Views on 'Future of Power Distribution Franchisee Model in India' by Dr. Murhari Kele, CE (Mumbai), MSEDCL

Dr. Murhari S. Kele,
Chief Engineer,
MSEDCL, Mumbai.

Power Distribution Franchisee (PDF) model in India saw mixed results across various operating areas so far. While the model saw good momentum after Bhiwandi success story with various states opting for the same, but there is no second success story to further boost the growth of the model.  

pManifold team recently spoke with Dr. Murhari Kele, an industry expert in Power Distribution Franchisee to understand his viewpoints on Future scenario of model. (The views here are personal views, and not to be associated with any company in any forms)

1. Power Distribution Franchisee (PDF), one of the reforms in power distribution utilities has seen ups and downs since its inception in 2007? What is your opinion on privatization of Indian Power Distribution Utilities, and opting Franchisee model as a possible precursor for same (compared with other private models like Delhi PPP model, PPP concessionaire, etc.)?

After inception of The Electricity Act-2003, SEB’s were unbundled in various activities. Power distribution reforms through National Tariff policy & National Electricity policy speaks about the private sector participation in public utilities through various models, like PPP model, franchisee model or full privatisation. These types of operating models are used for turnaround of loss making utilities. Each model is having its own characteristics with risks & challenges. But based on performance of various models for last five years, it shows that private ownership was superior both for PPP & to public ownership. With private ownership there were two models namely Privatisation & second Franchisee. In terms of reduction of system losses the performance of both PPP model in Delhi  & Franchisee model in Bhiwandi, the results were dramatic & comparable. These were obtained not only by better management practices, better surveillance etc but also by providing superior services to customers. 

Mobility solutions from Mobicule for Utilities in India

Mr. Siddharth Agarwal, Founder
& CEO, Mobicule

The global market has experienced a paradigm shift with the introduction of SMAC technologies. The letter ‘M’ which stands for 'Mobility’ has changed the opinion of undertaking business and has been dominating in the minds of technocrats, businessmen, and the investors. It does not surprise us to perceive industries shifting to mobile devices where India accounts more than 900 million subscriber base. Catching with the trend various innovative mobile apps has been developed leading to interesting business case. It is believed that mobile app download will grow exponentially and if this is the scenario, one of the biggest beneficiary of these technologies can be Indian utilities aiming to improve their efficiency and streamlining their operation through more focused customer engagement.

pManifold team recently spoke to Mr. Siddharth Agarwal, Founder & CEO, Mobicule to understand how the mobility solution is changing the landscape of Indian utility markets. The below shared are author's personal views and not to be associated with any of their company's association.

JSEB Franchisee bid submission date extended, Mr. Ajoy Mehta's Vision Session at IUKAN 2014 - Power Distribution Newsletter, April 2014

This is a newsletter for the month of April, 2014 sent to mailing list of pManifold sharing Power Distribution industry opportunities and updates.

We continue to share Power Distribution Utility updates for broader community development. Some of them are mentioned below and hope you find it useful. 

Existing Opportunities Last date of bid submission for Jharkhand State Electricity Board's (JSEB) floated tenders for appointment of Collection based Distribution Franchisee model in its 10 rural sub-division has been extended by 12th April, 2014. (Readhere)  Roll Outs from Utilities  In order to ensure reliable power supply and to reduce the breakdown and voltage fluctuation, Spanco Nagpur Discom Limited (SNDL) to invest Rs. 30 Cr. to augment its power network. (Read here) An integrated project of Automated Demand Response (ADR) and AMI are conceptualized together by TPDDL to improve the power reliability and to manage peak power demand more optimally. (Read here)

IT Services & Capacity Building from Cronos group for Utilities in India

Dr. Ralf Bauermann, Chairman,
Cronos Group

pManifold team recently had an interview with Dr. Ralf Bauermann, Chairman, Cronos Group of Companies to understand about their IT and Capacity Building solutions for Utilities in India. (The below shared are author's personal views and not to be associated with any of their company's association)

