Impact assessment for Open Access to 1MW+ customers

DIRECTIVE:

The Ministry of Power Govt. of India issued a directives for implementation in the all States of India, after seeking consultation with Ministry of Law and Justice and said that,

“Section 42(ii) read with the first and fifth proviso is a self-contained code with regard to consumers who required the supply of electricity of 1 MW and above and accordingly the State Electricity Regulatory Commissions cannot continue to regulate the tariff for supply of electricity to any consumer of 1 MW and above”.

“The provisions of section 42 need to be analyzed in relation to the duties of the distribution licensees and open access.  While sub-section (2) requires the State Commission to introduce open access within one year of the appointed date the fifth proviso makes it mandatory for the State Commission to provide open access to all consumers who require supply of electricity where the maximum power to be made available at any time exceeds 1 MW.  The fifth proviso was introduced by Act 57 of 2003 with effect from 27th January 2004”.

“The first issue is if open access is made obligatory whether the distribution licensees will continue to have the responsibility of universal service obligations with regard to consumers whose requirements are in excess of 1 MW.  An analysis of the various provisions (particularly section 49 of the Act) shows that if certain consumers want to have the benefit of the option to buy power from competing sources, then it is logical that DISCOMS do not have an obligation to compulsorily supply power to such consumers.  If such consumers want power from the DISCOM then  the terms and conditions of the supply would be determined in terms of section 49 of DISCOM also”.

“There is no conflict between the aforesaid conclusion and the provisions of section 42(3) of the Act which provides that a person requiring supply of electricity has to give notice in respect thereof.  If the consumer intends to use the network of the DISCOMS, he has to give notice and upon such notice to DISCOM (it) is duty bound to provide non-discriminatory open access to its network.  Section 42(3) cannot be construed to mean that giving of a notice is a pre-condition for the implementation of open access”.

The directives issued by MoP shall have great impact on power sector particularly Electricity consumers, generators, traders and power market.  There are positive as well as negative sides which are to be looked into minutely.  The Commission will have a great responsibility to implement the suggestions of MoP by making suitable Regulation as well as to protect consumers against some negative points which are elaborated below.

POSITIVE POINTS:

1. Consumers of 1 MW and above are deemed OA consumers and shall have choice of purchase of power from cheaper sources including Discom. 
2. The tariff of such consumers shall not be regulated by Commission and the heavy burden of cross subsidies shall not be loaded to such consumers. 

Ongoing survey results preview on MP Distribution Franchisee bidding

A lot anxiety is getting build amongst the bidders and general observers of Madhya Pradhesh Distribution Franchisee bidding. With expected fourth revision in the RFP, there is a silence from MP Govt. side on the topic and next steps including tentative dates. Industry internal resources have pointed that the issue is on hold for cabinet approval. While on one side there is eagerness in existing MP Govt. to see all 9 districts see bidding before next election in 2013. However on other side, there is a fear to enter newly into this very emerging DF business model, when not much of performance (both pros and cons) clearly established from existing operating DFs. Their main concern being "How to protect utility's interest in this long tenure contract with private DF operators?". See our earlier blog Pre-Bid conference take-away from Madhya Pradesh Distribution Franchisee bids.

Keeping this in view, pManifold team floated an online survey of top management of prospective bidder companies (some 30+) for ongoing 3 regions (Gwalior, Ujjain and Sagar) DF bidding. This is an independent survey conducted to increase the understanding of Bidder's issues for MP Distribution Franchisee Bidding and taking it rightly with the policy makers. The responses so far collected are from established companies in the power sector and who have taken this pre-bidding phase very diligently. While not all prospective bidders have responded so far, the results are looking interesting and it is requested that those remaining also take upon this survey soon to let your voice resonate and influence design of RFP revisions. (see survey link. Please note that no personal identification is requested)

Some key questions that this survey intends to find opinion of bidders keeping in mind the ongoing MP bids revisions:

1. Qualification criterion improvements
2. Top viability concerns
3. Anomalies in existing RFP and suggestive key changes
4. Improvement suggestions to baseline data
5. Overall satisfaction with MP bidding and stakeholder engagement process

The so far collected response has following highlights:

• 50% entering first time into the DF bidding
• 67% of participants qualifies both technically and financially
• Only 33% are sure for bidding, while rest are still deciding
• Most interested in Gwalior, followed by Ujjain and then Sagar
• Almost all satisfied with financial qualification criterion
• 33% dissatisfied with Technical qualification criterion
• 33% dissatisfied with the overall bidding process

Some key concerns raised by survey participants:

• Most finds high mandated capex, strict reduction target and unreliable baseline as serious viability concern. Most understand importance of improved customer services and has seeked more clarity on customer satisfaction performance and evaluation.
• Major pre-bid support request from bidders is to have certified joint audit of baseline (specially ABR) and guaranteed power supply and non-performing clauses for utility made clear. 
• Many of them find R-APDRP linkage with DF performance and evaluation not fit, given R-APDRP assets have not been kept well
• There are requests to further improve transparency in the bidding process and keep all participating pre-bidders well informed on steps, delays, and broad reasons etc. in bid process handling. 

We hope that these results further aid planning and improved design of DF process, possibly the coming RFP revision for MP bids. With this broad objective to support scale-up of DF model, we request DF bidders community to participate actively in this survey and share their non-confidential learnings. (Please click here to take online survey)

Post by Rahul Bagdia @ pManifold

pManifold's services in Distribution Franchisee space: 

• Customer Side information & Analytics: as we believes that customers opinions, preferences and satisfaction play an important role in establishing good governance of the emerging model, provides actionable insights to bidders and DF operators to plan their customer-end and new capex roll outs etc.
• Industry Reports & Knowledge Platforms for all DF associated stakeholders (see our blogs, Linkedin group and organized conference)

Cheat sheet for Distribution Franchisee

This is a consolidation of our previous blogs, focussed more to help the current bidders for Madhya Pradesh DF bids.

