Transcript Private Sector Participation in Distribution
Private Sector Participation in Distribution
Puneet Munjal, Sr. GM
TATA POWER DELHI DISTRIBUTION LIMITED (formerly North Delhi Power Limited) Dec 23, 2011
Contents
•
Key Issues in the Distribution Sector
•
Need for Private Sector Participation
Tata Power Delhi Distribution Limited (A PPP Model)
•
Pre Reforms Situation in Delhi
•
Reforms Objectives
•
Delhi PPP Model
•
About Tata Power Delhi Distribution Limited
•
Our Turnaround Story
•
Initiatives
•
AT&C Loss Reduction
•
Reliability
•
Consumer Service Excellence
•
Change Management
•
Corporate Sustainability
Key Issues in the Distribution Sector (1/3)
• High Aggregate Technical and Commercial Losses • National Average at 26-28% • Absence of Cost Reflective Tariffs • Huge Revenue Gaps for discoms on account of Deferred Tariffs: creation of Regulatory Assets
not in favor of anyone except bankers !
• Incorrect economic signals to consumers on consumption vis-à-vis price • As per Plng. Commission’s HLP Report, losses of SEBs at end of 2010 at Rs. 1,07,000 Cr; to increase to app. 2,90,000 Cr. by end of XII Plan (2017) at existing tariffs
Source: PFC Report on Performance of Power Utilities 2009-10 Source: PFC Report on Performance of Power Utilities 2009-10
Key Issues in the Distribution Sector (2/3)
• • Huge Cross subsidies built into existing tariff structures • Major inhibitor to introduction of Competition under Open Access Framework • Insignificant progress towards Tariff Rationalization in line with NTP Spiraling Generation Tariffs • No control on Input (Coal/ Gas cost for Power Generation) but output cost (Retail Tariff) is controlled • Dissonance between Generation and Distribution Regulations – while in Distt., efficiency is expected to be brought annually in O&M Costs (RPI- X), no such requirement in Generation.
Source: PFC Report on Performance of Power Utilities 2009-10
• Competition Open Access yet to take off 4
State Owned DF PPP Current Scenario (More than 85% state owned)
Need for Private Sector Participation
•
Professional and Accountable Management
Pvt •
Introduction of Best Practices
What can private participation offer ?
•
Agility in decision making
•
Attract talent in the Distribution Sector
•
Responsiveness to consumer expectations
•
Ability to inculcate Performance Orientation in Employees
•
Equity contribution by private players can free scarce state resources for public use Private participation – insulates Utility from Political Interference ; runs utility on Commercial principles
5
Need for Private Sector Participation
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Observation of High Level Panel studying various distribution models in India
•
Govt. owned utilities have to perform within a rigid framework coupled with low levels of accountability While, Private Utilities enjoy greater flexibility in operations, are more focused on their actual businesses and have greater individual accountability at all levels
•
To raise high density areas to optimum levels of efficiency and performance, these should be carved out into separate entities and privatized
6
Some Pre Requisites for Private Sector Participation
• • • • • •
Sustainable Business Model
• Reasonable Return after recovery of costs • Clean Balance Sheets
Reasonably Accurate Baseline Stable Regulatory Regime: MYT Policy Cost Reflective Tariffs Govt. Support for
• • Transition Loss Reduction : Police Force, Special Courts
Freedom to select employees (maybe restricted)
7
Models for Private Participation
Sale of 51% Equity to Pvt. Player PPP Model Delhi / Orissa Discoms • Distribution Companies privatized by Govt. through sale of majority stake • License-based Regulated business – license for 25 years • AT&C loss targets as bid variable; Guaranteed 16% RoE on meeting AT&C Loss Reduction Targets. • Tariff set by regulator on cost plus RoE. • Overachievement gains shared with consumer • Transition Support by Govt.
