Two licensees in one area, and a government's power to direct the regulator: how parallel power distribution works

Background

Haryana's parallel power licence is in the news this week, so here is the framework behind it. In a parallel distribution arrangement, two licensed companies may supply electricity in the same geographical area, with the existing state utility continuing to operate, and a consumer may choose a supplier once the new distributor's network reaches that consumer. An applicant seeks such a licence from the state electricity regulatory commission under Sections 14 and 15 of the Electricity Act, 2003, and the same framework already runs in Mumbai. The commission is not free of the state government on policy: Section 108 of the Act requires it to be guided by written directions from the state on policy matters involving the public interest, and the government's own view on whether a question is a policy matter is final. An order of the commission can be challenged before the Appellate Tribunal for Electricity. In Haryana the dispute matters because the districts in question made up 35.23 per cent of the southern distribution company's sales and 42.98 per cent of its revenue of Rs 9,493.75 crore in 2025-26. The company estimated that a shift of 2.5 per cent of its sales would cost it Rs 424.12 crore in 2027-28, and a shift of 20 per cent as much as Rs 1,898.75 crore. The Union Power Ministry's consultative committee discussed a national framework for parallel distribution earlier this year.