Indian state DISCOMs debts lower to pre-UDAY level – CRISIL

CRISIL, a global analytics company has come out with a report which is an analysis on DISCOMs of 15 states (Andhra Pradesh, Gujarat, Karnataka, Madhya Pradesh, Maharashtra, Rajasthan, Andhra Pradesh) being some. According to the report the aggregate external debt of these state-owned discoms is set to increase to pre-Ujwal level Discom Assurance Yojana (UDAY) levels of Rs. 2.6 Lakh crores by the end of this financial year.

Since most states have a limited room for tax reduction, any type of continuous support to their discoms might get difficult. As a result, the discoms will have to become commercially viable through well-thought tariff hikes and a material reduction in AT & C losses. As per the report, these states account for approximately 85% of the losses currently.

As per the Memorandum of Understanding (MoU) signed by the states under the UDAY scheme in FY 2016, the discoms were to initiate structural reforms in the form of AT& C losses reduction by 900 basis points (bps) to approximately 15% in FY 2019. In turn, the state governments were to let go off three to four months of discom debt further reducing their interest cost burden.

Since the initiation of the scheme, the discoms enjoyed the benefit of debt reduction, but the structural reforms happened at 400 bps till December 2018 from pre-UDAY levels and average tariff increase happened ~3% per annum.

Any further improvement in the operations may be difficult for the discoms since now the focus is on new rural connections which comes with an inadequate tariff hike, in turn, increasing the losses.

Further, the funding needs for budgeted capital expenditure, and external debt of the discoms would reach to ~ 2.6 Lakh crores by the end of FY 2020.

Currently out of the 15 states, nine states are already violating the Fiscal Responsibility and Budget Management Act Bound of 25% debt and gross state product ratio. This makes the structural reforms of discoms a critical need in the form of cost-effective tariffs and better infrastructure for the reduction in AT&C losses.

Kerala Finalizes Solar Rooftop Policy

Kerala State Electricity Regulatory Commission (KSERC) through an order on 10th June 2014, has finalized its policy for solar rooftop systems. The policy is named Grid Interactive Distributed Solar Energy Systems.

The policy is aimed at promoting solar power in the state by involving more generators. The policy is applicable for all the distribution licensees in the state and to all consumer availing electricity at voltage levels below 11kV, and shall come into force from the date of publication in the official gazette.

According to the regulation, any consumer may install the solar energy system owned by him or by other third party, provided that the installed energy system should fall under the rated limits, as defined under the regulation, and should comply with the systems of the distribution licensee.

The rated capacity of the installed system shall not be less than 1KWp (Kilo Watt peak) and shall not exceed 1MWp (Mega Watt peak).

The output of the solar system shall comply with provisions of the Kerala Electricity Supply Code 2014, which is defined as –

Sl. No. Type of connection Supply Voltage Output specifications
1 Low Tension Single phase 240 V 240 V, 50 Hertz
2 Low Tension Three phase 415 V 415 V, 50 Hertz
3 High Tension 11000 V 11000 V, 50 Hertz

Banking facility: The solar energy systems installed under this regulation are eligible for the banking facility and shall be done on the basis of the readings taken for the billing period applicable to him.

Metering arrangements: The net meters shall be installed at the interconnection point of the consumer with the network of the distribution licensees, and the solar meters shall be installed at the delivery point of the solar systems to measure the energy generated. The commercial settlement shall be done on the basis of readings of this meters.

The eligible consumers have the right to avail open access for wheeling the excess energy generated to one or more premises owned by him within the area of supply of the distribution licensee. Such right for wheeling access energy shall be available only if the wheeled energy to other premises exceeds 500 units in month and the consumer will be able to avail only 95% of the total energy wheeled, while remaining 5% will be adjusted towards distribution losses.

Accounting and settlement – The accounting of the energy generated, consumed and injected by the consumer shall be done on the basis of the readings taken by the meters, for the period applicable to him.

Solar RPO – The energy generated from the solar energy systems of any consumer shall be accounted towards RPO if the consumer is an obligated entity, and if not, then such energy shall be accounted towards RPO of the distribution licensee.

Banking and Cross Subsidy Charge – The eligible consumers generating solar power under this regulation, shall are exempted from banking and cross subsidy surcharge.