1. Please elaborate Cronos IT solution for Utilities? (phase wise modules, current deployment stage (if any PPP / Franchisee), key features, hardware requirements, team size for setup and regular running, business engagement model (Capex vs. Opex based), next planned add-ons, etc.)
• As a utility IT solution provider, Cronos believes in engaging the customer for successful implementation of the project and with this implementation strategy Cronos has developed template solutions for utility specific business processes like Billing (Go), CRM (Go), AMI (Go) and migration tools for reducing the implementation time by 70%. Implementation of the SAP End to End Solution in phased manner as per the Utility needs which is a key for successful implementation and continual engagement. 
• Consulting services are adapting new approaches in reducing in time and cost of implementation to meet the urgent business requirements of utilities to increase their revenue, improve customer satisfaction and operational efficiency.Our express implementations with standard customized templates will help the consulting services team to bring utilities the best (cost and time) in mission-critical software for far less than they might have anticipated.
• A standard set of customized templates for critical business processes for specific utility types (electric, gas, water, waste management):
• Pre-configured software solution
• Use pre-defined tools and approaches for integration with other client solutions
• Out-of-the-box training materials specific to our pre-configured solutions
• Use Change management approaches

Mr. Ajoy Mehta shared his vision on 'Sustainability of Indian Power Distribution Utilities and further roadmap' at IUKAN 2014

Mr. Ajoy Mehta, MD,
MSEDCL

Mr. Ajoy Mehta, MD, MSEDCL, in a recently concluded IUKAN 2014 conference shared his vision on 'Sustainability of Indian Power Distribution Utilities and further road-map'. A brief excerpt from his Vision session is shared below. (The views here are personal views, and not to be associated with any company in any forms)

There is need to create right and holistic competition in the power distribution sector, and the road-map cannot be same as followed in Telecom, as electricity is still not ‘wireless’, and differential pricing based on Value-added-Services is not allowed. In Power Distribution sector, competition should be created on customer services delivery side, and private participation in this area should be strongly encouraged. Creating competition between Discoms and private companies on Generation and Network side via mechanisms like Open Access, should be further vetted for Discom viability.

Jharkhand Rural Distribution Opportunity, Expert Opinions and IUKAN 2014 Updates - Dec, 2013 Newsletter

This is a newsletter for the month of Dec, 2013 sent to mailing list of pManifold sharing Power Distribution Franchisee industry opportunities and updates. 

Some of the recent updates from the Power Distribution Franchisee model are mentioned below. Hope, you find it useful.   

New Opportunities

• Jharkhand State Electricity Board (JSEB) has floated tender for appointment of Rural Distribution Franchisee in its 8 areas under different sub-divisions. Last date of bid submission is 17th Dec, 2013. (More details can be seen at NIT, RFP, DFA)  

Expert Opinions

• Views on Managed IT services for Distribution Franchisee by Mr. Ananth Chandramouli, Head - Energy and Utilities, Infosys (Read here)

Trends & Analytics

• CARE Research recent report on Power Transmission and Distribution indicates Distribution Franchisee as a preferred model for PPP route in the sector (Read here)

Update on IUKAN Annual Conference 2014

• In the last 2 weeks, me and my colleagues have spoken to industry leaders from over 200+ companies across power and water sectors. The response has been extremely overwhelming especially for the Best Practices Awards being launched with IUKAN. 
  • If you still haven't nominated your company for Utility Best Practice Awards, then please nominate now. Download the form online or get in touch with us. Last date for submission is 25th Dec, 2013. (See detailed list of business areas for nomination)
• Online registration for the conference is now open. Early bird registration ends on 1st January, 2014. Use Discount code - IUKAN2014-EARLYBIRD to avail 20% discount.
• See updated list of IUKAN Advisors here.

pManifold's Utility Practice can be viewed here, If you would like to know more about us, please contact at kunjan.bagdia@pmanifold.com.

Posted by: Kunjan Bagdia @ pManifold

Views on Managed IT services for Distribution Franchisees by Mr. Ananth Chandramouli, Head - Energy and Utilities, Infosys

Mr. Ananth Chandramouli, Head - 
Energy and Utilities, Infosys 

Indian Power market has fast changed and further evolving post unbundling reforms. There is rapid emergence of various private/PPP models across Power Distribution. There is high attractiveness of the end B2C Power Distribution business, as it brings cash for all other businesses in the value chain. The recent surgence of Franchisee models in Distribution has raised the end-service delivery & price value expectations of the end-customers, which is putting more and more pressure on utilities to bring efficiencies and streamline their operations and overall IT.

pManifold team recently spoke to Mr. Ananth Chandramouli, Head - Energy & Utilities, Infosys to understand about their IT solutions Utility-in-a-box (UIB), an innovative cloud-based platform for Utilities. The below shared are author's personal views and not to be associated with any of their company's association.

