Energy Accounting: Introduction

You must be familiar with financial accounting. You may perhaps be maintaining your household accounts! Energy accounting is just like financial accounting, except that instead of money, we account for energy.You know that financial accounting has the function of balancing and controlling the flow of money. The practices in financial accounting enable proper accounting of funds to detect the leakages, misappropriation,fraudulent transactions, etc. and contribute in improving the financial performance of the organization.In the same way, energy accounting helps in balancing the flow of energy and related costs, and determining the magnitude of energy losses.The underlying idea is to treat One Energy Unit (kWh) as a unit of electrical money and develop a system for accounting each unit, which is the same as the procedure followed in financial accounting and auditing.

What is Enargy Accountion?

Energy accounting is a system to record, analyze and report energy consumption and cost on a regular basis.In the power sector, energy accounting involves preparation of a “balance sheet” of energy, i.e., the preparation of accounts of

• the energy flow to various segments,

• energy consumption by various categories of consumers,

• energy losses including both technical and commercial losses at various stages, and

• energy required for meeting the technical requirements of the system out of the total quantum of energy available over a
specified time period.

This helps in an accurate accounting of the energy generated,energy consumed, energy lost, revenue realised and revenue losses at each level of power generation, transmission and distribution.For example, an energy accounting system (Fig.) at the distribution level should account for the energy made available at substation/11kV feeder/Distribution transformer,compare it with the quantum of units consumed by end-users, determine the difference between the two which gives the energy losses,and check whether these are reasonable and within permissible limits.This exercise will help the utility in estimating the revenue realised and the revenue losses. This comparison will enable it to ensure that all energy is billed and the revenue realized in an effective manner.

Purpose of Energy Accounting
Energy accounting helps in establishing the energy input and quantum consumed by/billed to various categories of consumers, identifying high loss areas, and evolving strategies and action plans for reduction of losses.Energy accounting is as fundamental to energy management as cost accounting is to financial management. It can be one of the most cost-effective tools that an organization can use to cut energy costs and conserve energy.You should understand that energy accounting by itself does not reduce energy demand or costs. However, it is the basis to identify weaknesses and to select and prioritize appropriate measures for the improvement of the energy system. For example, energy accounting can raise the awareness about reducing energy demand and help in energy conservation efforts. In fact, there are many more reasons why your utility should go in for energy accounting. Let us explain them in the context of the power sector.

The
Process of
Energy
Accounting

Need for Energy Accounting

You know that power is a critical infrastructure for the growth of our economy.The power sector has to be financially and commercially viable and be able to attract fresh investments in order to spur our country’s economic growth.However, that the financial health of most of the power utilities is a matter of grave concern and their AT&C losses have reached an alarming level.

For a country like India, which generates over one lakh MW of power, even a small percentage of loss translates into a very large amount of power in absolute terms. Preventing this loss would effectively serve as capacity addition, thereby reducing the demand-supply gap and improving supply.Even 1% reduction in AT&C losses would provide substantial financial benefits to the utilities.

Technical losses can be reduced through system improvement, e.g., by reducing overloading of lines and transformers, improvement of voltage profile, etc. But these measures require large capital investments. However, commercial losses can be reduced at a comparatively lesser cost and in a shorter time frame through administrative and legislative action with greater financial gains. We need to find out the quantum of such losses and take action to reduce them.

There are many other reasons why power utilities should undertake energy accounting. We list some of these here.A comprehensive energy accounting system would enable the utility to quantify losses in different segments of the system and pinpoint the areas that lead to high commercial losses.Energy auditing, about which you will study in the next unit, would provide the means to identify the areas of leakage, wastage or inefficient use. This would help in identifying measures suitable for reduction of T&D losses.Thus the first and foremost reason for energy accounting in a power utility is to record the available energy and attribute energy consumption and losses in the power generation, transmission and distribution system. Energy costs depend on the amount of energy consumed and its price.

Energy accounting will make it possible to compare energy use and cost among the various components of the power supply system and to monitor how energy use changes over time. This information will help those responsible for managing energy costs − maintenance staff,site managers, and others − to get feedback on how well their utility is performing.Energy problems and billing errors could be identified and tackled.By consistently tracking energy use, you can identify problems in the system. A sudden unexplained increase in energy consumption, for instance, would require investigation of the cause. Billing errors can also  be caught.

Energy accounting would provide a basis for prioritizing energy capital investments and preparing a more accurate budget. You could identify operations or segments in which the utility incurs the highest energy costs and consider targeting them for energy management and cost reduction efforts.With the help of energy accounting, power utilities could evaluate the success of their energy conservation and management efforts. Did they save as much energy as they thought they would from their energy conservation efforts? Such questions can be answered only through energy accounting.Utilities could create incentives for energy management. Energy management is still not a priority for a majority of the utilities. There is apparently little incentive to take on this task. But if the power distribution
utilities realise the benefits of increasing energy savings and reducing energy costs, they can appreciate the need for energy management.Energy accounting makes it possible to set quantifiable energy cost reduction goals, which could be used to augment the budget.

For any organisation, it is important to be clear about how it will use the energy accounting information to serve its broad goals of managing energy costs; promoting energy and environmental awareness; and managing resource costs.This will require a clear statement of specific objectives, which would determine the functions of energy accounting.

