity generation and a retail market for distribution. In the former case, competing generators offer their electricity output to retailers and in the latter case end-use customers choose their supplier from competing electricity retailers. The deregulated market is characterized by a number of power producers trying to sell electric power though bilateral agreements or power exchanges
Power generation in India has been a state owned monopoly and the deregulation era began after the introduction of the Electricity Act, 2003 along with Availability Based Tariff. The act envisages transforming the power sector from a system of monopoly providers at regulated rate to a system in which different companies compete to provide electricity at a competitive rate.
The conceptual framework underlying this new legislation is that the electricity sector must be opened of competition. It focuses on creating competition in the industry, protecting consumer interests, ensuring supply of electricity to all areas, rationalizing tariff for lowering cross-subsidization levels and encouraging autonomous regulation with the separation of policy, regulatory and operational aspects. The bill provides opportunity for open access in the distribution and to phase out cross-subsidies.
