scef design document final draft - 31january2012-final · the project implementation team includes...

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DESIGN DOCUMENT

Prepared by:

International Institute for Energy Conservation (IIEC)

10005 Leamoore Lane, Suite 100, Vienna VA 22181, USA

Telephone: +1.703 281 7263 Facsimile: +1.703 938 5153

Grant funding by:

UNITED KINGDOM FOREIGN & COMMONWEALTH OFFICE (UK-FCO)

January 2012

State Clean Energy Funds – Design Report

January 2012

CONTENTS Executive Summary ........................................................................................... I

Acknowledgements ........................................................................................ III

List of Acronyms .............................................................................................. IV

1 Introduction and Project Background ........................................................... 1

1.1 The Need for a Clean Energy Fund ......................................................................... 1

1.2 IIEC Project Activities ................................................................................................... 3

1.3 Structure of This Report ................................................................................................ 3

2 International Review of Clean Energy Funds ................................................ 4

2.1 Barriers to Clean Energy Financing ......................................................................... 4

2.2 Policy Initiatives and Financing Instruments .................................................................... 5

2.3 Clean Energy Funds – International Perspectives ............................................................. 5

2.4 Public Benefits Charge as Funding Source ....................................................................... 6

2.5 U. S. Experience with Clean Energy Funds ...................................................................... 7

2.5.1 Overview .................................................................................................................. 7

2.5.2 Spending Levels ........................................................................................................ 8

2.5.3 Deployment of Clean Energy Funds ............................................................................. 8

2.6 Clean Energy Funds in the U.K. ..................................................................................... 9

2.6.1 Energy Saving Trust ................................................................................................... 9

2.6.2 International Climate Fund ........................................................................................10

2.6.3 U.K. Carbon Trust .....................................................................................................11

2.7 Clean Energy Funds in Asia ..........................................................................................11

2.8 Clean Energy Funds in Other Countries .........................................................................13

2.8.1 Belgium ...................................................................................................................13

2.8.2 Brazil .......................................................................................................................13

2.8.3 Denmark ..................................................................................................................14

2.8.4 Norway ....................................................................................................................14

2.9 Clean Energy Funds in India .........................................................................................15

2.10 Conclusions from the Review of International Clean Energy Funds .................................24

2.10.1 Management and Operation .....................................................................................24

2.10.2 Criteria for Selecting Projects ...................................................................................25

2.10.3 Financial Barriers Addressed by a Clean Energy Fund .................................................26

2.11 Lessons learned from International and National Funds ................................................26

3 Legal Mandate Supporting Creation of State Clean Energy Funds .... 28


January 2012

3.1 Statutory Provisions and Interpretations ........................................................................28

3.2 Energy Conservation Act 2001 ..............................................................................29

3.3 Load Management Charge ............................................................................................31

3.4 Preferred Legal Structure of Public Benefits Charge ........................................................32

4 State Clean Energy Fund Design and Implementation Arrangements ....... 40

4.1 Attributes of SCEF .......................................................................................................40

4.2 Funding Sources ..........................................................................................................42

4.3 Fund Management & Governance Structure ...................................................................43

4.4 Procedure to Select a Fund Manager .............................................................................44

4.4.1 Terms of Reference for SCEF Manager .......................................................................44

4.4.2 Eligibility criteria .......................................................................................................45

4.4.3 Selection criteria .......................................................................................................45

4.5 Typology of Projects Funded through SCEF ....................................................................46

4.6 Project Application Procedures to Avail SCEF ..................................................................47

4.7 Project Reporting & Monitoring Procedures ....................................................................48

4.8 Contents of the SERC Regulations related to SCEF..........................................................48

4.9 Summary of SCEF Set-up, Management and Governance Structure ..................................48

5 Conclusions and Next Steps ............................................................... 50

Appendix A: Summary of Discussions at Stakeholder Meeting and List of Participants in the State Meetings ................................................................. 51

Appendix B: Additional Information – Review of International Clean Energy Funds 56

Appendix C: Legal Mandate - Supporting Summaries – Case Laws and Rulings 61

Appendix D: Structure of Regulations to Set-up SCEF through Collection of PBC 66


January 2012 I

EXECUTIVE SUMMARY

India’s power sector has not been able to keep up with the country’s economic growth and electricity

shortages are threatening to limit the rate of growth. While large-scale power development and

renewable energy projects have received most of the attention to date, there is a tremendous

opportunity for clean energy initiatives, comprising energy efficiency (EE) and end-use renewable energy

(RE) projects. Clean energy represents the most cost-effective and sustainable energy resources for

sustainable development. While large projects can be promoted effectively with the government’s general

budget allocations, clean energy projects need a focused boost through an earmarked specialized fund

for implementation. Despite the intrinsic benefits of clean energy projects, uptake of such programs has

been hampered by limited availability of capital for implementation and lack of interest among financing

institutions. Among various sources of creating such funds, the use of a regulator-driven Public Benefits

Charge has become a trend-setting option internationally. Implementation of clean energy projects has

benefited a lot from a partnership amongst the regulated electricity distribution licensees and end-use

consumers. This project addresses such a concept to set-up the fund to address the financing barrier to

scaling up end-use efficiency and renewable energy adoption.

IIEC was awarded a grant by UK Foreign & Commonwealth Office (UK-FCO) to Develop a Roadmap to

Create State Clean Energy Funds (SCEFs) collected through a Public Benefits Charge levied on electricity

bills. One of the key project activities during the initial phase of the project was to explore the willingness

of State Electricity Regulatory Commissions to set-up such a fund and possible support from the State

Governments for this concept. Initial results from the Stakeholder Consultations with the State

Government officials and the Electricity Regulatory Commissions indicate interest in creating SCEF in the

states of Bihar, Gujarat, Karnataka and Maharashtra. In addition to seeking initial views from the

stakeholders, the following specific activities were conducted: (i) review of international experiences in

setting up clean energy funds using a Public Benefits Charge; (ii) legal analysis confirming the existence

of a mandate to establish such a fund within the ambit of Electricity Act 2003, case laws, and judgments

of Honorable Appellate Tribunal for Electricity and Honorable Supreme Court; and (iii) development of a

Design Document defining how to set-up such a SCEF, its governance requirements, procedures for

appointment of a Fund Manager, and development of the capitalization structure. Key findings and

conclusions drawn from the project are presented below.

International Review of Clean Energy Funds: The most successful examples of setting up Clean Energy Funds are from the United States, where over 20 states have successfully operated such funds. Clean energy expenditures as a share of annual utility revenues in several states vary from 1.1% in Colorado to 4.4% in Vermont. Over 2.5% savings in the annual energy use have been achieved in some of the states. Two key examples from the United Kingdom (U.K.) – International Climate Fund (ICF) and Energy Savings Trust - support international and domestic clean energy actions. In Asia; Korea, Thailand, Sri Lanka, China and India have tried setting-up Clean Energy Funds with different scopes and varying degrees of success. The international review of clean energy funds suggests the need for the creation of a sustainable mechanism to capitalize the funds. The Public Benefit Charge (PBC) has proven to be such a sustainable mechanism. The utilization of funds collected through a PBC has included a combination of loans, grants and information dissemination products launched by the Fund Managers.


January 2012 II

Legal mandate to establish Clean Energy Funds through collection of Public Benefits Charge:

The Electricity Act 2003 was enacted by the Government of India as a way of bringing competition in the

electricity market. Among several complementing statutes under this Act, Section 23 specifically

empowers the State Electricity Regulatory Commissions (SERCs) to take necessary steps and measures

for maintaining the efficient supply of electricity, and provides sufficient mandate to the SERCs to

implement new methods of promoting efficiency in electricity distribution. SERCs have specific powers to

either notify Regulations or pass Orders to mandate actions by the distribution licensees. Among these

two options, Regulations provide a stronger and less contestable mandate. As such, this report suggests

setting up of proposed SCEF through notifying Regulations.

Design of the SCEF: Based on international experience and the legal mandate available within the

purview of the Indian electricity regulations and judgments, this report recommends creation of the SCEF

through collection of a Public Benefits Charge (PBC). The SCEF capitalized through a PBC can potentially

be complemented by other sources such as State Government allocations, donor funds, private equity

fund and debt funds. PBC is recommended to be included as a below-the-line Rs/kWh charge in the

electricity bills. Based on the benefits and costs of proposed fund utilization the SERCs shall announce the

absolute Rs/kWh numbers by way of an Order. The SCEF will be entrusted to or owned by a separate

SCEF Trust. The SCEF Trust will appoint a Fund Manager selected through a competitive bidding process.

SCEF Manager shall be responsible to manage the funds in a trust account and provide grants, disburse

loans and ensure reflows from loans. The types of projects to be covered by the SCEF shall include the

Super-Efficient Appliances Program of the Bureau of Energy Efficiency, grants/loan programs launched by

the distribution licensees, and projects implemented by the consumers on their own. Any unutilized

component of the funds from the SCEF is recommended to be transferred back to the distribution

licensees to be included in their Aggregate Revenue Requirements after a definite period recommended

by the SERCs.

The next steps in the project include providing support to at least one state in helping the SERC to notify

PBC Regulations, launching a public commenting process, and finalizing the Regulations.


January 2012 III

ACKNOWLEDGEMENTS

The IIEC team thanks the UK-FCO management and program management team who entrusted this

assignment that would enhance the uptake of clean energy projects in India.

We acknowledge the feedback from Mr. V. P. Raja, Chairman, MERC, Mr. U. N. Panjiar, Chairman, BERC,

Mr. M. R. S. Murthy, Chairman, KERC, and Dr. Iyer, Member, GERC for insights shared on this topic

during the first Stakeholder Roundtable held in August 2011 and subsequent meetings held at the

individual states. Inputs from Mr. Ajay Naik, Principal Secretary – Energy, Government of Bihar, and Mrs.

Shamim Banu, Principal Secretary – Energy, Government of Karnataka, are also acknowledged. We also

thank all the participants at the meetings held in Mumbai and other cities. A detailed list of participants at

these meetings is included in the Appendix to this report.

The project implementation team includes the following individuals:

Mahesh Patankar, PhD – Team Leader

Nitin Pandit, PhD – Project Director

Dilip Limaye – International Consultant

Arijit Maitra – Legal and Regulatory Expert

Anil Kumar – Task Manager

Mrudula Kelkar – Project Associate


January 2012 IV

LIST OF ACRONYMS

ATE - Appellate Tribunal for Electricity

BEE - Bureau of Energy Efficiency

BERC - Bihar Electricity Regulatory Commission

BSEB Bihar State Electricity Board

DSM - Demand-side Management

EA 2003 - Electricity Act of 2003

EC Act 2001 - Energy Conservation Act of 2001

EE - Energy Efficiency

GEDA Gujarat Energy Development Agency

GERC - Gujarat Electricity Regulatory Commission

GHG - Greenhouse Gas

IIEC - International Institute for Energy Conservation

KERC - Karnataka Electricity Regulatory Commission

KREDL Karnataka Renewable Energy Development Company Ltd

kW - Kilowatt

kWh - Kilowatt Hour

MERC - Maharashtra Electricity Regulatory Commission

PBC - Public Benefits Charge

RE - Renewable Energy

SCEF - State Clean Energy Fund(s)

UK-FCO - UK Foreign & Commonwealth Office


January 2012 1

1 Introduction and Project Background

1.1 The Need for a Clean Energy Fund

India’s rapid economic growth has been accompanied by a corresponding growth in demand for energy

services. The gap between electricity supply and demand in terms of both capacity (i.e. kW) and energy

(i.e. kWh) has been steadily growing in India. The shortfall is being addressed by diversifying energy

imports, developing indigenous energy sources, and reducing the intensity of energy use of the Indian

economy. Meeting rising energy demand without demand side management is an expensive solution that

will increase greenhouse gas (GHG) emissions. Advancing the efficient use of energy is therefore crucial

to address the twin challenges of energy security and GHG emissions mitigation. In addition, efficient use

of energy can be supplemented with energy supply at the end user level to reduce the extreme pressure

on the electricity grid. There is a tremendous opportunity to tap energy efficiency (EE) and end use

renewable energy (RE) potential, but several barriers have constrained the implementation of EE/RE

projects.

The importance of clean energy (defined here as energy efficiency and end-use renewable energy) is

increasingly recognized worldwide as the most cost-effective option in the short to medium term for

meeting the energy requirements of increased economic growth, enhancing energy security, and

minimizing the local and global environmental impacts, without adversely affecting economic

development. For India, clean energy offers a very attractive solution in view of high economic growth,

large reliance on imported energy, increasing fuel costs and the inability of the power supply system to

meet the country’s electricity needs. Clean energy options can reduce the need for expensive new

electricity generation capacity and, since much of India’s generation is coal-based, reduce GHG

emissions. Recognizing the importance of clean energy in India’s economic development, the Government

of India released the National Action Plan for Climate Change1 in 2008. While launching the Plan, Dr.

Manmohan Singh, Prime Minister of India, stated “Our vision is to make India's economic development

energy-efficient,” and designated the National Mission on Enhanced Energy Efficiency (NMEEE)2 as a core

strategy in the Action Plan.

The International Energy Agency has estimated that an additional $10.5 trillion of investment is needed

in total in the 450 ppm scenario defined to limit the temperature rise to 20 C.3 Measures to boost clean

energy (energy efficiency and end-use renewables) will account for 57% of the abatement through 2030

as illustrated in Figure 1.1. Similar to the global scenario, India too has immense potential to reduce the

GHG emissions by creating an investment platform that supports large-scale uptake of EE and RE

resources.

1 Government of India, Prime Minister’s Council on Climate Change, National Action Plan for Climate

Change, http://pmindia.nic.in/Pg01-52.pdf. 2 “National Mission for Enhanced Energy Efficiency to be implemented April 1.”

http://netindian.in/news/2009/12/14/0004413/national-mission-enhanced-energy-efficiency-be-implemented-apr-1.

3 International Energy Agency, World Energy Outlook, 2009


January 2012 2

Figure 1.1: Role of Energy Efficiency in Mitigating Climate Change4

Large scale implementation of clean energy projects requires leveraging of public and private funds, as

demonstrated in the United Kingdom and other developed and developing economies. While India’s

National Energy Conservation Act, 2001 mandated the establishment of State Energy Conservation

Funds, there has been limited progress in the 10 years, due to budgetary constraints, legislative

procedures, other priorities, lack of champions promoting the cause, and limited support from state

governments. The establishment of the National Clean Energy Fund (NCEF) is new and the states have

just begun making proposals to apply for funding. Other donor supported funding options are also

possible but a strong leveraging of an existing fund that is managed by professional institutions is still at

a nascent stage. Electricity being a concurrent subject in India, clean energy promotion and adoption in

individual states is as important as the central support schemes like the NCEF. It is important to create

state-specific funds that focus both on EE and RE sources, are perpetual and can leverage other fund

capitalization opportunities. As such, establishing State Clean Energy Funds to encompass EE and end-

use RE applications will help boost the clean energy adoption. Among all the funding options discussed

later in this report, Regulatory-driven fund development seems to have a better potential to succeed.

Proposed SCEF in this project is designed to complement state energy conservation funds and the NCF

and have the potential to leverage other funding sources from private and donor-support. Key drivers

and need to establish a SCEF are listed in Box 1.

Box 1: Key drivers and need to establish a SCEF

Both end-use EE and RE sources can release pressure on the electricity grids

Establishing legislative mechanism-supported state energy conservation funds has been a long-drawn

process and is still at a nascent stage

Regulatory-supported creation of Funds offers a long-term solution providing perpetuality

Proposed SCEF will complement other funds managed by State and Central Governments

4 Source – International Energy Outlook, 2009


January 2012 3

1.2 IIEC Project Activities The objective of this project is to develop new options to establish Clean Energy Funds at the state level

that are capitalized using innovative structures such as collection of a Public Benefit Charge (PBC) from

the electricity consumers and are leveraged with other funding sources. The project is being conducted

by the International Institute for Energy Conservation (IIEC), under grant funding from the UK Foreign &

Commonwealth Office (UK-FCO), and is developing a structure of a potential State Clean Energy Fund

that would be supported by the electricity regulators and the State governments. IIEC’s project activities

are targeted to produce the following key outputs:

Develop a detailed “State Clean Energy Fund” design document that can be used as a discussion paper

for any public commenting process; develop a structure of regulations that can potentially be issued by

the Regulatory Commissions and/or define a process to include collection of such a fund in the tariff-

setting mechanism

Develop a Roadmap for establishment and implementation of a State Clean Energy Fund including

narration of regulatory decision-making requirements; timelines & implementation responsibilities;

opportunities and mechanisms for establishing public-private partnerships, etc.