Bidders Perspective

·         Baseline:  Key comparison of revised RFPs for MP Distribution Franchisee

·         Selection: Distribution Franchisee Attractiveness - Comparison for Madhya Pradesh's 9 districts

·         Customer mix: Customer segmentation and analytics of revised MP Distribution Franchisee bids

·         Input price: Bid analytics for MP Distribution Franchisee

·         Viability: Urban & Rural customer segmentation in revised Distribution Franchisee bids at MP

Utility and Regulators perspective

·         Baseline accuracy & trust: Third Pre-bid Conference take-away from Madhya Pradesh Distribution Franchisee Bids

·         Customer Satisfaction is key: Pre-Bid conference take-away from Madhya Pradesh Distribution Franchisee bids

·         Utility gains?:  Real gains for Utility and End-Consumers from Distribution Franchisee business

·         Large theft: Local Insights on Gwalior City - Field interview with utility ground staff

·         Capacity Building: R-APDRP: Missing understanding on usability of technology by utility people

Local business intelligence on utilities performance - take informed bidding on MP Distribution Franchised towns

The revised MP Distribution Franchisee RFPs has brought down on average coverage area by 100%, number of consumers and electricity sales by 60% and number of DTCs by 77%. Also with mandated capex of Rs. 170 cr for Gwalior, Rs. 70 cr. for Ujjain and Rs. 30 cr. for Sagar and target ATC reductions to 15% in 2 years, the bids will become more competitive and likely also volatile. It has become more important now to integrate various perspectives and data sets of information to validate assumptions and prepare informed bidding numbers. 

pManifold is an Information and Advisory company and is working broadly with relevant stakeholders to help scale-up of the emerging Distribution Franchisee model in India. In this role, we conducted a first type of study to measure Customer Opinions, Preferences and Satisfaction for Electric Utilities of Ujjain, Sagar and Gwalior, which brings a fair customer perspective that could be integrated with technical perspective to arrive at tighter estimates of Capex and Opex. We have compiled a Consolidated report on the 3 towns (priced at Rs. 25K), which could provide winning edge in the MP bids. 

Also available are comprehensive regional packages (priced at Rs. 25K) each consisting of 4 separate reports with GIS visualization and together they could help find answers to the following viability questions:

1. Customer Satisfaction – Top Results (30+ slides) includes top level findings with attribute and factor level comparisons and recommendations
   
• What are the key customer segmentation trends in terms of geographical localization, avg. monthly consumption, economic loss due to power outages, types of meters, backup equipments, education/profession, access to internet, electricity bill payment preferences, opinion on DF privatization etc? (across 4 consumer categories of Residential, Industrial, Commercial & Agri)
• What are the key issues on Power reliability, Metering/Billing, Customer services, utility communications, utility IT and records handling, Tariff and utility Management as perceived by customers across 28+ attributes? (across for 4 consumer categories and also overall)
• What areas required capital expenditures to improve overall utility's performance? How to prioritize capital expenditure for highest return on customer satisfaction, which is found to be correlated with ROI?
  

Customer segmentation and analytics of revised MP Distribution Franchisee bids

Our earlier blog Urban & Rural customer segmentation in revised Distribution Franchisee bids at MP compares the category wise distribution of number of consumers across the 3 locations of Gwalior, Sagar & Ujjain. This blog summarizes the comparison of other key parameters - Electricity Sales, Revenue Billed and Collection Efficiencies between new & old RFP regions.

Electricity Sales (in LUs)

Key observations from the above table are:

• Electricity Sales has decreased most in Sagar (>77%), followed by Ujjain (>72%) and Gwalior (>30%).
• Electricity Sales to 'Irrigation' customers has decreased more than 90% across all the 3 locations indicating that the majority of Agri customers falls outside city limits.
• Across 'Industrial' customers for all 3 locations, Sagar city has highest drop in Electricity Sales which is more than 70%.

Third Pre-bid Conference take-away from Madhya Pradesh Distribution Franchisee Bids

The third pre-bid conference organized by GoMP on 15^th October saw participation of 20+ prospective bidders, almost the same list of companies that participated in second pre-bid event with minor new additions. This includes NDPL, Torrent Power Limited, Tata Power, Reliance Infra, GTL Limited, SPANCO, CESC Ltd, Enzen Global Solutions Pvt. Ltd, Essar Power, GMR Energy, Dainik Bhaskar, Adani Power Ltd, Lanco Infratech Limited, A2Z Powertech, Dalmia Bharat Enterprise, Ramky, BLA Power Pvt. Ltd,  Shyam Indus Power Solutions Pvt Ltd, Era Infrastructure Engg Ltd., Agrawal Power Pvt. Ltd, Eltel Engineers Pvt. Ltd, Lanka Electricity Pvt. Ltd. (LECO), Moser Baer and few others. The list includes many first time entrants in the distribution sector with one international participation from LECO group. (See our earlier blog on second pre-bid conference takeaways)

GoMP has revised the Distribution Franchisee boundaries to city/town level from earlier entire district level and has also removed any minimum benchmark input prices. This potentially makes the bidding more favorable to bidders, but at the same time more competitive. See our earlier shared bid analytics and comparison results of old and new RFPs:

• Key comparison of revised RFPs for MP Distribution Franchisee
• Bid analytics for MP Distribution Franchisee
• Urban & Rural customer segmentation in revised Distribution Franchisee bids at MP

One strong message passed by Energy Secretary Mr. Mohd. Suleman was that there will be no further revisions in RFPs and no further delays in bidding dates. He guaranteed 90+% accuracy of baseline data shared in RFPs and reiterated the need for trust between utility and DF operator to further correct/refine any mutually identified issues. One strong non-negotiable point put forth by utility was high customer satisfaction to be guaranteed by DF with 24 hours power supply and improved customer services.