• Performance Assurance Standards vested with licensee Franchisee Model Bhiwandi • Licensee appoints franchisee for a tenor of 15-20 yrs • Input Rate for Bulk Power as bid variable • Assets transferred to Franchisee on license to use basis • Franchisee Tariff similar to that of remaining licensee area • Performance Standards of licensee to be maintained by Franchisee • Franchisee insulated from direct Regulatory Oversight; Licensee adopts the Regulatory Role Concession Based PPP Model (under consideration) • Long Term Concession – BOOT basis • Assets transferred to Concessionaire on License to Use Basis; to be returned to Concession Granting Agency on termination of Concession Agreement • Bid Evaluation Criteria – positive / negative Viability Gap Funding Requirement based on a pre determined wheeling tariff • Regulator to only fix the Retail Supply Tariff based on actual cost of input • Penalties/ Incentives for over/underachieving Performance Assurance Standards – to be specified in the RFP/ Concession Agreement 8
Tata Power Delhi Distribution Limited (A PPP Model)
Joint Venture between Tata Power (51%) and Govt. of Delhi (49%) Distributing Electricity in North and North West of Delhi
Pre Reforms Situation in Delhi
Pre 2002 Delhi Electricity Board – A Vertically Integrated Utility Burgeoning Aggregate Technical & Commercial (AT&C) Losses - 50% - 60% Condition of Network Pathetic – supply system on the verge of collapse Govt. Subsidies of ~ Rs. 1200-1400 Cr. p.a. Billing Receivables Close to 1 year Outstanding Harassed Consumers- Large no. of Complaints and Requests Backlog Lack of accountability, initiative & service orientation in ageing and semi skilled workforce Ill maintained administrative infrastructure and no IT Enablement Sector becoming increasingly unviable leading to decision to reform through unbundling and privatization
Attract investment
Reforms Objectives
Improvement in Quality of supply Focus on Consumer Service Make Sector Self Sustaining Reduction in AT&C Losses
Delhi PPP Model: 2002
Integrated SEB unbundled: Generation, Transmission and three Discoms Discoms privatized (51%) through sale of majority stake at par value AT&C Loss Reduction Commitment: Sole Bid Evaluation Criteria Clean Balance Sheets with only serviceable liabilities Guaranteed 16% RoE on meeting AT&C Loss Reduction Targets Overachievement gains shared equally between Utility & Consumers Power Purchase cost to Discoms subsidized through Govt. owned Bulk Buyer Transco to prevent tariff shocks Transition Support by Govt. to Transco – (Rs. 3,450 Cr. over first five years) to cover Transco’s deficit which was to be paid by Discoms for Power on Capacity to Pay basis
Delhi PPP Model:2002
Government Oversight through Board Shareholders Agreement between Govt. of Delhi (49%) and Tata Power (51%)
Salient Features of Shareholder Agreement are as follows:
Private Entity entitled to appoint MD/ CEO and all other Executive Directors of the Company.
Govt. Nominees on Discoms’ Board of Directors – One less than Majority Shareholder.
Quorums for Board Meetings – at least one Govt. Nominee Director to be present Approval of Govt. Directors essential in critical matters till the Govt. Entity holds 10% or more of Discom Equity Govt. Partner Entity entitled to examine books and accounts kept by the Discoms and to be supplied with all relevant information including quarterly management account and operating statistics.
Prior intimation to Govt. Partner Entity for transfer of shares in excess of 26% of total equity share capital First Right of Refusal on Sale of Shares with both Shareholders 13 Fully protects the interest of the Government and citizens at large
Delhi PPP Model:2002
Regulatory Oversight • License issued by the DERC w.e.f. March 12, 2004 for distribution and retail supply of power in North and North West Areas of Delhi. • The same is valid for a period of 25 years from this date. • • • The Licence may be renewed by the DERC for such further period or periods and on such terms and conditions, as it may consider appropriate The Licence lays down the Terms and Conditions for operation of the License together with the conditions under which the Licence can be suspended / revoked. 14
Our Turnaround Story
About Tata Power Delhi Distribution Limited
• • • • • The Tata Power Company Ltd. and Govt. of Delhi JV (51:49) License Area : N. Delhi- 510 sq. km Consumer Base : 1.1 Mln ; serving population of 5 Mln Peak Load Served : ~ 1300 MW Employee Base : 3998 Tata Power : Largest Integrated Power Co. in Private Sector Tata Power Delhi Distribution : ISO 9001, 14001, 27001 ; SA 8000 Certified
Our inheritance
Bleeding with 53.1 % Technical & Commercial losses Un-reliable Power Situation Transformers’ failure rate 11% Absence of key management functions like HR, Finance, Governance etc.
1,00,000 Billing Complaints 20,000 New Connections Erroneous consumer database A workforce of 5600 employees with little skill set 17
Areas of Focus
Our Sustainability Philosophy
Success Parameters Drivers
AT&C Loss Reduction Operational Excellence Consumer Service Excellence
ATC Levels
Shareholder Value
Reliability Indices
Care for Customer
Skilled & Motivated
Excellence
Workforce
Environment
Improving CSI Score
Consumer Centric Inclusive Approach
Care for Community Care for Environment
Safety
TCCI Score AA Score Becoming Carbon Neutral
Care for Community
Innovative Technology Adaptation Passion for excellence
Tata Power Delhi Distribution Limited: Snapshot of Turnaround
Parameter
AT&C Losses System Reliability – ASAI Transformer Failure Rate Length of Network Power Transformation Capacity Distribution Transformation Capacity New Connection Energization Time Peak Load Number of Consumers Number of employees Street Light Functionality Capex Incurred (Cumulative) Consumer Satisfaction Index Employee Satisfaction Index
UoM
% % % Ckt. Km MVA MVA Days MW Nos. ‘000 Nos.
% Rs. Cr.
% %
July 2002 (on takeover)
53.10 70 11 6750 1730 1926 51.8
930 700 5600 40 920 -
2010-11
13.2
99.9
1.10
10034 3209 4160 7.3
1313 1184 3981 99.1
3663 88 72
% change
75.1
42.7
90 48.6
85.5
116 85.9
41.1
69.1
28.9
147.7
298.1
19
AT&C Loss Reduction
• • • •
Consistently overachieved AT&C Loss Reduction Targets Saved over Rs. 6500 Crs. for Exchequer over last 9 years Pre-paid to Govt. its 552 Cr. Opening Balance Sheet Loan in the fourth year against 13 years tenor Started paying dividends from the 4 th year of operation
20
Initiatives Undertaken
I.