Develop a Manual on Establishing State Clean Energy Funds by state governments in India that includes

Best Practices examples of PBCs from USA, Europe and Asia.

The IIEC project grant is for the period August 2011 through January 2013. During the initial phase of

this project with support from the UK-FCO, IIEC organized a Stakeholder Consultation Roundtable and

invited Chairmen of four Commissions – Maharashtra Electricity Regulatory Commission (MERC),

Karnataka Electricity Regulatory Commission (KERC), Bihar Electricity Regulatory Commission (BERC),

and the Gujarat Electricity Regulatory Commission (GERC). The IIEC team also conducted state-specific

meetings and roundtables in the four states with participation from State Energy Departments, Members

of the Electricity Regulatory Commissions and State Energy Development Agencies. Based on the inputs

received during the first Stakeholder Consultation Roundtable and state-specific roundtables/meetings,

IIEC has prepared this Design Document to establish State Clean Energy Funds. Appendix A of this

report includes summaries of discussions held at the Stakeholder Consultation Roundtable in Mumbai and

also lists participants at the state-specific meetings/roundtables in Mumbai, Gandhinagar, Ahmedabad,

Patna and Bangalore during the period August 2011 to November 2011.

1.3 Structure of This Report Section 2 of this report reviews barriers to clean energy financing, available policy initiatives and clean

energy funds established internationally. Section 3 summarizes key legal mandates available to launch

clean energy funds within the provisions of Electricity Act 2003 and associated Orders of the electricity

regulators’ Ombudsman and various decisions and conclusions from the Indian Courts. Based on the legal

provisions and the inputs from the state-specific meetings/roundtables, Section 4 presents one feasible

structure for further exploration. This proposed structure suggests leveraging rate-payer and tax-payer

funds to launch a fund that is professionally administered by a professional Fund Manager selected

through a competitive bidding process. Section 5 lists key conclusions and next steps proposed to be

followed by the IIEC team to provide support to interested states in launching the State Clean Energy

Funds through the involvement of regulatory mechanisms and state allocations.


January 2012 4

2 International Review of Clean Energy Funds

2.1 Barriers to Clean Energy Financing Despite the large potential, availability of commercial technologies, and attractive economics, the

implementation of clean energy projects has been far short of the potential due to a number of barriers.

These barriers include policy and regulatory barriers, end user and equipment provider barriers, and

financing barriers.5 Among these, the financing barriers are often cited as the most important constraints

to large scale implementation of clean energy.

The financial barriers result from some of the unique characteristics of clean energy projects relative to

traditional investment projects, such as their small size relative to conventional energy projects, high

project development and transaction costs, utilization of new or innovative technologies, relatively small

value of project assets, and utilization of new business models involving performance contracting and

third party implementation. In addition, banks and financial institutions are generally resistant to

financing clean energy due to their limited knowledge and understanding of such projects and their

perception of high risk. Figure 2.1 illustrates typical financing barriers to clean energy.

Figure 2.1: Barriers to Clean Energy Financing6

5 Singh, Jas, Dilip Limaye, Xiaoyu Shi and Brian Henderson, Public Procurement of Energy Efficiency Services: Lessons from International Experience, The World bank, 2010

6 Source: The World Bank, financing Clean Energy Investments: Lessons from International Experience, 2011

Financing

Barriers

Availability

of funds

Limited internal

funds

Limited

borrowing

capacity

Lack of

perceived

incentives

Information,

awareness and

communication

Information for

project hostsa

and ESCOs

Communication

between

project

developers and

financiers

Project

development &

transaction

costs

Small project

size

Project

development

costs

Other soft

costs

Risk

assessment &

management

Lenders' risk

perception

Collateralization

M&V

Need for new

financial

products and

appraisal tools

Lack of

capacity

Bank loan

officers & risk

managers

Energy service

providers

Project hosts

M&V agents


January 2012 5

2.2 Policy Initiatives and Financing Instruments Governments and donor agencies have developed and implemented a wide range of policies and

regulations to overcome the barriers to clean energy discussed in Section 2.1.7 Consistent with these

policies and regulations, many financing mechanisms have been utilized. A recent World Bank report has

classified financing instruments for clean energy into the following types:8

• Clean energy funds

• Utility demand side management funds

• Utility on-bill financing programs

• Dedicated credit lines for clean energy projects

• Risk sharing programs

• Leveraging commercial financing through performance contracting and energy service companies

(ESCOs)

• Equity funds

Among these, one the most common and successful approaches has been the establishment of clean

energy funds.

2.3 Clean Energy Funds – International Perspectives Clean energy funds have received increasing acceptance in both the developed and the developing

countries. Such funds may be established as special purpose funds by national or state governments for

financing clean energy projects. In some countries, international donor agencies, such as, the World

Bank, the Asian Development Bank (ADB), or the European Bank for Reconstruction and Development

(EBRD) have established such funds.

Government policy-makers and regulators have used a wide range of approaches for promoting clean

energy. Examples of regulatory initiatives include: mandating utility requirements for DSM activities;

requiring Integrated Resource Planning (IRP); providing for capitalization of DSM investments and

incentives to shareholders; acquisition of demand-side resources through standard offers of bidding;

establishing Energy Efficiency Portfolio Standards and White Certificates; creating new Energy Efficiency

Utilities; and developing special clean energy funds through the mechanism of public benefit charges

(PBCs).9

7 See for example, World Energy Council, Energy Efficiency Policies Around the World: Review and Evaluation, 2008

8 The World Bank, Financing Clean Energy Investments: Lessons from International Experience, 2011 9 Dilip R. Limaye, Utility Demand-Side Management: International Perspectives, presentation at the DSM

Interaction Forum, Mumbai, December 2011.


January 2012 6

A review of international best practices in clean energy funds was conducted by the USAID ECO-Asia

program10 to examine the approaches and methods used in different countries for establishing such

funds. Some of the best examples of clean energy funds are in the U.S. Most of these funds have been

created at the State level, with different mechanisms used to create the funds. The most common

approach has been to include a surcharge (levy or cess) on electricity sales. The funds are collected by

the electricity utility and either used directly to finance energy efficiency projects (such as in California),11

handed over to a specially created agency to administer the financing programs (such as in New York

State),12 or mobilized through a newly created energy efficiency utility (such as in Vermont).13 Some

States have used taxes, general revenues or state revenue bonds to create clean energy funds. In a few

cases, petroleum taxes have provided the funding source.

The most common, reliable and sustainable source of funding is a tariff surcharge, cess or levy

established by the regulator and collected by the utility via the customer’s electricity bill. Such a

surcharge or levy is known as a Public Benefit Charge.

2.4 Public Benefits Charge as Funding Source The Public Benefits Charge (PBC), also known as a System Benefits Charge (SBC), is based on the

fundamental concept that utility ratepayers should pay for a part of the costs of the economic, social and

environmental benefits of clean energy. In restructured electricity markets, utilities generally do not have

an economic incentive for investing in clean energy projects that provide public benefits. Therefore,

policymakers and regulators have established the PBC as a broad-based and competitively neutral

approach to fund clean energy.14

It should be noted that a Public Benefit Fund (PBF) established using the PBC mechanism for funding

clean energy projects at the end use level is somewhat analogous to the funds created by many countries

and states to promote grid-connected renewable energy projects using the Feed-In Tariff (FIT)

mechanism. In the FIT mechanism, payments are made to the renewable project

developers/implementers and the costs are passed through to the electricity ratepayers under the

assumption that the renewable energy sources provide long-term benefits to the utility system and

therefore to the ratepayers (as well as to GHG mitigation). The PBC is an analogous charge to the

ratepayers to fund clean energy projects that are at the end use level and create long term benefits to

the utility system, the ratepayers and to the nation in terms of GHG mitigation.

A PBC is generally implemented through a charge on customers’ utility bills, either based on their energy

usage or through a flat fee. It is designed to create a funding mechanism for clean energy (and

sometimes also for certain low-income assistance programs and projects). It can be created by national

10

ECO-Asia Clean Development and Climate Program, Energy Conservation Funds - International Best Practices, Presentation at the Roundtable on Establishing a State Energy Conservation Fund in Kerala, US Agency for International Development, July 2008.

11 See California's Long-term Energy Efficiency Strategic Plan, http://www.californiaenergyefficiency.com/index.shtml

12 About NYSERDA. (n.d.). Retrieved January 31, 2012, from http://www.nyserda.ny.gov//About.aspx 13 Efficiency Vermont, Annual Report 2009, Nov 2010 14Public Benefit Funds | Center for Climate and Energy Solutions. (n.d.). Retrieved January 31, 2012, from http://www.c2es.org/what_s_being_done/in_the_states/public_benefit_funds.cfm


January 2012 7

or state government statutes or regulatory orders, is generally applied to all customers (“non-

bypassable”), and is designed to provide a sustainable and long-term funding source.

The rationale for funding clean energy projects through the PBC is that clean energy:

• is often the lowest cost resource to individuals and society as a whole;

• can allow consumers to obtain the energy services they need at a lower cost than new or existing

generation, transmission and distribution systems;

• can lead to lower energy costs in the long term thereby helping to improve the competitiveness

of the economy, as well as the security and diversity of energy supply;

• can improve the environment and public health, reduce waste, and conserve additional resources

such as water and fossil fuels;

• can contribute to economic development, through increased employment opportunities.

2.5 U. S. Experience with Clean Energy Funds

2.5.1 Overview

Many states in the U.S. have used clean energy funds as a tool to accelerate the development of energy

efficiency and clean distributed generation (DG), including renewable energy and combined heat and

power (CHP). Clean energy funds provide a funding stream that can be customized in ways that best

meet the state's energy goals, natural resources, and industry presence. Many state clean energy funds

receive money from public benefits funds (PBFs). PBFs have been used to support energy efficiency,

renewable energy, and clean DG programs in competitive markets. In most cases, states fund their PBFs

through a public benefits charge (PBC) or systems benefits charge (SBC), which levies small fees

(typically in the range of 0.001 - 0.01 cents/kWh) that are added to the electricity rates paid by

customers. An illustrative structure of an energy efficiency fund is shown in Figure 2.2.


January 2012 8

Figure 2.2: Illustrative Structure of a Clean Energy Fund15

2.5.2 Spending Levels

The total spending on clean energy programs in the U.S. in 2009 was estimated to be $4.6 billion.16 The

levels of funding vary from state to state. The more progressive states have assessed a levy of 1-3% of

electricity sales revenues to finance their EE funds. These clean energy funds have been very successful

in achieving energy savings. The American Council for an Energy-Efficient Economy (ACEEE) periodically

assesses the performance of state clean energy funds.17

Section B.1 of Appendix B18 shows information from the top 10 states related to budget levels, fund

size as a percentage of revenue, energy savings in MWh, and savings as % of total energy consumption.

The typical range of clean energy fund budgets per capita is from $20 to $50.

2.5.3 Deployment of Clean Energy Funds

The Clean Energy Funds in the U.S. states have been utilized to finance a wide range of clean energy

programs. The financing mechanisms have included grants, loans, subsidies, equity funds, loan

guarantees, credit guarantees, and supplier credits. Because of the very large number of programs

implemented by U.S. states using PBF-based clean energy funds, it is not feasible to list all such

programs. In general, these programs can be classified into the following categories.

• Information, education and communication programs

• Pilot and demonstration program

15

Source: Limaye, Dilip R., Lessons Learned from Innovative Financing of Energy Efficiency Programs, Presentation to the Asia Clean Energy Forum, Regulatory and Policy Dialog, Manila, June 2011.

16 Consortium for Energy Efficiency, State of the Efficiency Program Industry, December 2010. 17 ACEEE, The 2010 State Energy Efficiency Scorecard, October 2010. 18 Source: American Council for an Energy-Efficient Economy, The 2010 State Energy Efficiency

Scorecard, October 2010.


January 2012 9

• Financial services for clean energy, including on-bill financing

• Incentives for clean energy products and technologies

• Direct installation of clean energy products or equipment

• Technical assistance, including subsidized energy audits, feasibility studies, design assistance,

etc.

• Acquisition of clean energy resources using a standard offer or a competitive bidding program

New construction programs, including design assistance and incentives for designing buildings

beyond existing codes

• Innovative pricing, including real-time pricing and smart metering

• Comprehensive implementation support which combines elements of the above types of activities

The ACEEE has documented “exemplary” programs implemented by utilities using these clean energy

funds.19 Section B.2 of Appendix B lists clean energy programs implemented in New York (by the New

York State Energy Research and Development Agency) and Vermont (by Efficiency Vermont).

2.6 Clean Energy Funds in the U.K. The U.K. has not utilized the PBC mechanism for establishing clean energy funds. However, there are

examples of climate funds established by the U.K. government. A brief discussion follows:

2.6.1 Energy Saving Trust

The Energy Saving Trust is a non-profit organization jointly funded by the British Government and the

private sector in order to help fight climate change by promoting the sustainable use of energy and

energy conservation, and to cut carbon dioxide emissions in the United Kingdom. While the Trust is not a

“Fund,” it provides free, impartial advice and information to people across the UK looking to save and/or

generate energy, reduce their energy bills, and use water more efficiently. They also work with like-

minded organizations and groups in the public and private sector who support clean energy as a solution

to climate change issues.20

The activities of the Energy Saving Trust include:

• Consumer advice and action on saving energy, conserving water, and reducing waste

• Product labelling and certification for insulation, glazing, home electronics, heating, home

appliances, lighting and IT products

19

ACEEE, Compendium of Champions: Chronicling Exemplary Energy Programs Across the U.S., February 2008.

20 Energy Saving Trust, Annual Review 2009-2010, 2010


January 2012 10

• Commercial partnerships with organizations that show a genuine commitment to reducing the

UK's carbon emissions in the domestic sector by helping them engage their customers and

employees to save energy

• Technical guidance to housing and building professionals to achieve high levels of energy

efficiency

• Advice, support and services designed specifically to help local authorities and housing

associations meet their obligations under the new carbon dioxide emissions performance

indicator

• Green Communities Program to support, facilitate and promote community based energy projects

2.6.2 International Climate Fund

The UK Government has set up the International Climate Fund (ICF) to help developing countries tackle

climate change and reduce poverty. The Fund works in partnership with developing countries to take

action to reduce carbon emissions, to help people adapt to the effects of climate change, and to tackle

deforestation.21

The International Climate Fund is managed by a high level cross-departmental project team with

representation from the Department for International Development (DFID), the Department for

Environment and Climate Change (DECC) and the finance ministry (Her Majesty’s Treasury). The

Department for Environment, Food and Rural Affairs (DEFRA) is also involved in decisions on the use of

the International Climate Fund for forestry.

The objectives of the ICF are to:

• Contribute to a successful global deal on climate change:

- by generating experience to inform, support and influence the development and

implementation of an efficient, effective and equitable financing framework as part of a new

global deal.

- by raising ambition, capacity and confidence in developing countries.

• Transform the way in which developing countries approach climate change, by piloting financial

approaches, which demonstrate how low carbon growth and climate resilience are compatible

with countries’ overall development paths.

• Contribute to the international institutional reform agenda by putting climate resilient

development and low carbon growth at the heart of the work of the multilateral development

banks.

21

International Climate Fund (formerly ETF-IW) - Climate Funds Update. (n.d.). Retrieved January 31, 2012, from http://www.climatefundsupdate.org/listing/international-climate-fund


January 2012 11

• Support strategic coordination and coherence across the international financing system for

climate change by providing a forum for discussions between donors and recipients about

appropriate financing mechanisms and tools for low carbon and climate resilient development.

