What are power sector reforms ?

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Power sector reforms refer to a series of policy, regulatory, and institutional changes aimed at improving the performance, efficiency, transparency, and financial viability of the electricity sector. These reforms are typically undertaken by governments to address issues such as power shortages, financial losses of utilities, inefficiencies in generation and distribution, and to promote competition, private investment, and sustainability.

Key Objectives of Power Sector Reforms

  1. Ensure reliable and affordable electricity supply
  2. Improve financial health of utilities (DISCOMs)
  3. Encourage private sector participation
  4. Promote competition and efficiency
  5. Enhance transparency and accountability
  6. Support transition to renewable energy and sustainability

Main components of power sector reforms 

Component

Description

Unbundling

Separation of generation, transmission, and distribution functions (e.g., from a single utility to multiple companies).

Privatization

Allowing private entities to own and operate generation, distribution, or transmission systems.

Regulatory Reform

Establishing independent regulatory bodies (like CERC, SERCs) to oversee tariffs, licensing, and dispute resolution.

Tariff Rationalization

Moving towards cost-reflective tariffs and reducing subsidies while protecting vulnerable consumers.

Open Access

Allowing large consumers to buy electricity directly from generators instead of being bound to DISCOMs.

Decentralization and Rural Electrification

Empowering local bodies and promoting schemes for 100% electrification and decentralized renewable energy systems.

Energy Efficiency and Conservation

Promoting efficient appliances, smart metering, and demand-side management.

Digitalization

Use of smart grids, energy management systems, and digital tools for billing, monitoring, and automation.

Renewable Energy Integration

Creating policies for grid integration of solar, wind, hydro, and storage.

Financial Restructuring

UDAY, RDSS schemes to address DISCOM losses and reduce aggregate technical and commercial (AT&C) losses.

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