The Distribution Licensee (Discom) has the universal service obligation of supplying electricity to meet the full demand of every consumer in its licensed area.
It is responsible for projecting demand growth and making arrangements for reliable electricity supply.
Discoms enter into long-term power purchase contracts with power-generating plants to ensure a steady supply of electricity.
These contracts help in meeting the growing demand for electricity and maintaining a comfortable power supply position.
Consumers with a load of 1 MW and above have the right to open access, allowing them to buy electricity from any supplier and pay the Discom for the use of their distribution network.
Cross-subsidy surcharges are levied to balance the tariffs between higher-end industrial and commercial consumers and lower-end households.
The challenges faced by Discoms are primarily in the domain of political economy.
Regulators struggle to determine cost reflective tariffs, and state governments find it difficult to provide timely subsidies.
Misgovernance and rent-seeking practices in some states contribute to the financial difficulties of Discoms.
Investment in generating capacity relies on long-term power purchase agreements with Discoms, which de-risk financing.
Discoms play a crucial role in projecting demand and entering into contracts to meet increasing electricity demand.
Without Discoms, the energy transition to renewables and the reliability of power supply would be at risk.
The UK's experience with deregulation and competition in the electricity market shows that significant demand growth did not occur after the new system was implemented.
The state had to invite bids for renewable energy to drive the energy transition.
Instead of wholesale deregulation, alternative solutions such as
addressing governance issues,
implementing timely subsidies,
exploring privatization in certain states where misgovernance persists should be considered.
COMMENTS