25 State Power Utilities Downgraded in Annual DISCOM Ratings

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The Ministry of Power has released its tenth annual integrated ratings for the state distribution companies (DISCOMs) for the financial year (FY) 2022.

Out of the 71 DISCOMs covered, six state DISCOMs received A+ ratings. They are Dakshin Gujarat Vij Company (DGVCL), Madhya Gujarat Vij Company (MGVCL), DNH Power Distribution Corporation (DNHPDCL), Uttar Gujarat Vij Company (UGVCL), Paschim Gujarat Vij Company (PGVCL), and Dakshin Haryana Bijli Vitran Nigam (DHBVNL). DNHPDCL is a union territory DISCOM.

Uttar Haryana Bijli Vitran Nigam (UHBVNL) received an A rating.

Compared to the previous ratings, 25 DISCOMs were downgraded, while only two improved their rankings. Assam Power Distribution Company and Tripura State Electricity Corporation were the utilities to improve their ratings.


The Eastern and Southern Power Distribution Companies of Andhra Pradesh and Meghalaya Power Distribution Company were downgraded to a new low rating of D.

India

The fiscal deficit in India’s power distribution sector exceeds ₹1 trillion (~$12.57 billion) on a cash-adjusted basis. The losses over FY19 and FY21 show that the deficit is widening. The absolute cash adjusted gap during the period increased by 10%. This rise was almost entirely due to the sector’s rising gap between the average cost of supply (ACS) and the average revenue realized (ARR). The gross input energy during the period remained almost constant.

The national ACS-ARR gap grew 11.4% from ₹0.83 (~$0.010) to ₹0.93 (~$0.012)/kWh. On average, India’s power distribution companies are making a loss of ₹0.93 (~$0.012)/kWh of input energy.

The ACS-ARR gap is the difference between the revenue and cost per kWh and is one of the critical performance parameters for power distribution companies. A wider gap means the DISCOMs are running losses.

Way out

Top-rated state DISCOMs of Gujarat and Haryana undertook innovative measures to improve their financial and operational performance. Best practices include implementing HVDS and underground cables, bifurcation of feeders based on loading, rerouting feeders, and replacing conductors to reduce technical losses.

These DISCOMs also instituted a dedicated team for data-based loss monitoring at substation and feeder-level, using digital channels for billing and payments and running special programs to improve awareness and engagement in rural areas.

The DISCOMs of Gujarat and Haryana can be good examples for other DISCOMs to follow.

DISCOM RatingsAndhra Pradesh

Andhra Pradesh DISCOMs Tenth Annual Integrated RatingThe two Andhra DISCOMs were downgraded to D for FY 2022. The Eastern Power Distribution Company of Andhra Pradesh (APEPDCL) was downgraded from C to D. The Southern Power Distribution Company of Andhra Pradesh (APSPDCL) was downgraded from B to D.

APEPDCL has a high cash-adjusted ACS-ARR gap of ₹1.22 (~$0.015)/kWh. The primary reason for its high ACS-ARR gap is low cash-adjusted revenue of 86% and high operational, and maintenance (O&M) costs of 19% of revenue. APEPDCL is performing well on power purchase costs as well as interest costs. APEPDCL’s cash-adjusted revenue, power purchase costs, and other expenses also improved from FY19 to FY21. However, its performance on O&M costs and interest costs declined during the period.

APSPDCL has a high cash-adjusted ACS-ARR gap of ₹1.49 (~$0.019)/kWh because of low cash-adjusted revenue at 80% of revenue and high O&M costs at 15% of the revenue. APSPDCL is performing well on power purchase and interest costs, and its performance on cash-adjusted revenue, power purchase costs, and O&M cost improved during FY19 – FY21. However, its performance on interest costs and other expenses declined.

Gujarat

Gujarat DISCOMs Tenth Annual Integrated RatingThe four Gujarat DISCOMs retained the same rating for FY 2022. The rating remained unchanged at A+ for the four DISCOMs.