Urban & Rural customer segmentation in revised Distribution Franchisee bids at MP

Our previous blog Key comparison of revised RFPs for MP Distribution Franchisee compare new and old RFPs for Sagar, Gwalior and Ujjain regions across key DF decision parameters. Here we want to study and compare the customer segmentation closely to better understand the dynamics that played key role for design of new RFPs and separation of urban and rural.

Consumer Segmentation in new and old DF RFPs at MP (Source: pManifold)

Some key observations made from above table are:

1. Sagar and Ujjain towns had 70%+ less number of consumers as compared to respective districts. The new town level geographic area is on average only 2% of the area of the entire district.
2. Sagar town has significant drop (greater than 70%) in terms of most valued electricity consumers namely HT, Industrial, Domestic and Others
3. 99% of irrigation customers falls outside the new revised RFP's town boundaries. This indicate a significant presence of agri customers outside city/town limit. 

Key comparison of revised RFPs for MP Distribution Franchisee

Madhya Pradesh has revised its Distribution Franchisee (DF) RFPs for the 3rd time, inviting a third pre-bid conference on 15th October at Bhopal. (See earlier blog post Pre-Bid conference take-away from Madhya Pradesh Distribution Franchisee bids). Some major revisions in new RFPs are as follows:

1. The Distribution Franchisee scope has been revised to city/town level from earlier entire district level. Currently only one most favorable town has been picked in each of three MP zones - Sagar, Gwalior and Ujjain. The other six regions will be followed upon post finalizing DF appointment in first three.
2. In revised RFPs, there are no benchmarking minimum input rates given. The bidders are now free to select their input rates under following constraints:
• The input rates for 15 years should have only increasing trend
• Ratio of specified min. to max. input rates should be atleast 0.7
3. Customer services are given more weightage with mandated capex investment in meeting specified benchmark KPIs - SAIFI, SAIDI, min. customer services centers, consumer indexing and as laid under SOP by state Electricity Regulatory Commission.
4. In addition to detailing DF's Events of defaults, the revised RFPs detailed Distribution Licensee event of default of not being able to supply committed input units.

In our earlier blog Distribution Franchisee Attractiveness - Comparison for Madhya Pradesh's 9 districts, we ranked key DF decision parameters for 9 districts to help bidders with their selection criterion. The chart below lay down similar comparison for the 3 towns as released under revised RFPs. We have also indicated the percentage deviation of these key parameters from the earlier RFPs at district level.

DF attractiveness Matrix (Source: pManifold)

Some key changes that comes out clearly with the new revised RFPs are as follows:

1. Avg. 98% reduction in geographical area
2. Avg. 61% reduction in overall population, number of electricity consumers and also Electricity sales (lac kWh units)
3. Avg. 51% reduction in connected load
4. Avg. 1549% increase in electricity consumer density (clearly reveals urban/rural conflict)
5. Avg 18% and 22% increase in LT and HT consumption respectively (kWh/consumer/month)
6. Avg. 5% improvement in collection efficiency
7. Avg. 77% and 63% reduction in number of DTCs and transformer failure rate respectively
8. Distribution losses on avg. increases by only 2% while ATC losses on avg. reduce by 1%. If the numbers shared in RFPs are correct, this implies that rural areas contribution to the overall distribution and ATC losses is similar to that of urban areas. 

It is clear that the preferred order for established bidders from DF attractiveness will be Gwalior, followed by Ujjain and then Sagar. However for new entrants, Sagar could be a good choice to innovate a low capex and hence lower risk DF model.

pManifold takes pride in able to influence the revised RFP design and bringing more customer focus in on-going reforms attempted in power utilities. This success is also shared with MP Govt., their transaction advisors and also some bidders. With our continued work in the same, we hope to drive the importance and connection of customer monitoring with business financial performance in private and public utilities and help them develop an increased ROI based power Distribution model.

Independent all 3 towns customer intelligence reports 'EUCOPS - Electric Utility Customer Opinion, Preferences and Satisfaction' are available for purchase with pManifold. Sample report could be viewed online. We hope that the bidder community make use of this local customer intelligence to guide it's technical due-diligence better. (See detailed steps)

For more details contact Rahul Bagdia @ 95610-94490.

Post by Rahul Bagdia @ pManifold

Bid analytics for MP Distribution Franchisee

Source: pManifold

The old 9 Madhya Pradesh's districts RFPs provided the minimum benchmark input prices for all 15 years as shown in the right. Comparing Gwalior, Ujjain and Sagar below:

• Gwalior has highest rates, followed by Sagar and then Ujjain for all 15 years. 
• The delta between the minimum and maximum rates are also highest for Gwalior (Rs. 1.07), followed by Sagar (Rs. 0.45) and then Ujjain (Rs. 0.27).
• Minimum delta was Rs. 0.05 for Dewas, maximum was Rs. 1.07 for Gwalior and average was Rs. 0.55

Key Findings from 'Consolidated Report' of Electric Utility Customer Survey in Madhya Pradesh (MP)

This is the summary of results from the top level analysis, developed using the 'Consolidated Report' of all the 9 districts in Madhya Pradesh (MP).

Across all 9 districts, expectations of customers based on certain factors like Customer Service, Power Quality & Reliability and Price are significantly leading to high Dissatisfaction among all categories of customers i.e. Residential, Commercial, Industrial & Agri. Following attributes of above factors need prior attention as suggested by customers:

• Unplanned / Planned Outages
• Local Electricity Infrastructure
• Resolution Billing Complaints
• Resolution Meter Complaints
• Service Response Time
• Value for money
• Fairness of Price

Customers Agreement Levels of 'Distribution Privatization' through franchisee model in all the 9 districts

• 83% respondents from 'Bhind' district agree with positive impact of 'Distribution Privatization' followed by 51% respondents from 'Gwalior'.
• Only 28% respondents from 'Sagar' district agree with positive impact of 'Distribution Privatization', which is the lowest of all the districts.

