CAs and lenders ask about power expense because electricity is a major operating cost and a useful signal of factory activity. They do not need stories. They need bill evidence, operating context and a clean explanation for abnormal months.
If the owner can explain power cost clearly, finance discussions become calmer. If the answer is only “bill zyada aaya”, confidence drops.
Why do finance teams ask about power cost?
Electricity expense affects gross margin, product costing, working capital and loan projections. For some factories, power is a visible cost line. For others, it is a warning signal when production and expense do not move together.
A CA may ask because:
- monthly expense moved sharply
- arrears or adjustments entered the bill
- power cost does not match sales trend
- solar or DG entries need classification
- prepaid or deposit treatment is unclear
- management wants product costing support
A lender may ask because power bills help assess operating scale, capacity utilisation, seasonality and capex need.
How should power cost per output be discussed?
Use a simple, consistent operating indicator. It may be units produced, tonnes processed, machine hours, batches, occupancy or sales value. Do not force one metric across different business types if it makes no operational sense.
The aim is to answer: did power expense move because the business did more work, or because the electrical pattern worsened?
Useful comparisons include:
- kWh per production indicator
- power cost per production indicator
- demand charge trend
- kVAh versus kWh relation
- shutdown month base consumption
- seasonal note
The foundation is monthly factory bill tracking. Without a tracker, every finance query becomes a fresh document hunt.
How do you explain abnormal bills?
An abnormal bill should be split before explanation. Was the change from energy, demand, surcharge, arrears, duty, PF, kVAh or ToD? The reason decides who should answer.
Examples of sound explanations:
- Production increased and operating days were higher.
- Maximum demand rose after commissioning a new machine.
- A previous provisional bill was adjusted this month.
- Summer cooling load increased office and process utility use.
- PF correction failed and kVAh rose relative to kWh.
- A shutdown month still carried base load and fixed demand charges.
Weak explanations blame “meter issue” without evidence. If a meter issue is suspected, keep readings, photos and complaint records.
What evidence supports savings claims?
Savings claims need before-after evidence. This matters for solar, APFC, compressor work, lighting retrofit, VFD projects and HVAC changes.
Keep:
- bills before the project
- bills after the project
- production or occupancy context
- commissioning date
- generation or meter records, where relevant
- invoices and scope documents
- notes on tariff changes or abnormal months
For solar, do not compare only the payable amount. Import, export, generation, demand and tariff treatment all matter. If outages are part of the business case, link the discussion with production loss from power cuts.
What do lenders expect in projections?
Lenders generally want assumptions that can be defended. If a project proposal says power cost will fall, show the mechanism. Is it solar self-consumption, lower demand, better PF, reduced DG runtime, new efficient machinery or process change?
Do not put aggressive savings into projections without measurement. A lender may not challenge the engineering detail, but they will challenge unsupported numbers if cash flow depends on them.
The article on where electricity goes in a factory bill helps convert a bill into a practical operating story.
Tips from the field
- Keep a single folder with monthly bills, tracker, production notes and major energy project documents for audit and loan discussions.
- Explain abnormal bills by charge line first, then by operating reason; this avoids vague plant-versus-accounts arguments.
- Record commissioning dates for solar, APFC, compressor or HVAC work so savings comparisons start from the correct month.
- Do not present solar savings without production context; lower grid import can be caused by lower production too.
- Separate arrears, deposits and delayed payment charges from normal power expense when discussing operations.
- Keep outage and DG logs if reliability spending is part of a loan or capex justification.
How can the owner prepare before being asked?
Prepare a concise power expense note each quarter or before loan appraisal. Include the bill trend, major changes, abnormal months, savings actions and open risks. Use the bill audit guide if the numbers do not reconcile.
Finance people do not expect the owner to speak like an electrical engineer. They expect the story to match the bills. When the bill evidence, plant notes and accounts classification agree, power expense becomes a manageable line item instead of a nervous question.
What should the note avoid?
Avoid unsupported claims. Do not write that a project saved money if production fell in the same period and the comparison has not been adjusted. Do not say the meter is wrong unless readings, photos or complaint records support that position. Do not mix deposits, arrears and normal consumption in one explanation.
A good note is modest and traceable. It says what changed, what evidence supports it, and what is still being checked. That tone works better with auditors and lenders because it shows control. It also protects the owner from committing to savings or cost assumptions that the next bill may contradict.
How should multiple meters be presented?
If the business has more than one meter, present each connection separately before adding totals. A factory meter, office meter, warehouse meter and solar net meter may tell different stories. Combining them too early can hide the reason for a change.
Show the connection number, tariff category, main use, monthly units, demand and payable amount. Then add a short comment for abnormal movement. This format helps a CA trace the ledger and helps a lender see which part of the business carries the power cost.