Transcript Distribution Reforms: Franchise … Sharing Experience of a Franchisee Torrent Power - Overview  Part of Rs.

Distribution Reforms: Franchise
… Sharing Experience of a Franchisee
Torrent Power - Overview

Part of Rs. 9592 Crore Torrent Group
• Power (Turnover – Rs. 7207 Crore)
• Licensee in Ahmedabad, Gandhinagar, Surat & Dahej
Distribution
• Franchisee in Agra & Bhiwandi
• Awarded Franchisee for Kanpur*
*-yet to takeover operations
Integrated
Power
Company
1647.5 MW Capacity
Generation
• 500 MW at Ahmedabad
• 1147.5 MW near Surat
Transmission • JV with PowerGrid for 400 KV network
2
Presence in the entire value chain of power sector
3
Contents

Current Status of Distribution in India

Desired objectives of Distribution reforms

Why distribution reform..& reform models

The input-based franchise model

Our experience

Key requirements for DF arrangement

Limitations of the Franchise model
4
Current Status of Distribution in India

High AT&C losses





Massive load shedding



Inadequate power availability
Inadequate capacity of evacuation corridors
Frequent power failures (low reliability)



5
Dilapidated network
Rampant Theft
Sub-standard/ old metering infrastructure
Low recovery
Due to very old and dilapidated network
Poor maintenance practices
Old and obsolete technologies still being used
Current Status of Distribution in India

Low customer satisfaction




Uninspiring work culture including unethical practices



Lack of accountability/ ownership among employees
No incentive for efforts
Unacceptable safety standards


6
Customer service standards are poor
Lengthy and tedious mechanisms for resolving consumer
grievances
Non adherence of SoP by Discoms and non insistence by the
SERCs
Lack of awareness
Lack of importance
Current Status of Distribution in India


Agriculture sector

High govt subsidies (realisation lower than cost of
supply)

Under-developed network

Not self sustaining as a separate business
Power availability

7
To manage power availability, there is discrimination in
meeting urban and rural demand
Desired Objectives of Reforms

Optimal cost of distribution

T &D Loss

Collection Efficiency

Manpower Cost

Capital Cost

Maintenance Cost

Customer services- Performance Standards

Quality of power

Safety

Choice of supply to consumer

Power to all (Urban/ Rural)
8
Why Distribution Reforms???

Present Distribution Scenario
• SEBs are majorly responsible for distribution
• Financial constraint – mounting losses
• Lack of requisite investment in T&D sector
• Lack of R&D in the distribution sector
9
Present Distribution Scenario – High Distribution losses
10
Source: Think BRIC – Comparative Study of Power Sector by KPMG- Jan 2010
Present Scenario of Power Shortage
Source: CEA publication
* Jul’11 as per CEA
11
Need of the hour

The power sector requires huge capital outlay to reduce the current
deficit and to sustain future GDP growth

It is not possible for the government to fund the growth of the sector
on its own

Investment are forthcoming in Generation from the private sector but
it is not sustainable if distribution reforms are not undertaken

Power distribution companies face an annual cash deficit of Rs
70,000 cr. Cumulative loss of Rs 80,000 cr of State utilities expected
to rise to Rs 1,15,000 cr in three years (ET Nov 5, 2011)
12
Models for Distribution Reforms
Allocation of
Responsibilities
Management
Contract
Franchise
Licensee
Asset ownership
Public
Public
Private
Operation & Maintenance
Private
Private
Private
Capital investment
Public
Private
Private
Commercial risk
Public
Private
Private
3-5 years
15-25 Years
Indefinite
Duration
13
High
Distribution Reform Process Effectiveness and Acceptance
Model
Contract
Management
Political Acceptance
SEB Driven
Reforms
Dist
Franchise
Low
Privatization
Slow
14
Reform Process
Fast
What is a Franchise?
As per Definitions of The Electricity Act, 2003
“franchisee” means a person authorised by a distribution
licensee to distribute electricity on its behalf in a particular area
within his area of supply;
Facilitation of Franchise Model in the Section 14 of the Act:
Provided also that in a case where a distribution licensee proposes
to undertake distribution of electricity for a specified area within his
area of supply through another person, that person shall not be
required to obtain any separate licence from the concerned
State Commission ………………………
15
Features of Input Based
Distribution Franchise
Role of a franchisee
State DISCOM
to supply power at
EHV substations
Fault Restoration
Planning
All Obligation and Rights of a
O&M
Revenue Collection
Distribution
Licensee
Energy Input
Metering
Generation
17
Transmission
Meter Reading
Customer Care
Distribution
Construction
CAPEX
Rights of DF