Karnataka

Karnataka DISCOMs Tenth Annual Integrated RatingKarnataka DISCOMs saw the highest number of rating downgrades. Three out of five utilities downgraded to C- were: Bangalore Electricity Supply Company (BESCOM), Chamundeshwari Electricity Supply Corporation (CHESCOM), and Gulbarga Electricity Supply Company (GESCOM). The Hubli Electricity Supply Company (HESCOM) and Mangalore Electricity Supply Company (MESCOM) were downgraded from B+ to C.

BESCOM’s rating fell due to a high cash-adjusted ACS-ARR gap of ₹0.95 (~$0.012)/kWh. The high ACS-ARR gap results from increased power purchase costs at 88% of the revenue and low cash-adjusted revenue of 93%. This translates to ₹13.6 billion (~$45.26 million) in unrealized revenue. Its O&M cost is also relatively high. BESCOM’s performance on all ACS-ARR gap components except cash-adjusted revenue declined during FY19 – FY21.

MESCOM has a cash-adjusted ACS-ARR gap of ₹0.47 (~$0.0059)/kWh. It performed well on power purchase and interest costs, but its O&M expenses rank at the bottom. Its performance on all ACS-ARR gap components except cash-adjusted revenue declined during FY19 – FY21.

CHESCOM has a high cash-adjusted ACS-ARR gap of ₹0.95 (~$0.012)/ kWh. It performed well on power purchase costs and interest costs. However, its performance on O&M expenses lies in the bottom tertile.

GESCOM has a high cash-adjusted ACS-ARR gap of ₹1.19 (~$0.015)/kWh due to low cash-adjusted revenue of 90%, which translates to ₹5.1 billion ($64.11 million) in unrealized revenue. All components of its ACS–ARR gap except power purchase costs lie in the bottom tertile. Its performance on all ACS-ARR gap components except cash-adjusted revenue declined during FY19-FY21.

HESCOM has a cash-adjusted ACS-ARR gap of ₹0.81 (~$0.010)/kWh. Its performance on power purchase costs was average. However, its interest costs and O&M costs are high. HESCOM’s performance on power purchase costs, O&M costs, and interest costs dropped during FY19-FY21.

Madhya Pradesh

Madhya Pradesh DISCOMs Tenth Annual Integrated RatingThe Madhya Pradesh Paschim Kshetra Vidyut Vitran Company’s (MPPaKVVCL) rating was downgraded to C from B+ for FY 2022. The Madhya Pradesh Madhya Kshetra Vidyut Vitran Company (MPMaKVVCL) rating fell from C+ to C-. Madhya Pradesh Poorv Kshetra Vidyut Vitran Nigam’s (MPPoKVVCL) rating also dropped from C+ to C-.

MPPaKVVCL has a cash-adjusted ACS-ARR gap of ₹0.81 (~$0.010)/kWh resulting from a low cash-adjusted revenue of 85%, which translates to ₹24.52 billion (~$308.24 million) in unrealized revenue. MPPaKVVCL’s power purchase costs, O&M costs, and interest costs are moderately high. Its performance on all ACS-ARR gap components except power purchase costs improved during FY19-FY21.

MPMaKVVCL has a high cash-adjusted ACS-ARR gap of ₹1.56 (~$0.020)/kWh. The primary driver of its high ACS-ARR gap is low cash-adjusted revenue of 83%, which translates to ₹24.86 billion (~$312.51 million) in unrealized revenue. The cash-adjusted revenue is insufficient to meet the immediate power purchase expenses, O&M expenses, interest costs, or other expenses. MPMaKVVCL’s performance on all ACS-ARR gap components has improved from FY 2019 to FY 2021.

MPPoKVVCL has a high cash-adjusted ACS-ARR gap of ₹1.89 (~$0.024)/kWh. The primary reason of its high ACS-ARR gap is low cash-adjusted revenue of 83%, which translates to ₹20.03 billion (~$251.83 million) in unrealized revenue. MPPoKVVNL’s performance on all ACS-ARR gap components except power purchase costs improved during FY19-FY21.

