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The Electricity Act, 2003 was enacted on May 26, 2003 to consolidate the legal principles dealing with the creation, transmission, allocation, trading and exploiting electricity and normally for taking steps advantageous for the progression of electricity industry, encouraging competition, safeguarding interests of the customers and provide electricity to all areas, diminishing the electricity tax, guarantee transparent policies, subsidy strategies, encourage well-organized and environmentally benign strategies, establishment of Central Electricity Authority, Appellate Tribunal and Regulatory Commissions.

The Central Government is empowered under the Act to organize the national electricity strategies and taxation policies under the guidance of the State Government and concerned authority for the enhancement of power system on the basis of best possible exploitation of resources like natural gas, hydro sources of energy, coal, nuclear substances, renewable sources of energy and natural gas. The National Electricity Strategy and taxation policy shall be published by the Central Government at reasonable times. The authority shall organize National Electricity Plan according to the National Electricity Policy after calling suggestions and oppositions from licensees, public and the generating companies.

The Central Government shall also prepare National strategies for stand alone systems, non-conventional energy systems, electrification and local distribution in the rural areas. However, the State and the Central Government shall take effort in cooperation to provide facilities for electricity for all rural areas by means of rural electricity network and electrification of all domestic purposes. The generating company shall manage and preserve a generating station and shall take necessary steps for hydro-electric generation. The Act permits a person to create, maintain and manage a captive generating plant as well as dedicated transmission lines.

The generating companies shall constitute, manage and preserve the generating stations, sub-stations, tie-lines and dedicated transmission lines as per the provisions of the Act, rules or regulations provided therein. The generating company shall also provide electricity to the licensee and the consumer, present technical information to the Appropriate Commission and the Authority and unify the Central and State Transmission Utility for conduction of electricity that it generates. Only the authorized persons shall conduct electricity, allocate electricity and assume trading in electricity. The Appropriate Commission may issue license to any person on an application provided by him for transmitting electricity, allocate electricity and assume trade. The Act also provides for the procedure to be followed by the Appropriate Authority for issuing license according to certain general or specific conditions. The Appropriate Commission shall issue direction for regulating supply, allocation, utilization and application of electricity.

The Central Government may make separation of the country area wise and make amendments for the well-organized, reasonable, and integrated transmission and provide electricity and assist voluntary inter-connections and unification of facilities for inter-State and inter regional production and transmission of electricity. The Act provides for the constitution of Regional Load Despatch Centre and State Load Despatch Centre by the Central and the State Government respectively for the purpose of discharging responsibilities and functions provided under the Act. Any Government company shall be notified as the Central Transmission Utility by the Central Government but such company shall not employ in the business of production of electricity or commercial dealings in electricity. Additionally, the transmission licensees are entrusted with certain duties to construct, preserve and manage efficient, unified and cost-effective inter-state or intra-state transmission system, abide by the orders of the Regional and State Load Despatch Centre etc. The distribution licensee shall have the power to recover charges, recover expenditure, require security etc.

The Appropriate Commission shall prescribe the terms and stipulations for the fixation of tax and for doing so it shall be aided by the provisions provided under the Act. The Act provides for the establishment of Central Electricity Authority to perform the functions and responsibilities provided under the Act. The Central Government shall also constitute Central Electricity Regulatory Commission and State Electricity Regulatory Commission as prescribed to discharge functions under the Act. Another body established under the Act is the Appellate Tribunal which shall have the jurisdiction to hear appeals from the orders of the adjudicating officer and Appropriate Commission.

The Central Government, in exercise of the authority conferred under the Act, formulated the Electricity Rules, 2005. The Parliament also enacted Electricity (Amendment) Act on May 29, 2007 for modifying the provisions of the Electricity Act, 2003. But in spite of these legislations additional charges are being imposed on electricity consumers which are not affordable by normal persons and the people are also not taking adequate steps to prevent excessive use of electricity in the Country.