• Leverage additional finance from other donors and the private sector for climate change.

• Maximize co-benefits in poverty reduction and sustainable management of natural resources.

2.6.3 U.K. Carbon Trust

The Carbon Trust is a U.K.-based not-for-profit company with the mission to accelerate the move to a low

carbon economy. It was established with core grant funding from the U.K. Department of Energy and

Climate Change and provides specialist support to help businesses and the public sector cut carbon

emissions, save energy and commercialize low carbon technologies. By stimulating low carbon action, the

Trust contributes to key U.K. goals of lower carbon emissions, the development of low carbon businesses,

increased energy security and associated jobs.

The Carbon Trust works with industry and academia to accelerate the development and deployment of

low carbon technologies by targeting support where it can make the biggest difference. Some of its

programs include: (i) Technology Accelerators aiming at opening markets for low carbon technologies; (ii)

Research Challenges for commercializing promising technologies which have not yet entered the market;

and (iii) Prioritization of resources for selecting customized projects.

While it is not a “Fund” it facilitates financing of low-carbon technology deployment in collaboration with

Siemens. The services offered by the carbon Trust include:

• Carbon Trust advisory services to help large companies as well as SMEs and the public sector

address issues across the climate change and sustainability agenda

• Financing and implementation support to help deploy best practice energy efficiency

technologies

• Assistance in measurement, management and reduction of an organization’s carbon footprint

• Acceleration of the commercialization of low carbon technologies by supporting low carbon

entrepreneurs and leading collaborative projects

2.7 Clean Energy Funds in Asia There are a number of examples of clean energy funds in Asia. These include:

• Korea - In 1980, the Korean Ministry of Knowledge Economy (MKE) established the Korea

Energy Conservation Fund (“Fund”)22 to promote the development of energy efficiency initiatives

by providing long-term, low-interest loans for investments in energy efficiency projects. MKE has

assigned KEMCO to manage the Fund, which offers loans for a wide array of projects. A case

study of the Korea Energy management fund is included in this report.

22

Korea Energy Management Corporation, Korea Energy Conservation Fund, presentation at the Asia Clean Energy Forum, Manila, 2008


January 2012 12

• Thailand – Thailand established the ENCON Fund under the Energy Conservation Promotion Act

of 1992.23 The funding for this was from a levy on petroleum products sold in Thailand, with the

aim to fund sustainable energy initiatives and incentive programs, as well as research and

development.

• Sri Lanka – The Government of Sri Lanka established the Energy Conservation Fund under the

Ministry of Power and Energy to finance energy efficiency projects. In 2007, this Fund was

transferred to the newly created Sustainable Energy Authority of Sri Lanka.24

• India – India’s national Energy Conservation Act, 200125 requires all Indian States to establish a

State Energy Conservation Fund to satisfy their obligations to promote energy efficiency under

the Act. The first such fund was established in the State of Kerala in 2010.26 Other Funds set up

in India are discussed in Section 2.8.

• China – China has established aggressive targets for reducing energy intensity and has

designated to the Provincial governments the responsibility to implement these targets. Some of

the Provinces, such as the Province of Hebei, have established energy efficiency funds through a

levy on electricity consumption. Hebei is using its fund to provide incentives and subsidies to

enterprises who implement energy efficiency measures.

Table 2.5 indicates the financing sources for these funds.

Table 2.5 – Asian Clean Energy Funds27

23 Kingdom of Thailand. The Energy Conservation Promotion Act, 1992 24 : SRI LANKA SUSTAINABLE ENERGY AUTHORITY :: (n.d.). Retrieved January 31, 2012, from http://www.energy.gov.lk/ 25 Government of India, Energy Conservation Act, 2001, The Gazette of India, 29 September 2001. 26 ECO-Asia Clean Development and Climate Program, Establishment of the Kerala State Energy

Conservation Fund, November 2009. 27 Source: Compiled by Authors

COUNTRY FUND FUNDING SOURCE

Korea Korea Energy Conservation Fund National Government Budget

Thailand ENCON Fund Petroleum Tax

Sri Lanka Energy Conservation Fund National Government Budget

China Provincial Clean Energy Funds Tariff Surcharge on Electricity

India State Energy Conservation Funds Provincial Government Budget


January 2012 13

2.8 Clean Energy Funds in Other Countries

2.8.1 Belgium

In Belgium, electricity distributors and producers have been required to set aside funds to support

“Rational Use of Energy” (RUE) activities in the three regions of the country since 1996.28 The RUE was

implemented to reduce energy consumption through the use of clean energy options. The funds from

distributors have been used to support energy audits, solar thermal systems, heat pumps, solar boilers,

relighting and CHP. The production funds were used to study the sector potential to reduce GHG

emissions, renewable energy activities, and promote CHP. The funding level was approximately 0.5% of

revenues for both distributors and producers.

In 2003, the Flemish Government imposed an obligation on the utilities to not only collect the RUE funds

but also achieve certain specified energy reduction targets (1 to 2%).29 The clean energy programs

implemented by the utilities include:

• General information to customers about the program and its advantages

• Audits / Energy management: individual energy audits for households, energy audits and energy

book keeping for municipalities, quick and detailed energy audits for industry and tertiary sector,

energy book keeping for the tertiary sector

• Rebates for specified clean energy technologies

• Financial help for investments of municipalities into energy efficiency measures

2.8.2 Brazil

Brazil was the first developing country to use the PBC mechanism for clean energy projects. Since 1998,

Brazil has captured one percent of revenues of privatized electric companies for investment in energy

efficiency and research and development. The funds generated are used for energy efficiency and

renewable energy investments, and the Brazilian ESCO industry owed its survival largely to this

mechanism.30 The PBC was a part of Brazil’s power sector reforms and created a binding obligation on

distribution utilities to invest in clean energy formalized by rulings of the Agência Nacional de Energia

Elétrica, Brazil’s electricity regulatory agency (known by the acronym ANEEL).

The allocation of wire-charge revenues among different programs and types of applications is subject to

regulations established by ANEEL, which also approves the project proposals of the utilities for use of

these funds and oversees compliance with norms. In 2007, the Brazilian congress passed a law which

reinstates the energy efficiency allocation to 50 percent of the total revenues generated through the

charge, half of which must be spent on energy efficiency measures targeted at low-income households.

28

Regulatory Assistance Project, International Experience with Public Benefits Funds: A Focus on Renewable Energy and Energy Efficiency, October 2003.

29 AID-EE, Evaluation of RUE Obligations of Electricity Distribution Grid Managers in Flanders, August 2006.

30 Renewable Energy and Energy Efficiency Partnership (REEEP), Brazil’s Public Benefit Wire-Charge Mechanism: Fueling Energy Conservation, http://www.reeep.org/file_upload/2785_tmpphpC9wvEx.pdf


January 2012 14

2.8.3 Denmark

The Danish Government has imposed an electricity surcharge of €0.0008/kWh payable by households

and the public sector. Funds from this source have been used to establish the Danish Electricity Savings

Trust, an independent entity with a board named by the Ministry of Environment and Energy. The

objective of the Trust is to reduce CO2 emissions through electricity savings in the household and the

public sectors. The Trust’s mission is to develop, test, and implement cost-effective instruments that

make it, simple, safe, and cheap for consumers to acquire and use energy-efficient appliances and

systems (e.g. lighting, white goods, IT equipment, and ventilation), or to convert from electric heating to

district heating or natural gas. Private companies or electricity companies are invited to tender an offer to

design and implement projects.31

The Trust has set a target for how its own activities can lead to new annual electricity savings of 150

GWH/year in the period 2007-2009. Its Action Plan is built around two elements, permanent information

campaigns and marketing initiatives, both of which are designed to ensure that households and the

public sector are well informed about possible ways to save electricity, regardless of whether these

involve the use of existing equipment, or new purchases. The major areas of emphasis are quantum leap

technologies, market transformation, and new construction, energy saving equipment and energy

management, and new business concepts for energy savings.

2.8.4 Norway

Norway has funded energy efficiency measures since the 1970s. In March 2001, the Norwegian

Parliament approved the establishment of a new public agency, Enova SF, fully owned by the Norwegian

government. Enova’s main mission is to support the environmentally sound and rational use and

production of energy, by using financial instruments and incentives to support the deployment of

renewable energy production and development of energy efficiency in Norway.32 Enova was originally

funded using a combination of a levy on distribution tariffs and grants from the State Budget. Since 2005,

the activities are solely funded by the distribution levy (NOK 0.01/kWh). Enova manages the Fund and

finances programs and initiatives that support national objectives of cost effective and environmentally

sound investments.

Grants from Enova are available for clean energy projects through support programs structured under the

following areas:

• Renewable Heating

• Renewable Power Production

• Industry

• New Technology

• Commercial Buildings

31 Danish Energy Saving Trust, Electricity saving Action Plan 2009, Copenhagen, February 2009 32

International Energy Agency, Energy Policies of IEA Countries, 2006


January 2012 15

• Public Buildings

• Residential Buildings

• International Activities

The core budget is guaranteed to Enova from the distribution levy and is therefore not subject to annual

budget allocation, thereby giving Enova the ability to conduct long-term planning within a secure funding

environment. The government has set a new goal for Enova for renewable energy and energy efficiency

of 30 TWH/year by 2016 compared with 2001.

2.9 Clean Energy Funds in India As stated in the earlier part of the report, Indian policy-makers have attempted institution of a few funds.

A formal mandate to set-up state energy conservation funds is mentioned in the Energy Conservation

Act, 2001 (EC Act 2001) that requires that each state designate an agency to implement the Act, and

establish the State Energy Conservation Fund (SECF). Section 15(d) of EC Act 2001 states that “The State

Government may, by notification, in consultation with the Bureau of Energy Efficiency (BEE), designate

any agency as designated agency to coordinate, regulate and enforce provisions of this Act within the

State.” Section 16 of EC Act 2001 states:

(1) The State Government shall constitute a Fund to be called the State Energy Conservation Fund

for the purposes of promotion of efficient use of energy and its conservation within the State.

(2) To the Fund shall be credited all grants and loans that may be made by the State Government or,

Central Government or any other organization or individual for the purposes of this Act.

(3) The Fund shall be applied for meeting the expenses incurred for implementing the provisions of

this Act.

(4) The Fund created under sub-section (1) shall be administered by such persons or any authority

and in such manner as may be specified in the rules made by the State Government.

During the desk review of the different types of funds in operation as enlisted and summarized below,

only three viz: Urja Ankur Fund, National Clean Energy Fund and Gujarat Green Energy Fund are large

funds above Rs. 200 Crores33 and the focus of operation of these funds has been promotion of medium

to large renewable energy projects. In case of the other six funds analyzed, these are the Energy

Conservation Funds in the states. BEE is providing a one-time corpus of Rs.2 Crores to those states,

which are willing to set up a SCEF that are managed by designated agency in the individual states.

List of specific funds that are already established is below:

i. Urja Ankur Fund in Maharashtra (conceived in 2006)

ii. Gujarat Green Energy Fund (conceived in 2011)

iii. National Clean Energy Fund (conceived in 2011)

33

1 Crore= 107=10 million


January 2012 16

iv. Rajasthan State Energy Conservation Fund (conceived in 2010)

v. Haryana State Clean Energy Fund (conceived in 2010)

vi. Kerala State Energy Conservation Fund (conceived in 2010)

List of funds that were conceived but are not set-up is below:

vii. Energy Conservation Fund Design for Maharashtra (conceived in 2005)

viii. Madhya Pradesh Energy Conservation Fund Design (conceived in 2010)

ix. Karnataka “Akshay Shakthi Nidhi” (conceived in 2010)

Structures of above-listed funds are described in Tables 2.6 to 2.14.

Table 2.6: Urja Ankur Fund in Maharashtra (2006)34

State Maharashtra

Implementing Agency Maharashtra Energy Development Agency (MEDA)

Proposed Fund Design Rs. 418 Crores, (Rs. 200 Crores by IL & FS & Rs.

218 Crores by Government of Maharashtra )

Types of programs covered to be funded Renewable Energy Projects

Fund Management Structure Includes Minister (Non-conventional Energy) as ex-

officio chairman of Urja Ankur Trust, Principal

Secretary(Energy), Principal Secretary(Finance) and

Director General MEDA as ex-officio trustees and

other trustees from Bank/FI and energy field.

Utility Involvement in Fund Set-up Nil – collected as a line item in the electricity bills

Government Budget Provision Rs. 218 Crores over a period of three years, to be

refunded by charge of Rs. 0.04 per unit sold to

commercial and industrial units for a period of 10

years starting 2004-05

Current status Projects are being funded for co-gen and power

generation through renewable

Urja Ankur fund is an example of fund created by collecting an additional amount in the electricity bills

but without any contribution from the energy charges. Urja Ankur Fund was designed to promote power

generation using bagasse as a source during the first phase and power generation using small hydro,

34

“Policy Initiatives by Maharashtra State for Renewable Energy Development”, Dr. Sudhir Kumar, General Manager, MEDA,April 2009


January 2012 17

municipal waste and geothermal energy in the second phase. The fund designed to support project

development by placing 20% equity and project development support.

Table 2.7: Gujarat Green Energy Fund35

State Gujarat

Implementing Agency Government of Gujarat

Proposed Fund Design Rs. 244 Crores, Rs. 0.02/kWh of the electricity

generated that is above 1 MW

Types of programs covered to be funded Power generation through renewable energy

sources, purchase of non-conventional energy,

protecting environment

Fund Management Structure State government will administer the fund and

make disbursements from the fund

Utility Involvement in Fund Set-up The generating company needs to register with the

collector of green cess and is liable to pay cess

except on generation of renewable energy or

captive generating plant or stand by generating

plant.

Government Budget Provision None

Current status Legislated on March 30, 2011

Gujarat Green Energy Fund is a fairly new fund and the Government of Gujarat is still in the process of

setting-up governance and management structure. After the initial management structure set-up, the

Government of Gujarat will start receiving proposals to support clean development in the state.

35 (Government of Gujarat, 2011)


January 2012 18

Table 2.8: National Clean Energy Fund (2011)36

State National

Implementing Agency Inter-Ministerial Group

Proposed Fund Design Rs. 3,124 Crores from coal cess (Rs. 50 per tonne

of coal), expected to grow to Rs. 6,500 Crores, a

non-lapsable fund under Public accounts

Types of programs covered to be funded Funding research and innovative projects in clean

energy technologies.

Fund Management Structure Finance Secretary- Chairperson,

Secretary(Expenditure)-Member,

Secretary(Revenue)-Member, Representatives from

Ministries of Power, Coal, Chemicals & Fertilizers,

Petroleum & Natural Gas, New & Renewable

Energy and Environment & Forests

Utility Involvement in Fund Set-up None

Government Budget Provision Not more than 40% of the total project cost

Current status Various projects are under planning stage

As of January 2012, Rs. 60 Crores have been approved for preparing detailed project reports for

remediation work at 12 sites contaminated by hazardous waste. NCEF is supposed to support

development and demonstration of integrated community energy solutions and applications of smart

grids in renewable energy applications. NCEF is also supposed to support demonstration projects in

renewable energy, clean fossil fuels and power evacuation projects related to renewable energy.

36 (Ministry of Finance, 2011)


January 2012 19

Table 2.9: Rajasthan State Energy Conservation Fund (2010)37

State Rajasthan

Implementing Agency Rajasthan Renewable Energy Corporation

Limited(RRECL)

Proposed Fund Design Funded by BEE, State Government, DISCOMS and

RRECL

Types of programs covered to be funded Renewable, Energy conservation

Fund Management Structure RRECL

Utility Involvement in Fund Set-up As required

Government Budget Provision Rs. 2.00 Crores

Current status Rs. 29.35 lacs38 disbursed to PWD Kota and

Bharatpur for installation of APFC panel and

occupancy sensor, Rs. 20.00 lacs o Udaipur for LED

street light project

Rajasthan State Energy Conservation Fund is a new fund created with the required support from the BEE

as perceived in the EC Act 2001. Disbursements have been initiated recently but will depend heavily on

the perpetual budget allocation in the subsequent years.

