distribution franchise … an experience. 2 integrated power company torrent power – at a glance...

Distribution Franchise

… An Experience

2

Integrated Power Company

Torrent Power – At a glance

Part of Rs. 8200 Crore Torrent Group

• Pharma (Turnover ~ Rs. 1916 Crores)

• Power (Turnover – Rs. 5958 Crores)

• Licensee in Ahmedabad, Gandhinagar & Surat• Franchisee in Bhiwandi, Agra & Kanpur*

DistributionDistribution

1647.5 MW Capacity • 500 MW at Ahmedabad• 1147.5 MW near Surat

GenerationGeneration

• JV with PowerGrid for 400 KV network TransmissionTransmission

* - yet to takeover operations

4

Why Distribution Reforms???

Present Distribution Scenario

• SEBs are majorly responsible for distribution

• Monopoly – Defined License areas

• Lack of requisite investment in T&D sector

• Lack of R&D in the distribution sector

5

Present Distribution Scenario – Drawbacks!

High AT&C losses

Frequent power failures due to very old and dilapidated network

Massive load shedding

Low customer satisfaction• Customer service standards are poor• Lengthy and tedious mechanisms for resolving consumer grievances

Uninspiring work culture

Old and obsolete technologies still being used

Unacceptable safety standards

6

0

5

10

15

20

25

India Russia China Brazil World

23.2

10.66.7

16.4

8.5

Distribution losses in developing countries in 2008

Source: Think BRIC – Comparative Study of Power Sector by KPMG- Jan 2010

Present Distribution Scenario – High Distribution losses

7

Present Scenario of Power Shortage

8

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

The government has embarked on an aggressive mission – “Power for All by

2012” and the private sector has a key role in achieving the objectives stated

in the mission

Need of the hour

9

Models for Distribution Reforms

Allocation of Responsibilities

Management Contract

Franchisee Licensee

Asset ownership Public Public Private

Operation & Maintenance Private Private Private

Capital investment Public Private Private

Commercial risk Public Private Private

Duration 3-5 years 10-20 years 25 years

10

Distribution Reform Process Effectiveness and Acceptance Model

Privatization

DistFranchise

SEB DrivenReforms

ContractManagement

Pol

itica

l Acc

epta

nce

Low

Hig

h

Reform ProcessSlow Fast

11

Benefits of Franchise Model

Reduction in technical losses and theft

Improvement in Metering, Billing and Revenue Collection

Capital investments in upgradation of the network

Enhancement in customer service quality

A win-win scenario for all:Consumers, DISCOM and Franchisee

12

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.

13

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

14

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

15

What is a Franchisee?

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

………………………

Features of Input Based Distribution Franchise

17

Role of a franchisee

Generation Transmission Distribution

Energy Input Metering

Fault Restoration

O&M

Customer Care

Revenue Collection

ConstructionCAPEX

Planning

Meter Reading

State DISCOM

to supply power at

EHV substationsAll Obligation and Rights of a

Distribution Licensee

18

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

19

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

Distribution asset maintenance

20

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

Attending consumer grievances

21

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.

For closing inventory

Arrears for last one month

22

Responsibilities of Licensee

Grant of Right to use of distribution assets in the circle

Network assets in field from the start of outgoing 22 kV feeders of

EHV s/s

Assets in stores as opening inventory

Deputation of willing employees to DF

Deputation rules/ deputation package of DF will be applicable.

23

Commercial Terms

DF

LICENSEE

Payment by LicenseeIncentive on recovery of arrears

SubsidySpecified payments upon termination / expiry

Payment by DFCharges for input energy as quoted by franchisee

Arrears collectedSecurity Deposit for new connections

Electricity Duty etc

Competitive bidding ensures that the State Discom gets the right price for input energy

Bhiwandi Franchise experience

25

Bhiwandi : Introduction

Government of Maharastra 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 of its

license area of Maharastra State

Torrent Power was selected as the Distribution Franchisee through an

open competitive bidding process

Distribution Franchise Agreement was signed with DISCOM on 20th

December, 2006

Operations taken over from 26th January, 07

26

Area 721 sq kms

Population 10 lacs

No of Customers 160,000 Nos

Demand 800 MVA

Annual Energy Input 2500 MUs

( at the time of takeover)