DF to distribute power in the franchise area for a fixed
term as per the agreement

DF is an exclusive agent of Licensee in the Franchise
Area

DF has all rights of a Distribution Licensee

E.g. authorization under Section 126, 135,152 of Electricity Act
2003
18
Responsibilities of DF

Purchase of power


From Licensee at EHV substations feeding the franchise area
Network Related

Network analysis and improvement planning

Make capital investment for renovation/ upgradation of
network

19
Distribution asset maintenance
Responsibilities of DF

Consumer Related

Metering

Meter reading

Billing as per Regulatory Commission’s approved Retail Tariff

Collection (both current revenues and arrears)

Issuing new connections

Adherence to all relevant Regulations of ERC including Supply
Code and SOPs

20
Attending consumer grievances
Responsibilities of Licensee

Supply of energy

As per the pre-determined schedule of supply on a non
discriminatory basis subject to power availability

Payment to DF upon expiry / termination

For assets created during the agreement term at depreciated
value.
21

For closing inventory

Arrears for last one month
Responsibilities of Licensee

Grant of Right to use of distribution assets in the circle

Network assets in field from the start of outgoing 33/22 kV
feeders of EHV s/s


Deputation of willing employees to DF

22
Assets in stores as opening inventory
Deputation rules/ deputation package of DF will be applicable.
Commercial Terms
Payment by DF
Charges for input energy as quoted by franchisee
Arrears collected
Security Deposit for new connections
Electricity Duty etc
D
F
Payment by Licensee
Incentive on recovery of arrears
Subsidy
Specified payments upon termination / expiry
Competitive bidding ensures that the State Discom
gets the right price for input energy
23
L
I
C
E
N
S
E
E
Benefits of Franchise Model

Reduction in technical losses and theft

Improvement in Metering, Billing and Revenue Collection

Ensures capital investments in upgradation of the
network

Enhancement in customer service quality
A win-win scenario for all:
Consumers, DISCOM and Franchisee
24
Technical Benefits

State of the art distribution system in franchise area

Lower peaking load due to better technical T&D
management

Better overall grid stability due to lower system
interruptions

Improvement in reliability parameters like SAIFI, SAIDI,
CAIDI, etc.
25
Financial Benefits to the State

Assured returns from distribution franchisee

No investment in the franchise area by licensee

Reduction in losses

Contribution to the Government exchequer
• Increase in collection of Electricity Duty as the metering and
billing becomes more accurate
• Increase in collection of other Central and State taxes pursuant
to growth of economy of franchisee area
26
Better services to Customers

Improved services
• Faster new connections/ load extensions
• Lower attendance time for faults
• Grievance Redressal mechanism
• Convenient bill payment facilities

Better availability and quality of power

Increased customer satisfaction
27
Bhiwandi & Agra: Introduction

Governments of Maharastra and UP took the lead in distribution
reforms and introduced a franchisee model for public-private
partnership

DISCOM consequently put through a process for selection and
appointment of a distribution franchisee for the Bhiwandi Circle in
Maharashtra & for Agra Urban Area of DVVNL and Kanpur
(KESCO) in Uttar Pradesh

Torrent Power was selected as the Distribution Franchisee through
an open competitive bidding process

Operations taken over from 26th January, 07 for Bhiwandi & 1st
April, 2010 for Agra
28
Bhiwandi Franchise experience
Bhiwandi
( at the time of takeover)
30
Area
721 sq kms
Population
10 lacs
No of Customers
160,000 Nos
Demand
800 MVA
Annual Energy Input
2500 MUs
Bhiwandi : At the time of takeover

AT&C losses : 58%

Mandatory load shedding of 6 hours at
the time of takeover and subsequently
increased to 8 hours