1. Please elaborate Infosys’s Utility-in-Box (UIB) IT solution? (phase wise Modules implemented, current deployment stage (whether LIVE), key features, hardware requirements, team size for setup and regular running, business engagement model (Capex vs. Opex based), next planned add-ons, etc.)
• Infosys UIB is a cloud based solution suitable for Utilities and Distribution Franchisees (DFs). The complete platform including hardware, software, data centre etc. is hosted and managed by Infosys and available on “pay as you go” (opex) model to the Utilities/DFs. Only network connectivity at site and office infrastructure (PCs, printers etc.) has to be procured by the Utility/DF. Infosys has already done capital investment in the state of the art centralized IT infrastructure, which can be shared by multiple DFs/Utilities. This helps DFs in two ways. 
• First, the CAPEX cost for IT is converted into recurring OPEX cost; this not only provides cash outflow predictability but also reduces the debt/equity investment by DFs.
• Second, this common infrastructure is designed to be used by multiple DFs hence the cost of hardware, software and services cost are apportioned amongst multiple users. This allows DFs to use this infrastructure at the fraction of the cost that they would have to shell out if they buy such systems at their own.
• UIB has pre-configured, field tested and optimized processes complying with Indian regulatory requirements so it is fast to implement and can be made up and running in about 3 months either in a big bang or phased manner depending on the readiness of the Utility/DF. This allows DFs to save substantial cost and time. It covers all key utility processes such as Connection Management (New Connection, Change of Name, Meter Shifting, Reconnection, Load Enhancement), Meter to Cash (Meter Reading, Tariff Administration, Billing, Collection), Revenue Assurance and Recovery (Disconnection and Dismantling, Vigilance), Meter Data Acquisition and Energy Audit (Meter Data Acquisition, Meter Data Management, Validation, Estimation and Energy Audit), Customer Care, Work Asset Management and Maintenance Management. 
• UIB is Smart Grid ready and the next avatar of UIB will have even more features to help Utilities/DFs realize the vision of Smart Grid without making huge investments in IT. Few of these features are - AMI based centralized prepayment, Remote connect/disconnect, Demand Response etc.

Moving from Electrical Contractor to 'Specialised O&M Managed Services Partner' for Power Distribution Franchisees

Mr. Gagan Aggarwal, MD,
Creative Entrepreneurs

Utilities are heavily driven by outsourcing of products and services, but most times, their integration is limited by lack of strong Service Level Agreements (SLAs) and vendor management practices. The new private operators usually start dealing with several products and contractors, and already
scarce Management bandwidth gets occupied in monitoring and renegotiating contracts and performance. The key question here is – can organized vendors be developed with more end-to-end managed services for these new PPPs?

Recently, pManifold team spoke with Mr. Gagan Aggarwal, MD, Creative Entrepreneurs (CE). The company has 30+ years of experience in providing Turnkey EPC and O&M services for Power and Water utilities. The interview focuses upon 'What new business models need to emerge for such managed services that have performance-linked contracts?' The below shared are the author's personal views and not to be associated with any of his company's and other associations.

Raising meaningful GIS implementation in Indian Discoms and Franchisees

Mr. Sanjay Sahay, VP - India
Sales

GIS is very much talked about in the utility space. Every new franchisee that starts or an existing utility wants to first start by mapping the network and its customers to a GIS map. How effective is this and how effectively it can be done are both questions whose answers differ. However, in the experience of an Indian utility, a well executed strategy for GIS and its integration with existing IT applications can be successfully implemented.

Rahul Bagdia from pManifold team spoke to Mr. Sanjay Sahay, Vice President - India Sales, Infotech - Enterprises. The company has 20+ international experience of providing solutions in the arena of Smart Grid, GIS, Network Management, etc. The below shared are the author's personal views and not to be associated with any of their company's association.

Bottom-up innovation: From Micro Grid in Indian villages to Smart Grid for urban Discoms

Yashraj Khaitan, Co-founder
and CEO, Grampower

Bringing electricity to rural areas that never may see the grid is a great boon to both people's quality of life and the region's economy. Smart Grid Technology or Renewable Microgrid is the topic of this discussion to improve operational and business efficiency of Indian Power Utilities.

Grampower, a energy technology company is working on addressing the electrification challenges in India. 

pManifold recently spoke to Mr. Yashraj Khaitan, Co-founder and CEO of Grampower. The company sets up energy efficient Smart Microgrids in remote areas to provide on-demand, reliable electricity to telecom towers and rural households with an affordable prepaid purchase model. He has been instrumental in raising over USD1.7 million for the company, and leads product and business development and partnership building to scale the company's operations.The below shared are the author's personal views and not to be associated with any of his company's and other associations.