The details of the order can be found here

For more details on net metering, click here


Maharashtra revises procedures for Wind Open Access

Keys points on Revised Procedure for Wind Open Access in Maharashtra:

1.i) For wind open access application process the documents required would be:

  • Last 3 months energy bills
  • Consent letter from the wind generator
  • Last 3 months generation credit note
  • Declaration regarding installation of SEM at both ends
  • Last open access permission of consumer / generator
  • OA through trader, copy of valid Trading License and MoU between the trader & consumer/generator
  • For Captive use, Chartered Accountant’s certificate regarding 100% ownership of the wind power project or Equity share holding and undertaking regarding more than 51 % self-consumption

ii) Complete open access application to be submitted well in advance i.e. preferably 30 days prior to the date of commencement of open access.

iii) If an open access consumer is situated in the License area of other utility / Distribution Licensee then copy of NOC / open access permission issued by the concerned Distribution Licensee shall be submitted along with the open access application.

iv) If an open access consumer fails to achieve the Maximum Demand equal to or greater than eighty (80) per cent of the threshold level, the open access permission will be cancelled and further he shall be liable to pay, to MSEDCL, a penalty equal to two times the wheeling charges for the financial year or part thereof for which he had failed to achieve such Maximum Demand

v) If the contract demand of the open access consumer is in the range of 1000 KVA– 1500 KVA then Renewal of Open Access Permission shall be subject to use of Maximum Demand equal to or greater than eighty (80) per cent of the threshold level during previous open access period

2)Eligibility conditions:

  • An open access consumer can avail power from a Generating Company only, sourcing power from more than one / multiple generating companies will not be processed
  • Declaration in advance by OA consumer for sourcing power from other sources or generating company.
  • Open Access permission will not be granted to the consumers availing single point supply and sub distributing it further to multiple consumers. Such consumers are required to apply for Distribution Franchisee through MoU route as per relevant MERC & APTEL orders
  • The open access consumer will be entitled to seek open access for sourcing 100% power generated from a wind power project.

 3) Metering:

 Installation of Special Energy Meter (SEM) at both ends i.e. at generation end and at consumption end of wind energy shall be mandatory to seek open access.

4) Energy Accounting & Billing:

  • Joint Meter Reading (JMR), the monthly Generation Credit Notes (GCN) will be issued by the field office in due course of time
  • The open access consumer/ generator shall arrange to pay the requisite open access charges (Wheeling charges, transmission charges, operating charges, charges for import of energy & KVARH charges) and collect the monthly GCN from field office regularly
  • Late fees of Rs. 5000/- will be recovered if the GCN is collected one month later than JMR. Similarly, late fees of Rs. 6000/- will be applicable for issuance of GCN after 2 months from JMR.
  • The GCN shall not be issued after 3 months from the Joint Meter Reading and the energy corresponding to the GCN shall be treated as lapsed
  • The field office, where the open access consumer is situated, will give corresponding TOD time slot – wise credit adjustment in the monthly energy bills of the open access consumer.
  • Open access consumer has to pay CSS charges for third party sale, CSS not applicable for captive.

5) Banking:

MSEDCL, for the time being, has decided to provide the banking facility in part i.e. the wind generation units will be allowed to get carried forward for getting adjusted in next energy bills if could not be adjusted in same month till the end of that financial year, but the surplus units, if any, at the end of financial year will not be purchased by MSEDCL.

6) Change of option not permitted during validity period:

OA consumer will be permitted only to change the option from open access to Sale to MSEDCL during the validity period of open access permission, no other option allowed.

7) Wind energy injected into the grid during the intervening period for which OA permission could not be granted due to late submission of OA application or change of option by wind open access generator from open access to Sale to MSEDCL during the validity period of open access permission, will be purchased by MSEDCL at MERC tariff rate from the wind generators.

  • Gr I: 10 % less than that of GR.II MERC rate of Rs. 2.52 per unit
  • Gr II: Rs. 2.52 per unit.
  • Gr III: As per MERC order dated 24.11.2003
  • Gr IV: Will not be purchased, wind energy will be treated as lapse.

Contributed by – Nishesh Pandit

Buying power from Exchanges economically viable for Captive Plants

According to an article in Business Standard, captive power plants have resorted to buying power from power exchanges than generating by themselves. This behavioural change  of power procurement has been attributed to two main reasons :

1. Unavailability of domestic coal.

2. Low spot market prices discovered at exchanges owing to fall in demand.

Energy intensive industries – Cement, fertilizer etc. dependent on captive power production, have been using these low prices to their advantage.