Further distress load shedding due to
deficit of 300 MVA in EHV Network

Overstressed distribution Network
• Overloading
• Breakdowns / trippings

Distribution transformer failure rate of
40%

Poor reliability of supply

Only 23% of the customers have
accurate metering and there are many
unregistered consumers
31
Key Challenges
Internal
• Human Resource
• Power Availability
 Manpower
 Load Shedding
 Integration
 Transmission Capacity
• Administrative Setup
 Offices
• T&D loss reduction
 Technical loss
 Commercial loss
• Reliability of system
• Safety
32
External
• Customer Confidence
 Customer Service
 Becoming
Bhiwandi
a
part
of
Overcoming the Challenge
Problem:
HR Challenge
Issue:
Creating administrative setup
Recruiting & Training of Manpower
Integration of all employees – TPL, MSEDCL, Laterals
and Freshers
Measures:
Offices made functional before Day One
Training provided in batches at Ahmedabad
Providing basic necessities – food, commutation
Defining uniform policies for all employees
Developing a “team attitude”
Direct communication with all employees regarding
Goals and Targets
Uniform and quick appraisal & reward mechanism
33
Bhiwandi Team Logo
34
Employee event
35
Sharing Goals and Targets
36
Organisation structure
37
Communicating Commitment
38
Employee feedback
39
Overcoming the Challenge
Problem:
Lack of Adequate Power
Issue:
Mandatory Load Shedding of 6 hrs increased to 8 hrs
Further distress load shedding of 2 to 4 hrs
Inadequate EHV transmission capacity
Measures:
Joint team with Transco & DISCOM formed
EHV network reconfigured
All support provided for creating additional capacity
Reduction in losses led to reduction in load shedding
as per MERC approved MSEDCL load shedding criteria
40
EHV Network Augmentation

Joint Team of TRANSCO /
DISCOM / DF to identify the
bottlenecks in Transmission
Network

3-Years EHV Augmentation
Plan prepared and got
approved
Pre-takeover
• Reconfiguration of EHV
Lines
• Additional power
transformers
• New EHV Substation
• Switchyard extension for
22KV feeders

41
1000 MVA Transformation
capacity added so far
Proposed
Overcoming the Challenge
Problem:
Frequent Power Failures
Issue:
2 to 3 DTs failing everyday
Frequent conductor breakdown
Overloaded System
Lack of adequate maintenance leading to deterioration
of network
Long restoration time in case of faults
Measures:
Failed DT replaced within 24 hours
24 x 7 control room to ensure faster restoration
All DTs revamped
42
Overcoming the Challenge
Problem:
Technical Losses
Issue:
Overloaded feeders leading to higher I2R losses
Improper crimping at joints
Poor power factor of the system
Measures:
Reconfigured the existing feeders
Added 29 new feeders to the existing 46 feeders
Added 125 MVA distribution transformer capacity
Proper termination and crimping provided
Installed capacitor banks to improve power factor
43
Distribution System
22 KV feeders
Distribution Transformers and FSPs
44
Shunt Capacitors
45
Overcoming the Challenge
Problem:
High Commercial losses
Issue:
Only 23% customers metered
Rampant theft of energy
No substantial action against non payment of bills
Measures:
Provide systematic metering for accurately measuring
consumption of the customers
Securitization of the network and extensive vigilance
Filing of FIR in case of repetitive power theft
Streamline processes to improve collection efficiency
“Ujjwal Bhiwandi Abhiyan” for legalising connections
46
Metering
47
Ujjwal Bhiwandi Abhiyan
More than 1 lacs connections since launch of UBA in Sept 07
48
Overcoming the Challenge
Problem:
Safety
Issue:
Lack of adequate clearance with lines
Transformers located at roadsides without any fencing
Double feed through hooking
LT/HT lines in poor condition (conductor snapping)
Measures:
Lines replaced by underground cables at critical
locations where clearance are issue
Earthing provided for all poles, transformers
Removal of double feed
Fencing provided for transformers
Lines replaced, where necessary
Public Safety Awareness programs
49
LT Network Revamping
50
Safety
51
Overcoming the Challenge
Problem:
Customer Service
Issue:
No concept of customer service
No consumer redressal system
Customers had lost confidence in utility
Measures:
Call Center started from Day One
Customer friendly bill introduced
2 Customer Service Centers Opened
Customer Redressal Mechanism established
Mobile Van as a value added service
52
24 x 7 Call Center
53
Customer Care Centers
54
Customer friendly bill
55
Overcoming the Challenge
Problem:
Creating Customer Confidence
Issue:
Public was instigated against a private company taking
over
No knowledge about Torrent’s capability
Measures:
A series of programs with influential citizens
informing them about Torrent Power
Direct interaction with Customers through letters
Performance standards widely publicized in direct
mailers, cable TV, hoardings
Cultural adaptability – active participation in all festivals
Completing the communication loop through customer
feedback - Setup a Customer Advisory Committee
56
Direct Interaction with Customers
57
Community development activities
Dahi Handi
Ganesh
Chaturthi
Iftar Party
Becoming a part of the social fabric
58
Customer Advisory Committee
59
The results
Major Accomplishments :
Distribution Transformer Failure Rate
At the time of takeover
40%
As on 31st
Mar’11
As on 30th
Sep’11
2.5%
2.24%
DT Failure Rate reduced by 37%
61
Major Accomplishments : Load Shedding
At the time of takeover
As on 31st Aug’11
10 to 12
hours
Less
than 3
Hrs
Reduction in losses has improved power
reliability in the area
62
Major Accomplishments : Accurate Metering
As on 31st Aug’11
At the time of
takeover
23%
>99%
99% of sales is based on actual reading.
63
Major Accomplishments: AT&C Loss
At the time of takeover
As on 31st Mar, 11
58%
17.95%
Reduction of 40%
64
Torrent Power
in
Agra
Commencement operation from 1st April, 2010
Agra…
International Tourist Place
Area : 200 Sqkms
Population : 20 Lacs
Customer base : 2.8 Lacs
Peak Demand : 426 MVA
Energy Input : 2200 MU
33KV OH Line : 230 Kms
33/11KV Substations : 41 Nos
11KV OH Line : 640 Kms
DTCs : 3600 Nos
HT Consumers : 350 Nos
LT Network : 1500 Kms
66
Initiatives at Agra
A
Reliability
B
Customer
Services
C
AT & C Losses
Modernization of S/S
E-Links – Extensions Counters
Metering / Reading / Billing
Capacity Addition
Call Center – 60 Lines
Mass Meter Replacement
Creating ring mains
Declared performance targets
- Weekly Reviews
Expediting Legal connections
Revamping & u/g of network
E-Bills and E-Payments
Extensive NPB / vigilance drive
O&M Practices
Extended Counter Timings,
Drop- Boxes
Undergrounding of networks
Enhanced Safety, Reliability and Improved Customer Services
67
Reliability

