A convoluted tariff regime, under-recoveries, power theft, and unpaid subsidies are threatening the sustainability of the Delhi discoms Delhi Government is looking at various options to address twin problems facing its three power distribution companies (discoms) namely BSES Rajdhani Power Limited (BRPL), discom for South & West Delhi; BSES Yamuna Power Limited (BYPL) — discom for Central & East Delhi; and Tata Power Delhi Distribution Limited or TPDDL – discom for North Delhi. These are (i) “Regulatory Assets” or RAs of Rs 27,200 crore lying in the books of these discoms; (ii) an equally staggering amount of Rs 26,500 crore they owe to power generation and transmission companies viz. Indraprastha Power Generation Co. Ltd (IPGCL), Pragati Power Corporation Limited (PPCL)...
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Category: Tariff Policies & Subsidies
With power freebies, debt comes calling
The core dilemma persists: How to prevent debt while ensuring universal electricity access? This issue entails policy intricacies and power sector reforms In an interview, Union Power Minister RK Singh revealed he has been telling States that electricity is not free. “If any State wants to give free power to any category of people, they can go ahead and do so, but you have to pay for it”. Singh’s exhortation to the States assumes significance in the backdrop of a spate of announcements by the latter to give free electricity to certain consumers which affect the viability of power distribution companies or discoms (they buy power from generating companies or gencos and supply to the consumers). He argues “like any...
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AAP pushing discoms into crisis
The AAP government’s decision to supply subsidised power in Delhi is adversely affecting the financial health of discoms Since the financial year (FY) 2019-20, the AAP government in Delhi led by Arvind Kejriwal has been subsidising the distribution of electricity to household (HHs) consumers. Whereas, HHs consuming up to 200 units per month are fully exempt from paying any charges, those with consumption between 201-400 units per month get 50 per cent of the bill amount as a subsidy subject to a cap of Rs 800. During FY 2019-20, the government spent Rs 2405 crore on subsidizing these consumers. The expenditure increased to Rs 2940 crore during FY 2020-21. It further increased to Rs 3090 crore during FY 2021-22. In...
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State doles can put discoms at risk
Discoms will be profitable only when they are unshackled from state controls and electricity distribution is deregulated Even as the Central government is making all-out efforts to remove the financial distress of power distribution companies or discoms (situated at the core of the power supply chain, they procure electricity from power generating companies or gencos and distribute it to the consumers) and restore them to robust health, actions of the state governments undermine these efforts. The financial distress of discoms arises fundamentally due to their inability to generate enough revenue to pay for the electricity they buy. For over two decades, they have been incurring losses year after year. They have funded these losses by borrowings from banks and other...
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Delhi power tariff will only go North
Delhi’s electricity bill cannot be reduced unless reforms such as de-licensing of the distributors, breaking the monopoly of a few discoms is undertaken In its order dated June 22, 2023, the Delhi Electricity Regulatory Commission (DERC) has allowed the power distribution companies (discoms) in the national Capital viz. BSES Yamuna Power Limited (BYPL), BSES Rajdhani Power Limited (BRPL) and New Delhi Municipal Council (NDMC) to charge 9.42 per cent, 6.39 per cent and 2 per cent respectively in PPAC (Power Purchase Agreement Cost) on top of the prevailing rates of 22.18 per cent, 20.69 per cent and 28 per cent. Earlier on June 7, 2023, Tata Power Delhi Distribution Limited or TPDDL (earlier NDPL) was allowed an additional PPAC of...
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Mess in Delhi’s power distribution business
The problem can be eradicated only if the State Government liberates the three discoms from its controls and gives them the much-needed freedom In 2018, the Delhi Electricity Regulatory Commission (DERC) issued an order requiring the Delhi Government to give subsidies to its preferred consumers, primarily households, ‘directly’ by crediting it to their bank account using the direct benefit transfer (DBT) mechanism instead of routing it through the three power distribution companies (discoms) namely BSES Rajdhani Power Limited (BRPL), discom for South & West Delhi; BSES Yamuna Power Limited (BYPL) — discom for Central & East Delhi; and North Delhi Power Limited (NDPL) — discom for North Delhi which is the existing practice. The order was never implemented and is...
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Regulatory assets are elephant in the room
Regulatory assets are created when state electricity regulatory commissions accept that the tariffs don’t cover discoms’ purchase cost but don’t raise rates The Power Ministry has taken two decisions which have a bearing on viability of the beleaguered power distribution companies (discoms). It has (i) warned state electricity regulatory commissions (SERCs) against creating a pile of ‘regulatory assets’; and (ii) proposed a pool of efficient thermal power units more than 25 years old to act as a balancing source for the increasing share of renewable energy in the electricity grid. Mostly owned and controlled by state governments, discoms purchase power from public sector undertakings (PSUs) such as the National Thermal Power Corporation (NTPC) and independent power producers (IPPs) under long-term...
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Unyielding Opposition derails power reforms
Power reforms have taken the backseat and promises of reforms and competition have been given up by the Centre The Electricity (Amendment) Bill, 2022 proposing amendments to the Electricity Act, 2003, with the stated objective of transforming the power sector, was introduced in Lok Sabha on August 8, 2022. Facing stiff resistance from the opposition parties, it had to be referred to a Standing Committee. The Opposition parties especially those ruling the State governments opposed the amendments on two major grounds: (i) these would result in over-centralization of the power distribution (Under the Constitution, distribution is a State subject even as generation and transmission (G&T) are under the purview of the Union Government]; (ii) these curtail powers of the States...
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Electricity Bill: Where is the spark?
After dilution of its key provisions, the Electricity Bill, 2021, falls short of reform objectives In the draft Electricity (Amendment) Bill or EAB, 2021, proposing amendments to the Electricity Act, 2003 introduced in February last year, the Narendra Modi-led NDA Government intended to bring about two transformative reforms — de-licensing of the electricity distribution business and direct benefit transfer (DBT) of subsidy. Delicensing of the distribution business aims to bring in competition, and give the consumer power to choose suppliers (or “open access”). Even as the Union ministry of power prepares to table a Bill in the upcoming Monsoon session (2022) of Parliament, both the provisions have been dropped. Under the extant arrangements, an overwhelming share of power generated by public...
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Power subsidy: Arvind Kejriwal’s volte-face
To promote competition, private firms should be allowed in the distribution business Arvind Kejriwal, chief minister of Delhi, has come up with a proposition: ‘From October 1, 2022, electricity subsidy will be given only to those households who ask for it’. This is bizzare. If the head of a state takes an in-principle decision to give subsidy to anyone who wanted it, as a natural response, almost everyone will say ‘Yes’. But, over 75% of the households are already enjoying a subsidy. So, why ask them? There is something more than what meets the eye. At present, households (HHs) consuming up to 200 units per month are fully exempt from paying any charges. Their number is around three million. For...
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