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.

Top 15 - Field analysis of Customer Indexing for a Utility Company

GIS based consumer indexing is one of the effective tool to improve the complex network of consumers for the utility company. The complexity of network and minimal baseline data available, the utility needs to take substantial efforts on field to create a strong database of the consumer.

While working with a major water utility in India, some of our observations are listed below. These observations could help in creating a strong database of consumer.

Problems & Resulting Issues:

A) Systemic Problems (arising due to problem in process/system)

• Background and purpose not clearly defined which is essential for correct inputs and improve the quality of data. 
• Lack of strong processes and system base implementation for customer indexing
• Recruitment of low quality people for on-field surveys which leads to lack of presentations skills, confidence, convincing capabilities, etc.
• No processes for submission of on-field data which results in faulty batching of data and missing of survey forms
• No regular updates of data (Monthly or Quarterly)
• Lack of effort estimation and resource allocation which results in exceeding deadlines and duplication of efforts

B) Data Collection Problem (Due to Presentation / Understanding / Customer Support)

• Wrong plot markings of property polygons in GIS base maps
• Incomplete information filled by surveyor to achieve the daily target
• Missed out consumers and properties by surveyors
• No validation of Consumer Indexing process compliance by surveyors who are doing mistakes on field
• No continuous tracking of surveyor records and inputs
• Management of surveyors becomes difficult due to high attrition rate on-field
• Difficulty in categorizing registered, unregistered and no-connection Consumers 
• Lower level supervisors tackling the issues arising out of political influence may create unwanted barriers

Recommendations:

- Create a strong stakeholder (internal & external) agreement on what is required output of the consumer indexing survey
- One of the most effective ways to ensure high quality of data collected is to emphasize more on re-validation of the data by a field team
- Preliminary survey by taking GIS base map also helps to minimize GIS related issues on-field.
- On-field continuous training and quality monitoring of surveyors which will help minimise mistakes at ground level
- Appropriate costing and effort estimation is required for timely delivery of data
- Frequent updates of data is important which will help resolve to bring consistency in data

Prologue:

A systematic execution of customer indexing creates a whole new intelligence about the local variables. At the same time it can suggest strategic interventions which could be used for creating a positive cash flow for the utility.

Nominations invited for Power Distribution Conclave for IT Decision Makers on 12 June 2013 at Mumbai

This is an announcement sent to the Power distribution franchisee group and mailing list of pManifold as a call for nominations. Reproduced for broader dissemination.

After the 'India Utility Knowledge and Networking (IUKAN)' Conference in Delhi in Feb 2013, yet again,  we are taking another step to engage the utility professionals offline with the following Business Technology Conclave in association with SAP,

Business Technology Conclave for IT Decision Makers and Thought Leaders in Power Distribution Utilities

------------------------------------------------------------------------------------------------------------

Theme: Organised IT: Recoding for Indian Power Discoms and Franchisees

Focus: IT in Power Distribution

Venue: Hilton Mumbai International Airport, Mumbai

Date: 12 June 2013 (1 day event)
Registration: By invitation only and Free

Bihar Distribution Franchisee Updates: 2 LoIs issued in March

Bihar State Power Holding Company Ltd (BSPHCL), the state owned Power Distribution utility has recently issued Letter of Intent (LoI) of Distribution Franchisee of Muzaffarpur and Bhagalpur regions to Essel Utilities and SPML respectively. The LoIs has been issued in March 2013.

Tender for appointment of distribution franchisee in PESU & Gaya regions has been cancelled. It is expected that BSPHCL will float new tenders for these 2 regions soon.

We wish the winning two companies successful operationalization so that the DF model achieves its potential.

For latest updates and information from the Power Distribution Franchisee industry, join our 'LinkedIn Group' having 700+ industry professionals.

Posted by - Kunjan Bagdia @ pManifold

Comparative View of Key Performance Indicators across Gujarat’s Power Distribution Utilities

Paschim Gujarat Vij Company Ltd. (PGVCL), the largest Power Distribution Utility, compared to other distribution utilities in Gujarat, is serving more than 47 lakhs customers, across 8 districts and 44 divisions. The utility PGVCL has considerable losses (both Aggregate Technical & Commercial (AT&C) and Transmission & Distribution (T&D)) compared to other utilities and hence, is evaluating different options of Public Private Partnership (PPP) models to improve the operational efficiency and performance monitoring. They are evaluating various models including the Input Based Distribution Franchisee (IBDF), Light Capex new Orissa model and others. To have a detailed understanding of IBDF model, a team of PGVCL recently visited MSEDCL’s office in Mumbai for a deeper study on the model.

pManifold has done a quick market research to understand the performance of Gujarat’s distribution utilities on key parameters using its DF Attractiveness Matrix. The data used is of the FY 2011-12.

Key excerpts are mentioned below:

• PGVCL has highest area compared to other utilities, covering scattered geography with 8 districts and 44 divisions. 
• Total number of customers is double in PGVCL as compared to others, with highest percentage of Agricultural customers (i.e. ~11%) followed by UGVCL with (~8%). 
• Losses are highest in PGVCL, compared to others due to larger proportion of agriculture sales. Due to this, the state regulatory has set trajectory of 2% loss reduction per year for PGVCL and 1% for others.    
• Average cost of supply (ACS) is highest for PGVCL and its sales realization is least. 
• Quarterly Transformer Failure rate is also highest for PGVCL. 

Apart from the above points, based on the analysis of tariff reports, it is observed that the tariff for domestic and agriculture customer categories has remained at 70-80% and 20-30% of the average cost of supply, while the non-domestic and industrial categories pay in the range of 120-150% respectively, across different utilities. Thus, non-domestic and industrial revenues continue to cross subsidize agriculture and domestic categories.      

With a view to reduce the losses and improve the overall system efficiency, PGVCL has taken a good initiative to understand more on the Distribution Franchisee model. We hope that the preliminary thoughts picks up more traction in coming time period so that the DF model develops further and reach to its potential.

Posted by - Kunjan Bagdia @ pManifold

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