Thursday, February 28, 2013

Interim (or Mini) Distribution Franchisee through MoU route – new initiative from MSEDCL

MSEDCL has taken another step in appointing Interim (or mini) Distribution Franchisee in Multi-storey buildings in its continuous effort to reduce AT&C losses, improve customer services and collection efficiency. After the appointment of Distribution Franchisees for bigger circles like Bhiwandi, Nagpur, Aurangabad and Jalgaon, they are now appointing Mini Distribution Franchisee in areas such as - Rural / Hilly area having scattered network, IT- Park, SEZ, etc., Urban Township Area and others including small colonies (having 100 connections or more), by signing a Memorandum of Understanding (MoU).

Eligibility Criteria:

The required criterion for eligible companies is that developer should have developed the required electrical infrastructure at their own cost and should be committed to expand and upgrade it in future.

Key Terms and Conditions:
  • MSEDCL shall provide the power supply at single/multiple points to the Franchisee and the Franchisee should develop and maintain an efficient and economical distribution system in his area of operation to meet the standards prescribed by MERC and MSEDCL. The cost of maintaining the infrastructure will be borne by Franchisee
  • The franchisee will have to take efforts to reduce AT&C losses and improve collection efficiency:
    • Meter Reading / Photo Reading mechanism devised for taking readings
    • DF shall arrange for distribution of bills
    • DF shall collect money from all consumers on behalf of MSEDCL
    • DF shall transfer the money collected on the same/next working day in the bank account of MSEDCL
  • In case the meters installed do not meet MSEDCL's specifications, then the meters will be replaced at the franchisee's cost. If already specified meters are deployed, the same may not be replaced
  • The franchisee should identify unauthorized consumption, theft and report the same to licensee for further action. Any amount imposed by way of compensation / penalty by MERC/any other statutory body should be borne by DF and will be recovered from payment of DF
  • Distribution Franchisee should provide new connection to customers as per norms of MSEDCL and submit reports for the same
  • The franchisee will have to submit a bank guarantee equal to ‘18 days of revenue collection in franchisee area divided by no. of days of the month’
    • Performance Guarantee – (18 days x Total revenue of the month) / No. of days per month
  • If DF wants to provide 24x7 continuous power supply to its customers for the period of Load Shedding, then they will have to make its own arrangement for Standby Power. Any extra cost for the same will be recovered as reliability charges from the customers, after appropriate MERC approval
Financial Recovery for Franchisee:
  • DF shall be paid separately for meter reading, bill distribution and collection as follows:
Sr. No.
Rate (Rs.)
For LT KwH Meter reading including Distribution and collection of bill amount
For MD based meter reading including distribution and collection of bill amount
50/- only
For HT meter reading including distribution and collection of bill amount
50/- only
  • In addition to metering and billing charges, MSEDCL shall also pay the franchisee for O&M charges as % of normative revenue collected excluding add-ons such as FAC, ED, etc.
Sr. No.
Particulars of DF area
Max. Allowed Distribution Losses
O&M Charges
Rural / Hilly area having scattered network
IT – Park, SEZ, etc
Urban Township Area
Others such as Single building/Small Colonies

How Interim Franchisee is different from Input Based Power Distribution Franchisee (IBDF)?

  • Interim Franchisee is focused on new coming multi-storey buildings like IT park, SEZ, malls, buildings and colonies, and look for Distribution system investment from the Developer. IBDF is focused on existing urban towns, with leased O&M model including upgradation capex responsibility.
  • The Interim Franchisee operator does not have to pay for power sourced from DISCOM, but fully pass on the collected bills from its customers back to Discom, and get service/management fees. In case of IBDF, the operator purchase power from Discom at bidded discount rates, manage all distribution and collect payments from the end customers. 

How is it an opportunity and for whom?

MSEDCL has seen good take away of this scheme, specially with the Real Estate Developers. This could be good market entry opportunity for new entrants into Power Distribution Franchisee business. For remote Industrial clusters (including rural), this could very well be augmented with captive/distributed Generation. While evolution of this model needs to be studied, and there remains further improvement opportunities, but it’s already a differentiator into creating a distributed Retailer and competition in Power Distribution in India.

Post by - Kunjan Bagdia @ pManifold

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