Avoiding mistakes with GIS implementation in Power Distribution Utilities

Noida Power Company Ltd (NPCL), a joint venture between the RP-Sajiv Goenka Group, a leading business house in India and Greater Noida Industrial Development Authority, distributes power in Greater Noida, near Delhi in Uttar Pradesh. The Company started its operations in December 1993 under a 30-year license from U.P. Government and is among the leading companies to use GIS technology with vast experience.

pManifold team spoke to Mr. Rajiv Goyal, Head (Projects and Power Trading) and Mr. Vikas Gupta, Manager (GIS) to understand their experience in GIS implementation and the best practices adopted by NPCL. The below shared are the author's personal views and not to be associated with any of his company's and other associations.      

Franchisee updates from Jharkhand & PESU, Expert Interviews & more - Aug, 2013 Newsletter

This is a newsletter sent to mailing list of pManifold sharing Power Distribution Franchisee industry opportunities and updates.

Some of the recent updates about the industry are mentioned below:

New Opportunities

• Jharkhand State Electricity Board (JSEB) has floated new RFP documents for appointment of 'Rural Distribution Franchisee' on the basis of 'Collection Based Model' in its 15 sub-divisions comprising of following Area Board: Ranchi, Jamshedpur, Hazaribag. 4 sub-divisions out of 15 are same as per the earlier released tender document in Feb, 2013. The key activities for the participating bidder includes meter reading, billing, collection, minor operation and maintenance of the LT/HT network, attending fuse calls, etc. Last date of bid submission is 27th August, 2013. (Request For Proposal, Distribution Franchisee Agreement and Notice Inviting Tender can be read here in details)

• South Bihar Power Distribution Company Ltd (SBPDCL) has re-initiated tenders through e-procurement mode only for selection of bidders for PESU area. Last date for request of bid document has been extended till 10th Aug, 2013 and for bid submission is 12th Aug, 2013. ('Pre-bid conference replies, RFP and Corrigendum'can be downloaded here)       

Mr. Ajoy Mehta shared his vision on Power Distribution Franchisee models in India

Mr. Ajoy Mehta, MD,
MSEDCL

Mr. Ajoy Mehta, MD, MSEDCL, in a recent Business Technology Conclave of IUKAN extended strong support to Power Distribution Franchisee model, for country to build sustainable power utilities. He shared his experience and vision for further strengthening of the Power DF model. A brief excerpt in form of Q&As from his Vision session at IUKAN is shared below. (The views here are personal views, and not to be associated with any company in any forms)

Q: What role of privatization you see in Indian Discoms?

A: Electricity Act, 2003 made Generation de-licensed, opening to private participation, but in T&D continued to require Licensing, opening it to part-privatization, but not allowing complete private ownership of assets.

• A Discom performs following core functions 1) sourcing of power 2) tariff filing and reporting to Regulators 3) various customer services like MBC etc. 4) distribution and fault management 5) and HR management.
• Out of above, sourcing of power & tariff filling and reporting are broadly considered as prerogative of Licensee only, and hence not kept in scope of Franchisee.
• The strength of private company is to handle customer relationship and bring operational efficiency, and hence remaining above activities including like MBC, IT, and Customer services, O&M, HRM etc. were made in scope of DF.

As Discoms are reeling under the high distribution loss and revenue deficit, the one way of improving the Distribution of electricity is to rightly involve private companies in the sector.     

Leveraging EE programmatic financing for expediting AT&C loss reduction

While Indian Discoms continue to focus on AT&C loss reduction, which in many cases stands to the order of greater than 60%, and lot of private efforts is getting attracted in, it is clear that this is a massive Energy Efficiency (EE) drive. There are various talked instruments for EE financing, but not much has been realised by Indian Discoms. With this Rahul Bagdia from pManifold team spoke to Mr. Vinod Kala, Founder & MD, Emergent Ventures India. He has over 25 years of industry experience, centered on Clean Energy, Strategic Management and Finance. Over the years, he has helped launch a number of new businesses in Clean Technologies including Renewable Energy Aggregators in wind, hydro and bio-mass energy, LED Appliances, Sustainable Farming etc.


This interview focuses upon 'If and how Indian Discoms could leverage & possibly expedite their AT&C loss reduction drive through potential financing from EE programmatic interventions'. The below shared are the author's personal views and not to be associated with any of their company's association.

