Subsidy - Cross-Subsidy:
The Act makes it mandatory for State Governments to gives subsidy in advance to the SERC, if it is to be provided to the consumers on its direction. If subsidy is not provided in advance, the direction of the State Government is not operative. Phasing out cross-subsidies in tariff has to be undertaken in a progressive manner.
Within a non-discriminatory open access of transmission and distribution systems, there will be a payment of surcharge till cross-subsidies are eliminated.
Option is vested along with State Governments to continue within SEBs that will then be treated as Distribution Licensees and the STU owning the generating assets. There is a provision for one-year transition to existing licensees. State Governments are empowered to defer application of the Act for a maximum period of six months.
b.) Cross Holdings
Gencos are free to undertake Distribution Business and Distribution Licensees are free to undertake Generation Business.