Designed by Freepik
Authors: Riddhi Rahi (Ms.), Shrishti Sharma (Ms.) and Tushar Todi (Mr.)
| 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 |
Date of First Publication: 03 January 2026
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.
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.
Key Amendments Proposed in the Draft Bill
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:
- Removes the requirement that each licensee must construct and operate a separate network.
- 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 as discussed in Section C below.
By granting licence to two or more persons for distribution of electricity ‘through their own or shared distribution system within the same area in accordance with the framework as specified by the Commission’ under the sixth proviso of Section 14 in the Bill, Parliament is effectively delegating the core mechanics of competition to Appropriate Commission. This creates regulatory primacy without statutory guardrails, increasing the risk of:
- divergent state-level regimes,
- forum shopping by market participants, and
- prolonged litigation on access terms, charges, and refusal standards.
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:
- Retaining the obligation to maintain an efficient network.
- Introducing a statutory duty to provide non-discriminatory open access to other distribution licensees within their areas of supply on payment of wheeling charges.
- Requiring avoidance of network duplication ‘as may be specified by the Appropriate Commission.’
Legal effect:
- Network access is no longer discretionary or policy-driven; it becomes a statutory duty.
- The operational autonomy of the incumbent licensee is considerably narrowed.
- Shifts the framework toward regulated third-party access.
While the objective of preventing inefficient capital expenditure and urban over-wiring is uncontroversial, the provision raises unresolved questions.
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:
- Large consumers (>1 MW) may no longer have a statutory right to require supply from all licensees.
- The designation mechanism ensures that a fallback supplier remains available.
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.
Accountability for network performance in shared-licensee areas
- responsibility for maintaining reliability and quality of supply,
- attribution of outages and voltage related issues,
- fault reporting by licensee and restoration coordination,
- control and ownership of shared network,
- the nature of network access (mandatory or voluntary),
- allocation of congestion, losses, and reliability,
- prioritization rules during outages, and
- protection of legacy investments made by an incumbent DISCOM.
The Bill does not specify the guardrails in respect of operational responsibility to be allocated in areas served by multiple distribution licensees using shared networks. Substantive and operational issues, such as:
arising in shared licensee areas are proposed to be addressed by regulatory framework to be developed by the Appropriate Commission.
Cost-allocation for shared networks
- O&M costs,
- augmentation and reinforcement costs,
- technical loss-sharing, and
- metering, billing, and data-handling responsibilities.
The Bill allows shared distribution systems but does not define mechanisms for allocating:
Given that network cost recovery remains central to tariff-setting, the absence of statutory guidance may generate disputes unless the Appropriate Commission prescribes detailed methodologies.
Impact of narrowing the universal supply obligation
- whether existing obligations for such consumers terminate automatically upon exemption, or
- how incumbent licensees recover network costs if high-paying consumers migrate.
While the existing law requires supply to all consumers, the proposed exemption for consumers above 1 MW can create differentiated obligations between licensees. The Bill does not clarify:
Large consumers traditionally contribute disproportionately to distribution revenues and cross-subsidy pools. Their migration to competitive supply models may:
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. These experiences underscore the need for clearly defined cost-sharing, network-access, and service-quality obligations between parallel distribution licensees.
Key Takeaways
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. Such an approach will be critical in addressing operational issues at both the micro level of consumer service and the macro level of sector-wide stability and will help in translating the Bill’s objectives into workable and sustainable results.
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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.
Riddhi Rahi (Ms.), Shrishti Sharma (Ms.) and Tushar Todi (Mr.)
Riddhi Rahi (Ms.)
Shrishti Sharma (Ms.)
