12th integrated rating of DISCOMs unveiled encouraging performance trends and sectoral growth

Union Minister highlights DISCOM improvements, emphasises long-term sustainability measures Gujarat, Haryana lead top rankings.

The 12th Edition of Integrated Rating of Distribution Companies (DISCOMs), unveiled by the Union Minister for Power and New & Renewable Energy, RK Singh, offers a systematic approach to evaluating their performance, guiding efforts towards improvement. Addressing power sector stakeholders at the release event in New Delhi on Monday, the Union Minister commended the DISCOMs for their overall improvement in the 2022-23 period, underscoring the significance of ratings in fostering transparency and accountability. He emphasised the role of ratings in encouraging efficiency enhancements and noted the positive outcomes observed in the past.

The Minister highlighted a decline in Aggregate Technical & Commercial (AT&C) losses and emphasised the importance of improving billing and collection efficiency, with the goal of achieving 100 percent efficiency and reducing AT&C losses to single digits through the implementation of smart prepaid meters. He acknowledged the improved performance of states that were previously lagging but expressed concern over the lower ratings of some developed or fast-developing states’ DISCOMs, stressing the importance of a viable power sector for sustained growth.

Regarding the increase in power prices, the Minister attributed it to DISCOMs’ failure to secure long-term power supply, leading to reliance on costlier short-term purchases. He emphasized the necessity for DISCOMs to enter into long-term Power Purchase Agreements (PPAs) to meet the majority of their electricity requirements. The Minister outlined measures such as Resource Adequacy Rules and penalties for load shedding to ensure the viability of the power sector.

Highlighting the growing power demand, the Minister assured stakeholders that the sector is capable of meeting this demand and has become more attractive for investment. He noted the reduction in outstanding dues of state power generation companies and emphasized the importance of timely payments to ensure financial stability across the sector.

The 12th edition rated 55 electricity distribution utilities for the year 2022-23, with 14 utilities receiving the highest rating of A+. Notably, utilities from Gujarat, Haryana, Karnataka, Madhya Pradesh, and Andhra Pradesh secured A+ or A ratings. Among private utilities, Adani Electricity Mumbai Ltd. (AEML) topped the list, followed by Torrent Power Surat and Torrent Power Ahmedabad from Gujarat. The report also rated power departments of 11 states and union territories, with Thrissur Corporation Electricity Department (TCED) of Kerala securing the top position.

Key findings of the 12th Edition include improvements in AT&C losses, billing efficiency, and reduction in payables to generation and transmission companies. The report also highlighted increased power purchase costs driven by growing demand, expensive coal imports, and higher exchange prices. The Average Cost of Supply (ACS) to Average Revenue Realised (ARR) gap increased, indicating challenges in fully passing on purchase costs to consumers.

The rating framework and scoring methodology are based on financial sustainability, performance excellence, and external environment parameters, with specific disincentives for non-compliance. This framework has evolved over the years to reflect changes in the power sector and national priorities.

Since 2012, the Integrated Rating exercise has been conducted annually to evaluate DISCOMs’ performance. The 12th edition, facilitated by the Power Finance Corporation, continues the same rating framework as the previous year, focusing on capturing performance changes and adhering to best sectoral practices. Each DISCOM is assigned a specific grade based on its integrated rating score and overriding conditions, reflecting a holistic assessment of performance.