Key Comparative findings from Customer Satisfaction Survey of Shajapur, Ujjain & Dewas districts of MP

A comparative view of top level findings is shown here, developed using the location specific reports of Shajapur, Ujjain & Dewas available here along with 6 other districts in Madhya Pradesh (MP).

See our earlier blog:

• Comparative findings in Gwalior, Datia & Bhind
• Comparative findings in Sagar, Satna & Narsinghpur

The analysis shows that in the above 3 districts, a substantial percentage of dissatisfaction in

Customers is coming due to 2 factors, namely 'Communication' & 'Price'.

The overall Satisfaction score on being computed

(on scale of 0-100 with 100 being all respondents 'very satisfied'):

	Communication	Price
Shajapur	33.68	30.76
Ujjain	27.09	32.77
Dewas	24.50	20.90

The main reasons for higher dissatisfaction across the 3 districts as indicated by the customers are due to following:

• Less 'Awareness' from Utility regarding the attributes 'Energy Efficiency' & 'Consumer Rights'
• Less communication for 'Advance notice about disruption'
• 'Power Tariff & its variations' is High

Existing grid connected Solar PV Plants in India

MNRE has recently released the list of all grid operating solar PV projects in India (latest updated as on July 2011. See the detailed list here and also below).

Comparative findings from Customer Satisfaction Survey of Sagar, Satna & Narsinghpur districts of MP

This is a comparative view of top level findings developed using the location specific reports of Sagar, Satna & Narsinghpur available here along with 6 other districts in Madhya Pradesh (MP).

See our earlier blog:

• Comparative findings in Gwalior, Datia & Bhind
• Comparative findings in Shajapur, Ujjain & Dewas

Power Quality & Reliability (PQ&R) and Customer Service (CS) are the 2 factors which needs immediate improvements in all the three districts.

The overall Satisfaction Score is as follows (on scale of 0-100 with 100 being all respondents 'very satisfied'):

	PQ&R	CS
Sagar	27.02	21.39
Satna	30.56	27.56
Narsinghpur	29.30	29.31

The primary reasons for high dissatisfaction across the 3 districts as indicated by the customers are due to following:

• Frequent interruptions in 'Voltage Stability',
• 'Breakdown Restoration Time' is long,
• Recurrent 'Unplanned Outages'

Proposed Rural Energy Services Company (RESCO) Model to scale-up Rural Energy

Earlier blog 'Poor Rural Energy access & delivery inspite 'High Need' and 'High Willingness to Pay' discussed the key issues in raising a scalable delivery model for Rural Energy/Electricity. This blog propose a potential model to attend to this cause. All discussions on the model are invited with broad objective to engage with right stakeholders to pilot a workable solution. The growing interest in Rural Franchisees could provide such an opportunity. 

A Rural Energy Services Company (RESCO) model is an exploratory institutional framework which will manage risks via a systematic analysis of information from various stakeholders in order to fulfill the energy needs of the rural consumers and the requirements of financial viability for all the participants in the energy supply chain.  This model complements the basic functionalities of energy services companies (that currently operate in either government or private sectors) with elements which are essential to the success of integrated last mile energy delivery to rural localities. Some of the features of the RESCO model, its functions and benefits to the rural energy economy are as follows:

Proposed Rural Energy Services Co. (RESCO) model (Source: pManifold & IFMR Trust)

Poor Rural Energy access & delivery inspite 'High Need' and 'High Willingness to Pay'

The term rural electrification conjures up a variety of images - from Shah Rukh Khan dramatically generating hydro-electricity in the Bollywood film ‘Swades’ to the more mundane government schemes extending distribution infrastructure to far flung villages in India. But for all the efforts invested in this idea and the buzz which it generates, it is sobering that there has been no substantial change in the status-quo of a typical Indian village chosen at random.

The remoteness and scattered topology of many villages makes electification via grid accessibility a non-viable option for them. Even in cases where the government has been able to extend  the national grid, difficulties with O&M, billing, collection, high Aggregate Technical and Commercial (AT&C) losses and poorly targeted subsidies causes a net loss to utilities which is a barrier to their ability to sustainably and continuously serve the rural areas. The poor quality of supply and services in addition to misleading political promises tends to further reduce people’s participation in the process resulting in abuse of the infrastructure. This failed last mile distribution has limited the benefits of private distributed generation (biomass, solar, hydro, wind etc.) to villagers, since utilities do not have financial incentives to serve the rural feeders with high costing power.  Ironically lower affordability by rural users is the most cited concern, despite the fact that they pay much more for energy usage than their urban counterparts.

A low-income rural household without electricity connection consumes on average 2-3 litres of kerosene per month for lighting, the cost of which escalates further if kerosene cannot be procured via the public distribution system. This scenario has given rise to a large market for local Diesel Genset (DG) operators, with usually 2 of them serving around 300 households. They supply 5 hours of power per day for a single 8W CFL bulb per household at a bartered rate of 2 litres of kerosene or Rs. 50 per month. Each household therefore pays Rs. 26 per month (when paid in terms of 2 litres public distribution system sold kerosene), equivalent to Rs. 22 per unit of electricity (kWh), which is at-least five times the rate paid by a grid connected user. The DG operator’s running expense comes out to be Rs. 20 per consumer per month for which he gets Rs. 50. DG distribution, other than its cost economics and environmental effects, is a good delivery model on account of its portability, easy access to fuel, reliable supply, flexible payment options and local ownership.