Renovation and modernization of
33/11KV substations

Creating a 33KV ring mains system
 To provide alternate feed (as compared to
radial system)
 120 Kms to create ring mains covering all
substations
 Conductor replacement of existing 33KV
Overhead lines
68
Reliability

Transformer Replacement & Revamping
 Since takeover, we have replaced around
1600 transformer against failure, overhauling
and augmentation
 Carried out overhauling of around 330 DTs
 Around
650
transformers
have
been
revamped with erecting fencing around the
transformer and also locking facility to avoid
encroachment.
69
Undergrounding of LT network
70
Feeder Reliability….
71
Month
Daily Feeder Availability (Minutes)
% Reliability
Apr-10
1223
84.93%
May-10
1203
83.54%
Jun-10
1235
85.76%
Jul-10
1238
85.97%
Nov-10
1381
95.90%
Dec-10
1358
94.31%
Jan-11
1377
95.63%
Apr-11
1386
96.25%
May-11
1300
90.28%
Jun-11
1324
91.94%
Jul-11
1366
94.86%
Aug-11
1360
94.44%
Sep-11
1359
94.38%
Oct-11
1294
89.86%
Nov-11
1367
94.93%
Customer Services

24 X 7 Outage Management Crews

24 x 7 Call center

3 Customer Care Centers / 18 Bill Payment Centers

Extended working hours (0900 Hrs to 1900 Hrs) & working on sundays

Duplicate bills on at all CCC & BPCs

Mobile Offices / Vans
72
Customer Services

SMS alerts for planned outages

Customer Friendly Bills

E-bills to all customers who register their e-mail ID

On line bill payment facility

High value consumer complaint handling by senior officer through dedicated e-mail ID
([email protected])

Common E-mail ID for all customers ([email protected])

Specials camps for billing / arrears related disputes
73
Customer Care Center at Sadar Bazar
74
Customer Service Counters
75
Customer Service Representatives
76
CCC-Help Desk
77
24 X 7 Self-help Kiosks
78
Customer centric approach through innovation
Mobile Van
79
Online payment facility
80
24 x 7 Call Center
State of Art Call Center
Priority Customer Handling
Dedicated Number
Caller line identification
All meter, power, billing, connections
related complaints / information
81
Frequent outbound to customers
Upgrading Metering Systems
82
Roshan Agra Yojana (RAY)
83
RAY….. Why ?
 To provide opportunity to customers of slum areas and economically
weaker sections.
•Subsidized service line charges
•Facility to pay service line charges in installments
•Connections given within 15 days by camping at site and processing
the applications there itself.
After creating a safe and legal network, if a consumer still prefers to steal
electricity then we would have to book him for theft.
By way of this till date we have released 8800 services.
84
Roshan Agra Yojana Camp
85
The results..so far..
Major Accomplishments: AT&C Loss
Upon takeover
For Q2 (11-12)
70%
52.56%
Reduction of 17%
87
Major Accomplishments :
Distribution Transformer Failure Rate
At the time of takeover
As on date
40%
13%
DT Failure Rate reduced by 27%
88
Major Accomplishments : Accurate Metering
At present
At the time of takeover
90%
35%
89
Key Requirements for DF arrangement
Key Requirements for DF Arrangement

