All DISCOMs Asked to Comply with Energy Conservation Act to Cut Electricity Losses

The Ministry of Power (MoP) issued a notification to cover all distribution companies (DISCOMs) under the purview of the Energy Conservation (EC) Act, 2001, to help reduce electricity losses and bring transparency.

The Ministry has prepared the notification in consultation with the Bureau of Energy Efficiency, a statutory body under the Ministry of Power. According to the new notification, all entities having issued distribution licenses under the Electricity Act, 2003, are notified as designated consumers. Earlier, only DISCOMs with annual energy losses of 1,000 Million Units (MU) or above were covered as designated consumers.

As per the new notification, the number of DISCOMs covered under the Energy Conservation Act will increase from 44 to 102. These DISCOMs will be governed under various provisions including, energy accounting and auditing, the appointment of an energy manager, identification of energy losses category-wise, and implementation of energy conservation and efficiency measures.

“This decision will facilitate energy accounting and auditing as a mandatory activity for all the DISCOMs leading to the actions towards reducing losses and increase the profitability of DISCOMs,” said the press statement.

MoP stated that the new amendment would help distribution companies monitor their performance and bring in transparency in the sector. It added that the amendment would help improve the financial state of DISCOMs and assist them in developing projects that can reduce their electricity losses.

According to its press statement, the government will collect and monitor the quarterly data of these DISCOMs to suggest various measures to enhance efficiency and reduce energy losses. The move is expected to be more effective if it is extended to the level of end consumers.

According to the Ministry of Power’s payment ratification and analysis portal PRAAPTI, DISCOMs owed over ₹106.7 billion (~$1.43 billion) to renewable energy generators (excluding disputed amounts) in overdue payments across 460 pending invoices at the end of September. This was a slight decline from August when DISCOMs owed renewable generators ₹109.08 billion (~$1.49 billion) in overdue payments spread across 497 invoices.

The MoP also proposed Late Payment Surcharge Rules 2020 after noticing the extremely high rate of late payment surcharges prevailing in the sector. The ministry has noted that the high rates were determined at a time when the cost of borrowing was also high. But now that the rates of interest have reduced, it found the need to reduce the late payment surcharge to reflect the current interest rates. The rules said that the surcharge on the outstanding payment would increase by 50 basis points each month after the first month’s expiry, subject to a maximum of the applicable bank rate plus 200 basis points.