The article has quoted a case of RSWM company of LNJ Bhilwara Group. The company generates power at an average cost of 4.2 Rs per unit (including coal cost and transmission losses). Due to present fall in spot market electricity prices, the company has been buying power at a cheaper rate of around Rs. 3 per unit. The company has also increased monthly power procurement from exchanges this fiscal.

As per IEX, the greater participation from captive consumers at exchanges has triggered higher volumes, greater competition and robust price discovery in short-term power market.

South Grid successfully synchronized with National Grid

According to a Press Release from the Ministry of Power on the eve of first day of new year 2014, the much awaited grid synchronization of south grid with National Grid has been successfully accomplished. This marks a major milestone in the history of Power Industry. With this. the long cherished dream of “One Nation One Grid”  is now a reality.

With a single large grid operational in India, accommodating a huge power capacity of 232 GW, India’s national grid is one of the largest grid in the world. This step will largely benefit a power starved condition of the southern grid, which currently had inability to transmit surplus power to the national grid or draw power from national grid in case of power deficiency. A single grid bestows grid managers with even greater responsibility of efficient grid management. Lapses that caused grid failures in July last year, will now have fatal consequences, affecting the entire nation at once. On a brighter side, such synchronization, will further open up the power sector in India. The price discovery in short-term electricity markets will now witness a downward trend in southern region.

In achieving such a milestone, efforts of BHEL Limited are laudable, as it completed work on 765kV Raichur-Sholapur transmission link, months before schedule. A coverage by The Hindu, on this, can be read here.

In October 2013, CEA, through a letter had urged CERC to expeditiously switch to a new-narrowed frequency band, contemplating gird synchronization work to be finished in beginning of the new calender year. Our coverage on the same can be read here.

Relevant media reports can be read as below:

The Hindu

Times of India

Live Mint

Power Bills to shoot up in Kerala, Karnataka and HP

After a recent power tariff hike by the states of Madhya Pradesh and Andhra Pradesh, it was now time for ERCs of Kerala, Karnataka and HP to come to the rescue of their respective DISCOMs. Time has come when poor financial condition of DISCOMs is getting passed to consumers by increased tariff rates. Kerala and Karnataka increased power tariffs with effect from 1st May 2013 whereas Himachal Pradesh put the same into effect from 1st April 2013.

In Kerala, there has been no hike in tariffs for domestic consumers (using less than 40 units in a month) and agriculture segment. Also in most cases the fixed charges have been kept untouched. For domestic consumers (using more than 40 units in a month) the average hike in tariff is to the tune of 6.94 % (considering slabs as per table below), the table below shows the slab-wise tariff for domestic consumers:

Similarly, for LT Commercial consumers with average tariff hike is 6.89% as can be seen in the table:

For LT Industrial consumers, the approved tariff is Rs. 4.7 per unit; compared to existing tariff of Rs. 4.25 per unit, i.e. an increase 10.58 % whereas for HT Industrial the percentage increase is around 12.5 % (Approved is 4.60 Rs. /unit).

In Karnataka, May 5th 2013 marked the conclusion of elections in the state and an exit poll result predicts change of government. Just after the elections the power consumers were given a power shock. The tariff was hiked by 20 paise for domestic consumers and by 25 paise for commercial consumers. A summary of the retail tariff revision by KERC was published on the website and can be accessed by clicking here.

Himachal Pradesh also revised its power tariff and the highest increase around 16 % was mandated for domestic consumer category. HPERC asserted that though average cost of power purchase per unit is almost same as last year because hydel stations are cheaper, major cost is power purchase and employee cost. Details of approved tariff are as in table below:

Category 2012-13 Tariff 2013-14 Tariff %age increase
Domestic 3.69 4.28 15.99%
Industry 4.76 5.50 15.47%
Street light 4.64 5.05 8.83%
Commercial 5.21 5.95 14.20%
Water Pumping 4.45 5.05 13.48%
Average 4.59 5.20 13.29%

Links to relevant media coverage:

Karnataka extends banking facility to Solar Projects

Hon’ble KERC has come up with an order dated 22nd March 2013 for introduction of banking facility to Solar Power Projects in Karnataka. KERC had previously invited comments /suggestions on the issue latest by 25th October 2012.

The Commission has asserted that solar power indeed is infirm in nature and is therefore comparable to those of mini-hydel and wind. In view of the same, the commission has agreed and extended banking facility, with banking charges of 2%, to solar projects on the same terms and conditions as prevalent and applicable to mini hydel and wind generators.