37

Energy Conservation Activities, Sunit Mathur, (Rajasthan Renewable Energy Corporation Ltd) 38

1 lac=105=0.1 million


January 2012 20

Table 2.10: Haryana State Energy Conservation Fund (2010)39

State Haryana

Implementing Agency Haryana State Energy Conservation Fund

Proposed Fund Design Rs. 50.00 lacs by state govt., Rs. 2.00 Crores by

BEE

Types of programs covered to be funded Awareness programs, Training and research for

energy conservation, develop testing and

certification procedure for energy consumption,

demo projects, promote use of energy efficient

equipment,

Fund Management Structure State level steering Authority- Headed by Financial

Commissioner & Principal Secretary Renewable

Energy Department, Managing Directors of

Haryana DISCOMS, Directors of Local Urban Bodies

etc.


Government Budget Provision Rs. 50.00 lacs

Current status Various projects are under planning stage

Haryana State Energy Conservation Fund plans various projects including heat recovery in industrial

clusters, EE in thermal power stations and EE in municipal water pumping systems. This fund too is very

new and would depend on the subsequent budget allocations by the State Government.

39 H A R E D A :: Department of Renewable Energy Government of Haryana. (n.d.). Retrieved January 18, 2012, from http://hareda.gov.in/?model=pages&nid=133


January 2012 21

Table 2.11: Kerala State Energy Conservation Fund (2010)40

State Kerala

Implementing Agency Initially by Energy Management Center (EMC);

subsequently to be transferred to an independent

professional Fund Manager

Proposed Fund Design Rs. 2.00 Crores

Types of programs covered to be funded Energy Audit subsidy, Interest buy down for

commercial and industrial customers, Energy

Efficient Appliance Financing, Energy Efficiency

Grant Scheme for Public Sector Projects,

Performance contracting for Public Sector Projects,

Partial Credit Guarantee Scheme

Fund Management Structure Initially by EMC then by professional fund manager

Utility Involvement in Fund Set-up As required

Government Budget Provision Rs. 1.00 Crore

Current status Several projects under preparation

Kerala was one of the first states in India that obtained legislative approval from State Government. EMC

and the Kerala Government expect the carbon finance accruing from the BEE supported compact

fluorescent lamps initiative to be used to build perpetual funding source.

40

(International Resources Group, 2009)


January 2012 22

Table 2.12: Maharashtra ENCON Fund Design41

State Maharashtra

Implementing Agency Maharashtra Energy Development Agency (MEDA)

Proposed Fund Design Rs. 3,000 Crores fund over a 10-years horizon

Types of programs covered to be funded Awareness building, energy audits, agriculture

pump sets, CFLs, EE in public water works,

streetlights and municipal buildings

Fund Management Structure Government (by MEDA)


Government Budget Provision Yes, fund proposed a budgetary allocation

Current status Not capitalized and not operational

This fund was proposed under a technical assistance provided by United States Agency for International

Development (USAID) during 2004-05.

Table 2.13: Madhya Pradesh State Smart Energy Conservation Fund (2010)42

State Madhya Pradesh

Implementing Agency Not finalized by the state government

Proposed Fund Design The Fund was to be administered by a Fund

Manager, who would be an independent contractor

appointed on a contractual basis by the Trustee

Types of programs covered to be funded Soft Loan Scheme for EE Projects; project

development assistance, credit guarantee scheme

to support private investments and rebate

programs for EE equipment & appliances.

Fund Management Structure A trust Fund under Indian Trusts Act, 1882 or the

Madhya Pradesh Public Trusts Act, 1951


Government Budget Provision The Government of Madhya Pradesh proposed to

contribute $ 1.25 million43, and the Bureau of

41

(International Institute for Energy Conservation, 2005) 42

Interview with Mr. M Dhariwal, Deputy Secretary, Dept. of Energy, MP Government, dated 14 Dec 2011


January 2012 23

Energy Efficiency was expected to provide a

matching contribution; The Asian Development

Bank was to provide a loan of $ 5 million and

technical assistance grant of $ 1.7 million towards

the starting up of the Fund

Current status MP Government rejected the ADB offer

As of January 2012, the MP fund has not been set-up pending the legislative approvals.

Table 2.14: Karnataka State Energy Conservation Fund (2010)44

State Karnataka

Implementing Agency Akshay Shakthi Nidhi Trust

Proposed Fund Design Rs. 55 Crores annually up to 2014

Types of programs covered to be funded Rs. 5 Crores for energy conservation fund and

balance Rs. 50 Crores for Renewable energy

project financing, land development for renewable

energy projects

Fund Management Structure Consortium of KREDL, Akshay Shakthi Nidhi Trust,

Energy Department and Karnataka State Finance

Corporation

Utility Involvement in Fund Set-up Yes, Green Energy Cess of Rs. 0.05/kWh on

commercial and industrial consumers

Government Budget Provision Yes

Current status Not yet legislated. The proposal is sent to KREDL,

awaiting their response

Karnataka Green Cess is still not cleared in the legislature but is expected to be cleared during the year

2012.

43

1 US$= ` 50.2 as on 27 January, 2012 44 Energy Department - Government of Karnataka. (n.d.). Retrieved January 30, 2012, from http://www.gokenergy.gov.in/karnataka_rep.html


January 2012 24

2.10 Conclusions from the Review of International Clean Energy Funds

2.10.1 Management and Operation

Experience with clean energy funds indicates that the responsibilities for the management and operation

of the EE Funds may be assigned to the utilities that are collecting the funds through the tariff or in other

cases may be assigned to other Fund Managers such as:

• Existing government agency

• Specially created statutory agency

• Public-Private Partnership

• Municipalities

• Third Parties:

• Independent Entity (with a Board of Directors comprised of Stakeholders)

• Financial institutions

• Non-Government Organizations (NGOs)

The three most common models for management and operation of clean energy funds are shown in

Figure 2.3. The first model is best exemplified by California, where the utilities that collect the public

benefits charges are also assigned the responsibilities by the regulators for managing the clean energy

fund s and designing and implementing a wide range of programs.

In the second model, the regulators assign the fund management responsibilities to a government

agency (exiting or newly created). A good example is the New York State where the funds collected by

the utilities are provided to the New York State Energy Research and Development Agency (NYSERDA).

This agency designs and implements the clean energy programs and reports to the regulators on an

annual basis.

In the third model, neither the utility nor a government agency is assigned the responsibility for

managing the clean energy fund; instead the responsibility is assigned to a competitively selected

independent third party (usually an NGO or non-profit organization). Such an agency manages the funds

under a contract with the regulators (generally a performance-based contract). The first such contract

was signed by the Vermont Public Service Commission with Efficiency Vermont.


January 2012 25

Figure 2.3 – Most Common Management Models for Clean Energy Funds

The selection of the organization for fund management and operation may be based on consideration of

some or all of the following criteria:

• Compatibility with public policy goals

• Credibility with funders and customers

• Technical, financial and administrative capacity

• Management incentive structure

• Ability to realize economies of scale and scope

• Minimal start-up requirements

• Ability to work collaboratively across agencies

• Ability to engage with clean energy stakeholders

2.10.2 Criteria for Selecting Projects

The criteria used for selecting the projects for financing generally include:

• Technical feasibility

• Compliance with environmental standards

• Financial characteristics

• Acceptability of the level of risk

• Replicability

• Contribution to developing sustainable energy efficiency markets

Public Benefits

Charge

Clean Energy

Fund

Managed by

Utilities

(e.g., California)

Managed by Govt.

Agency

(e.g., New York)

Managed by

Third Party

(e.g., Vermont)


January 2012 26

• Documentation of project characteristics

2.10.3 Financial Barriers Addressed by a Clean Energy Fund

The lessons learned from international experience with clean energy funds demonstrate that such funds

can address a number of financing and implementation barriers. Section B.4 of Appendix B illustrates

some of the barriers and how they may be addressed by a clean energy fund.

2.11 Lessons learned from International and National Funds

The major lessons from the assessment of Indian and international clean energy funds are presented in

Boxes 2 and 3.

Box 2: Lessons from National efforts related to Clean Energy Fund

• States are still in the very early stages of seeking legislative approvals and

obligating program funds.

• Administrative and Fund Management structures are still evolving.

• Inclusion of an additional cess added in the electricity bills below-the-line is a

proven approach adopted by the state governments.

• None of the Funds have so far leveraged private sector capabilities in Fund

Management functions and most of the current structures are government-

managed.


January 2012 27

Box 3: Lessons from International Clean Energy Funds

• In the United States (U.S.), a substantial amount of activity related to clean

energy funds (CE Funds) has been undertaken at the State level.

• CE funds have been very successfully used in the U.S. as well as many other

countries.

• The different mechanisms used by states to establish CE Funds include:

� Regulations establishing a tariff levy or cess on electricity

consumption

� Special taxes

� General state tax revenues

� State bonds

� Petroleum taxes

� Certification fees

• The most common, reliable and sustainable source of funding is a tariff levy

established by the energy regulator using the public benefits charge and

collected by the utility via the customers’ bills.

• The levels of funding vary across different funds. The more progressive funds

have assessed a levy of 1 to 2% of electricity sales revenue to finance their CE

Funds.


January 2012 28

3 Legal Mandate Supporting Creation of State Clean Energy Funds

This Section presents an analysis of the various provisions of applicable law and regulatory framework to

support the levy of a PBC so that clean energy in various forms is financed. In other words, this Section

examines the legal mandate for using the PBC to create a SCEF.

3.1 Statutory Provisions and Interpretations At first, statutes which rank the highest in the hierarchy of law and which are applicable to the subject

matter of energy efficiency and/or clean energy are discussed. The two main statutes are the Electricity

Act, 2003 and the Energy Conservation Act, 2001. Both these statutes have been enacted by the

Parliament as Central Legislation. The Electricity Act, 2003 has been enacted under Item No. 38

“Electricity” of List III – Concurrent List in the Seventh Schedule to the Constitution of India.

Section 23 of the Electricity Act, 2003 reads as follows:-

“23. Directions to licensees. - If the Appropriate Commission is of the opinion that it is necessary or

expedient so to do for maintaining the efficient supply, securing the equitable distribution of electricity

and promoting competition, it may, by order, provide for regulating supply, distribution, consumption or

use thereof.”

Section 23 of the Electricity Act, 2003 empowers the Electricity Regulatory Commissions to take steps and

measures for inter alia maintaining the efficient supply of electricity. One way of maintaining the efficient

supply of electricity would be to take steps and measures to reduce the shortage/deficit of electricity. For

this, the Regulatory Commissions will need to take steps for conservation of electricity. The term

“conservation” has been defined under Section 2(14) of the Electricity Act, 2003 as follows:

“Conservation” means any reduction in consumption of electricity as a result of increase in the efficiency

in supply and use of electricity”. Therefore, if the Electricity Regulatory Commissions take steps to

maintain the efficient supply of electricity by requiring consumers to pay the PBC to be used for

purchasing energy efficient appliances and equipment, the result would be reduction in consumption of

electricity.

Under Section 23 of the Electricity Act, 2003 the Electricity Regulatory Commissions are empowered to

issue orders providing for regulation of consumption and/or use of electricity. It has been held by the

Supreme Court of India in several cases that the word “regulate” is of wide import. Section C.1 in

Appendix C provides a list of case laws and other rulings in support of identifying Regulations as a

stronger legal mandate.

The word “regulating” appearing in Section 23 has been interpreted by the Supreme Court of India

liberally with the interpretation that powers of the Commission are wide and take into its sweep the

power to take steps and actions in exceedingly wide terms and to embrace within its ambit all powers

necessary for the implementation of the Act. The word "regulate" in Section 23 of the Electricity Act,

2003 reflects a statutory mandate of all-encompassing jurisdiction. Legislation has an aim; it seeks to

obviate some mischief, to supply an inadequacy, to effect a change of policy, to formulate a plan of

government. That aim, that policy, is evidenced in the language of the statute, as read in the light of

other external manifestations of purpose. [See Justice Frankfurter, Some Reflections on the reading of


January 2012 29

Statutes, 47 Columbia LR 527, at page 538 (1947); Union of India v. Ranbaxy Laboratories Ltd. and

others; {(2008) 7 SACC 502} and D. Purushotam Reddy and another vs. K. Sateesh, {(2008) 11 SCALE

73}].

Hence, the Regulators are empowered to require consumers to use energy efficient appliances and

equipment. Within this scope of power, the Regulators can create a fund which would cater to the

financial requirements of consumers to buy and install energy efficient appliances and equipment from

disbursements from the said fund. However, for creating the fund, there has to be a source of inflow of

monies. This source would be the levy of Public Benefit Charge. At this stage, Section 23 of the Electricity

Act, 2003 requires to be read as a whole as follows:-

“23. Directions to licensees. - If the Appropriate Commission is of the opinion that it is

necessary or expedient so to do for maintaining the efficient supply, securing the equitable

distribution of electricity and promoting competition, it may, by order, provide for regulating

supply, distribution, consumption or use thereof.”

PBC structure, thus, can be construed to be necessary or expedient to be implemented to maintain the

efficient supply of electricity by regulating the consumption and use thereof. Usage of energy efficient

appliances and equipment appear to be necessary as well as expedient so that efficiency of supply of

electricity can be achieved by reducing the deficit of electricity with the usage of energy efficient

appliances and equipment. Surely, a mechanism can be formulated in terms of which some considerable

fund is generated which would come to the benefit of consumers by helping them purchase these EE

appliances and equipment, install them in the premises, and help in the reduction of electricity deficit to a

certain extent. Hence, in exercise of the powers under Section 23, the Regulatory Commissions can take

action to levy a charge on various types of electricity consumers, be it industrial or commercial or others.

In the backdrop of the aforesaid statutory provisions, a need has been felt to formulate a charge called the PBC. This would be a seed fund to be sourced from various types of electricity distribution retail tariffs to be paid by consumers. These funds would facilitate the implementation of clean energy projects. In other words, a certain amount of the end user project cost would be borne by the electricity consumers through their electricity Bills (not tariff). These consumers would also benefit from the implementation of the end user clean energy projects. The nature of the PBC is, thus, conceptualized as a regulatory charge to be levied through electricity Bills (not tariffs) as determined by the State Electricity Regulatory Commissions in the exercise of their statutory functions under the Electricity Act and the policies thereunder. It would be the local distribution companies/licensees who would collect these charges. The PBC will be utilized to finance and implement end user clean energy projects as per the directions of the Regulators.

3.2 Energy Conservation Act 2001

Another aspect may be relevant, i.e., the Energy Conservation Act, 2001, which empowers the Bureau of

Energy Efficiency to take steps towards energy conservation by regulating end-use and by promoting the

use of energy efficient processes, equipment, devices and systems as also to promote innovative

financing on energy efficiency projects. The functions of the Bureau of Energy Efficiency under the EC Act

2001 are extracted and included as Section C.2 in the Appendix C.


January 2012 30

Keeping in view the provisions of the Energy Conservation Act, 2001 covered in Section C.2 of

Appendix C, it is necessary to examine if there is any overlap with the imposition of the PBC under the

Electricity Act, 2003. There is a provision for establishing a fund called the “State Energy Conservation

Fund” under the EC Act 2001, which is authorized to be used for the purposes of meeting expenses for

the promotion of efficient use of energy and its conservation. The sources of the SCEF are the inflow of

grants and loans made by the State Government or Central Government or any other organization or

individual. There is also a Central Energy Conservation Fund constituted from grants and loans made to

the BEE by the Central Government; fees and other sums received by the BEE. The Central Energy

Conservation Fund can be used for the expenses of the Bureau of Energy Efficiency in discharge of its

functions. However, there is no such mechanism at the moment of making provision for disbursement of

funds under the SCEF and the Central Energy Conservation Fund for helping consumers purchase and

install energy efficient appliances and equipment.