Key Solar Players in India in Solar Cell & Module manufacturing

The guidelines for second batch under Phase I of Jawaharlal Nehru National Solar Mission (JNNSM) were announced recently by Ministry of New and Renewable Eneergy (MNRE) . The excerpts of the guidelines are captured in our previous blog.

To give strong impetus in promoting domestic manufacturing, the developers are expected to procure their project components from domestic manufacturers. For Solar Photo-voltaic (PV) projects using Crystalline technology, to be selected in second batch during FY 2011-12, it is mandatory for all the projects to use cells and modules manufactured in India. However, Thin film and Concentrated PV (CPV) has no such domestic limitations.

In view of the above, the list of major Indian players in Solar Cell and Module manufacturing along with Technologies are mentioned below:-

Sr. No.	Company Name	Solar Cells	Solar Modules	Crystalline Silicon	Thin Film
1	Moser Baer PV Pvt. Ltd.	Yes	Yes	Polysilicon	Amorphous-Silicon
2	Titan Energy Systems Ltd.	-	Yes	Monosilicon & Polysilicon	Amorphous-Silicon & Copper Indium Gallium Selenide
3	Maharishi Solar Technology Pvt. Ltd.	Yes	Yes	Polysilicon	-
4	Tata BP Solar	Yes	Yes	Monosilicon & Polysilicon	-
5	Solar Semiconductors	Yes	Yes	Monosilicon & Polysilicon	-
6	Central Electronics Ltd.	Yes	Yes	Monosilicon	-
7	BHEL	Yes	Yes	Monosilicon	-
8	Lanco Solar Pvt. Ltd.	Yes	Yes	Monosilicon & Polysilicon	-
9	Signet Solar	-	Yes	-	Amorphous-Silicon
10	Webel Solar	Yes	Yes	Monosilicon	-
11	Indosolar	Yes	-	Monosilicon & Polysilicon	-
12	PLG Power Ltd.	Yes	Yes	Polysilicon	-

The above list may not be a complete and comprehensive list, but it gives an overall and fair representation of players involved in manufacturing of solar cells and modules.

• What is to be seen if the domestic content constraint on Crystalline technology and its relative higher costs compared to Thin film will force new projects to go with Thin film technology
• Also there will be competition amongst Crystalline panel manufacturing players to get share of batch-2 projects and this could drive new market dynamics

pManifold as part of its Solar practice offer services to properly reveal and pen down the technology, cost and performance trade-offs. (See pManifold services in Solar for more details)

Solar PV System Workshop -Technology, Risks, Manufacturing, EPC, O&M and Investment

pManifold as Knowledge Partner to IIES 2011 organized a workshop on 'Solar PV System – Technology, Risks, Manufacturing, EPC, O&M, Investment'. The workshop brought best Industry experts and participants through out the country.

pManifold Indis_Solar PV_IIES_Workshop_report

View more presentations from pManifold

Leveraging Customer Perspective for a stronger Onsite, Local Due-Diligence in Pre-Bid phase

Consumer centricity has returned or finding its way into most of the businesses in emerging economy like India. Consumer 'needs' and 'willingness to pay' for good quality products and services is driving a whole new era of competition. It first started in luxury industry with high economy class consumers, where there was established 'willingness to pay' for better services and then slowly start penetrating into other sectors and also lower economic classes and raising their 'aspirations'. These phenomenon is creating a whole new market and driving innovations from bottom-to-top. The aviation, telecom (mobile and internet) and various other industries has seen this Consumer cycle. India's Power Distribution sector has begin its journey of enabling 'diversity' and adding more 'choices' to its electricity customers. Like other sectors, the cycle first began with high volume or developed consumers through 'top-down' innovation like 'Open Access' and now we have started hearing of 'bottom-up' innovation like 'Pre-paid metering', 'Net-metering' and 'Distributed Generation based Distributed Franchisee (DGBDF)'.

The to-be leaders in the Power Distribution space will soon have to learn this change that is sweeping the country and include the end-consumers into the designing and co-creation of solutions and soon also accept equally the urban and rural consumer mix to drive bottom-top innovation. The new saga is to forgo or overcome references like BPL, APL, agri (or rural), tariff subsidies and free power, but start innovating scalable ventures to meet the needs and challenge. Grameen Micro Financing model first innovated at Bangladesh is now widely accepted and MFI is a very big and fast growing industry with strong developing linkages to the main streamline capital industry through various derivatives.

Remember this all begins with a 3 letter word - KYC i.e. 'Know Your Customer'. Its an important phase after you are done with Market Analysis through KYM i.e. 'Know Your Markets'. KYC should be a pre-cursor for high confidence KYI i.e. 'Know Your Investments'.

Our recent discussions with prospective bidders for Distribution Franchisee tenders in 9 districts of Madhya Pradesh (MP) was full of encouragement for our recently conducted 'Customer Satisfaction study for Electric Utilities' in those regions.

• Most companies easily perceived our work's importance to operating  Distribution Franchisee post the bid win for regular (internal & external) benchmarking of Customer Satisfaction to evaluate and better prioritize their system investments and efforts.
• Almost all experienced companies in running Distribution extended the applicability of our Customer Satisfaction research also to the pre-bidding phase. They found it will add an important perspective to their already on-ground technical due-diligence and help them validate their assumptions on Capex and Opex plans for bidding. 

Bid Analytics for JNNSM Batch-1 Solar PV projects

1000 MW Phase-1 under JNNSM by 2012

Under the Jawaharlal Nehru National Solar Mission (JNNSM), the total aggregated capacity of grid connected Solar Projects in Phase-1 shall be 1000 MW. The deployment of Solar PV and Solar Thermal projects shall be in the ratio of 50:50. The allocation of capacities in Phase-1 is done in two batches and over two financial years  i.e., 2010-2011 and 2011-2012. The total capacity of Solar PV projects to be selected in First Batch i.e., in FY 2010-11 was limited to 150 MW. The Projects for remaining capacity of 350 MW for Solar PV Projects will be selected in current Second Batch i.e., in FY 2011-12 (See detailed guidelines from earlier post 'Solar JNNSM Batch-2 pickup - RfS deadline 23 Sep').  Grid connected Solar Thermal power projects of an aggregate capacity of 500 MW have already been selected in FY 2010-11.

