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)