Objectives and Functions of Energy Accounting
For power distribution utilities, the specific objectives of energy accounting could be to:

prepare an energy account on each feeder to record the quantum of energy received and the quantum of energy supplied to various

customers;

segregate losses into technical/non-technical losses;

identify areas of mismatch between billing and revenue collection;

improve metering, billing and collection;

identify high loss areas and remedial steps for reduction of both technical and commercial losses;

prepare benchmarks of actual system losses with the standards;

continuously review the progress made in the remedial action initiated earlier.

These objectives translate into certain functions of energy accounting.

Utilities can also provide energy accounting as a service to its consumers and play an important role in energy conservation.
So far we have introduced the concept of energy accounting and discussed the need for it as well as its objectives and functions as applicable to power distribution utilities. You have learnt that one of the objectives of energy accounting is to segregate losses into technical and non-technical losses. For this, you should also know about the losses in the power system, which occur as electrical power flows from the power generating station to the end-user.



AT&C Losses in the Power Distribution Network

The term AT&C loss covers technical losses and commercial losses that together contribute to revenue losses and hence need attention from the energy accounting point of view.As electric current flows from the power plant through the transmission lines to the distribution segment, every element in the power system (e.g., a line or a transformer, etc.) offers resistance to it and the electrical energy is converted to heat energy, which is lost to the system. The cumulative energy lost by all the elements in a power system is classified as Technical Loss.

Here we state them briefly.Technical losses in the network occur on account of:

• losses in conductors due to the conversion of electrical energy to heat energy (technically termed the copper losses or I 2 R losses);

• transformer losses;

• overloading of existing lines and substation equipment;

• poor maintenance and repair of equipment;

• inadequate reactive compensation;

• lack of modernisation of old lines and equipment;

• low HT: LT ratio, etc.

Low capital investment is also a major reason for increase in technical losses in the power distribution sector.

Commercial losses in the network occur due to:

• non performing, underperforming and defective meters;

• erroneous multiplying factors;

• defects in circuitry;

• non-reading of meters;

• pilferage by manipulating or by-passing of meters;

• tampering of meter reading by mechanical jerks, placement of powerful magnets or disturbing the disc rotation by foreign materials; and

• theft by direct tapping.

These are all due to non-metering of actual consumption. Besides these factors, low accountability of employees, absence of energy accounting and auditing mechanisms also contribute to these losses. The sum total of “Technical” and “Commercial” losses is termed as T&D loss. It is the difference between the units input and units for which bills are raised.

T&D loss does not capture revenue losses on account of factors such as non realization of payment for the billed units due to reasons such as non-billing, defective billing and poor collection.The aggregate of T&D loss and revenue loss is termed as the “AT&C loss”(Aggregate Technical and Commercial loss). It is the difference between the units input into the system and units for which the payment is collected (payment realised).

What are AT&C losses?

AT&C losses to the utility are the sum total of technical losses,commercial losses and losses due to non-realisation of total billed
demand.

Let us take an example to explain this point.

So far you have learnt that energy accounting is quite similar to financial accounting: In the case of financial accounting, we measure the flow of funds by various ledgers and account books. In energy accounting, we measure the flow of energy at various points and maintain a record. Thus, for proper understanding of the energy accounting mechanism you must also grasp the fundamentals of the metering, billing and collection system in the power distribution sector.

Metering, Billing and Collection: The Key to Understanding
You have studied that metering is required for energy measurement. Bills should correctly reflect the cost of actual energy used by the consumer.

Energy accounting can tell you how accurate the billing is and whether the collections match the cost of energy supplied at the input. The difference gives us an estimate of the losses. We discuss each of these aspects briefly. Metering: Meters should be placed at appropriate points in the electricity distribution network for proper measurement of the energy input and output at those points (You may like to see Fig. to understand meter placements).

The absence of meters at any point in the distribution network signifies loss of revenue to the utility since energy flow at that point is not accounted for.It is unfortunate that many services in the power distribution segment are still not metered. A large scale drive is necessary to bring all unauthorized consumers on to the rolls. Such a drive in Andhra Pradesh during a single month (June, 2000) resulted in the metering of 20 lakh new consumers and regularization of 2.57 lakh agricultural services. The Electricity Act, 2003 contemplates metering of all the services and visualizes action on the company and the individual officers responsible for lapses.

Billing: For accounting to serve any purpose, the measured energy must be billed to the consumer of that energy. You have studied about the billing problems encountered by utilities in Unit 1 of the Course BEE-001 and Unit 3of the Course BEE-003. Correct billing and timely serving of the bill will go a long way in improving the collections. Computerised spot billing can solve
these problems and increase collection.

In the case of abnormal meters, utilities usually take into account the last three months’ average for billing purposes. However, the last three months’average would not give a correct picture of the consumption as a meter initially becomes sluggish and then slowly drifts to a stuck up position. A study in Andhra Pradesh revealed that the utilities are annually losing crores of rupees on this count alone.

There is no substitute to proper metering and billing. Utilities need to be alert and vigilant in this matter. For example, if a comparison with similarly connected loads reveals very high consumption, it is an indication of unauthorized additional loads. Utilities must also target not only the services where the variation from the norm is abnormally high but also the ones where the standard deviation in consumption is less than 2%. Constant realisation of less than minimum revenue in better-off areas should attract the utility’s attention and remedial measures should be taken.

Collection: Utilities should take stringent action against defaulters and provide increased facilities for bill payments to improve collections. These aspects have been dealt with in detail in next unit