No. 17 - 2019 /Integration of Power Utilities                           26 - 06 - 2019

Hon,ble Sri R K Singh

Minister of State for Power, New & Renewable Energy (I/C)

Shram Shakti Bhawan

New Delhi

Sub: Integration of all unbundled power utilities in States

Respected Sir,

       You are kindly aware that with the enactment of Electricity Act 2003, different states re-structured the State Electricity Boards unilaterally as per their wishes. While in some states there were multiple distribution Companies like in Karnataka (5 Discoms), UP (5 Discoms), MP (3 Discoms), Haryana (2 Discoms), other states retained the entire state under 1 Discom as in Maharashtra, Uttrakhand and in case of Punjab and Tamil Nadu generation and distribution were retained as one company while transmission was separated out. In case of Kerala and Himachal Pradesh the integrated structure of generation, transmission and distribution was retained in one company in name of KSEB Ltd and HPSEB Ltd respectively. 

2.    It is seen that there is no uniformity and wide diversity in structure of state power utilities across the country.

3.    The experience since 2003 has however shown some results and lessons which are summarized.

a)    One common argument for creating multiple Discoms within a state was that smaller Discoms would be more efficient and better managed. This has not been proved as correct. On the other hand multiple Discoms with their separate Board of Directors create coordination and inter-organization problems within the state.

b)    The other argument for multiple Discoms was that it would create competition and peer pressure to improve performance has not been proved practically for example if the T&D losses in different Discoms are widely different it is explained by the type of consumer mix-for example a Discom with higher industrial load would have lower loses as compared to a Discom with higher agricultural load.

c)    The third argument for having separate Discoms was that it would give consumer choice to select the preferred Discom. This argument has also proved impractical and incorrect and with very few exceptions, consumer choice is not a priority for consumer.

4. FACTORS IN FAVOR OF INTEGRATED STRUCTURE

i)     Every state has one SLDC where the entire state is considered as one control area. This gives SLDC a clear advantage to manage load dispatch over the state as one entity. For example if there is load crash in one portion of state (due to rain, storm etc.) SLDC can  order additional supply or loading in other areas of state to offset load crash, so that overall drawl by State remains without deviation.

ii)    With one state Discom concept the state thermal and hydro generation can be optimally dispatched by SLDC in the most economic and optimum manner.

iii)   Manpower and HR functions are performed more efficiently and with uniformity with one organization as opposed to multiple companies. In some states, like Karnataka the entire engineering manpower is under Transco, i.e. KPTCL while the Discoms draw their manpower requirement from  KPTCL. IF there is only one integrated Company instead of 5 the problem is automatically solved.

iv) In regulatory matters of state level, and dealing with SERC, it is practically effective with one Discom and generation and transmission combined. Creation of multiple units only complicates SERC issues.  

v)    Similarly, in dealings with CERC and APTEL etc. it is practically possible and justified considering the state as one entity in case of Rajasthan, for example, it is only on paper that the three Discoms are shown as separate parties.

vi)   IN several states a separate coordination body has been created which is the controlling body of multiple Discoms. This body is the URJA VIKAS NIGAM. In states like Gujarat, MP, Rajasthan the Urja Vikas Nigam has been established it is opined that instead of having multiple companies in distribution, generation and transmission controlled has Urja Vikas Nigam, It would be more effective, coordinated and economical  to have one organization integrating the functions of distribution, generation  and transmission as in case of KSEB Ltd and HPSEB Ltd.

5.   AIPEF requests that GOI should introduce a separate section in National electricity Policy whereby the objective to integrate the state power sector is contained. The objective of combining generation, distribution and transmission under one integrated in one company is stated as a matter of policy for the States to adopt.

Even without a provision in National Electricity Policy the States are empowered and at liberty to re structure their respective power utilities so as to achieve the objective of integrated operation since Electricity is a Concurrent subject. 

6. Therefore you are kindly requested to issue directions to states to restructure and integrate all un -bundled power utilities of state in the larger interest of state for better coordination and better consumer service.

Thanking you.

Yours faithfully

Shailendra Dubey

Chairman

CC.

All Chief Ministers of States & Union Territories

with the request to to re structure and integrate their respective power utilities for better consumer service so as to achieve the objective of integrated operation since Electricity is a Concurrent subject.