The sources of inflow of monies to constitute the aforesaid two funds under the EC Act 2001 are

somewhat different from the inflow of monies to constitute the PBC under the Electricity Act, 2003. The

latter is to be levied on the consumers of electricity, while the sources of the two funds under the Energy

Conservation Act, 2001 are not from any levy on the consumers of electricity. Apart from the inflow of

funds from the consumers, there is no bar for the State Government to make grants to constitute the

PBC under the Electricity Act, 2003. Moreover, there may not really be an overlap between the two

statutes because the Regulatory Commissions under the Electricity Act, 2003 can require consumers to

use those appliances and equipment that have been prescribed under the EC Act 2001 for conservation

of and efficient use of electricity. Further, it must be noted that Section 60 of the EC Act 2001 provides

that “the provisions of this Act shall be in addition to, and not in derogation of, the provisions of any

other law for the time being in force.”

Hence, it can be concluded that all measures under the EC Act 2001 as well as the powers and functions

of BEE and other Authorities under the Energy Conservation Act would be in addition to and not in

derogation of the PBC under the Electricity Act, 2003. It must also be noted that even if there is any real

conflict between the two statutes, under settled principles of statutory interpretation, the latter

enactment is always to prevail over the former. Hence, the Electricity Act having been enacted in the year

2003 is to prevail over the EC Act enacted in 2001. The second parameter for interpreting which of the

two statutes is to prevail is to consider as to which statute is a general statute and which statute is a

special statute. At this stage, it is important to mention that the Supreme Court of India has held in the

case of Power Trading Corporation of India Ltd. v/s Central Electricity Regulatory Commission reported in

AIR 2010 SC 1338 that the Electricity Act, 2003 is an exhaustive code on all matters concerning

electricity. Hence, the Electricity Act, 2003 is a complete code and a special law pertaining to electricity

and if an issue arises as to whether the levy of PBC by the Regulatory Commissions acting under the

Electricity Act, 2003 is in conflict with the powers and functions of the BEE or any other Authority under

the Energy Conservation Act, 2001, the answer would be that the PBC under the Electricity Act, 2003,

which is a special law and a complete code on electricity, is to prevail over the Energy Conservation Act,

2001. Thirdly, as per settled principles of statutory interpretations, a statute containing a non-obstante

provision is to prevail. The non-obstante provision is contained under Section 174 of the Electricity Act,

2003 which does not save the Energy Conservation Act, 2001 under Section 173. Both these sections are

extracted hereunder:


January 2012 31

“173. Inconsistency in laws. - Nothing contained in this Act or any rule or regulation made

thereunder or any instrument having effect by virtue of this Act, rule or regulation shall have

effect insofar as it is inconsistent with any other provisions of the Consumer Protection Act, 1986

(68 of 1986) or the Atomic Energy Act, 1962 (33 of 1962) or the Railways Act, 1989 (24 of

1989).”

“174. Act to have overriding effect. - Save as otherwise provided in section 173, the

provisions of this Act shall have effect notwithstanding anything inconsistent therewith contained

in any other law for the time being in force or in any instrument having effect by virtue of any

law other than this Act.”

However, instead of getting concerned with the issues of potential overlaps in the laws, it would be

advisable to harmonize the provisions of the EC Act 2001 and the Electricity Act, 2003 by designing the

PBC, its utilization and monetary mechanism in such a manner so that it is consistent with the EC Act

2001. Hence, the formulation of the Public Benefit Charge is to be in such a manner that the separate

functions of the BEE and the Electricity Regulatory Commissions can co-exist.

3.3 Load Management Charge The Appellate Tribunal for Electricity (ATE) came to examine the provisions of Section 23 in two cases

viz., Vidarbha Industries Association v. Maharashtra State Electricity Distribution Company Ltd. & Ors. In

appeal No. 158 of 2006 dated 19th October 2006, and Spencers Retail Ltd. v. Maharashtra Electricity

Regulatory Commission in appeal No. 146 of 2007 dated 19th December 2007, where the issue was

different from that of imposition of the aforesaid PBC. In the cases dealt by the ATE, the issue for

examination was whether or not a Load Management Charge was valid under Section 23. The Load

Management Charge was imposed by the Regulatory Commission during a time when there was an

alarming level of demand-supply gap in the State of Maharashtra as a result of which huge load shedding

was being done by the State-owned electricity distribution company.

The Load Management Charge was imposed to restrict and limit the timing of usage of electricity during

certain timings of the day; usage of certain kinds of lighting to be banned, restricting the timing of

industrial units to consume electricity during certain timings of the day, restricting use of agricultural

pump sets to only non-peak hours, etc. The Load Management Charge was to restrict electricity

consumption. The Appellate Tribunal upheld the levy of Load Management Charge as valid under Section

23, but also held that such a charge cannot take the character of tariff and cannot form part of the costs

of the energy distributed viz., it cannot be a part of the Annual Revenue Requirements and Tariffs.

Therefore, it is quite clear that one of the actions contemplated by the Legislature expressly is to regulate

the end use of electricity under Section 23 of the Electricity Act, 2003. However, the aforesaid cases dealt

by the ATE are different in nature and are to be contradistinguished from the levy of the PBC.

In the judgement in Vidarbha Industries Association Supra the issue under consideration was whether a

load management charge for restricting usage of electricity during certain timings of the day and usage

of certain kinds of lighting etc. could have been issued. The ATE held that levy and collection of load

management charge cannot take the character of tariff and cannot form a part of the costs of the utility

for energy distributed i.e. it cannot be a part of the annual revenue requirements and tariffs. However, it

was confirmed that the load management charges was validly imposed under section 23 of the 2003 Act

by the regulator as a regulatory measure. In the judgement in Spencers Retail Ltd. Supra, it was inter alia


January 2012 32

held that “consumers could be incentivized for adopting DSM measures but cannot be penalized for not

doing so with tariff higher than that determined under the provisions of the Act and enforcement of DSM

measures is not within the jurisdiction of the Commission. Enforcement of DSM measures for energy

conservation is subject to regulation under Energy Conservation Act, 2001, by agencies so designated”.

It was also held that “it is open to the Commission to hold separate proceedings for load regulation under

section 23 of the Act, if considered expedient……”

It needs to be pointed out that the fundamental difference between the imposition of load management

charges dealt with by the ATE in the aforesaid judgments in Vidarbha Supra and Spencer Supra and the

present proposal of imposition of PBC is that while the load management charge was designed to charge

a higher tariff in order to restrict and limit the usage of electricity by consumers during peak and off-peak

hours, a PBC is conceptualized as a long-term mechanism to generate funds that can leverage

commercial financing with a specific accountability structure. A clinching distinction between the Load

Management Charge and the PBC is that, whereas the Load Management Charge for promoting demand

side management is designed to encourage customers to amend their electricity consumption patterns

with respect to timing and level of electricity, there is no such requirement for the PBC whose objectives

are entirely different.

Taking into account the above judgments of the ATE, the question that arises is as to how the PBC could

at all be part of costs of the utility and hence be a part of the tariff/annual revenue requirements? The

answer perhaps lies in the proposal to collect the PBC as part of the consumers’ utility bill being a ‘below-

the-line item’ of billing - not through the determination of tariff under section 64 of the 2003 Act. The

quantum of PBC in a given case may be calculated on the quantum of consumption of the consumer. The

source of authority to factor in the PBC in the consumers’ utility bill would be contained in the regulations

to be notified by the State Electricity Regulatory Commissions under sub-section (1) of section 181 of the

2003 Act.

3.4 Preferred Legal Structure of Public Benefits Charge

PBC will be collected from consumers and pooled as a Regulatory Fund. The Distribution Licensee shall

have to be authorized to collect the PBC as part of the consumers’ utility bill being a below-the-line item

of billing not through the determination of tariff under section 64 of the 2003 Act. The quantum of PBC

in a given case may be calculated on the quantum of consumption of the consumer.

Other operational details of the managing the fund, its Governance structure, selection of a Fund

Manager and application of Fund are covered in the Section 4.

A preferred way of putting in place the imposition and the setting up of the PBC; utilization and

application; its management, governance, monetary mechanism etc., would be by notification of

Regulations by the State Electricity Regulatory Commissions in exercise of their powers to do so under

section 181(1) of the 2003 Act.

A reference, at this stage, needs to be made to a judgement passed by the Supreme Court of India, the

highest judicial body, in the case of Power Trading Corporation of India Ltd., v. Central Electricity

Regulatory Commission reported in AIR 2010 SC 1338 dated March 15, 2010. In this judgement, the

scope of regulations has been discussed, as also the situations in which a regulation could be made. The

decisions of the Supreme Court are inter alia as follows:-


January 2012 33

“43. The above two citations have been given by us only to demonstrate that under the 2003

Act, applying the test of “general application”, a Regulation stands on a higher pedestal vis-

à-vis an Order (decision) of CERC in the sense that an Order has to be in conformity with the

regulations.”

Hence, the PBC would be implemented by a Regulation because “Regulation stands on a higher

pedestal vis-à-vis an Order”.

A reference to the judgement passed by the Supreme Court of India in the case of Power Trading

Corporation of India Ltd., v. Central Electricity Regulatory Commission reported in AIR 2010 SC 1338

dated March 15, 2010 where it has been held inter alia as follows:-

“43. ………….Therefore, we are not in agreement with the contention of the appellant(s) that

under the 2003 Act, power to make regulations under Section 178 has to be correlated to the

functions ascribed to each authority under the 2003 Act and that CERC can enact regulations only

on topics enumerated in Section 178(2). In our view, apart from Section 178(1) which deals with

“generality” even under Section 178(2) (ze) CERC could enact a regulation on any topic which

may not fall in the enumerated list provided such power falls within the scope of 2003 Act.”

“49. ……………….In that judgement also this Court held that the enumerated factors/topics in

a provision do not mean that the authority cannot take any other matter into consideration which

may be relevant. The words in the enumerated provision are not a fetter; they are not words of

limitation, but they are words for general guidance.”

“59. Summary of Our Findings:

(i) In the hierarchy of regulatory powers and functions under the 2003 Act, Section 178, which deals with

making of regulations by the Central Commission, under the authority of subordinate legislation, is wider

than Section 79(1) of the 2003 Act, which enumerates the regulatory functions of the Central

Commission, in specified areas, to be discharged by Orders (decisions).

(ii) A regulation under Section 178, as a part of regulatory framework, intervenes and even overrides the

existing contracts between the regulated entities inasmuch as it casts a statutory obligation on the

regulated entities to align their existing and future contracts with the said regulations.

(iii) A regulation under Section 178 is made under the authority of delegated legislation and consequently

its validity can be tested only in judicial review proceedings before the courts and not by way of appeal

before the Appellate Tribunal for Electricity under Section 111 of the said Act.

(iv) Section 121 of the 2003 Act does not confer power of judicial review on the Appellate Tribunal. The

words “orders”, “instructions” or “directions” in Section 121 do not confer power of judicial review in the

Appellate Tribunal for Electricity. In this judgment, we do not wish to analyse the English authorities as

we find from those authorities that in certain cases in England the power of judicial review is expressly

conferred on the Tribunals constituted under the Act.

In the present 2003 Act, the power of judicial review of the validity of the Regulations made under

Section 178 is not conferred on the Appellate Tribunal for Electricity.


January 2012 34

(v) If a dispute arises in adjudication on interpretation of a regulation made under Section 178, an appeal

would certainly lie before the Appellate Tribunal under Section 111; however, no appeal to the Appellate

Tribunal shall lie on the validity of a regulation made under Section 178.

(vi) Applying the principle of “generality versus enumeration”, it would be open to the Central

Commission to make a regulation on any residuary item under Section 178(1) read with Section 178(2)

(ze). Accordingly, we hold that the CERC was empowered to cap the trading margin under the authority

of delegated legislation under Section 178 vide the impugned notification dated 23.1.2006.”

In Power Trading Corporation of India Ltd., Supra one of the prime issues that came up before the

Supreme Court was whether a Regulation could have been notified determining trading margin in the

inter-state trading of electricity when the word used in the relevant section 79(1) (j) was “to fix the

trading margin” thereby requiring an order to be passed and not “to specify” the trading margin - the

word “specify” having been defined as “specified by Regulations…….”. This is a landmark judgment in the

history of power sector and regulatory jurisprudence where the Supreme Court has inter alia held that

the power conferred on the regulators to enact Regulation only on enumerated topics or that Regulations

must be correlated to the functions ascribed to them does not create any fetter on the regulator to enact

Regulations on any topic which may not fall in the enumerated list, provided however that such a power

falls within the scope of the 2003 Act. A position stands clarified pursuant to the aforesaid Supreme Court

judgment that if sub-section (2) of section 181 of the 2003 Act has enumerated almost 41 topics on

which regulations could be made, any other regulations on any other topic could also be made in exercise

of the general powers to make regulations under sub-section (1) of section 181. The Supreme Court has

specifically held that “the words in the enumeration provision are not a fetter; they are not words of

limitation, but they are words for general guidance.”

The preamble to the 2003 Act inter alia states that it is “An Act …….. generally for taking measures

conducive to development of electricity industry”. Taking into account the Supreme Court judgment in

PTC India Supra, regulations can be notified to provide for imposition etc. of PBC for financing end user

clean energy projects which is a measure conducive to development of electricity industry.

In this Section several references to the legal opinions have been made. A summary of the key provisions

and the interpretations is presented in Table 3.1 for an easier understanding.


January 2012 35

Table 3.1: Matrix of Statutory Provisions and Inferences

Act / Policy /

Case Law

Provision /

Case Law Citation

Inference Special Remarks

The Electricity

Act, 2003

Section 23 empowers the

Electricity Regulatory Commission

to regulate consumption and use

of electricity for maintaining

efficient supply in order to reduce

the electricity deficit.

The scope of the power would be to

levy a Public Benefit Charge on

consumers of electricity so that the

Public Benefit Charge can be

utilized for helping consumers to

install and use energy efficient

appliances and equipment in order

to achieve efficient supply of

electricity.

Although Section 23 requires the

Electricity Regulatory

Commissions to issue an order/s,

it is advisable that regulations

may be notified by the Electricity

Regulatory Commissions in view

of the position stated in the

judgement of the Supreme Court

of India in the case of PTC India

Ltd. v/s CERC clarifying that in

hierarchy regulations are on a

higher pedestal than an order.

The Supreme Court has also held

that even if the provision

requires an order to be passed,

the Regulatory Commissions can

always notify regulations

because regulations have a more

universal impact and

enforceability than an order.

Electricity Act,

2003

The term “conservation” has been

defined under Section 2(14) of the

Electricity Act, 2003 as follows: -

“Conservation” means any

This can be achieved by requiring

consumers to use energy efficient

appliances and equipment.


January 2012 36

reduction in consumption of

electricity as a result of increase in

the efficiency in supply and use of

electricity”.

The preamble of

the Electricity Act,

2003

“An Act to consolidate the laws

relating to …use of electricity and

generally for taking measures

conducive to …promotion of

efficient and environmentally

benign policies …”

The preamble itself clarifies

expressly that the Electricity Act,

2003 is a consolidating statute

which inter alia consolidates all laws

relating to use of electricity. Hence,

it would be within the scope of

Electricity Act, 2003 to provide for

and regulate usage of energy

efficient appliances and equipment

as an end-user requirement with

the help of the mechanism of Public

Benefit Charge and which will

ultimately promote efficient and

environmentally benign policies.

The Public Benefit Charge may

provide matching funds to States

for low income assistance,

energy efficiency programme,

consumer education and the

development and demonstration

of emerging technologies,

renewables.

National

Electricity Policy

notified under

Section 3 of the

Electricity Act,

2003.

5.9.7 For effective implementation

of energy conservation measures,

role of Energy Service Companies

would be enlarged. Steps would be

taken to encourage and incentivize

emergence of such companies.