Bid Analytics of Batch-1 JNNSM Solar PV Projects

The mission has designated NTPC’s Vidyut Vyapar Nigam Limited (NVVN) as the nodal agency for procurement of solar power. On 18th August 2010, NVVN invited Request for Selection (RfS) from interested developers to develop 150 MW solar PV projects with a capacity of 5 MW each, and 500 MW solar thermal projects with a minimum capacity of 5 MW and maximum of 100 MW each. The last date for receiving the RFS was September 24, 2010. NVVN received 418 RfS from both PV and Solar Thermal project developers. Out of the total of 418 requests, 343 were applications for solar PV and 55 for Solar Thermal.

The interest in investor community was high with Solar PV receiving 343 applications (x 5MW = Total 1715 MW) against requirements for 30 projects (total 150 MW) i.e. 11.43 times higher application. The process then went into 'reverse bidding' to select only 30 bidders, with winner being the company that can offer highest discount to base set tariff rate of Rs. 17.91 per kWh. 

The 'winner' 30 bids for solar PV under Batch-1 varied from Rs. 10.95/kWh to Rs. 12.76/kWh, at an average bid price of Rs. 12.15/kWh.

Rural Franchisees - Could they become pilot ground to raise next level of Distribution services?

A recent publication from Prayas on 'Rajiv Gandhi Rural Electrification Program - Urgent need for mid-course correction' gave a very good overview of RGGVY program, its features and progress. Some key observations made:

1. Total 1.1 lakhs Rural Franchisees in India (detailed distribution given below)
• This covers only 19% of total villages in the country including both the RGGVY and non-RGGVY villages 
• Only 38% RGGVY villages are covered under Franchisees, when all are supposed to have mandatory Rural Franchisees
• 95% of total Rural Franchisees are Revenue Collection based Franchisees
• Bihar, Gujarat (91%), Haryana (91%), Karnataka (73%), Nagaland, UP and West Bengal have above national average (i.e. 19%) Rural Franchisees in RGGVY villages
  
2. Rs. 26000 cr. already spent in last 6 years since 2005 and estimated another same amount to be spent (totaling to Rs. 52000 cr.) for coverage of RGGVY original targets of 100% village electrification and 2.34 cr. rural BPL household connections.
• Since 2005, 96562 villages have been electrified raising the level of ‘village electrification ’ from 74% to 91%. (Total villages in India is ~6 lacs, out of which 1.25 lacs did not have access to electricity in 2005)
• Since 2005, 1.75 crores rural households are given new connections raising the level of ‘rural household electrification’ from 43% to 56%. (Total # of rural households in India is ~14.5 crores, out of which 7.8 crores did not have access to electricity in 2005)
  
3. By estimate of investment, of order Rs. 52000 cr., RGGVY scheme is comparable to R-APDRP scheme of GoI. 

State-wise Rural Franchisee distribution in India (Source: MoP website)

Solar JNNSM Batch-2 pickup - RfS deadline 23 Sep

The guidelines for batch-2 of JNNSM are announced by MNRE and available here. NTPC Vidyut Vyapar Nigam (NVVN) has issued the Request for Selection (RfS) document due date for submission as 23 September 2011.

Some important considerations in the guidelines

1. Plant Size:
• Total capacity under bidding – 350 MW
• Minimum capacity of a single PV plant – 5 MW
• Maximum capacity of a single PV plant raised to 20 MW.
• Plant capacity will be in multiples of 5MW. In other words, a developer can bid for projects of size 5 MW, 10 MW, 15 MW or 20 MW.
2. Company structuring:
• A company in any form (including parent, affiliate, ultimate or any group company) can bid for a maximum of 3 projects totaling 50MW.
• Foreign companies can participate in the bidding process. But before signing of the PPA, they have to form an Indian company registered under the Companies Act, 1956
• Controlling shareholder of the project must maintain 50% share for 1 year (up from 26% in earlier Batch-1 RfS)
3. Financial selection criterion:
• Minimum Net worth of Rs. 3 Crore/MW upto 20 MW size of project and there after Rs. 2 Crore/MW. Share premium not to form part of the Net worth calculation. Also Net worth to be established atleast 7 days prior to RfS submission.
4. Technology selection criterion:
• Domestic requirement – Both cells and modules have to be manufactured in India. This domestic content requirement does not apply for Thin film and Concentrating Photovoltaic(CPV) technologies.
• The bidder will have to deploy only commercially proven technology – those that have at least one project successfully operational for at least  one year, anywhere in the world.
• Inter-connection authorization letter from State Transmission company to allow evacuation of power at voltage level 33KV and above.

Pre-Bid conference take-away from Madhya Pradesh Distribution Franchisee bids

Madhya Pradesh (MP) Energy Dept. has taken a bold step with decision to private franchise 9 MP district’s Power Distribution simultaneously. This is unique as there is less than 9 total operational Input based Power Distribution Franchisees (DF) pan India at the district level scale while the model is still emerging. The associated officials and transaction advisory have incorporated good learning in current RFPs for the 9 districts from previous awarded Distribution Franchisee RFPs (across India) and emerging Distribution Franchisee implementation scale-up issues. There is appreciable effort from Energy Dept GoMP to engage various stakeholders to raise a strong and standardized Distribution Franchisee model.

