Positive Results

PFC report highlights measures that helped reduce AT&C losses

The power distribution segment is among the weakest links in the power sector. In an effort to improve the health of distribution utilities and promote best practices, the Power Finance Corporation (PFC) recently released the findings of a study on the operational performance of 10 discoms that have seen a reduction in aggregate technical and commercial (AT&C) losses in the past five years.

The 10 utilities selected by PFC for this study were Eastern Power Distribution Company of Andhra Pradesh Limited (APEPDCL), Uttar Gujarat Vij Company Limited (UGVCL), Dakshin Gujarat Vij Company Limited (DGVCL), Southern Power Distribution Company of Andhra Pradesh Limited (APSPDCL), Maharashtra State Electricity Distribution Company Limited (MSEDCL), Mangalore Electricity Supply Company Limited (MESCOM), Uttarakhand Power Corporation Limited (UPCL), Hubli Electricity Supply Company Limited (HESCOM), Madhya Pradesh Paschim Kshetra Vidyut Vitaran Company Limited (MPPKVVCL), and West Bengal State Electricity Distribution Company Limited (WBSEDCL).

A summary of the background for the report and its key findings…

Background for the report

The report states that, “Although there is no prevalent competition in the power distribution segment, it has long been facing questions about financial sustainability on account of below cost tariffs for different consumer groups, supply of unmetered and free electricity to agriculture, and high AT&C losses. These have affected the finances of state utilities, lowering their ability to attract private investment in the sector, which in turn has resulted in heavy dependence on the government for both investment and working capital.”

As per PFC’s report on the performance of state power utilities for 2013-14, aggregate losses (without accounting for subsidy) for all the utilities increased from Rs 667.43 billion in 2009-10 to Rs 1,066.59 billion in 2012-13, but marginally decreased to Rs 985.95 billion in 2013-14.

In October 2015, the Parliamentary Standing Committee on Energy discussed the measures to check commercial losses in a meeting and advised to carry out an operational study of 10 selected discoms where AT&C losses have reduced in the past five years. A team of PFC officers visited all the 10 utilities to understand the various measures adopted by them for bringing down AT&C losses.

The data for the study was collected from the discoms and was supplemented with the minutes of the meetings with their key officials. Other sources of data include audited accounts, PFC’s reports on the performance of State power utilities, websites of the utilities, and the State Distribution Utilities Third Annual Integrated Ratings.

The financial analysis of discoms and study of their AT&C loss reduction trajectory was done by PFC for the past five years from 2009-10 to 2013-14 as the comprehensive report on the performance of state power utilities, including the AT&C loss computation of all utilities for 2014-15, is yet to be finalised by PFC.

Key findings and recommendations

As per the findings, all 10 discoms made adequate investments and undertook the necessary measures for strengthening the distribution network, meeting the electricity demand and reducing the AT&C losses. These discoms also took measures to improve customer satisfaction.

By and large, some general measures were adopted by all the utilities to reduce losses and improve customer satisfaction. However, some discoms undertook a few unique measures, notes the report. It also identifies the following measures that can be adopted right away by other discoms to reduce overall AT&C losses:

  • Segregation of agricultural load from the existing rural feeders.
  • High voltage distribution system/ aerial-bunched cable in theft-prone areas.
  • Augmentation of conductors/Segregation of lines where load flow is high, and drawal of the three-phase line against the single phase in order to redistribute load and reduce losses.
  • Increase in the size of conductors and improvement in high tension (HT)-low tension ratio (LT) to reduce losses.
  • Augmentation/New installations against overloaded distribution transformers (DTs).
  • Use of three/five-star Bureau of Energy Efficiency-rated DTs and energy efficient pump sets.
  • Installation of capacitors in substations and high consumption consumers, including agricultural services, to control reactive power drawls and maintain a good voltage profile.
  • Regular load balancing/load flow analysis of substations/feeders.
  • Demand improvement by periodic checking of consumer load.
  • Conversion of Single-phase two-wire LT network into single phase three-wire network and conversion of three phase four wire LT network into three phase five wire network.
  • Regularisation of unauthorised/ghost consumers through special drive camps.
  • Conduct feeder-wise regular energy audit across the discom and take appropriate measures (technical/ administrative) in high-loss feeders.
  • Implementation of the feeder franchise model for improvement in billing and revenue collection as well as maintenance activities in rural areas.
  • Discoms to achieve 100 per cent consumer metering, including automated meter reading for HT consumers, and replacement of all electromechanical meters with tamper-proof static meters.
  • IT enablement of billing and collection throughout the discoms and use of photo meter billing for minimising billing complaints.
  • To introduce various payment channels such as online payment, kiosks, any-time payment machines, mobile app, etc. for ease of consumers.
  • Dedicated cell for high-value consumers and monitoring.
  • Strengthening of the vigilance enforcement mechanism to deal with electricity theft.
  • Consumer awareness camps on the use of energy efficient light-emitting diode bulbs as well as major load during off-peak hours.
  • Appropriate incentive mechanism for feeder managers for reduction of losses as well as an incentive mechanism for informers of electricity theft.

Conclusion

Commercial viability of discoms is critical not only to ensure that they are able to support the investment required in upgrading their networks, bring down losses and enable universal access, but also to make them bankable entities to catalyse and support investments in related segments such as fuels, generation and transmission.

Continuous financial and operational studies of discoms have thus become extremely crucial. These studies provide a comprehensive coverage of individual entities and are extremely helpful for discoms that are reeling from continuous losses.  The remedial measures taken by these 10 discoms along with the key recommendations of PFC will be a guiding light for the remaining discoms and help improve the overall efficiency of the power distribution system.

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