AT&C Loss Reduction Initiatives (1/2)
• • • • • Energy Audit up to the DT level – prioritizing focus HVDS & LT ABC Implementation – Technology interventions for theft prevention Replacement of Electromechanical meters with Electronic meters AMR for all High Revenue consumers – 70% of Total Revenue Aggressive Enforcement activities with scientific inputs & analysis Energy Audit at 4 levels HVDS LT ABC AMR
• • •
AT&C Loss Reduction Initiatives (2/2)
Collaboration with NGOs – awareness creation across LA especially slums Public participation in controlling Theft through Community pressure Separate Segment for consumers at Bottom of Pyramid –Sp. Consumer Group • Employment Oriented Vocational Trainings - “ Creating Capacity in consumers to
pay before asking them to pay”
Removed Hooks after Raid Meeting Reforms Objectives • •
Consumers
24x7 Supply of Power Moderate Tariffs New Connection Camps
Government
Govt. Exp. On Distt. Sector minimized Red Colored Bills for Default
Shareholders
Handsome Returns RoE :CAGR 21%
II.
Reliability Improvement (1/2)
• • • • Focused approach to improving Network Reliability & N-1 redundancy Capital works of over Rs. 2743 Crs commissioned in 9 years on an acquired asset base of Rs. 920 Crs Innovative Technology Adaptation: Various Work Systems automated and integrated to improve Reliability and Efficiency Many Firsts: SMS Based Fault Management System Unmanned Grids Packaged Substation SCADA GIS
Reliability Improvement(2/2)
• • • • Energy Security PPAs • Executed long term PPAs for appr. 1700 MW over 1281 MW allocated Own Generation • Establishing 108 MW Gas Based Power Plant • Enables supply continuity to critical installations even during Grid Collapse Developing Renewable Portfolio Established first operational MW SPV Plant in Delhi TPDDL Generation Plant at Delhi 1 MW SPV at Delhi Addressing Reform Objectives
Consumers
Improved Service Quality
Consumers
Reliable Power Supply
Government
Enhanced Consumer Satisfaction
III. Consumer Service Excellence (1/3)
• Revamping Consumer Experience • BPR of Revenue Management Cycle • Integrated Commercial Software developed in-house to automate workflow • • • 14 Fully networked consumer care
centers
Call Centers for No Supply and Commercial Complaints The SUGAM Experience – Billing database of 100% of consumers on website Business Process Reengineering of RCM Sugam - website Commercial Call Center
Consumer Service Excellence (2/3)
• Innovative Consumer Offerings in Delhi Distribution Sector
Benchmarked to Banking industry
•
Door Step Delivery of New connections
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SMS based pull services
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Instant Connection
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Video conferencing for Consumers
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E-Bills
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Automatic Cash/Cheque Collection machines
Consumer Service Excellence (3/3)
• Inclusive Approach • • Meetings with RWA /IWA Segmented Consumer meets • Segment wise Relationship Approaches • Client & Account Managers for Xpress, KCG & HRB consumers • Consumer Relationship Officers (CROs) for HCB Consumers.
• Special Consumer Group Addressing Reform Objectives
Consumers
Redefined Service Delivery
Government
Enhanced Consumer Satisfaction
IV. Change Management(1/2)
• Organization Performance Alignment through BSC Approach
TPDDL entered “BSC Hall of Fame” in 2008 for its effective use of BSC to attain organizational objectives
Change Management (2/2)
• •
Capability Development & Knowledge Management
• Training Center- CENPEID for own and other Utilities employees • Sanchay (Repository) – Knowledge Management Portal linking all employees • SEEKH (Learning) – Platform for Sharing of Best Practices and Knowledge • TPDDL Innoverse and SHINE – Fostering culture of innovation & improvement
Multiple Communication Forums to encourage employee participation
• SAMVAD (Dialogue Sessions) constituted for two way communication.
• Joint Interaction Forums • Meet the CEO • SARTHI (Helpdesk)launched to capture and resolve Employee Grievances • Multilingual Newsletters for internal communication
Consumers Employees
Addressing Reform Objectives
Consumer Centric Employees Learning & Growth
V.
Corporate Sustainability (1/2)
• 3 pronged Inclusive Approach • Philanthropic • Compensatory • Business Oriented Village Adoption Support to MS Patients • • • • Affirmative Action to support Underprivileged through • Education Employment Employability Entrepreneurship Development Drug De-Addiction Camps Free Health Camps Energy Conservation Street Plays
Corporate Sustainability (2/2)
•
Climate Change Initiatives
• Carbon footprint reduced by 75% from 0.41 to 0.10 TCO2/Mwh (2002-03 to 2010-11) on account of loss reduction • Aspire to be Carbon Neutral and Water Neutral by 2014-15 • Renewable Projects – Roof Tops (5-10 MW) • Water Harvesting projects being initiated at Grids in Phases • Demand Side Management • Green Village Project • Delhi Water Utility Peak Shifting Project • LED Hoardings & Streetlights