Cut off transmission access to discoms defaulting on payments to gencos: Govt

electricity

After barring the distribution companies (discoms) that defaulted on payments to generation companies (gencos) from power exchanges in 2022, the government is set to intensify its control over power utilities to uphold consistent payment practices. The Ministry of Power has put forth a proposal to regulate access to the Central transmission network in cases where power utilities neglect to settle their dues to gencos beyond two and a half months from the issuance of the bill.

For this, the ministry has proposed to regulate power supply by barring access to the General Network Access (GNA), including short, medium and long term open access. The GNA provides access to the central transmission network to all power producers. While taking the access, power producers are only required to indicate the capacity and the time-block within which such capacity has to be transmitted.

Under the forthcoming government proposal, the access of distribution companies (discoms) to GNA will be intricately connected to their payment discipline. Entities defaulting on payments will be denied access to various segments of the GNA. Conversely, upon the clearance of outstanding dues by discoms, their access to GNA will be promptly reinstated within a two-day period, as outlined in the draft amendments released by the ministry on December 14. The Ministry has entrusted the National Load Dispatch Centre (NLDC) with the task of formulating the detailed procedure for implementing this rule..

To implement this measure, the ministry has proposed amendments to the Electricity (Late Payment Surcharge and Related Matters) Rules. Public input on these proposed changes is invited, and comments are being accepted until January 12, 2024.

Recognising the cash flow problems arising out of outstanding receivables of gencos from discoms and to increase basic payment discipline in the power sector value chain, the government notified the Electricity (Late Payment Surcharge and Related Matters) Rules, 2022 on June 3, 2022. These rules entail obligations upon the discoms to clear their legacy dues as existing on June 3, 2022 in a time bound phased manner in equated monthly installments with benefits of non-applicability of late payment surcharge.

These rules also provide framework for time bound clearance of current dues through a payment security mechanism, failing which it allows progressive withdrawal of open access as well as power regulations. It also allows discoms to avail loans from PFC Ltd. and REC Ltd. to clear their dues to gencos.

Data from the Ministry of Power showed that the current payments from generation companies (gencos) are fully current, and the outstanding legacy dues of gencos have experienced a significant reduction by 63 percent. The amount has decreased from Rs 1.396 lakh crore to Rs 51,268 crore in a little over a year since the notification of the late payment surcharge rules.

In August, 2022, the Centre barred 27 distribution companies (discoms) across 13 states from buying or selling electricity in power exchanges citing their non-payment of dues to generation companies (gencos). The affected states said the move could lead to power outages, even as some immediately started clearing their outstanding amounts to avoid a power crisis. But, it was only after the states cleared their dues that their access to the power exchanges were restored.

The payment discipline rules introduced by the government has resulted in the Aggregate Technical & Commercial (AT&C) losses of discoms to come down from 22.62 percent in 2013-14 to 16.42 percent in 2021-22. These have further declined to about 13.5 percent in FY23 from 16.4 percent in FY22, according to provisional data prepared by the Ministry of Power.

AT&C losses are a combination of energy loss and commercial loss. While energy loss may comprise technical loss, theft, and inefficiency in billing; commercial loss constitutes default in payment and inefficiency in the collection.