Huge Capital expenditure is required to renovate and modernize the
network

Longer tenure (20 to 25 years) increases the investment by Franchise
thereby increasing the pace of reforms

Franchise should have appropriate customer mix and have sufficient load to
have benefit of scale of operations (Input Energy of 2500 MUs per year)
• Non discriminatory distribution of customer categories in DF area
• HT category should not be separated from DF area: As it creates overlap in network
Area will attract the large and experienced players &
Tenure will attract the required level of investment from them.
91
Key Requirements for DF Arrangement

The required power should be made available
• Despite the marked improvement brought in Bhiwandi, change
not visible as load shedding continues
• Customers want quality power 24 x 7
• Availability of adequate upstream infrastructure (Transmission
Capacity) to cater to the demand in the franchise area
• Distributed Generation based Dist Franchisee is a step in the
right direction
Franchise should be provided with adequate power so that the benefits of the
improvement are realized
92
Key Requirements for DF Arrangement

In Franchise, the overall control lies with Distribution licensee, but to
ensure success, independence in operations should be given to
Franchisee
• Right to do Capital Expenditure at its own discretion
 Only then can a franchisee bring in the required level of
improvement in the system which is the main objective of
franchising an area
• Rights under section 126,135 of Electricity Act 2003 to stop theft
 Adequate police and admin support could help
• Non – interference in day-to-day activities
Franchise should be given the rights as long as it follows the orders of Regulatory
Commission and the prevalent laws of land
93
Key Requirements for DF Arrangement

Adequate support from the State Discom
• Manpower (On deputation from Licensee)
 List of interested employees to be made available to DF
 DF should have the right to select / reject from the list without assigning
any reason
 Term of Deputation to be mutually decided
 Employee on deputation cannot go back on their own
• Coordination with local authorities / Govt. bodies
Support of Govt , Discom and general public is essential for success of DF
94
Key Requirements for DF Arrangement

For certain statutory / regulatory processes, Franchisee should be
considered independent of licensee
• Levy of Service Line Charges
• Accelerated Power Development and Reforms Programme
• Regulator need to recognise the locus standi of the franchisee so as to ensure
that interests of the customers of the franchise area are protected
Franchisee should have the right to approach the regulator wherever
required
95
Key Requirements for DF Arrangement

Loss reduction trajectory:
• There should not be any penalty for non-achievement
• Non reduction of loss is itself a loss to a Distribution Franchisee
• Penalty will only further strain franchisee’s resources

Data needs to be more reliable:
• To restrict bidder to have any built in margin due to erroneous data

Minimum Benchmark Input Rates:
• It does not allow price discovery
• Should be given as indicative only – not as mandatory minimum
Franchisee must be given a proper space to carry out improvements as per its
own discretion
96
Limitations of Franchise


Uncertainty on completion of tenure

Does the area go back to the SEB OR fresh round of bidding

In either case, sustainability of the efficiency parameters is a question mark
Franchisee may not invest in non-profitable Capex e.g. Safety,
customer services, aesthetics, etc


Subsidised power to franchise area


Consumers of other areas may object that the franchisee area is supplied power
at lower than average State pool cost
Locus standi with the Regulator

97
Little incentive to take a long term view and build brand equity due to fixed
contract period
Franchisee is dependent on the licensee to approach the Regulator for issues
like additional power purchase etc
Limitations of Franchise

Regulatory approval for Franchisee Capex




98
The capex does not meet the level of scrutiny that a licensee’s capex does.
Expectation that Franchisee would meet SoP from day one

Not possible for the Franchisee to meet the SOPs from day one considering the
state of affairs handed over to it

Since Franchisee has to bear the penalty for non-compliance, it would lead to
undue strain on the franchisee
Franchisee may not make any efforts to recover old arrears of SEBs

Franchisee does not take over any liability of the old arrears

May not be interested in recovering the arrears for earning commission
Continuous investment in capex may not happen during the later
part of the franchise
Thank you