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State distribution utilities to be rated: Power Ministry

According to reports, the Ministry of Power said on Friday that an integrated rating methodology to cover the state power distribution utilities have been put in place.

“The objective is to rate all utilities on the basis of their performance and their ability to sustain commercially viable operations in the long run. The methodology focuses on rewarding efforts of distribution utilities and, therefore, stimulating and improving operational and financial performance of distribution entities,” the Ministry said in a statement.

Marks would be assigned for both current levels of performance and relative improvement over the baseline parameters. It would also rank the utilities on the basis of performance.

In the rating system, about 60 per cent weightage has been given to parameters such as AT&C losses, financial planning, cost coverage ratio and subsidy received.

At the same time, compliance to regulatory practices has been assigned a weightage of 15 per cent. Remaining 25 per cent would be counted on the basis of submission of audited accounts, metering, IT and computerisation, timely payments without default to banks and financial institutions and renewable energy purchase obligation.

A system of negative marks has also been introduced in the rating methodology.

The parameters assigned negative marks include non-auditing of accounts (up to minus 12 per cent), SEB unbundling (up to minus 5 per cent), non-filing of tariff petition (up to minus 5 per cent), untreated revenue gap (up to minus 5 per cent), deterioration in AT&C Loss (up to minus 5 per cent), increase in payables (up to minus 3 per cent), presence of regulatory asset (up to minus 3 per cent), negative networth (minus 3 per cent) and extent of cross subsidy (up to minus 2 per cent).

“This integrated rating methodology is expected to facilitate realistic assessment by banks and financial institutions of the risks associated with lending exposures to various state distribution utilities. It would enable funding with appropriate loan covenants for improving operational, financial and managerial performance,” the Ministry said.

The annual ranking and rating of all state power distribution utilities (except those in North Eastern States) will be carried out by the agencies appointed by the Ministry of Power. The ratings would be published on the Ministry’s Web site.

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