KERC to begin prudence check of capital expenditures by KPTCL, Escoms

Bengaluru: The Karnataka Electricity Regulatory Commission (KERC) will soon start a prudence check of the capital expenditures of the Karnataka Power Transmission Corporation Limited (KPTCL) and all Escoms in the state. 

The exercise will look at various capital-intensive projects taken up by these agencies during 2022-23 and 2023-24 and determine their impact on the ground. 

“During the prudence check, we analyse the results achieved through capital expenditure incurred by the KPTCL and Escoms against the objectives set out while making such investments. Any expenditure not meeting the objectives would mean that the consumers are burdened with costs of redundant investments,” a senior KERC official explained. 

Prudence checks will help the KERC keep an eye on the financial condition of these companies and help the authorities determine the budgetary allocations that should be allowed based on their performance.

The analysis report from the prudence check will have a direct impact on the budgetary and expenditure approvals of the electricity supply companies. 

“Based on the results of the prudence check, we will be able to put in place stringent measures. During the annual review, the KERC will make deductions in the expenditure proposed by the Escoms to bring down any unwanted expenses,” another official explained. 

The prudence check is expected to take place once in two years, and the commission has laid out clear guidelines on the works that need to be analysed. 

A representative sample of all works over Rs 5 lakh will be considered for analysis. For instance, in case of KPTCL, the analysis will be based on capital expenditure towards establishing substations, construction of transmission lines, augmentation of transmission lines and construction of terminal bays. 

For Escoms, the focus will mostly be on works related to upgrade of distribution network for improvement in quality of power supply, strengthening of substations, installation or upgradation of Supervisory Control and Data Acquisition (SCADA) systems and conversion of overhead lines to underground cables. 

The KERC hopes to complete the exercise within the next four months so that the commission has a comprehensive report on the capital expenditures and their impact on ground by the time ESCOMs submit a tariff revision and financial status report by January or February.