Maharashtra

Maharashtra DISCOM Tenth Annual Integrated RatingThe Maharashtra State Electricity Distribution Company’s (MSEDCL) rating fell from A to C- for FY 2022.

MSEDCL has a high cash-adjusted ACS-ARR gap of ₹0.95 (~$0.012)/kWh. The primary driver of its high ACS-ARR gap is low cash-adjusted revenue of 89%, which translates to ₹87.14 billion (~$1.09 billion) in unrealized revenue. MSEDCL performed well on power purchase and O&M costs. MSEDCL’s performance on all ACS-ARR gap components declined during FY19-FY21.

Rajasthan

Rajasthan DISCOMs Tenth Annual Integrated RatingJaipur Vidyut Vitran Nigam (JVVNL) retained its C rating. Ajmer Vidyut Vitran Nigam (AVVNL) was downgraded from C+ to C. Jodhpur Vidyut Vitran Nigam (JDVVNL) was downgraded from C to C-.

JVVNL has a high cash-adjusted ACS-ARR gap of ₹0.94 (~$0.012/kWh because of low cash-adjusted revenue of 85%. This translates to ₹33.87 billion (~$425.84 million) in unrealized revenue. JVVNL performed well on power purchase as well as O&M costs. Its interest costs were high. JVVNL’s performance on cash-adjusted revenue, O&M expenses, and interest costs improved during FY19-FY21. However, its performance on power purchase costs and other expenses declined.

AVVNL’s high ACS-ARR gap of ₹0.66 (~$0.0083)/kWh is due to the below-average cash-adjusted revenue, which is around 88% of the revenue. This translates to ₹18.66 billion (~$234.6 million) in unrealized revenue. AVVNL performed well on power purchase and O&M costs, but interest costs were high. AVVNL’s performance on all components of the ACS-ARR gap improved during FY19-FY21.

JDVVNL’s high cash-adjusted ACS-ARR gap of ₹1.63 (~$0.020)/kWh is due to its low cash-adjusted revenue at 79% of the revenue. This translates to ₹38.65 billion (~$485.97 million) in unrealized revenue. JDVVNL performed well on power purchase costs and O&M costs. However, its performance on interest costs lies in the bottom tertile. Its performance on all ACS-ARR gap components except cash adjusted revenue and O&M expenses declined during FY19-FY21.

Tamil Nadu

Tamil Nadu DISCOM Tenth Annual Integrated RatingThe rating of the Tamil Nadu Generation and Distribution Corporation (TANGEDCO) was downgraded to C- from C.

TANGEDCO has a very high cash-adjusted ACS-ARR gap of ₹2 (~$0.025)/kWh – one of the highest in the sector. The primary driver of its high ACS-ARR gap is low cash-adjusted revenue at 90% of revenue booked. This is sufficient to cover its power purchase costs. Another reason for the high ACS-ARR gap at TANGEDCO is the tariffs that are not reflective of the cost since FY18 as the retail tariffs have not been revised. TANGEDCO’s performance on interest and O&M costs lies in the bottom tertile. Its performance on all ACS-ARR gap components except cash-adjusted revenue and power purchase costs declined during FY19-FY21.

Telangana

Telangana DISCOMs Tenth Annual Integrated RatingThe rating of the Southern Power Distribution Company of Telangana (TSNPDCL) was downgraded to B from C-, and the rating for Northern Power Distribution Company of Telangana (TSSPDCL) was downgraded to C+ from C-.

TSNPDCL’s high cash-adjusted ACS-ARR gap of ₹1.31 (~$0.016)/kWh is attributed to high power purchase and O&M costs, accounting for 110% of revenue. While TSNPDCL’s performance on cash-adjusted revenue and power purchase costs improved during FY19-FY21, its performance on O&M costs and interest costs declined.

TSSPDCL has a high cash-adjusted ACS-ARR gap of ₹1.63 (~$0.020)/kWh because of low cash-adjusted revenue and high power purchase costs. TSSPDCL’s O&M costs and interest costs are average. While its performance on cash-adjusted revenue and power purchase costs improved during FY19-FY21, its performance on O&M costs and interest costs declined during the period.

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