It may, perhaps, be considered to

use the Public Benefit Charge (at

least some part thereof) to put in

place Energy Service Companies

providing a broad range of

comprehensive energy solutions

including design and

implementation of energy saving

projects, energy conservation,

energy infrastructure outsourcing,


January 2012 37

power generation and energy

supply and risk management,

design energy efficient solution,

install required elements, maintain

systems to ensure energy savings,

etc.

Electricity Act,

2003

Section 86(1)(e) - Promote

cogeneration and generation of

electricity from renewable sources

of energy by providing suitable

measures for connectivity with the

grid and sale of electricity to any

person, and also specify, for

purchase of electricity from such

sources, a percentage of the total

consumption of electricity in the

area of a distribution licensee.

The Public Benefit Charge may also

provide matching funds for the

development and demonstration of

renewable energy projects.

A part of the Public Benefit

Charge may also be considered

for disbursement towards the

development of renewable

energy projects.

Electricity Act,

2003

Section 166(5) - There shall be a

committee in each district to be

constituted by the Appropriate

Government –

…….

…….

(c) to promote energy efficiency

and its conservation.

The Regulatory Commissions may

have to recognize the role of the

State Government and the

Committee constituted by the State

Government while enacting the

Regulations providing for levy of

Public Benefit Charge to promote

energy efficiency and its

conservation. This Committee may

be accorded certain specific role. Its

role could be recommendatory or


January 2012 38

supervisory or it could also be

required to monitor the

implementation of the Regulations

of the Electricity Regulatory

Commission in regard to the levy

and utilization of the Public Benefit

Charge.

Supreme Court

judgment

Power Trading Corporation of India

Ltd. v/s Central Electricity

Regulatory Commission reported in

AIR 2010 SC 1338

Regulations can be made with

respect to the levy and mechanism

of PBC

Appellate Tribunal

for Electricity

Vidarbha Industries

Association v. Maharashtra

State Electricity Distribution

Company Ltd. & Ors. in appeal

No. 158 of 2006 dated 19th

October 2006 and in the case

of Spencers Retail Ltd. v.

Maharashtra Electricity

Regulatory Commission in

appeal No.146 of 2007 dated

19th December 2007

If PBC is to be imposed in

exercise of powers under

Section 23 of the Electricity

Act, 2003 then PBC cannot take

the character of tariff. PBC

cannot be imposed by following

the tariff making procedure

under Section 64. PBC will then

have to be levied as a below

the line item in the electricity

bills. PBC cannot be a deterrent

measure.


January 2012 39

Summary of key findings from the Legal Review are included as Box 4.

Box 4: Summary of review of legal review

Section 23 empowers the Electricity Regulatory Commission to regulate consumption and

use of electricity for maintaining efficient supply in order to reduce the electricity deficit

Proposed inclusions of a Public Benefits Charge is a mechanism that could thus be supported

under the Section 23 of the E Act 2003

Notifying Regulations by the State Commissions is a stronger legal instrument compared to

an Order passed

PBCs can be set-up through Regulations notified by the State Regulatory Commissions


January 2012 40

4 State Clean Energy Fund Design and Implementation Arrangements

Based on the review of International Clean Energy Funds and legal aspects of developing such a fund in

India, this Section develops a proposal to set-up and launch a SCEF. This Section describes the attributes

of the proposed SCEF, funding sources, and typology of projects that can be funded through the SCEF,

fund management structure, and fund governance structure. It also presents a structure of possible

Regulations to be notified by the State Electricity Regulatory Commissions (SERCs).

4.1 Attributes of SCEF To reiterate, the proposed SCEF is intended to support clean energy applications, defined as end-use

energy efficiency and end-use renewable energy, which have direct benefit to the electricity system. The

benefits of projects implemented by SCEF would include implementation of energy efficient appliances,

load management in small & large consumer loads, and on-site generation of heat or electricity through

renewable energy resulting in reduced draw of energy from the grid. Large-scale grid-connected

renewable energy generation projects are excluded from the fund application as those are substantially

supported through various funding options from Ministry of New & Renewable Energy, renewable feed-in

tariffs, and carbon finance mechanisms. As reviewed in the earlier Section, a government-supported

clean energy fund can be generated through grants, budgetary allocations and collecting a

cess/additional charge in the consumer electricity bills. The proposed SCEF structure in this report was

developed in consultation with the SERCs and other relevant stakeholders in order to create some

perpetuality in the fund and to ensure enough leveraging with other funding sources.

In this proposed design, the SCEF will primarily be collected through rate-payers (consumers of

distribution licensees) and other sources including state government allocations, donor/grants/loans. The

EC Act 2001 supports creation of State Energy Conservation Fund. Proposed SCEF will move beyond the

current efforts related to energy conservation funds and will be driven by SERCs by way of notifying

Regulations to allow the distribution licensees to collect an additional below-the-line charge in the

electricity bills. SCEF will target creating a budget that represents an appropriate percentage of annual

energy expenditure by all the consumers of a distribution licensee. Legitimate Consumers of distribution

licensees that are governed by the SERCs will contribute to the SCEF. All legitimate Consumers using a

distribution network of the distribution licensees can benefit from the SCEF governed through the fund

application procedures specified in further Sections.

The proposed SCEF capitalization structure would lead to cash availability to prospective projects. The

SCEF is intended to create a mechanism where a steady stream of budget is available to end-use

efficiency and end-use renewable energy projects leading to system benefits. The SCEF will also leverage,

as appropriate, other sources of funding from tax-payers (state government contribution), which is

infeasible in other designs where a budgetary allocation in the ARR is made for DSM projects and the

funds are retained as budgets with the distribution licensees. The SCEF will be capitalized on a

continuous basis using an appropriate below-the-line item charge per kWh billed to the consumers every

month. The above amount would be disclosed by the SERCs by an Order corresponding to a set of

specific Regulations. Another important provision in the proposed SCEF design is returning the unutilized

funds back to the distribution licensee after a certain period, which would be notified by the SERC by an


January 2012 41

Order. The unutilized funds would be merged in the ARR calculations thereby allowing reduction in the

tariffs to an extent.

As the SCEF will use rate-payer contributions termed as the Public Benefit Charge as a key source, a

specific set of Regulations shall be notified by the SERCs. These regulations shall define the below-the-

line contribution, governance & management structure, and complaint redressal process. Such

Regulations shall be developed based on the provisions of Section 23 of the Electricity Act 2003 read with

the provisions of Section 86 (i) (e) and Section 181 of the same Act. SERCs shall retain Powers to Amend

the Regulations as may be needed to strengthen the SCEF operations. The legal mandate to develop

such Regulations has been discussed and summarized in the previous Section.

The “ownership” of the Fund created by such a mechanism will be entrusted by the Regulatory

Commission to a separate SCEF Management Trust participated by state departments’ representatives or

an existing government department agency as the funds are public funds and therefore subject to public

auditing. The fund will be operated as a Revolving Fund under which low-interest rate loans and grants

may be extended to end-use efficiency and renewable energy projects. In order to assure efficient and

effective management of the Fund, the government agency or trust shall engage a professional “Fund

Manager/Advisor” with appropriate qualifications for management of a large public fund. Such a Fund

Manager will be selected using a competitive bidding process. The competing organizations can be either

an existing or proposed public-private partnership (PPPs) involving Commercial Banks (private or public

sector) and other private and not-for profit institutions with expertise in energy efficiency and renewable

energy promotion45. An example of such a Fund Manager structure is the Urja Ankur Fund in the State of

Maharashtra discussed in Section 2 of this report, where the Fund ownership is with the public Urja Ankur

Trust, while the Infrastructure Leasing and Finance Corporation (IL&FS) is designated as the Fund

Administrator.46

The Fund Manager will bid for the management fees to cover its administration and associated risks and

shall also commit to a certain return on equity/investments related to the loan component. Two types of

projects (classified as end-use energy efficiency and end-use renewable energy projects) shall be

implemented. These include – (i) Utility implemented DSM initiatives for retail consumers, and (ii) Large

consumers (or group consumers) implemented initiatives. SCEF will also support project development,

awareness building and results monitoring activities. All the programs that are supported by SCEF shall

have cost-share contribution by the Consumers who are availing the SCEF benefits. SCEF shall actively

support Super-Efficient Appliances initiative launched by the Bureau of Energy Efficiency (BEE). The

proposed capitalization, governance and applications structure of SCEF is presented Figure 4.1.

45Two specific examples are available in India: 1. iDECK – a public private partnership created by the

Government of Karnataka and the Industrial Development Finance Corporation (IDFC) focusing on the infrastructure development in the State of Karnataka and 2. IL&FS – acting as Fund Manager with the Maharashtra Energy Development Agency (MEDA) investing in to and providing grants to Sugar Cogeneration plants in Maharashtra sponsored through the Urja Ankur fund created by the Government of Maharashtra through a legislative mechanism.

46 Urja Ankur Fund was created to support large renewable energy projects in Maharashtra with a legislative mechanism allowing an additional charge levied to the industrial consumers in the state


January 2012 42

Figure 4.1: SCEF Structure

4.2 Funding Sources As described above, the main funding source for the SCEF shall be the below-the-line billing contributions

as a PBC. The collection of the rate-payer contribution shall be governed by the SERC Regulations. Such

a charge shall be identified as a PBC in the Regulations notified by the SERCs. The PBC thus charged will

not be a part of the Energy Charges or any other Fixed Charges, such as, the demand charges or other

variable charges such as the Fuel Adjustment Charges. However, the PBC shall be linked to the energy

consumed during the billing cycle.

Other sources used to capitalize SCEF would include:

i. Budget allocations by the State Governments

ii. Private funds/grants

iii. International Climate Funds

iv. Other donor-driven concessional loans/grants


January 2012 43

4.3 Fund Management & Governance Structure As stated above, the ownership of the SCEF will be assigned to a trust/state government agency. This

entity will engage a professional Fund Manager/Advisor selected competitively. The Fund Manager will

have the sole responsibility of managing the SCEF and will be governed by a Fund Management

Board/Trust. The Fund Manager shall set up the governance standards and routine operations under the

guidance and direction of the Fund Management Board. These will include:

• Governance activities

o Develop SCEF Charter and Memorandum of Articles

o Assist in registering the SCEF with the relevant statutory bodies to ensure compliance

o Set up rules and regulations to capitalize the SCEF

o Develop procedures to govern the trust fund and rules to ensure Fund liquidity

o Assist in setting-up a Management Board/Advisory Committee to oversee the performance of

the SCEF

o Set-up a Proposal Approval Committee to evaluate the proposals received from the

distribution licensees, large C&I Consumers or the group of Consumers and BEE-moderated

EE project implementers

o Develop Guidelines to structure the proposals from the project proponents establishing the

cost-share, private-sector project contribution requirements; templates to evaluate benefit-

cost of the projects to prove the system benefits

o Develop audit procedures and appoint Auditors

• Routine activities

o Monitor the SCEF capitalization from the monthly collection of additional charge applied to

distribution licensee consumers

o Facilitate a process of State Government contributions and other donor contributions, as

applicable, to the SCEF at the beginning of the financial year

o Develop a quarterly plan for the Proposals Approval Committee meetings and follow the

technical & financial due diligence procedures

o Define supporting activities to be funded by SCEF such as capacity building/training and

information dissemination initiatives

o Adapt BEE (or other competent agency) measurement & verification protocols for program

monitoring and enroll independent M&V professionals

o Launch bidding process to shortlist distribution licensee, C&I consumers and BEE programs

who would avail of the grants and loans from the SCEF


January 2012 44

o Create Annual P&L and Balance Sheets for Auditing and approval of the Management Board

and audits by statutory bodies

SCEF Fund Management Board shall have representation from key stakeholders involved in governance of

distribution licensees, project financing and technical assessment of energy sector projects. Suggested

constitution of the Fund Management Board is:

• Chief Executive / President or nominated Officer of the Fund Management Company (PPP or the

Bank) (ex-officio Secretary to the Board)

• Principal Secretary – Energy from the State Government

• Secretary – State Electricity Regulatory Commission

• Representative of a leading Academic Institution

• Representative of a Consumer Group appointed by the SERC

• Leading Chartered Accountant serving as an Independent Director on the Board of any

recognized Financial Institution/Bank

• International and/or national experts in the energy efficiency and/or renewable energy field as

special invitees

4.4 Procedure to Select a Fund Manager The agency or trust that is the owner of the SCEF shall launch a competitive bidding process to select a

Fund Manager to manage the SCEF for a specific tenure. The SCEF Manager thus needs to have the

ability to provide the professional management of the SCEF and ability to carry out financing due

diligence and moderate the repayments of loans from the Fund. Eligibility criteria, Terms of Reference

and evaluation procedure to select the SCEF Manager are mentioned below.

4.4.1 Terms of Reference for SCEF Manager

The SCEF Manager shall be a Financial Institution or a Bank or a Public Private Partnership between a

Bank/Financial Institution and any Government entity, capable of assessing the projects and carrying out

due diligence of technical proposals from distribution licensees/C&I consumers/BEE-appointed project

implementers. SCEF Manager will earn its earnings as Administration & Management Fees based on

actual performance. As an example, for every Rs. 10 Crores of loans and grants disbursed to the project

proponents (distribution licensees, C&I Consumers and BEE-appointed implementers), there will be a

certain percentage that would be claimed as Administration & Management Fees.

The SCEF Manager is required to provide following services.

1. Assist in creation and maintenance of a separate Trust Fund capitalized using the PBC collected

from the consumers of the distribution licensees and other funding sources and shall have the

ability and track-record to leverage other private sector/international climate funds/own equity to

ensure scaling-up of clean energy projects


January 2012 45

2. Develop criteria to screen project proposals (based on benefits/costs, internal rate of returns)

and seek approval of the Fund Management Board

3. Moderate the Funds flow in the SCEF trust fund and be able to make investments in the private

sector projects ensuring cost-shares/project proponents’ contribution and moderate the reflows

when low-interest financing is done through the SCEF

4. Disburse the grants to eligible programs as applicable and facilitate the monitoring process

5. Make investments from the SCEF held in the trust fund and turn around the interest earnings to

the distribution licensees to merge the earnings in the ARRs

6. Create SCEF Management Board and Proposals Approval Committee and develop strong

management and operations audit procedures

7. Facilitate the process to turn around unutilized amounts to the distribution licensees

4.4.2 Eligibility criteria

1. Should be a financial institution/Bank with a valid license from the relevant Banking Regulators

and/or an existing PPP or a proposed PPP (a signed Memorandum of Understanding among the

PPP partners is essential)

2. Existing Bank/Financial Institutions should have been in operations during the past 5 years and

should have demonstrated profits during the past 5 years (submit audited balance sheets)

3. Should not have defaulted and/or been black-listed by banking regulator in India/other statutory

entities/any other government entities

4. Demonstrated experience in project financing and grant-making; should have disbursed no less

than Rs. 50 Crores annually for the past three years

5. Should have at least 2 Fund Managers with experience in investments; should have at least 2

project finance experts with a proven track-record in the energy efficiency and/or renewable

energy projects

4.4.3 Selection criteria

The SCEF Trust/State Government Department will select a SCEF Manager based on:

• Initial short-listing based on legal authenticity of the Applicants

• Scores assigned to the points described in the Eligibility Criteria

• Proposed Administration and Management percentage for loans and grants disbursed

• Proposed Return on Equity in percentage assured to the contributing entities (distribution

licensees collecting the PBC and other funding sources)


January 2012 46

• Proposed leveraging with commercial finance and rate structure thereof resulting in overall low-

interest financing

The above initial selection process shall be expanded in consultation with the SERC and State

Government during the roll-out phase.

