From captive customers to customer-centric discoms

This article is authored by Gaurav Bhatiani, senior fellow and Vaibhav Chowdhary, director, Ashoka Centre for a People-centric Energy Transition.

For over two decades, India's electricity policies have focused on one question: How do we make discoms viable? For the next two decades, the question should be: How can discoms maximise customer value and become financially viable by making customers choose them?

Electricity (Pic for representation)

This requires a fundamental mindset shift.

Last year, we argued that the next generation of electricity reforms must place citizens at the core. Recent developments indicate an emerging customer-centric electricity system. It is time to institutionalise it in policy, programs and projects.

The draft National Electricity Policy, issued in January this year, incorporates a section on customer-centricity. It is a good beginning. In March, the ministry of power (MoP) issued draft Electricity (Rights of Consumers) Amendment Rules, 2026 to enable new services, strengthen customer rights, and improve standards. Both are yet to be finalised, and suggestions have been invited to strengthen them further.

The MoP’s Consultative Committee recently deliberated on frameworks for parallel distribution licensing, emphasising consumer choice, service quality and efficient utilisation of distribution infrastructure. This differed from previous meetings, which focused on issues such as nuclear power, national electricity plan for generation, and transmission.

Both sides are right, but also incomplete.

The policy challenge is not choosing between competition and viable discoms. It is to create a system where discoms are rewarded for delivering value to customers. Such an approach will enable higher willingness to pay, therefore, enhancing DISCOM viability. Value can be enhanced by improving the quality of supply, introducing flexibility on demand, decentralised energy and EVs, and through reasonable prices achieved by optimising costs.

States such as Andhra Pradesh are experimenting with an alternative approach of awarding a separate distribution licence to large customers, such as one proposed for Google's hyperscale data centre in Visakhapatnam. Previously, Uttar Pradesh granted a licence to NIDP Developers Pvt Ltd. Even earlier, SEZs in Karnataka and Gujarat were awarded distribution licences within the territory of state discoms.

In the past, large customers owned and operated captive generation. In the future, large customers will seek to manage their own electricity ecosystem, including networks. Distribution may evolve from a one-size-fits-all utility into differentiated models tailored for different categories of customers.

Technology is reinforcing this shift. The India Energy Stack will create the digital infrastructure to enable a more interactive market system. Rooftop solar, battery storage, EVs, demand response and vehicle-to-grid technologies are turning consumers into producers, traders and flexibility providers. The traditional distinction between supplier and customer is dissolving.

These developments signal impending transformation like that in telecommunications, civil aviation and banking post 1991. These sectors stopped protecting incumbents and empowered customers. Competition improved quality, accelerated innovation and changed customer expectations. Electricity distribution may now be approaching a similar inflection point.

The future will not belong to a utility merely because it possesses a licence. It will likely belong to utilities that consistently deliver reliable supply, superior power quality, flexible tariffs, transparent billing, faster connections, responsive grievance redressal, digital convenience and competitive prices. Such utilities will earn the customer’s trust. The future will belong to discoms that own customer trust. That trust will become an asset more valuable than a licence.

This does not imply the decline of public discoms. But like public sector banks after reforms or public telecom operators after liberalisation, they will increasingly need to compete on performance rather than rely on captive customers. The form of competition may differ, but the future will require them to be customer oriented.

The policy response should, therefore, be ambitious rather than incremental. We propose a five-point customer-centric reform agenda.

First, the National Electricity Policy should explicitly redefine the purpose of electricity distribution as maximising customer welfare. Every major regulation and investment decision should be assessed against measurable customer outcomes such as reliability, affordability, quality of supply, speed of service and customer satisfaction. Regulators should measure and reward performance rather than simply approving costs. Comprehensive performance-based regulation that rewards improvements in customer satisfaction should be implemented at the earliest. Utilities that consistently deliver better outcomes should be allowed to earn higher returns.

Second, the debate on parallel distribution licences should move beyond the binary choice between competition and monopoly. Different institutional models, including parallel distribution licences, retail competition over common networks, franchise arrangements and, over time, independent distribution system operators should be allowed to evolve based on state-specific circumstances. Policy can be neutral while remaining firm on outcomes: better customer service, efficient networks and financially sustainable utilities. Complementary reforms in wholesale markets, PPAs, transmission and financial hedging should reinforce this transition by improving liquidity, flexibility and the ability of customers and utilities to manage market risks.

Third, enabling discoms to emerge as energy platforms and customers to become active market participants. Discoms should evolve beyond selling electricity to integrate distributed energy resources, including rooftop solar, battery storage, electric vehicles, demand response and community energy systems. This transition would improve system flexibility while creating new revenue opportunities. Regulations should support this and enable emergence of prosumers. Tariffs should also reflect system conditions and customer choice rather than relying on volumetric charges. Dynamic pricing, subscription-based service plans, premium reliability options and bundled energy services can provide greater flexibility while improving system efficiency. Targeted direct support should protect low-income and vulnerable consumers.

Fourth, unlocking the value of discom assets to create new revenue streams. Most distribution utilities own valuable land parcels, office buildings, substations, rights-of-way, utility poles and rooftops located within rapidly urbanising areas. These assets often remain significantly underutilised. Regulators and state governments should enable discoms to monetise these assets commercially through transparent leasing and public-private partnerships while retaining ownership. This can generate stable, long-term revenues and enable discoms to evolve into multi-utility infrastructure companies.

Fifth, accelerating the India Energy Stack as public digital infrastructure. Standardised digital identities for electricity connections, consent-based data sharing, interoperable service platforms and secure digital transactions can dramatically reduce switching costs and improve innovation. Open digital infrastructure can enable new service providers, aggregators and energy management companies to compete on customer experience without duplicating basic infrastructure.

The power sector has an opportunity to reform from a position of strength. Demand is growing, renewable energy is expanding, digital technologies are maturing, and consumer expectations are changing. These forces are converging to create the best opportunity in two decades to redesign electricity distribution. The question is not whether India's electricity sector will become more customer centric. The real question is how policymakers will shape and accelerate this change.

(The views expressed are personal)

This article is authored by Gaurav Bhatiani, senior fellow and Vaibhav Chowdhary, director, Ashoka Centre for a People-centric Energy Transition.