Optimising power purchase cost, cut in AT&C losses can prop up TN power sector: ICRA Analytics

Optimising power purchase cost, reduction in Aggregate Technical and Commercial (AT&C) losses, and improving financial stability and regulatory timeliness were some of the action plans suggested for Tamil Nadu power sector to help the State become a leader in the industry, said an official of ICRA Analytics.

Optimising the power purchase cost can be achieved through better demand forecasting, optimum utilisation of cheaper power sources, retiring old generating units and improving the operational efficiency, said Satyajit Suklabaidya Head – Energy & Natural Resources ICRA Analytics Ltd (Knowledge Partner), at a virtual conference on Tamil Nadu’s Emergence as a power sector leader organised by the Madras Chamber of Commerce and Industry in association with India Energy Forum.

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For instance, the AT&C loss of TANGEDCO (17.47 per cent) is below the national average of 22.03 per cent but still far away from the target of 13.50 per cent under UDAY. Collection and billing efficiencies also remained below the target specified under UDAY ― 99.87 per cent and 100 per cent respectively. Even a 5 per cent reduction in AT&C losses of TANGEDCO could reduce current losses by around 25 per cent, he said. Reducing AT&C losses can be done through improvement in consumer metering, distribution transformer metering, collection and billing efficiency, he added.

The State has huge outstanding payments to generating companies, much higher than other discoms. Higher dues of discoms are affecting the cash flow of generating and transmission companies, he said.

Despite joining UDAY in January 2017, financial losses started accumulating again. Out of the total loss of ₹13,258 crore (FY 2018-19) for Tamil Nadu state utility, the distribution and generation business accounts for ₹12,623 crore. Higher financial losses of the State are due to higher cost of ACS-ARR (average cost of supply-average revenue realised) gap of ₹1.32/kWh against the target of ₹0.07/kWh, he said.

Tamil Nadu provides tariff subsidy to discoms to bridge the ACS-ARR gap created by lower-paying consumers. The high reliance on tariff subsidy is indicative of poor operational and financial performance of the State. However, decreasing dependence on subsidy is a positive sign for TANGEDCO, he said.

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The State’s energy demand growing at a rate of 2.13 per cent (five-year CAGR) is lower than the national demand growth of 2.99 per cent (five-year CAGR). At 10 per cent, the energy deficit now is minimal compared to 10 years ago. The per capita energy consumption of the State is higher than the national average due to commercial and industrial consumption, and has grown at around 5 per cent over the last decade, he added.

On renewable energy (RE), Suklabaidya said that there is a huge untapped potential for RE in the State. Being a cheaper source and bundled with the storage option, it can be utilised for power purchase cost optimisation with solar tariff ― ₹2/kWh and wind tariff ― ranging between ₹2.43/kWh and ₹3/kWh.