MESCOM and CESC though had a contradictory opinion on the same. CESC submitted that since it has not met its RPO it is not in favour of the motion, while MESCOM feared that it will not be able to meet its RPO as generators will then opt for Open Access. Moreover extending banking along with free wheeling will burden these DISCOMs further.

Referring to an order of Hon’ble ATE dated 22.01.2009, KERC avers that Solar Power Generators will have to bear the difference between the UI charges prevalent at the time of injection and UI charges prevalent at the time of drawal of power along with fixed banking charges of 2%.

Wheeling charges as of now is zero for solar projects and KERC ordered that the same would continue until further notifications.

In our opinion, since zero wheeling charges will be regarded as promotional, solar generators will have to face some glitches as far as their eligibility to explore the REC Market is concerned. Also since solar generators may now favour opting open access, to offset their renewable purchase obligations DISCOMs will inevitably have to buy RECs from the market rather than signing PPA’s with solar generators.

The order can be found here.

Call for Reform of Discom’s Gathering Steam

Business Standard wrote on the topic of Power Discom reforms – the second time in two days. The important points raised by the Shunglu Committee are:

  • Huge Losses at the Discom’s:

During the five years (from 2006 to 2010), losses were Rs 1,79,000 crore before subsidy and Rs 82,000 crore after subsidy. These losses were primarily because of the gap of about 0.60/kwh between average cost and average revenue

creation of a Special Purpose Vehicle that would buy the bank loans of discoms, subject to various conditions

  • Creation of a new post of ‘Power Utilities Chief Executive’

power utility’s chief executive should be appointed through an all India selection process

Try India’s first RPO calculator here

Shunglu Committee Proposes An SPV to Buy Bad Debts of Discoms

A recent article in Business Standards mentioned that an SPV is being proposed to buy the bad debts of Discom’s. The fact that Discom’s are essentially bankrupt has been known for a long time. The good news that is there is increasing focus on this issue now. (See past articles – Pramod Deo, Chairman, CERC Talks About Open Access and the State of Electricity Markets; States Need to do More to Provide Open Access)

The REC market is also closely tied to the fate of Discom’s and how their financial problems are resolved. Eventually, Discom’s will be the biggest participants in the REC markets, and how do you ask a bankrupt company to pay more? This is also the reason why open access and other reforms are hardly implemented.

The article mentions that the SPV model will only be provided to those Discom’s that also undertake reforms:

However, buying out the loans of discoms from banks would depend on various conditions, including state governments’ agreements for a regular tariff increase, a plan to meet technical and operational performance parameters, an agreement between the state government and banks regarding interest rates, the period of repayment and the amount of repayment.

The discoms would also be asked to undertake capital expenditure, since this would generate additional income, as a precondition to set up the SPV. In case of non-compliance of the terms of the SPV, state governments would have to give an undertaking to RBI that the amount defaulted would be debited to the state government accounts with RBI, the report added.

Very sensible suggestions. Lets hope we move to a point of implementing these soon, and start sorting out the mess.


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Open Access in All States May Finally Become a Reality

An article in Business Standard mentioned that the Ministry of Power has issued an order to all state governments, power regulators and distribution utilities to implement the open access provisions of the Electricity Act, 2003.

The article further states that “the power ministry had taken the law ministry’s advice before issuing the new instruction on Tuesday”.


The law and judiciary department said “The provisions of section 42 (3) of the Electricity Act provides that a person requiring supply for electricity has to give notice. If the consumer intends to use the network of the distribution companies, he has to give notice and upon such notice to a discom, it is duty-bound to provide non-discriminatory open access to its network. Section 42 (3) cannot be construed to mean that giving of a notice is a pre-condition for the implementation of open access.”

It said the requirement of a notice was only to communicate the open access consumer’s intention of using the discom’s network in line with the relevant regulations and not to seek its permission for doing so.

The coverage in DNA on the same topic also mentioned the below:

“All 1 megawatt (mw) and above consumers are deemed to be open access consumers and that the regulator has no jurisdiction over fixing the energy charges for them,” the Ministry of Law said in a note to the Ministry of Power.


This interpretation is welcome, and much needed. The current practice, which provides discretion to the state utilities to provide open access, or not is a major roadblock. It has done nothing more than give additional discretion in a system that already dosen’t work.

See previous coverage on the topic of Open Access:


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