A second revision in RFPs was made post first pre-bid conference after consulting with participating prospective bidders (See first pre-bid conference minutes). A second pre-bid conference was organized in Bhopal on 25th August jointly for all 9 districts. The meeting was chaired by Hon. Energy Secretary GoMP, Mr. Mohd. Suleman and was attended by overwhelming 20+ prospective bidding companies. pManifold participated in this pre-bid conference based upon their relevant work in the Distribution Franchisee space and having collected valuable customer satisfaction data on local electric utilities performance in the 9 MP districts.

Some key points of discussion raised by Licensee (the utility) for opinion from participating prospective bidders were:

1. If and how utility not only avoid financial losses as established in baseline, but also make profits in a truely win-win Distribution Franchisee model in long term?
2. How could utility protect its and its end-consumer's interests better while in Distribution Franchisee long term contractual arrangement? In specific what could be better contract and company structuring - whether utility should sign contract with SPV (Special Purpose Vehicle) or the Parent company?
3. If and how 'urban' and 'rural' Power Distribution Franchisees could be clubbed together? In specific with current all 9 MP districts having high rural characteristics, how bidders look upon viability of a combined Distribution Franchisee model at entire district level?

It was encouraging to see the utility's Top Management and participating prospective bidders recognizing 'Customer Satisfaction' as the most important performance objective for Distribution Franchisee. In light of this, there was discussion to add some mandated customer services in the RFP and DFA in addition to current 100% Electronic Metering, Billing and Payment as part of Capex roll-out plan. 

Chhattisgarh also on Distribution Franchisee map - New tender/RFP for Baloda Bazar, Raipur

Chhattisgarh also has entered into the race of Power Distribution Franchising with its announcement of one of Raipur O&M Division named Baloda Bazar. The size of the project is smaller than all the recent 9 districts Distribution Franchisee in Madhya Pradesh (See our earlier blog 'Upcoming Projects of Power Distribution Franchisee in Madhya Pradesh'). The project is announced under RGGVY program.

CSPDCL, Raipur announced the tender on 30-07-2011 and has 25-08-2011 as bid close date. Comparing to earlier Power Distribution Franchisee tenders, this seems to be the shortest time duration tender, given amongst the first experiments for CSPDCL.

Some key characteristics of the tender:

1. Tenure for Input based Franchisee tender is 5 years
2. No input minimum benchmarking rates provided
3. High distribution losses of the order of 63.41% (Annual Input energy of the order of 250 MUs with Revenue billed approx. Rs. 18 crores)
4. Scattered area 4794 sq.kms
5. Low Peak demand of 43 MW
6. High Collection efficiency (almost 100%). (This reflects that unmetered sales is primary cause for high losses)
7. BPL consumers are highest in numbers (almost 54% of total consumers, but contributing only 12% to total connected load and 0% to revenue collected as totally subsidised)
8. 18 number of 33 KV substations (total capacity 76.45 MVA, mostly of 3.15MVA power transformer)
9. Approx. 25784 LT poles and 1273 Distribution Transformers (DTRs)

The qualifications for the bid is easier for new entrants. 

What is to be looked is innovation in Rural Distribution Franchisee to make it emerge as viable model and sustain RGGVY efforts. 

Reference:

• Baloda Bazar (O&M Circle) Distribution Franchisee RFP
• Baloda Bazar (O&M Circle) Distribution Franchisee DFA

Three key comparative findings from Customer Survey Results of Gwalior, Datia & Bhind

This is a comparative view of top level findings developed using the location specific reports of Gwalior, Datia and Bhind available here along with 6 other districts in Madhya Pradesh (MP).   


Regional traits like urban/ rural development differentiation are strikingly clear; Customer satisfaction lowest in Bhind

In the overall scheme of things,

• Bhind district scored a dismal 26.96
• Gwalior district scored 52.41 & 
• Datia district scored 58.22

Specifically in Datia, the increased score can be attributed to the respondents in the Commercial category who indicated satisfaction on most major factors under consideration especially their comfort with the current Pricing available to them and also their satisfaction with the Power Quality and Reliability. 


While, long hours of load shedding (6-10 hours), frequent unplanned outages, poor infrastructure and maintenance and poor customer services in Bhind specifically constitute its low score. 


Satisfaction of customers is also relative and consistent to the level of customer’s expectations in different regions.

When asked if they agree that “A lot needs to be done to improve the current systems and make me fully satisfied” comparatively least respondents agreed in Datia (55%) than Gwalior (58%) followed by Bhind (91%) where most respondents agreed they are expecting a lot to be done before they get satisfied with the utility services.


Regions where customer’s believed more needs to be done to make them satisfied scored low on customer satisfaction.



Mixed reactions towards privatization of power distribution through franchisee model in Gwalior, Datia and Bhind
When asked if ““Service levels will improve if a private company manages electricity distribution”
In Gwalior 51% respondents agreed
In Datia 36% respondents agreed
In Bhind 83% respondents agreed

Over 70% of respondents from Commercial Category in both Datia & Gwalior disagreed that privatization would help improve service levels.

Over 80% of respondents in Bhind, both in Residential and Commercial categories, agreed that Privatization will help improve the current situation.

For individual reports on each region, please get in touch with Rahul Bagdia, +91 956 109 4490, rahul.bagdia@pManifold.com.

Update: Rescheduling of Distribution Franchisee tenders in Madhya Pradesh

A previous blog covered the market status of on-going and upcoming projects in Power Distribution Franchisee in Madhya Pradesh (MP).

As per the latest tender notices, Submission Dates has been revised for all the 9 districts in MP.

Another Pre-Bid Conference is scheduled on 25th Aug 2011 for all the 9 districts. The table below provides the revised dates for all the the 9 districts.

