Govt notifies rules for financial sustainability of power Discoms


New Delhi: The government has implemented additional measures to improve distribution companies’ financial health by expediting the processes of accounting, reporting, billing, and payment of state subsidies to distribution corporations.

The measures are in response to the need for a framework for sustainability in the sector, as well as the fact that inaccurate and non-transparent accounting, as well as non-payment or delayed payment of subsidies announced by the states, are some of the causes of Discoms’ financial crisis. On July 26, the Ministry of Power made the rules public.

The Rules require the distribution licensee to submit a quarterly report within thirty days of the end date of the respective quarter, and the State Commission to evaluate the report and release it within thirty days after the filing of the quarterly report.

The findings will include, among other things, the raising of subsidy demands based on accounts of the energy consumed by the subsidised categories, the subsidy payable to these categories as announced by the state government, and the actual payment of subsidy in accordance with Section 65 of the Act.

The State Commission shall take appropriate action against those responsible for non-compliance with the provisions of the Act if subsidy accounting and the raising of bills for subsidy are not found to be in accordance with the Act or Rules or Regulations issued there under.

To define a definite and reasonable goal for reducing aggregate technical and commercial (AT&C) loss, the framework for sustainability requires that the AT&C loss reduction trajectory be approved by the State Commissions for tariff determination in accordance with the trajectory agreed by the respective State Governments and approved by the Central Government under any national scheme or programme, or otherwise.

The State Commission must define the trajectory for both collection and billing efficiency for distribution licensees.

To guarantee that the Distribution licensee recovers all expenses involved in distributing electricity, it has been mandated that all sensible costs of power acquisition be taken into consideration when establishing the tariff. Similarly, subject to the fulfilment of stipulated conditions, all reasonable costs expended by the distribution licensee for creating assets for the development and maintenance of the distribution system would be accounted for.

It is also stated that any gains or losses incurred by the distribution licensee as a result of divergence from the approved AT&C loss reduction trajectory will be shared by the distribution licensee and consumers.

The Central Electricity Authority has been tasked with developing rules for the operation and maintenance of the distribution system.

A reasonable return on equity (RoE) is one of the most important variables required to ensure industry investment. The Rule states that the State Commission’s RoE would be matched with the RoE set by the CERC in its Tariff Regulations for the relevant period, with appropriate modifications to account for the risks associated in the distribution business.


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