Embedding Financier's & Lenders perspective in design of Power Distribution Franchisee

One recent success for Distribution Franchisee model in the country was first debt funding to Essel DF project at Nagpur. SBI Caps was involved in Debt Syndication partner role. Rahul Bagdia from pManifold Team recently spoke to Mr. Sudarshan Mohotta, VP Project Advisory & Structured Finance Division, SBI Capital Markets. Mr. Mohotta and his team were instrumental in closing this deal. He has around 17 years of experience in project & corporate finance and banking including financing of infrastructure projects. At SBI Caps, he has been actively involved in structuring and evaluating infrastructure projects and arranging funds with focus on power, port and road sector.

This interview focuses upon 'What will bring confidence amongst investors to invest in Power Distribution Franchisee models?' The below shared are the author's personal views and not to be associated with any of his company's and other associations.

Part 2 of 2 - Suggested amendments in National Tariff Policy

This is sequel to "Part 1 of 2: Suggested amendments in National Tariff Policy". 

Part 1 of 2 - Suggested amendments in National Tariff Policy

Rahul Bagdia is Co-Founder and Director
of pManifold. The co. specialize in Utilities and
Emerging Markets Research and Advisory,
and is focusing upon operationalisation and improvement in
Service Delivery of Power Distribution models.

Ministry of Power (MoP) is reviewing the Electricity Act 2003 and the National Tariff Policy 2006. 

Federation of Indian Chambers of Commerce of Industry (FICCI) recently had a small group meeting to discuss amendments in these Acts and invited suggestions. 

Mr. Rahul Bagdia, Director, pManifold Business Solutions, shared below suggestions to FICCI team on potential amendments to further create more Market governed healthy power sector in India. These are independent and individual views of the author and not to be associated with any of his affiliation with any company or whatsoever.  

Our existing Policy framework is strong; however its enforcement has been weak. The new amendments in addition to driving more market led changes, should act as better facilitator for measuring performance and enhancing governance in our utilities. Below suggestions are directed in Power Distribution space only.

Interview with Mr. Ajai Nirula, COO at TP-DDL on PPP models for Power Utilities in India

Mr. Ajai Nirula, Chief Operating Officer (COO) at Tata Power - Delhi Distribution Limited (TP-DDL) was one of the sessions moderator in recently concluded IUKAN 2013. As a veteran in the Power industry, he shared his inputs on various distribution reforms and the challenges associated with it.

1. What are the current trends in PPP models for Power Utilities in India? 
• Presently, three business models are in existence i.e. Privatization, Franchisee Based (Unit Based Input Model) & Concession Based (Now recommended by Planning Commission)
• Franchisee Based Model: Operates in designated areas, responsible for network maintenance, for a fixed period (generally 15 Yrs.), Bidding is done on price you pay for per unit power purchased
• Concession Based Model: Fix tenure for 25 Yrs., Bidding party gets a license to operate in the area, bidding is done on viability gap funding concept
• Privatization Model (Delhi/Orissa): Responsible for AT&C Reduction & maintaining reliability of network, licenses to operate in designated areas, asset valuation at a notional value, incentivization on overachievement of targets, Governed through a regulator

'Financial Institutions with outstanding debt to Discoms should take Equity position under planned restructuring to bring effective Performance Management' says Amulya Charan

Mr. Amulya Charan, Chief Mentor, Power Trading and Advocacy at Tata Power has 22+ years of experience in the Indian Power Sector, spanning Generation, Transmission, Distribution and Trading. With senior Mgmt. roles at NTPC, Power Grid, Tata Power Ltd., he was ex- MD at Tata Power Trading Company Ltd for four years. Mr. Charan shared following views in recent meet with pManifold.

Question 1: What are the Key Issues with our Discoms?

• SEB Financial Health – another sub-prime crisis in the making
• The cash losses of SEBs have increased 40x FY05-09 to a colossal Rs 284 bn and AT&C losses continue to scare at 28% (All India)
• These losses along with theft of electricity and insufficient increase in tariffs have been the reason for staggering financial losses and curtailing their ability to service their customers
• The investment by discoms in upgrading the distribution infra is much lower than required due to unavailability or limited availability of cash

• High Debt exposure of lenders to the Power Sector
• Outstanding debt of state power utilities have grown to a staggering Rs 6 lakh crore or 6% of the GDP. Roughly a third of these are loans taken to fund past losses which cannot be serviced through tariff hikes and, hence, are being considered for a benign restructuring by the Centre. Unless big reforms are undertaken to stem losses and spur revenue streams, these liabilities would grow further to Rs 7.3 lakh crore by March 2013. This looks like a reasonable estimate, given that annual losses (after receipt of subsidy) of discoms in the country were Rs 42,415 crore in 2009-10, up 18% over the previous year.

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.