India has released new energy audit norms for electricity distribution companies to better measure and track their transmission and distribution (T&D) losses.

The Bureau of Energy Efficiency (BEE) notified its latest regulation, dated October 2021, regarding the “Manner and Intervals for Conduct of Energy Audit in Electricity Distribution Companies”. This is expected to ensure better measurement and tracking of the transmission and distribution (T&D) losses of electricity distribution companies (discoms).

India is the third-largest producer and second-largest consumer of electricity in the world, with an installed power capacity of 384.11 GW, as of June 2021. With expansion in industrial and manufacturing activity, India’s power consumption is projected to intensify. This power consumption is estimated to reach 1,894.7-terawatt hour (TWh) in 2022, driven by population growth along with increasing electrification and per capita usage.

The Indian government is pushing for massive investment in the sector with 100 percent FDI policy support, along with several other schemes like Deen Dayal Upadhyay Gram Jyoti Yojana (DDUGJY), Ujwal DISCOM Assurance Yojana (UDAY), and Integrated Power Development Scheme (IPDS) to support the sector. Simultaneously, the government has been pushing for reforms within the sector to plug its repetitive losses. The new audit regulations aim to be a coherent step in this direction.

India intends to reduce the aggregate technical and commercial (AT&C) losses of power distribution companies, which is why special attention is being paid to the transmission and distribution losses that form a major part of the AT&C losses.

Currently, despite Central Electricity Authority guidelines, most discoms adopt varying methodologies to calculate AT&C losses – without stating the underlying assumptions and data. This difference in methodology can create a difference in the AT&C reporting by up to four percentage points, thereby making their measurement and tracking difficult. It must be noted that the average AT&C losses reported by electricity distribution companies range from 22 to 25 percent.

The new energy audit regulations prescribed by BEE will change this situation to bring uniformity in the reporting methods. Additionally, in 2020, the BEE had notified that all discoms are now ‘Designated Consumers’ under the Energy Conservation Act, 2001, obliging them to conduct periodic energy audits and undertake energy conservation measures.

Discoms are required to submit energy accounting reports every quarter and an audited energy report every year to the BEE in prescribed formats. This includes data on energy input and consumption at each voltage level by all users, including discoms’ consumers, open access and captive users, as well as distribution franchises. This enables a better estimation of T&D losses based on the actual energy handled by the system.

The indicative structure for the energy audit report is prescribed in the second schedule of the regulations.

The recent regulations prescribe a set of pre-conditions to be met for the annual energy audit and periodic energy accounting before the start of the relevant financial year. They include:

The discoms must ensure that all feeder wise, circle wise, and division wise periodic energy accounting shall be conducted for each quarter of the financial year and such periodic energy accounting report must be submitted to the BEE and respective State Designated Agency. Such report must also be made available on the website of the discom/electricity distribution company within 45 days from the date of the periodic energy accounting.

Every annual energy audit and periodic energy accounting under these regulations shall be conducted in the following manner:

The BEE regulations specify clear timelines for discoms to upgrade their metering infrastructure at the feeder, distribution transformer, and consumer levels. All the feeders are required to have functional communicable meters by December 2022 whereas all the distribution transformers should be metered by December 2025. Furthermore, discoms are required to provide status of the metering infrastructure in the annual energy audit reports.

Below is the timeline for metering, as provided in the First Schedule of the regulations:

Further, existing non-communicable distribution transformer meters are to be replaced with communicable meters integrated with advanced metering infrastructure, within the timelines applicable to the respective areas.

The remaining areas and consumers may be taken up in a phased manner subsequently. However, electricity distribution companies can additionally cover any other areas as well as agricultural consumers, at their option, by December 2023. Further, in rural / hilly areas with connectivity or communication issues, wherein installation of smart meters may not be feasible, prepaid meters may be opted for.

According to the Energy Conservation Act, 2001, non-compliance with these regulations can attract a penalty of up to INR 1 million (US$13499.02) with INR 10,000 (US$135) per additional day of non-compliance. However, industry watchers feel that such a miniscule penalty amount will not be deterrent enough for giant discoms whose annual revenues are in billions.

Furthermore, apprehension is also cast on the BEE’s resource capability to track and deter non-compliance. The Ministry of Power, which is its parent organization, needs to strengthen the BEE with higher allocation of resources.

These regulations have the potential to substantially curb the long-standing problem of high transmission and distribution losses plaguing the Indian power sector. However, it will require synergies and efforts from all stakeholders to make it a success.

Meanwhile, the coal dependent Indian energy sector, which experienced unprecedented power crises in October and triggered by massive supply and demand side disruptions, needs to undergo a holistic revamp characterized by critical forward-looking reforms.

India Briefing is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world, including in Delhi and Mumbai. Readers may write to india@dezshira.com for more support on doing business in in India.

We also maintain offices or have alliance partners assisting foreign investors in Indonesia, Singapore, Vietnam, Philippines, Malaysia, Thailand, Italy, Germany, and the United States, in addition to practices in Bangladesh and Russia.

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