Haryana electricity regulator’s decision to grant Eleven Power a 25-year electricity distribution licence for Gurugram and Nuh raises a question for India’s power sector: how much additional infrastructure should competition in electricity distribution require?
The Haryana Electricity Regulatory Commission (HERC) granted the licence after considering, among other matters, Eleven Power’s proposed investment of ₹4,716.73 crore over five years and its phased rollout plan. The State government announced that it would challenge the order before the Appellate Tribunal for Electricity (APTEL).
Under the current framework, a distribution licensee is ordinarily required to establish and operate its own distribution system. The Draft Electricity (Amendment) Bill, 2025 proposes to allow multiple licensees to supply consumers through own or shared networks, subject to regulatory oversight and charges. However, the draft remains under consultation and is not law in force.
HERC’s decision puts the economics of the existing model into focus; while, the proposed amendment to the Electricity Act raises the possibility of a different approach.
What does a second network buy?
A new distribution licensee must invest in cables, substations, metering and other infrastructure while establishing its operations and customer base. An incumbent already has a network and existing power procurement commitments. The entrant’s investment must generate sufficient value to justify the additional capital.
A second network can potentially improve capacity, reliability and resilience. It may be justified where existing infrastructure is constrained, requires substantial upgrading or cannot adequately serve changing demand. Separate infrastructure also gives a licensee greater control over network design and expansion.
The economics change where suitable infrastructure already exists. Building parallel cables, substations and other assets adds capital costs. The case for that investment rests on the improvements it can deliver, such as fewer interruptions, shorter outages, better voltage quality, faster connections or lower technical losses.
Eleven Power’s approved rollout plan is based on developing its own distribution network. Its proposed investment will be spread over five years, with implementation proceeding in phases. The cost and performance of that network will show whether the additional infrastructure delivers benefits commensurate with its cost.
Open access offers a route, but not a complete framework
The Electricity Act, 2003 already provides for open access to distribution networks. Section 42(3) allows a person within a distribution licensee’s area of supply to require the licensee to wheel electricity sourced from a generating company or another licensee, in accordance with the applicable State Commission regulations and charges. Open access remains subject to the wider statutory and regulatory framework, including applicable surcharges and other conditions.
This provision principally enables a consumer to receive electricity sourced from elsewhere through the existing network. A competing distribution licensee seeking to use the incumbent’s network to supply its own retail customers raises a broader set of issues.
Existing open-access provisions can provide a route to network use in permitted circumstances. They do not, by themselves, establish a complete framework for a second distribution licensee to acquire consumers, manage switching, obtain network access on defined terms and allocate the costs of network use and legacy obligations.
The Draft Electricity (Amendment) Bill, 2025 proposes to address network sharing more explicitly. It envisages non-discriminatory access to a distribution licensee’s network for other licensees, subject to charges determined by the State Electricity Regulatory Commission. It also proposes requirements for network development and maintenance intended to avoid unnecessary duplication.
For a new entrant, sharing could reduce the capital required before it can compete. Where existing infrastructure has sufficient capacity, the entrant could use that network and direct more investment towards procurement, metering, technology and customer service.
The network would still need to be maintained, faults repaired and capacity expanded. Access charges must reflect the costs attributable to network use without becoming discriminatory or punitive. The framework must also determine who pays for additional capacity, who is responsible for reliability and how disputes between competing licensees are resolved.
Sharing could lower the cost of entry, but its benefits depend on how access and responsibility are regulated.
Who bears the cost when consumers switch?
The economics of distribution competition extend beyond the network. Consumer migration can change how the costs of supplying electricity are recovered.
If a new entrant attracts large commercial and industrial consumers, the incumbent may lose revenue while retaining fixed network costs and commitments under existing power purchase agreements. Consumers who remain with the incumbent could face a greater share of costs previously recovered across a larger customer base.
The opposite concern also applies. An incumbent’s legacy costs should not become a means of shielding it from competition or making access to its network prohibitively expensive.
HERC considered objections that Eleven Power’s phased rollout could favour commercially attractive locations. However, HERC rejected the contention that phasing, by itself, established cherry-picking, taking account of the proposed investment and rollout plan, including the allocation of ₹304.37 crore to Nuh.
That finding relates to the plan submitted to HERC. The actual rollout, service performance and consumer migration will show how the licence translates into outcomes across the territory.
The unresolved legacy-cost problem
The Draft Electricity (Amendment) Bill, 2025 proposes network access subject to charges determined by the State Electricity Regulatory Commission. It also requires SERCs to establish a framework for multiple licensees in the same area. However, it does not appear to specify how fixed and other legacy costs under existing power purchase agreements should be allocated among licensees as consumers migrate.
The Draft Electricity (Amendment) Bill, 2022 had proposed that the power and associated costs under existing PPAs be shared among all distribution licensees operating in the same area, under arrangements specified by the State Commission. That mechanism does not appear to have been carried forward in the 2025 draft.
The allocation of regulatory assets, cross-subsidy obligations and stranded network costs also requires clarity under the applicable regulatory framework.
A new supplier may attract customers and reduce the incumbent’s revenue, while the incumbent continues to bear costs tied to its existing commitments. Shared networks could lower the cost of entry, but they would not resolve this underlying problem.
Competition may change who pays for the system without reducing the costs the system must recover.
Designing competition around the full cost
The Haryana licence puts an own-network model into operation, subject to implementation requirements and the announced legal challenge before the APTEL. The draft 2025 bill proposes a possible alternative for future competition. But neither approach guarantees better outcomes by itself.
Separate networks may be justified where they add capacity, resilience or service benefits. Shared networks may lower entry costs where existing infrastructure can accommodate another supplier. A combination of the two could be appropriate across different locations, provided access conditions, investment responsibilities and charges are clearly defined.
The regulatory task is to determine where new infrastructure adds value, where existing networks can support another supplier, and how the costs of maintaining the system should be allocated as consumers switch.
Network sharing changes the economics of entry, but it does not automatically resolve the economics of competition. A shared network still requires rules for access pricing, expansion, legacy power purchase commitments and the costs left behind when consumers move.
India’s distribution reform needs to address the full cost of supplying electricity, rather than the cost of wires alone. Regulators must decide which investments should be duplicated, which infrastructure can be shared and how the obligations attached to the existing system should be allocated.
A second distributor may create consumer choice. Whether that choice improves the economics of distribution will depend on the rules governing the network, the obligations attached to it and the costs that remain when consumers switch.
Should distribution competition depend on building a second network, or can shared infrastructure deliver better outcomes for consumers?
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