The Telangana government has issued the modalities for the creation of the third distribution company (DISCOM), which will be operational from April 1, 2026.

In November 2025, the Telangana Cabinet approved the creation of the third electricity DISCOM.

The third DISCOM  will be incorporated under the provisions of the Electricity Act 2003, which permits two or more licensees to operate in the same area.

It must meet the creditworthiness mentioned under the “Distribution of Electricity License (Additional requirements of Capital Adequacy, Creditworthiness and Code of Conduct) Rules, 2005. The Telangana Electricity Regulatory Commission (TNERC) will determine the capital investment required for the distribution network after considering the size of the supply area and the service obligations.

The new DISCOM must assure TNERC that it (including promoters) can arrange for at least 30% of the project cost as equity based on the net worth and generation of internal resources of its business, including those of the promoters, in the preceding three years.

DISCOM Jurisdiction

The third new utility’s jurisdiction will cover the entirety of Telangana.

It will be responsible for supplying power to consumer categories such as agriculture, beneficiaries of composite protected water supply (CPWS)/Mission Bhagiratha, the Hyderabad Metropolitan Water Supply and Sewerage Board (HMWSSB), lift irrigation programs, and municipal water connections with separate distribution transformers (LT VI-B) programs.

It will also purchase power in accordance with the allocated share under the power purchase agreement.

The new utility’s responsibilities will include onboarding new agricultural connections, operating and maintaining assets, and accounting for energy consumption through distribution transformer (DTR) metering and consumer metering for lift irrigation, CPWS, and Hyderabad Metropolitan Water Supply (HMWS).

The incumbent utilities will supply power up to the interface point and operate and maintain upstream assets.

Transfer of Assets

An estimated ₹49.3 billion (~$546.16 million) worth of assets will be transferred to the third DISCOM.

Downstream of the assets from the agriculture DTRs to the end-consumption point will be transferred to the new distribution licensee.

The asset transfer will be accompanied by the installation of smart meters on the low-tension (LT) side of distribution transformers. The cost of installing a smart meter for each DTR is estimated at ₹25,000 (~$276.95).

The operation and maintenance of the assets transferred to the third DISCOM will be under the purview of the new utility. The manpower required by the new distributor will be used to manage the transferred assets from the incumbent licensees.

The incumbent distribution licensees will levy wheeling charges on the new utility for the upstream infrastructure they own and operate.

Existing arrears of the Telangana DISCOMs, corresponding to consumer categories such as LI programs, HMWSSB, and Mission Bhagiratha, will be transferred to the new utility. Reallocation of arrears from the select categories identified for transfer to the new utility will result in an overall reduction of ₹412.4 billion (~$4.56 billion) from TGNPDCL and TGSPDCL.

Loans with government guarantees will be transferred from existing utilities to the new distribution company using the following formula:

Loan amount to be transferred = (Value of Distribution Network Transferred) +

(Government Receivables Transferred) – (Payables to GENCO, STU, SCCL Transferred)

The amount equivalent to government services arrears, power purchase true-ups approved, fuel charge adjustment amounts, asset costs, and other amounts due to distribution licensees by the Telangana government, equivalent loan amounts, and amounts payable to the generation companies will be transferred to the third DISCOM.

PPA Allocation

The existing power purchase agreements (PPA) with Telangana State Northern Power Generation Corporation (TGNPDCL), central generating stations (CGS), independent power producers (IPPs), and interstate solar are split between Telangana State Southern Power Distribution Company (TGSPDCL) and TGNPDCL in the ratio of 70.55% & 29.45% respectively.

The PPAs between the utilities will be split in the following ways:

• The existing PPAs with the incumbent DISCOMs will be vested with the three licensees proportionate to the energy requirement
• The share of the three DISCOMs will be determined on the proportion of average energy consumption attributable to these utilities in the last five years
• Existing PPAs with TGGENCO, CGS, IPPs, interstate solar, and interstate hydro projects will be split in the ratio of the energy requirements
• Intrastate solar and non-conventional energy will remain with the incumbents as they are allocated on a geographical basis
• Upcoming additions in Pradhan Mantri Kisan Urja Suraksha Evam Utthaan Mahabhiyan and Indira Mahila Sakthi will be allocated to the third DISCOM for meeting the renewable purchase obligation compliance

Telangana has been taking steps to increase renewable energy consumption. In January 2025, the state set a target to add 20,000 MW of renewable energy and storage capacity additions by 2030. The policy will be valid until 2035.

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