| Reference Date | Version | 03 January 2026 | 1.0 |
| Keywords | Electricity Act 2003, Electricity Amendment Bill 2025, electricity distribution, multiple distribution licensees, shared network model, open access, tariff design, competition in electricity distribution, energy law |
| Legislation(s)/Policies | Electricity Act, 2003 Electricity (Amendment) Bill, 2025 (proposed) |
| Jurisdiction | India |
The Electricity (Amendment) Bill, 2025 marks a significant shift in India’s electricity distribution framework by introducing competition through multiple distribution licensees, regulated shared network access, and expanded open access mechanisms under the Electricity Act, 2003. Navigating this evolving framework will require specialised legal insight grounded in electricity law, regulatory practice, and power-sector deal structuring.
A. Introduction
The Draft Electricity (Amendment) Bill, 2025 (‘Bill’) proposes changes to the Electricity Act, 2003 (‘Act’) with the stated policy goals of strengthening distribution-sector performance, enabling cost-reflective tariffs, reducing cross-subsidies, and allowing competition through multiple distribution licensees operating on either individual or shared networks.
This article examines the legal implications of the proposed amendments, particularly relating to multi-licensee frameworks, duties of distribution licensees, and supply obligations.
B. Key Amendments Proposed in the Draft Bill
1. Multi-licensee distribution through own or shared networks
Under the current Section 14 of the Act, more than one distribution licence may be granted in the same area, provided each licensee develops and maintains its own distribution system. The sixth proviso prohibits refusal of a licence by the Appropriate Commission merely because another licensee already operates in the same area. The Bill modifies the sixth proviso by enabling distribution licensees to operate through ‘their own or shared distribution system’, subject to the regulatory framework prescribed by the Appropriate Commission.
This is a material change as it creates a statutory basis for shared-network competition, which previously was not permitted under the Act.
Legal effect:
II. Allows shared network access between licensees, contingent on regulations prescribed by the Commission.
The amendment creates a statutory gateway for shared networks but leaves almost all substantive questions to subordinate regulation.
2. Expanded duties of distribution licensees and mandatory open access
The Act currently requires each distribution licensee to develop and maintain an efficient, coordinated and economical distribution system and supply electricity as per Section 42.
The Bill restructures this duty by:
b. Introducing a statutory duty to provide non-discriminatory open access to other distribution licensees within their areas of supply on payment of wheeling charges.
c. Requiring avoidance of network duplication ‘as may be specified by the Appropriate Commission.’
Legal effect:
II. The operational autonomy of the incumbent licensee is considerably narrowed.
III. Shifts the framework toward regulated third-party access.
II. Does reinforcement, redundancy, or capacity augmentation qualify?
III. How are competing technical assessments to be resolved?
By not articulating any statutory benchmarks, the Bill likely places substantial design power in subordinate regulation.
3. Exemption from universal supply obligation under Section 43 of the Act for consumers above 1 MW
Section 43 imposes a universal duty on licensees to supply electricity to any owner or occupier of premises within one month of receiving an application, with a penalty for delay.
The Bill introduces a new sub-section 43(4), permitting the State Commission, after consultation with the State Government, to exempt a licensee from the duty to supply electricity to consumers requiring more than 1 MW. The Commission must designate a distribution licensee to ensure continuity if the selected arrangement fails.
Legal effect:
II. The designation mechanism ensures that a fallback supplier remains available.
Arguably, the requirement that exemptions be granted after consultation with the State Government introduces an additional political-administrative layer into what has traditionally been a quasi-judicial, regulator-driven determination.
C. Issues Left to Regulatory Design and Execution
Although shared network access is now intended to be mandatory, the manner in which such access is structured, priced, and enforced remains dependent on Appropriate Commission and execution.
1. Accountability for network performance in shared-licensee areas
I. responsibility for maintaining reliability and quality of supply,
II. attribution of outages and voltage related issues,
III. fault reporting by licensee and restoration coordination,
IV. control and ownership of shared network,
V. the nature of network access (mandatory or voluntary),
VI. allocation of congestion, losses, and reliability,
VII. prioritization rules during outages, and
VIII. protection of legacy investments made by an incumbent DISCOM.
2. Cost-allocation for shared networks
I. O&M costs,
II. augmentation and reinforcement costs,
III. technical loss-sharing, and
IV. metering, billing, and data-handling responsibilities.
3. Impact of narrowing the universal supply obligation
I. whether existing obligations for such consumers terminate automatically upon exemption, or
II. how incumbent licensees recover network costs if high-paying consumers migrate.
Large consumers traditionally contribute disproportionately to distribution revenues and cross-subsidy pools. Their migration to competitive supply models may:
I. erode the financial base of incumbent licensees,
II. increase tariff pressure on smaller or residential consumers, and
III. intensify the need for explicit subsidy mechanisms.
D. Use of Past Sectoral Experiences
Mumbai’s parallel-license model demonstrates that consumer switching behaviour and tariff differentiation are heavily influenced by regulatory design and network access rules. Experience from the city also reveals persistent issues, including cherry-picking of high-value consumers, disputes over duplication and shared use of distribution networks, disagreements on cross-subsidy mechanisms, and conflicts relating to network charges and power purchase agreements.
E. Key Takeaways
2. Mandatory open access: Incumbent licensees must provide non-discriminatory access to other licensees, strengthening competitive entry but requiring detailed regulatory mechanisms.
3. Reduced universal supply obligation: Consumers above 1 MW may be exempt from statutory supply rights, altering existing consumer–licensee relationships.
4. Regulatory architecture not yet complete: The Bill relies heavily on future regulations for defining network responsibility, cost-sharing, inter-licensee protocols, metering, switching, and reliability obligations.
5. Competition feasibility depends on regulatory detail: The statutory amendments enable competition but do not yet provide operational clarity; without an effective regulatory framework, implementation challenges in the Bill are likely.
In order to achieve fair and effective competition, the Bill will need to be complemented by detailed rules and coordinated regulatory oversight. A centrally guided framework, implemented consistently by Appropriate Commission, can provide clarity on accountability, minimise disputes, and promote uniform outcomes.
Founded in 2003 by Divjyot Singh and Suniti Kaur, Alaya Legal takes pride in its boutique practice, encompassing Litigation & Arbitration, Corporate & Commercial, Energy & Sustainability, and Information Technology (IT) & Artificial Intelligence (AI). The firm offers tailored solutions to its clients to align with their growth objectives by leveraging its expertise and experience in these sectors. If you are interested in related topics such as electricity distribution reforms in India, multi-licensee electricity distribution models, open access and shared network frameworks, or similar energy law aspects, reach out to our legal firm in Gurgaon. Our Energy & Sustainability Practice Group would be happy to understand your specific requirements and work with your team to address various issues related to these matters.
