In a significant overhaul of its electricity distribution framework, the Telangana government has established a third power distribution company (discom). This strategic move involves the transfer of nearly 29 lakh crucial electricity connections from the existing two discoms to the newly formed entity.
Massive Transfer of Assets and Liabilities
The state's energy department formalized the creation of the new discom through government orders issued on Wednesday. The restructuring is not limited to consumer connections alone. The government has also shifted assets valued at a staggering ₹36,000 crore to the new company. Alongside these assets, the discom will shoulder substantial financial responsibilities, including liabilities of nearly ₹27,000 crore and loans worth about ₹9,000 crore.
The newly formed entity will specifically handle service-oriented connections. This includes power supply for agriculture, various lift irrigation schemes, water supply services for Hyderabad, and the statewide drinking water project, Mission Bhagiratha. These connections were previously managed by the two older discoms: the Southern Power Distribution Company of Telangana Limited (TGSPDCL) and the Northern Power Distribution Company of Telangana Limited (TGNPDCL).
Addressing a Critical Financial Gap
The government stated that the primary objective behind this major restructuring is to stabilize the finances of the state's power sector. This financial stabilization is deemed essential to continue providing free and subsidized electricity to priority sectors like agriculture and drinking water supply.
In the government order, officials explained that the financial health of the two existing discoms had deteriorated over time. This was primarily due to the widening gap between the average billing rate and the average cost of supplying electricity. The poor financial situation hindered the discoms' ability to secure funding for government-led developmental projects. It also limited their participation in critical central schemes like the Revamped Distribution Sector Scheme (RDSS) and posed challenges in delivering reliable, quality power to consumers.
Operational Changes and Future Steps
The creation of the third discom will trigger several operational changes. A key step will be the realignment of existing Power Purchase Agreements (PPAs), which were originally tied only to the two older discoms. For day-to-day operations, the maintenance of distribution transformers and lines will continue through manpower transferred from the existing discoms.
The new entity will file its Aggregate Revenue Requirement (ARR) separately with the electricity regulatory commission. To mobilize revenue, it is empowered to levy wheeling charges on its consumers, who are primarily various government departments, subject to regulatory approval. One of the critical tasks assigned to the new discom is to recover outstanding dues amounting to approximately ₹35,000 crore from various government departments and ensure timely payments to power generation companies.
This restructuring represents Telangana's bold attempt to create a more sustainable and efficient power distribution model, separating financially challenging service connections to protect the overall health of the electricity infrastructure.