Bhiwandi

27

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

28

Key Challenges

Internal

• Human Resource Manpower

Integration

• Administrative Setup Offices

• T&D loss reduction Technical loss

Commercial loss

• Reliability of system

• Safety

External

• Power Availability Load Shedding

Transmission Capacity

• Customer Confidence Customer Service

Becoming a part of Bhiwandi

29

Overcoming the Challenge

Problem: HR Challenge

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

Issue: Creating administrative setup

Recruiting & Training of Manpower

Integration of all employees – TPL, MSEDCL, Laterals and Freshers

30

Bhiwandi Team Logo

31

Sharing Goals and Targets

32

Communicating Commitment

33


Problem: Lack of Adequate Power

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

Issue: Mandatory Load Shedding of 6 hrs increased to 8 hrs

Further distress load shedding of 2 to 4 hrs

Inadequate EHV transmission capacity

34

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

• Reconfiguration of EHV Lines

• Additional power transformers

• New EHV Substation

• Switchyard extension for 22KV feeders

250 MVA Transformation capacity added so far

Pre-takeover

Proposed

35


Problem: Frequent Power Failures

Measures: Failed DT replaced within 24 hours

24 x 7 control room to ensure faster restoration

All DTs revamped

Issue: 2 to 3 DTs failing everyday

Frequent conductor breakdown

Lack of adequate maintenance leading to deterioration

of network

Long restoration time in case of faults

Overloaded System

36


Problem: Technical Losses

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

Issue: Overloaded feeders leading to higher I2R losses

Improper crimping at joints

Poor power factor of the system

37

Distribution System

22 KV feeders

Distribution Transformers and FSPs

38

Shunt Capacitors

39


Problem: High Commercial losses

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

Issue: Only 23% customers metered

Rampant theft of energy

No substantial action against non payment of bills

40

Metering

41

Ujjwal Bhiwandi Abhiyan

98000 connections since launch of UBA in Sept 07

42


Problem: Safety

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

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)

43

LT Network Revamping

44

Safety

45


Problem: Customer Service

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

Issue: No concept of customer service

No consumer redressal system

Customers had lost confidence in utility

46

24 x 7 Call Center

47

Customer Care Centers

48

Outage Management

49


Problem: Creating Customer Confidence

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

Issue: Public was instigated against a private company taking over

No knowledge about Torrent’s capability

50

Direct Interaction with Customers

51

Community development activities

Dahi Handi

Ganesh Chaturthi

Iftar Party

Becoming a part of the social fabric

52

Customer Advisory Committee

The results

54

Major Accomplishments :Distribution Transformer Failure Rate

DT Failure Rate reduced by 37%

40% 2.8%

As on Nov 2010

At the time of takeover

55

Major Accomplishments : Load Shedding

Reduction in losses has improved power reliability in the area

10 to 12hours

Less than 3

Hrs

At present


56

Major Accomplishments : Accurate Metering

99% of sales is based on actual reading.

23% 99%

At present


57

Major Accomplishments: AT&C Loss

Reduction of 39%

58%

18.8%12 monthMovingAverage


As on March 10

58

Agra

Area : 188 Sqkms

Population : 23 Lacs

Customer base : 2.8 Lacs

Peak Demand : 420 MVA

Energy Input : 1800 MU

International Tourist Place

33/11KV Substations : 38 Nos

11KV OH Line : 713 Kms

DTCs : 3269 Nos

HT Consumers : 350 Nos

LT Network : 1500 Kms

33KV OH Line : 230 Kms

59

Agra Network : Major Issues

Power Supply Shortage

• For distressing the system

• Bottlenecks in EHV Network

Technical shortcomings

• Inadequate Network

• Aging T & D Network

• Highly unsafe Network

• Significant Overloading

• Lack of Redundancy

• Inadequate protection system

• Inadequate Reactive Compensation

Sub-optimal Maintenance

• Poor Upkeep & Maintenance

• Complete lack of standardizationCouple of major outages every day adversely affecting the reliability of supply

60

Agra : Major Issues

Commercial Profligacy

• Inadequate metering

Few consumers with accurate metering

• Incongruent billing processes

• Inconsistencies in database

• High theft & pilferage

Many Unregistered consumers

• Low collection efficiency

• Huge backlog of new connections and customer complaints

High distribution losses

Lack of Customer Services

Manpower problems

• Shortage of skilled manpower

Complete lack of IT in overall business

Crying need for complete overhaul of the system

61

Key Challenges

Type text

Type text Type text

Reliability of SupplyRobust, Secured and Safe Network

through absorption of latest technologies

Customer ServicesBringing Value added systems and

technologies for Customers

AT & C LossesBringing efficiency in Network,

metering, billing & other Commercial Processes

… easier said than done … the consumer base, complexity of network & geographical spread being large, it’s a real challenge !!!

Key Requirements for DF arrangement

63

Key Requirements for DF Arrangement

Huge Capital expenditure is required to renovate and modernize the

network

Depreciation rates should be as per CERC norms

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)

Area will attract the large and experienced players &Tenure will attract the required level of investment from them.

64


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

65


In Franchise, the overall control lies with Distribution company 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

• 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

66


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

67


For certain statutory / regulatory processes, Franchisee should be considered

independent of licensee

• Levy of Service Line Charges

• Accelerated Power Development and Reforms Programme

• Regulator has 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

Thank you

distribution franchise … an experience. 2 integrated power company torrent power – at a glance...

Documents

distribution sector

distribution franchisee

distribution reforms

franchisee slide

distribution monopoly

experience slide

hour slide

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