4.5 Typology of Projects Funded through SCEF Three types of projects, that qualify as end-use energy efficiency or end-use renewable energy projects,

can be funded through the SCEF:

1. Projects implemented by the distribution licensees to provide incentives to promote efficient use

of appliances, load management and end-use renewable energy interventions

a) Efficient cooling or ventilation systems (ceiling fans, air-conditioners and refrigerators, room

heating systems, small & large thermal storage systems),

b) Efficient lighting (fluorescent or LED lighting systems),

c) Common area pumping, lighting or water heating applications

d) Demand Response programs involving load curtailment options

e) Group Cogeneration, HVAC and Trigeneration Systems

2. Projects directly implemented by consumers or group of consumers that offer substantial savings

a) Efficient cooling or ventilation systems (ceiling fans, air-conditioners and refrigerators, room

heating systems, small & large thermal storage systems),

b) Efficient lighting (fluorescent or LED lighting systems),

c) Common area pumping, lighting or water heating applications

d) Group Cogeneration, HVAC and Trigeneration Systems

e) Renewable energy projects that support reduced electricity grid dependence (solar-PV, solar

hot water systems that are not currently included in other subsidy programs)

3. Projects implemented by the Bureau of Energy Efficiency promoting Super-Efficient Appliances

a) Super-efficient appliances program launched by the BEE

b) Appliances and equipment that have been selected by the BEE to support substantial

ratcheting up of standards (current list includes ceiling fans, LED TVs, LED lighting)

SCEF will provide grants and low-interest rate loans to the following programs that align with the

indicative list of technologies covered above. The list below is illustrative and specific norms shall be

developed when the SERCs notify Regulations.


January 2012 47

• Grants funding will be extended to the following activities:

o Project preparatory grants made to distribution licensees that do not go beyond 2% of

the total costs – activities may include load research activities and

o Awareness building and capacity building activities resulting in market development

o BEE-implemented Super-efficient appliances programs

• Low-interest-rate loans shall be extended to the following activities:

o Projects proposed by individual C&I consumers

o Projects proposed by group of C&I consumers

o Projects that need higher capital and meet the criteria of promoters’ contribution

In the initial phase of rolling-out of the SCEF, the Fund Management Board of the SCEF will formalize the

extent to which the grants and loans programs are split. As an example, in the initial years, the Fund

Management Board may decide to provide 50% grants and 50% loans. In the subsequent years, the loan

component may be increased to make sure C&I consumers and other private sector sources can leverage

the low-interest loans with high-cost commercial finance available to them. The Fund Management Board

will also develop rules related to the extent of grants and loans the consumers of contributing distribution

licensees can avail. Primarily, the grants and loans allocation may be linked to the PBC collection

proportion and benefits to the system in the State.

4.6 Project Application Procedures to Avail SCEF SCEF will run 4 quarterly cycles to accept and evaluate proposals from the distribution licensee, C&I

Consumers and BEE-appointed implementing agency for national programs.

SCEF will issue detailed guidelines to submit the proposals for grants and low-interest loans.

Grant proposals shall include at least the following.

• Project description and list of activities

• List of market barriers addressed and a plan to assess the efficacy of the project outcomes

• Program tenure and outreach activities

• List of products/reports/manuals that would enhance the end-use energy efficiency and

renewable energy project development

• Implementation arrangements and cost-share committed

Loan proposals shall include at least the following.

• Type of technology that will be implemented and benefits to the system (both capacity/demand

reduction and energy conservation)


January 2012 48

• Benefit-cost analysis of the investments related to the total cost, incentives/grants and

promoters’ contribution

• Project implementation timelines and project monitoring plans

• Measurement & verification protocols

• Cash-flow statements and project P&L and balance sheet for large projects (developed based on

standard templates)

4.7 Project Reporting & Monitoring Procedures SCEF will be governed by a set of project-level and portfolio-level monitoring procedures. Proposed

Regulations shall cover the Reporting and Monitoring procedures.

4.8 Contents of the SERC Regulations related to SCEF Structure of the proposed set of Regulations is attached as Appendix D to this report. The presented

structure follows the formats used by Central and State Electricity Regulatory Commissions.

4.9 Summary of SCEF Set-up, Management and Governance Structure

The key attributes of SCEF are summarized in Box 5.


January 2012 49

Box 5: Key attributes of State Clean Energy Fund

• SCEF will support end-use energy efficiency and end-use renewable energy projects

with direct benefits to electricity system

• SCEF will be capitalized through below-the-line charge in the electricity bills and

other government/donor funding sources

• Rate-payer contribution to SCEF will be governed by State Electricity Regulatory

Commissions by notified Regulations

• All Consumers of distribution licensees will contribute to the fund

• Consumers can benefit from SCEF to implement Clean Energy projects that support

utility system

• SCEF will be capitalized perpetually by charging an additional amount charged in

monthly bills in monthly electricity bills; amount shall announced by an Order by

SERC

• SERCs shall notify specific Regulations to collect below-the-line contribution to the

SCEF, its governance & management structure

• Every 3 years (or a period specified by the SERCs by an Order), unutilized funds in the

SCEF shall be returned back to the distribution licensees to be merged in the ARR

calculations

• SCEF will be managed by a third-party Fund Manager/Advisor appointed through a

bidding process by the SCEF Trust/State Government Department; Fund Managers

can be existing or proposed PPPs or Banks

• SCEF shall support three types of projects – (i) BEE-implemented Super-efficient

Appliances Initiative, (ii) utility implemented DSM measures and (iii) direct Consumer

(or group of Consumers) implemented Clean Energy projects


January 2012 50

5 Conclusions and Next Steps

International experiences clearly identify the benefits of pushing forward the clean energy agenda

through the use of Clean Energy Funds. US examples in key states have highlighted between 1% and 3%

of Annual Revenues spent on efficiency projects that resulted in 1 to 3% annual savings in electricity

consumption. Among various options of generating budgets to implement efficiency programs, the most

commonly used approach is through a PBC levied in the electricity bills. This approach has been effective,

efficient and sustainable in various states in the U.S. and has demonstrated substantial energy savings

and GHG reductions.

Three Fund management structures are evident from the U.S. experience: a) management by utilities, b)

management by a separate Government agency and c) management by a third-party. At least 3 Indian

states have tried setting up Energy Conservation Fund but the legislative process of setting up the funds

has been rather long. Kerala happens to be one of the first states that has brought about legislation to

set-up the State Energy Conservation Fund. One example of collecting a Load Management Charge (in

Maharashtra) paved the way for some of the implementation of DSM initiatives. Legal mandate of the

Electricity Act 2003, specifically the provisions of Section 23 of the Act, allow generating such funds.

In some States, setting up of such a fund is likely to receive a matching grant from the State Government

through the legislative process. As such, a leveraged SCEF with two sources – from consumers of

distribution licensees and from the State Government, is a possible option that has received support from

the State Regulatory Commission and the Energy Department in at least one State. Other Funds

capitalization opportunities including state government allocations and donor-funds are available as well.

Based on the initial meetings with the State Governments, the IIEC team proposes setting up of SCEF

capitalized through collection of PBC and other allocations. IIEC proposes outsourcing the Fund

Management function to a competitively selected entity with experience in project financing and fund

management, by creating an incentive structure to be earned as a Fund Management Fee based on the

disbursed grants/incentives and loans disbursed.

The Fund Management structure and structure of Regulations proposed in this report will be shared with

at least one Regulatory Commission and the State Government Energy Department to be used in a public

commenting process expected to begin in April 2012 quarter. Based on the suggestions received and the

internal decisions at the State Electricity Regulatory Commissions, the IIEC team will assist the SERC to

finalize the Regulations during the tenure of this grant ending January 2013.


January 2012 51

APPENDIX A: SUMMARY OF DISCUSSIONS AT STAKEHOLDER MEETING AND LIST OF PARTICIPANTS IN THE STATE MEETINGS

Notes from the Stakeholder Roundtable on August 24, 2011 - Mumbai

A Project implemented by:

International Institute for Energy Conservation (IIEC)

Funded by:

UK Foreign & Commonwealth Office (UK-FCO)

International Institute for Energy Conservation (IIEC) convened the first Stakeholder Roundtable to discuss the project titled Preparation of Design and Road map for State Clean Energy Funds for “end-use” energy efficiency and renewable energy projects. This note is intended to summarize the discussions during the Roundtable.

Summary of proceedings

The Stakeholder Roundtable was attended by Chairpersons of three Electricity Regulatory Commissions, representatives of banking/financial institutions, legal experts, UK-FCO programme management team, and IIEC project implementation team. The list of participants is included in next section.

• Dr. Nitin Pandit, President, IIEC, welcomed participants at the meeting and introduced IIEC activities, in particular the proposed activities to review the possibilities of setting up a State level Clean Energy Fund based on public benefits charge mechanism. In particular, the group acknowledged presence of Mr. V. P. Raja, Chairman, Maharashtra Electricity Regulatory Commission (MERC), Mr. M. R. S. Murthy, Chairman Karnataka Electricity Regulatory Commission (KERC) and Mr. U. N. Panjiar, Chairman, Bihar Electricity Regulatory Commission (BERC) at the meeting.

• Dr. Philip Douglas, UK-FCO Programme Director, made remarks on the UK-FCO activities in India and its potential role in promotion of Clean Energy projects in the focus states

• IIEC project implementation team made two presentations

o Mr. Dilip Limaye, in his presentation on “Clean Energy Funds: Overview of International Experience,” linked benefits of energy efficiency and identified financing barriers encountered by project implementers. The presentation defined the use of Clean Energy Funds to overcome the barriers, and defined such funds have been used, including descriptions of successful models of application of rate-payer contributed funds in California, Vermont and New York. This presentation defined the concept of the “public benefit charge” to create the funds and summarized three models of fund management: (i) management by utilities; (ii) management by a Government agency; and (iii) management by a third party. Examples from California, New York and Vermont including the inception, implementation arrangements and success in terms of energy savings were discussed as well. The presentation also listed Indian examples of setting up similar funds including in Maharashtra (Load Management Charge and Urja Ankur), National Clean Energy Fund managed by the Ministry of Finance through collection of a cess on coal, and State Energy Conservation Fund (SECF) in the state of Kerala. The presentation made important points related to implications


January 2012 52

of international experiences to Indian regulatory structure and included some thoughts of differences in legislative and regulatory interventions and their comparisons.

o Presentation by Dr. Mahesh Patankar highlighted the mandate of the Electricity Act 2003 to promote environmentally benign development of power systems. The presentation compared two possible mechanisms to generate budgets to implement Clean Energy projects. These include a separate Public Benefits Charge developed by regulation and budget allocation in the Aggregate Revenue Requirements (ARR) of the distribution licensees. The public benefits charge (PBC) was highlighted as a long-term mechanism to generate funds that can leverage commercial financing with a specific accountability structure. PBC generation and application structure involving part of the funding used by the utilities in grants/incentives program and part leveraged by the commercial/scheduled banks to lend to EE projects were discussed. Two fund management structures: (i) completely outsourced model and (ii) complementing fund utilization by utilities and a fund manager were discussed. Both options highlighted the need to have a professional Fund Manager selected through a competitive bidding process approved by the Regulatory Commission to act as a fund trustee. The presentation further discussed key features of the Clean Energy Funds which included developing an incentive structure to be linked to the utility performance (application of funds) and the possibility of funds merged with ARR after a finite time. This presentation also highlighted the need for a separate set of Regulations to formalize collection of the PBC and its management structure through a public commenting process.

• Mr. V. P. Raja, Chairman, MERC, Mr. M. R. S. Murthy, Chairman KERC and Mr. U. N. Panjiar, Chairman, BERC made specific remarks related to the need to ensure equity, creation of political leadership, and application of funds in the sectors that matter the most (such as public and agriculture). The Chairpersons of the Regulatory Commissions also suggested the need to ensure that:

o Fund management structure is robust and well governed

o Funds attract good projects leading to desired results across the consumer class

• The legal expert of the IIEC team highlighted the need to structure the institution of state PBCs and Clean Energy Funds through specific Regulations passed by the Electricity Regulatory Commissions

• Representatives of the Banks and Financial Institutions supported the need for a separate fund addressing end-use Clean Energy projects and the need

• Dr. Nitin Pandit from IIEC summarized the discussions in the following key points:

1. The proposed Clean Energy Fund would be used to provide grants/incentives or soft loans to end-use efficiency and renewable projects. Large renewable projects that are funded through other mechanisms will be excluded from the Clean Energy Fund application.

2. The design of the fund will consider other existing funds to ensure that there is no overlap and that a complementary fund utilization mechanism is ensured. Though the current phase of the Clean Energy Funds will target PBC as a revenue source, other donor-supported funding options may be considered to capitalize the fund in the future. Project activities may also include discussions with the Ministry of Finance GOI, through the respective state governments to seek their views on the legal requirements.

3. The fund management structure should include governance, monitoring (including measurement and verification), and application procedures, and should address the primary motivations to collect such a fund using an appropriate Regulatory structure

4. Private sector Banks/Financing institutions have a wealth of experience in project financing for energy efficiency and renewable energy projects. Learning from their experience is important in setting up the fund.

5. Mechanics that need to be followed to create a set of Model Regulations need to be studied, especially to establish a legal mandate of the Clean Energy Funds


January 2012 53

• The IIEC project implementation team will soon hold specific meetings in the individual states to develop a roadmap to set-up a Clean Energy Fund in each state. State-specific meetings will be convened during the September to December 2011 timeline.

Stakeholder Roundtable Agenda – August 24, 2011 – 5 pm to 8 pm - Mumbai

Time Agenda

05:00 pm to 05:10 pm Welcome and introductions (IIEC and all participants)

05:10 pm to 05:20 pm UK-FCO brief on collaboration with GoI (UK-FCO)

05:20 pm to 06:00 pm Public Benefit Charges – International Experiences (IIEC team)

06:00 pm to 06:30 pm Options – Regulatory System supported PBCs in India (IIEC team)

6:30 pm to 07:00 pm Reflections by State Regulators

Shri V. P. Raja, Chairman, Maharashtra Electricity Regulatory Commission

Shri M. R. S. Murthy, Chairman, Karnataka Electricity Regulatory

Commission

Shri U. N. Panjiar, Chairman, Bihar Electricity Regulatory Commission

07:00 pm to 07:45 pm Moderated discussion (All participants) – suggested discussion points:

Regulators’ perspectives

Legal mandate

Pooling funds with Commercial finance

Application of PBC to scale-up project implementation

07:45 pm to 08:00 pm Next steps (IIEC team)


January 2012 54

List of Participants in the state meetings

Sr. No. Name Designation Organisation

Shri V P Raja Chairman MERC

Shri M Murthy Chairman KERC

Shri U N Panjiar Chairman BERC

Dr Philip Douglas First Secretary British High Commission

Shri Amit Oke Technology Finance Group ICICI Bank

Ritu Anand Policy Advisor IDFC

Shri Naman Gupta Sr. Regional Climate Change &

Energy Advisor British High Commission

Shri Raman Mehta British High Commission

Dr Nicolette Bartlett Program Manager Cambridge University

Mrs. Shobhana Desai Joint Secretary Government of Gujarat, Energy

Department

Shri. Raju Pandya Sr. Project Manager GEDA

Dr. M.K.Iyer Member GERC

Shri. U. N. Panjiar Chairman BERC

Shri R N Sharma Member BERC

Shri S C Jha Member BERC

Shri Ajay B Nayak Principal Secretary(Energy) Government of Bihar

Shri Mihir Kumar Singh Secretary Government of Bihar

Shri Ganesh Prasad Secretary BERC

Shri P K Ray Chairman BSEB

Shri Satish Kumar Chief Engineer BSEB

Shri Vinayak

Chandragupta Member(Finance) BSEB

Shri Raj Mohan Jha Dy. Director Bihar Renewable Energy


January 2012 55

Development Agency

Chairman KERC

Principal Secretary Energy Department, GoK

Secretary Finance, GoK

Managing Director KREDL

Mr. Ian Felton Deputy High Commission BHC

Arijit Mitra Legal Consultant IIEC

Dilip Limaye Sr. Advisor Consultant IIEC

Dr Nitin Pandit President IIEC

Dr Mahesh Patankar Advisor Consultant IIEC

Shishir Athale Sr Project Manager IIEC

Ira Athale Prem Project Manager IIEC

B. Anil Kumar Sr. Project Manager IIEC

Prajakta Saraf Intern IIEC

B. Akhila Intern IIEC


January 2012 56

APPENDIX B: ADDITIONAL INFORMATION – REVIEW OF INTERNATIONAL CLEAN ENERGY FUNDS

B.1: EE budgets, savings and savings as % of consumption in key U.S. states

Examples of Clean Energy Funding in Selected U.S. States

Clean Energy Funding Information form Top 10 States

STATEEE Spending as % of

Annual Utility Revenues

Vermont 4.4%

California 2.9%

Washington 2.5%

Utah 2.4%

Oregon 2.3%

Massachsetts 2.3%

Minnesota 2.2%

Idaho 2.1%

Iowa 1.8%

New York 1.7%

Wisconsin 1.6%

Connecticut 1.4%

New Jersey 1.2%

Colorado 1.1%


January 2012 57

Rank StateEE BudgetMillion $

1 California 998.3

2 New York 378.3

3 Massachusetts 183.8

4 Washington 146.5

5 Florida 132.6

6 New Jersey 132.3

7 Minnesota 111.2

8 Wisconsin 101.1

9 Texas 98.7

10 Pennsylvania 96.9

By Budget Level

Rank StateEE Budget as % of Revenue

1 Vermont 4.40%

2 California 2.86%

3 Rhode Island 2.66%

4 Washington 2.48%

5 Utah 2.44%

6 Oregon 2.34%

7 Massachusetts 2.20%

8 Minnesota 2.19%

9 Idaho 2.13%

10 Iowa 1.78%

By % of Revenue


January 2012 58

Energy Savings – Top 10 States


January 2012 59

B.2: Illustrative Clean Energy Programs in Vermont and New York47

Source: Prepared by authors using reports from NYSERDA and Efficiency Vermont

47

Source: Compiled by Authors form Annual Reports of Efficiency Vermont and NYSERDA

