Streamlining distribution – the Hindu BusinessLine


The electricity bill (amendment), which proposes to indict the electricity distribution sector to promote competition, is in principle well. Competition can improve the accountability and the quality of the offer to the consumer. But this must be accompanied by an overhaul of the economic model of discotheques, taking into account the emergence of open access. It is about reforming the finances of the discom and aligning them with the realities of emerging markets so that all stakeholders benefit. The commercial consumer is already exercising a choice through open access, which is estimated to be around 12% of the electricity traded, a figure that increases with the growth of power exchanges. But the point is, the home user also deserves affordable, high-quality power.

As ruling secretary Alok Kumar noted in a recent interview with this newspaper, states are responsible for the mess the discoms find themselves in, with their losses accumulated at around ₹ 4.5 lakh crore. They postponed tariff revisions and announced free electricity, not to mention the fact that farmers do not benefit when nightclubs are deprived of the resources to provide quality electricity. Two other factors have hampered the viability of nightclubs: the cost of purchasing electricity, which accounts for over 70% of the total cost of nightclubs, and the loss of large commercial consumers with the advent of open access and cheap renewable energy. The first arose mainly as a result of biased PPAs for thermal projects that occurred between 2007 and 2017, as pointed out by Prayas Energy Group and other analysts, who overestimated capacity utilization and underestimated fuel costs. The flight of large consumers has upset the cost subsidy model. Discoms should explore the possibility of getting out of bleeding PPAs by paying a liquidation fee. Open-access consumers should be asked to lock down their outing options for at least a year, so discos and vendors can plan ahead. The Discoms must get started in the management of the threads. The integrity of the grid is of great importance in the context of renewable energies. Rural subsidy costs will decrease as utility solar power plants are installed at the substation level. State discoms can be the main supplier to domestic consumers and industrial and agricultural users who will need them as a backup. In the absence of storage technologies, basic thermal will be the mainstay.

While undertaking dcom reforms, it is important to realize that the transmission and USO issues in liberalizing dcom operations can be managed. Building on the experience of Mumbai, which has two or more suppliers in the same sourcing areas, it is possible to deploy this model, with a company’s consumer purchasing power and sourcing through the sons of another, by paying the latter a cross – subsidy and transport costs. But launching the Mumbai model across the country will not be easy. Infra and maintenance costs must be shared fairly. Still, the future is bright.


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