(Click on image to see the enlarged view)

References:

• Last Pre-Bid Conference Update - http://www.madhyavitaran.nic.in/Franchisee_Pre%20Bid-%2023Jul11.pdf
• Direct Links for each districts extension in Due Dates can be had from following links - 
• Gwalior, Datia & Bhind - http://www.madhyavitaran.nic.in/Extension_Date_11Aug11.pdf
• Shajapur, Ujjain & Dewas - http://www.mppkvvcl.org/html/td_cmd_se_bd_12308_extension_x03.pdf
• Satna - http://www.mp.gov.in/energy/mpseb/tender_files/RFP-satna-SBD-110811.pdf
• Sagar - http://www.mp.gov.in/energy/mpseb/tender_files/RFP-sagar-110811.pdf
• Narsinghpur - http://www.mp.gov.in/energy/mpseb/tender_files/RFP-Narsinghpur-SBD-110811.pdf

  

Launched: Electric Utility Madhya Pradesh - Report Series 2011

As you know we have been working since the last couple of weeks on capturing the latest insights from electricity customer across upcoming Power Distribution Franchisee areas in Madhya Pradesh, India specifically the regions of Bhind, Satna, Shajapur, Gwalior, Sagar, Dewas, Datia, Narsinghpur & Ujjain.


This 'first of its kind' report series attempts to raise the local customers voice, to enable the distribution franchisee & utility stakeholders to monitor the local situation, identify key priority actions and plan investments & road maps accordingly.

Key features of the report are:

• Most recent, independent, “indicative, land based, face-to-face” survey providing the customer’s perspective of local electricity utility performance with satisfaction scores, opinions including Distribution privatization and customer preferences (example: preferred mode of payment, communications etc.) with detailed GIS visualization.
• Most comprehensively parameterized, customer centric “indicator” of the effectiveness of utility performance on 28 well-chosen attributes that appropriately represent key areas like power quality, reliability, metering, billing, payments, information systems and customer services
• Comes along with Additional independent primary and secondary research for Local Electricity Utility stakeholders specifically Distribution Franchisee bidders and licensees

Download a Snapshot Report which contains details on the Report series including survey motivation, methodology, sample results, report data, GIS visualizations and info-graphics.

OR view it below,

Electric Utility Madhya Pradesh - Report Series 2011 - Snapshot

Why Customer's Satisfaction & Preferences are important for Electricity Utilities?

The Forum of Regulators Report on Standardization of the Distribution Franchisee model (September 2010) mentions that the objectives of appointing a distribution franchisee, inter alia,

are:

i. To minimise Aggregate Distribution and Commercial losses

ii. To bring improvement in Metering, Billing and Revenue Collection

iii. To minimise Current Assets on account of arrears

iv. To enhance customer satisfaction level by improving quality of service

Placing focus on the fourth point, we find that while much information is shared in the Distribution Franchisee RFPs, they hardly provide any information on the current customer satisfaction levels nor the customer's perspective of the network infrastructure, current quality of services etc. This is a stark thing to miss considering all CERC, CEA, State ERCs and State Discom's mandate Improving Customer Satisfaction as one of the 4 objectives of a Power Distribution Franchisee. The reason probably for the miss is that the areas being offered for franchisee are any way loss making and hence customer dissatisfaction is well understood.

However, while all utilities, licensees and potential or current distribution franchisee operators try to improve quality of service; could efforts to understand the customer's perception and expectations from the utility help the utility make more quality decisions to improve the services and have a happy, paying customer?

The answer probably is a big "Yes". Measuring customer satisfaction - using a structured methodology that relates the customer responses with consumer demographics and key factors/attributes affecting business performance - is probably the only way of independently & periodically benchmarking effectiveness of utilities operating in same or different zones. No doubt a number of such mechanisms have evolved and established themselves in the western countries where multiple state / private companies operate in the same locality.

But how really could measuring customer satisfaction or proactively identifying customer preferences help? We believe, they could in the following key ways,

Local Insights on Datia City's Electricity status quo - New district for proposed DF in Madhya Pradesh

Datia is one of the 9 districts which will host Distribution Franchisee in Madhya Pradesh. It is the smallest district in Madhya Pradesh with people there have low paying capacity. Below is brief top line capture from interviews with local utility people:

• Datia city as a whole has 1 payment collection center. With growing needs, this is in phase of augmentation to 3 more centers for ease of consumers. 
• City has 12 subdivisions (areas outside city limits) where there are 12 payment collection centers, one for each.
• Load shedding is approx 6 hours in city and around 8-10 hours in subdivisions.
• 20% of the locations in the city are prone to electricity theft.
• Average loss on twelve of 11KV feeders is 60%.
• Local utility has initiated steps like organizing camps for awareness in consumers and as a result were able to add 250 new connections.

More details with local intelligence on all 9 MP districts is available with pManifold Distribution Franchisee practice.

Posted by: Kunjan Bagdia @ pManifold

Local Insights on Gwalior City's Electricity status quo - Field interview with utility ground staff

pManifold team as part of its new initiative to increase local intelligence and know-how of new proposed 9 Distribution Franchisee sites in Madhya Pradesh, is conducting a methodical stakeholder surveys with more than 1000 samples across 9 districts. The stakeholders includes end-consumers categorised into Residential, Commercial, Industrial and Agriculture; utility ground staff - lineman and substation operators; and utility senior management. More details on the methodology and parameters captured for measuring Customer Satisfaction could be looked at http://web.pmanifold.com/insights/electric-utility-customer-satisfaction-2011.

Some high level capture of important observations when speaking to local utility ground staff in Gwalior city: 

• Most frequent problem in the city is of fuse-off calls, which comprises around 70% of the problems for the local lineman.
• On average, a lineman receives approx 30-35 complaints in a day, out of which 20-25 could be attended.
• Use of Air Breaker (AB) switch is only on 20% of DTCs. The results are encouraging to support further augmentation of AB switches in the network.
• Call centre facility for consumers is available for registering complaints.

More detailed observations and results are available in our new series of reports. 

Posted by: Kunjan Bagdia @ pManifold