VERMONT NEW YORK

Residential Programs Residential Programs

Appliance Rebate Program Home Energy Performance

Energy Efficiency Incentives - New Homes EnergySmart Multifamily Program

Energy Efficiency Incentives - Existing Homes EnergyStar Products Program

Energy-Efficient Lighting Program Solar Electric Incentive Program

Incentives for Other EE Products Residential Geothermal Program

Weatherization Perogram Low Income Assistance Program

Commercial/Industrial Programs Commercial/Industrial Programs

Efficient Commercial Lighting EnergySmart Loan Program

Efficient HVAC Systems Flex-Tech Cost Sharing Program

Compressed Air Systems Technical Assistance - New Construction

Refrigeration and Controls Performance-based Incentives

Incentives for CE in New Construction Clean Energy Manufacturing Incentives

Insulation and Air Sealing Transportation Efficiency

Industrial and Process Efficiency

Public Sector Programs Public Sector Programs

Municipal Street Lighting Program FlexTech Program

LED Lighting Incentives Existing Facilities Program

State Buildings/Facilities Retrofit New Construction Program

Financing Program for Schools Free Energy Benchmarking Service

Rebates and Financing for Hospitals Alternative-fuel Vehicles Program

Renewable/Indigenous Energy R&D Program


January 2012 60

B.3: Addressing the Financing and Implementation Barriers48

BARRIER HOW ADDRESSED

Lack of knowledge and awareness Fund demonstration projects; publicize success

stories

New clean energy technologies Finance projects with innovative technologies;

provide training, publicize success stories

Limited availability of conventional

financing

Provide funds for projects.

Supplement conventional financing.

Small project size Facilitate financing of small projects.

Standardize and aggregate projects

Limited applications of project

financing

Educate banks on applicability of project

financing. Provide risk guarantees

Lack of experience of financial

institutions (FIs)

Provide information and training to FIs.

Work with FIs to finance demonstration

projects

Perception of high risk Provide risk guarantees.

Document and publicize success stories.

Collateral or strong balance sheet

requirement

Provide credit guarantees.

Assist ESCOs & project developers in project

financing.

High transaction costs Standardize project financing application

forms. Create forum for interaction among

FIs & ESCOs.

High development costs Finance/subsidize energy audits.

Educate consumers on benefits of DSM/EE and

on role of ESCOs.

Monitoring, measurement and

verification methods and tools

Develop guidelines and procedures for M&V.

Demonstrate the applications in early projects.

Limited infrastructure for project

implementation

Provide a clear signal to the market that Fund

will be financing projects on an on-going basis.

Source – Prepared by Authors

48 Source: Adapted by authors from Limaye, Dilip R., Financing DSM and Energy Efficiency: The Role of State Energy Conservation Funds, Energy Manager Journal, April-

June 2010


January 2012 61

APPENDIX C: LEGAL MANDATE - SUPPORTING SUMMARIES – CASE LAWS AND RULINGS

C.1: Rulings supporting legal mandate of Regulations over Orders

(i) K.Ramanathan vs State of Tamil Nadu (1985) 2 SCC 116 page 130

para 18.

“The word ‘regulation’ cannot have any rigid or inflexible meaning as to exclude

prohibition. The word regulate is difficult to define as having any precise

meaning. It is a word of broad import, having a broad meaning, and is very

comprehensive in scope. There is a diversity of opinion as to its application to a

particular state of facts, some courts giving to the term a somewhat restricted

and others giving to it a liberal construction. The different shades of meaning are

brought out in Cofrpus Juris Secundum Vol 76 at p.611:

“Regulate” is variously defined as meaning to adjust order or govern by rule

method, or established mode, to adjust or control by rule, method, or

established mode or governing principles or laws, to govern by rule, to govern

by, or subject to certain rules or restrictions, to govern or direct according to

rule, to control govern or direct by rule or regulations. “Regulate “ is also defined

as meaning, direct, to direct by rule or restriction, to direct or manage according

to certain standard laws, or rules, to rule, to conduct, to fixed establish, to

restrain to restrict see also Webster’s Third New International dictionary Vol.II p.

1913 and Shorter Oxford Dictionary Vol. II 3rd

Edn. P. 1784.

19. It has been said that the power to regulate does not necessarily include the

power to prohibit and ordinarily the word regulate is not synonymous with the

word prohibit. This is true in a general sense and in the sense that mere

regulation is not the same as absolute precipitation. At the same time, the power

to regulate carries with it full power over the things, subject to regulation and in

absence of restrictive words, the power must be regarded as plenary over the

entire subject. It implies the power to rule, direct and control and involves the

adoption of a rule or guiding principle to be followed, or the making of a rule

with respect to the subject to be regulated. The power to regulate implies

the power to check and may imply the power to prohibit under certain

circumstances, as where the best or only efficacious regulation consists

of suppression. It would therefore appear that the word regulation

cannot have any inflexible meaning as a exclude prohibition. It has

different shades of meaning and must take its colour from the contest in which it

is used having regard to the purpose and object of the legislation and the court

must necessarily keep in view the mischief which the legislature seeks to

remedy”.


January 2012 62

Indu Bhushan vs Rama Sundar AIR 1970 SC 228, page 231 para 5.

“The dictionary meaning of the word regulation in Short Oxford Dictionary is “the

act of regulation” and the word “regulate” is given the meaning “to control,

govern, or direct by rule or regulations”. This entry thus, gives the power to

Parliament to pass legislation for the purpose of directing or controlling all house

accommodation in cantonment areas. Clearly, this power to direct or control will

include within it all aspects as to who is to make the constructions under that

conditions the construction can be altered, who is to occupy the recommendation

and for how long, on what terms it is to be occupied, when and under what

circumstances the occupant is to ceased to occupy it, and the manner in which

the accommodation is to be utilized. All these are ingredients or regulation of

house accommodation and we see no reason to hold that this word “regulation”

has been used in a wide sense in this entirety.”

(ii)V.S. Rice and Oil Miss vs State of Andhra Pradesh AIR 1964 SC 1781

Page 1787 Para 20 “… … … … The word “regulate” is wide enough to confer

power on the respondent to regulate either by increasing the rate or decreasing

the rate, the test being what is it that is necessary or expedient to be done to

maintain, increase, or secure supply of the essential articles in question and to

arrange for its equitable distribution and its availability at fair prices. The concept

of fair prices which S.3(1) expressly refers does not mean that the price once

fixed must either remain stationary, or must be reduced in order to attract the

power to regulate. The power to regulate can be exercised for ensuring the

payment of a fair price, and the fixation of a fair price would inevitably depend

upon a consideration of all relevant and economic factors, which contribute to

the determination of such a fair price. If the fair price indicated on a

dispassionate consideration of all relevant factors turns out to be higher than the

price fixed and prevailing, then the power to regulate the price must necessarily

include the power to increase so as to make it fair.”

(iii) Deepak Theatre, Dhuri vs State of Punjab 1992 Supp (1) SCC 684 @ 687 – AIR 1992 SC 1519 Page 687 Para 3 – “It is settled law that the rules validly made under the Act, for all intents and purpose, be deemed to be part of the statute. The conditions of the license issued under the rules from and integral part of the statute. The question emerges whether the word regulation would encompass the power to fix rates of admission and classification of the seats. The power to regulate may include the power to license or to refuse or to requiring taking out a license and may also include the power to tax or exempt from taxation, but not the power to impose a tax for the revenue in rule making power unless there is valid legislation in that behalf. Therefore, the power to regulate a particular business or calling implies the power to prescribe and enforce all such proper and reasonable rules and regulations as may be deemed necessary to conduct the business in a proper and orderly manner. It also includes the authority to prescribe the reasonable rules, regulations or conditions subject to which the business may be conducted … … … …


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(iv) Cellular Operators Association of India & Ors. Vs Union of India & Ors. AIR 2003 SC 899 “33. The regulatory bodies exercise wide jurisdiction. They lay down the law. They may prosecute. They may punish. Intrinsically, they act like an internal audit. They may fix the price, they may fix the area of operation and so on and so forth. While doing so, they may, as in the present case, interfere with the existing rights of the licensees.”

C.2: Extract relevant to BEE activities from Energy Conservation Act 2001

“13. (1) The Bureau shall, effectively co-ordinate with designated consumers, designated

agencies and other agencies, recognise and utilise the existing resources and

infrastructure, in performing the functions assigned to it by or under this Act

(2) The Bureau may perform such functions and exercise such powers as may be

assigned to it by or under this Act and in particular, such functions and powers include

the function and power to -

(a) recommend to the Central Government the norms for processes and energy

consumption standards required to be notified under clause (a) of section 14 ;

(b) recommend to the Central Government the particulars required to be displayed on

label on equipment or on appliances and manner of their display under clause (d) of

section 14;

(c) recommend to the Central Government for notifying any user or class of users of

energy as a designated consumer under clause (e) of section 14;

(d) take suitable steps to prescribe guidelines for energy conservation building codes

under clause (p) of section 14;

(e) take all measures necessary to create awareness and disseminate information for

efficient use of energy and its conservation;

(f) arrange and organize training of personnel and specialists in the techniques for

efficient use of energy and its conservation;

(g) strengthen consultancy services in the field of energy conservation;

(h) promote research and development in the field of energy conservation;

(i) develop testing and certification procedure and promote testing facilities for

certification and testing for energy consumption of equipment and appliances;

(j) formulate and facilitate implementation of pilot projects and demonstration projects

for promotion of efficient use of energy and its conservation;

(k) promote use of energy efficient processes, equipment, devices and systems;

(l) promote innovative financing of energy efficiency projects; “


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The Central Government under the Energy Conservation Act, 2001 has the following functions:

“14. The Central Government may, by notification, in consultation with the Bureau, —

(a) specify the norms for processes and energy consumption standards for any equipment,

appliances which consumes, generates, transmits or supplies energy;

(b) specify equipment or appliance or class of equipments or appliances, as the case may be, for

the purposes of this Act;

(c) prohibit manufacture or sale or purchase or import of equipment or appliance specified under

clause (b) unless such equipment or appliances conforms to energy consumption standards;

Provided that no notification prohibiting manufacture or sale or purchase or import or equipment

or appliance shall be issued within two years from the date of notification issued under clause (a)

of this section;

(d) direct display of such particulars on label on equipment or on appliance specified under

clause (b) and in such manner as may be specified by regulations;

(e) specify, having regarding to the intensity or quantity of energy consumed and the amount of

investment required for switching over to energy efficient equipments and capacity or industry to

invest in it and availability of the energy efficient machinery and equipment required by the

industry, any user or class of users of energy as a designated consumer for the purposes of this

Act;

(f) alter the list of Energy Intensive Industries specified in the Schedule;

(g) establish and prescribe such energy consumption norms and standards for designated

consumers as it may consider necessary: Provided that the Central Government may prescribe

different norms and standards for different designated consumers having regard to such factors

as may be prescribed;

(h) direct, having regard to quantity of energy consumed or the norms and standards of energy

consumption specified under clause (a) the energy intensive industries specified in the Schedule

to get energy audit conducted by an accredited energy auditor in such manner and intervals of

time as may be specified by regulations;

(i) direct, if considered necessary for efficient use of energy and its conservation, any designated

consumer to get energy audit conducted by an accredited energy auditor;

(j) specify the matters to be included for the purposes of inspection under sub-section (2) of

section 17;

(k) direct any designated consumer to furnish to the designated agency, in such form and

manner and within such period, as may be prescribed, the information with regard to the energy

consumed and action taken on the recommendation of the accredited energy auditor;

(l) direct any designated consumer to designate or appoint energy manger in charge of activities

for efficient use of energy and its conservation and submit a report, in the form and manner as


January 2012 65

may be prescribed, on the status of energy consumption at the end of the every financial year to

designated agency;

(m) prescribe minimum qualification for energy managers to be designated or appointed under

clause (l);

(n) direct every designated consumer to comply with energy consumption norms and standards;

(o) direct any designated consumer, who does not fulfil the energy consumption norms and

standards prescribed under clause (g), to prepare a scheme for efficient use of energy and its

conservation and implement such scheme keeping in view of the economic viability of the

investment in such form and manner as may be prescribed;

(p) prescribe energy conservation building codes for efficient use of energy and its conservation

in the building or building complex;

(q) amend the energy conservation building codes to suit the regional and local climatic

conditions;

(r) direct every owner or occupier of the building or building complex, being a designated

consumer to comply with the provisions of energy conservation building codes for efficient use of

energy and its conservation;

(s) direct, any designated consumer referred to in clause (r), if considered necessary, for efficient

use of energy and its conservation in his building to get energy audit conducted in respect of

such building by an accredited energy auditor in such manner and intervals of time as may be

specified by regulations;

(t) take all measures necessary to create awareness and disseminate information for efficient use

of energy and its conservation;

(u) arrange and organise training of personnel and specialists in the techniques for efficient use

of energy and its conservation;

(v) take steps to encourage preferential treatment for use of energy efficient equipment or

appliances: Provided that the powers under clauses (p) and (s) shall be exercised in consultation

with the concerned State. “


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APPENDIX D: STRUCTURE OF REGULATIONS TO SET-UP SCEF THROUGH COLLECTION OF PBC

1. Statement of Objects and Reasons

2. Introduction

3. Short Title, Commencement, and extent of application

4. Definitions and Interpretations

a) Act

b) Fund Manager

c) Public Benefits Charge

d) State Clean Energy Fund

e) Below-the-Line

f) End-use Energy Efficiency

g) End-use Renewable Energy Projects

5. Collection of Public Benefits Charge

6. Constitution of the State Clean Energy Fund as [a trust under the Public Trust

Act; or society under the Societies Registration Act; or a not for profit (unlimited

company) under Section 25 of the Companies Act, 1956 – retain as desirable]

7. Ownership and Governance of the State Clean Energy Fund

8. Selection of Fund Manager

9. Fund Manager

10. Fund Management Board

11. Application and Utilization of State Clean Energy Fund

12. Procedure for identification and prioritization of end use projects

13. Operation of the State Clean Energy Fund

a) Bank Accounts

b) Audit

c) Annual Report


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14. Fund Manager Fees

15. Utilisation of Unused Funds

16. Annual compliance reports to be submitted to the Commission

17. Property and Income of the State Clean Energy Fund

18. Dissolution of the State Clean Energy Fund

19. Power to remove difficulties

20. Power to Relax

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