Ideas to improve TANGEDCO’s Financial Situation - Subsidies, Profitability, Improvement Levers and New Tariff Design
The Sustainable Energy Transformation in Tamil Nadu (SET-TN) initiative is hosting a webinar to discuss ideas to improve the financial health of the Tamil Nadu Generation and Distribution Corporation (TANGEDCO). SET-TN is a collaborative initiative by Auroville Consulting (AVC), Citizen Consumer and Civic Action Group (CAG), and WRI India. It aims to facilitate higher clean energy deployment in the state in partnership with stakeholders.
Here is a full recording of the webinar:
A crucial challenge to improving clean energy deployment in India is the poor financial health of electricity distribution utilities. TANGEDCO is rated ‘B’ by ICRA Limited in the 7th integrated rating for state power distribution utilities in 2019. As of today, TANGEDCO has an accumulated debt of over one lakh crore rupees. Like other distribution utilities in the country, the gap between costs and revenue has increased in the state.
One reason for TANGEDCO’s financial situation is that electricity tariffs have remained the same for a few years. Another is the subsidy regime, which has dominated the state’s electricity tariff process for several decades. Have these subsidies worked? What impact have they had on TANGEDCO’s financial bottom lines and on the reliability and quality of their services? And what steps can TANGEDCO initiate to improve their profitability?
Recent policy interventions have been encouraging. Record-breaking low auction prices for renewable energy, especially solar promises to reduce power purchase costs. Apart from the direct financial benefits, significant co-benefits include green jobs, GHG emission reduction, and meeting the solar energy targets. Also, Tamil Nadu Energy Development Agency (TEDA) has initiated steps to implement the KUSUM scheme, to solarise agriculture in the state. By reducing the extent of free power supply, KUSUM can significantly reduce the financial burden on TANGEDCO, while also ensuring a reliable supply of electricity to farmers.
There is significant scope to improve TANGEDCO’s revenue realization by moving to a more rationalized tariff structure with increased accountability of supply and service quality. This is also the possibility to explore flexible power procurement planning, take measures to move towards dynamic tariff design, and ensure improvements in revenue recovery for TANGEDCO.
- Mr. S Sankara Narayanan, General Manager, Tamil Nadu Energy Development Agency (TEDA)
- Ms. K Saraswathi, Secretary General, The Madras Chamber of Commerce & Industry
- Ms. Ann Josey, Fellow, Prayas (Energy Group)
- Mr. S Venkatachalam, Chairman, The Madras Chamber of Commerce & Industry, Energy Committee
- Mr. Martin Scherfler, Co-founder, Auroville Consulting
- Ms. Harsha Meenawat, Senior Research Specialist, Energy Program, WRI India
- Moderated by Ms. Sandhya Sundararagavan, Lead, Energy Transitions, WRI India