Parallel Electricity Distribution Licensing

Parallel electricity distribution licensing means allowing more than one distributor to supply electricity within the same geographical area. Under the Electricity Act, 2003, overlapping licences are permitted, but each applicant must satisfy statutory requirements, including distribution through its own distribution system.

Legal basis for overlapping licences

The sixth proviso to Section 14 empowers the Appropriate Commission to grant licences to two or more persons for distributing electricity through their own distribution systems within the same area. An existing distribution licence therefore does not, by itself, confer an exclusive territorial monopoly.

• The licensing authority is the Appropriate Commission, ordinarily the State Electricity Regulatory Commission for distribution within a state.
• An applicant that meets all requirements cannot be refused a licence merely because another licensee already distributes electricity in the same area for the same purpose.

Conditions for granting another licence

Permission for overlapping licences is conditional, not an exemption from normal licensing scrutiny. The applicant must meet both the general requirements for a distribution licence and the additional requirements prescribed by the Central Government.

• The additional requirements include capital adequacy, creditworthiness and code of conduct, as specified under the framework authorised by Section 14.
• The applicant must also satisfy the other applicable provisions of the Act and the licence conditions imposed by the Commission.
• Under Section 15, the licensing process includes public notice and consideration of objections or suggestions before the Commission decides the application.
• An existing distributor's presence is not a valid standalone ground for rejection, but failure to satisfy the applicable requirements can justify refusal.

Network, supply and tariff obligations

The statutory model concerns competing distribution licensees, not merely competing sellers automatically using the incumbent's wires. A parallel licence does not, by itself, confer an unrestricted right to use another distributor's network.

• The own-distribution-system requirement is central to the overlapping-licence provision; network access is governed separately by the Act's open-access framework.
• Under Section 42, each distribution licensee must develop and maintain an efficient, coordinated and economical distribution system in its area of supply.
• Under Section 43, a distribution licensee has a duty to supply electricity on application by an owner or occupier of premises within its area, subject to the Act's provisions.
• Under Section 62(1)(d), where multiple licensees distribute in the same area, the Commission may fix only a maximum ceiling for retail tariffs to promote competition.