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Issues in Electricity Distribution

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Page 1: Issues in Electricity Distribution

8/10/2019 Issues in Electricity Distribution

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Issues in Electricity Distribution

Some Fundamentals

• T&D Losses: difference between the energy available and the energy supplied

as recorded! to the consumers"• T&D Loss#Technical Loss$%onTechnical Loss

• Technical LossLoss occurring due to physical characteristics of the power

systempower lines' transformers' substation e(uipments! )ccur mainly in the

transmission*distribution lines and the transformers!

•  %onTechnical LossLoss occurring due to wrong measurement of energy

supplied to consumers"+easonstheft and faulty meters!

• T&D Loss#Total EnergyTotal Load#Total EnergyDirect Load$,onsumer

Supply!

• -ercentage T&D Loss#.// 0 T&D Loss*Total Energy!

• Till such time as all agricultural and domestic supplies are fully metered andenergy audit is in place' T&D losses are a derived figure*inappropriate

measure"

• Till the time metering is completed' the level of losses is being assessed in

terms of 1ggregate Technical and ,ommercial Losses"

• 1T&, Loss is the difference between units input into the system and the units

for which the payment is collected*realised"

• 1T&,#Energy InputEnergy +ealised!*Energy Input

• Energy +ealised is the number of units for which money is collected from the

consumers"

• 1s per ,E1 T&D Loss in India is of the order of 2.3"• 1s per -F, 1T&, Loss in India in 4//5/6 is of the order of 22"763"

• 1T&, Loss is in the range of 7/5/3 in many states"8har9hand653'

anipur;43 and Si99im;<3!

• 1T&, Losses1hmedabad and Surat...43'%oida -ower ,o": ./"7=3'

>SES aharashtra:.."243' %orth Delhi -ower ,o: 46"543

• 1vailability >ased Tariff and its impact:1>T refers to the new tariff structure

which separates the fi0ed and variable costs of power generation" Fi0ed

,harge ,apacity ,harge!#)perating and aintenance ,ost$Income

Ta0$Interest$+epayment of Loan$Depreciation$+eturn on e(uity ?nder

1>T a generation company would receive this component depending on thedeclared availability of its plant and irrespective of actual generation"!@ariable

,ost*Energy ,harge#Fuel ,ost Depends upon schedule of generation as

given by load dispatch centre' based on load re(uirement"! Segregation of

fi0ed and variable charges enables generation based on incremental cost of

generation' bringing down the overall generation cost"

• Aheeling ,harge: The tariff payable as per the tariff orders provided by

various regulatory commissions"

• )pen 1ccess: +efers to a mechanism whereby generating company can sell

 power to a buyer of its choice and a consumer can purchase power from seller

who gives him the best price anywhere within the country"

• ,ross Subsidy Surcharge: This is to be paid by open access consumers" This is

calculated as the difference between the consumer tariff and the cost of supply"

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,ost of Supply is calculated based on the weighted average of power purchase

costsfi0ed and variable! of the costliest 53 sourcese0cluding li(uid fuel

 based sources! adBusted for average loss compensation at the relevant voltage

level and the distribution networ9 charges" Surcharge#TariffC,ost 0

.$Loss*.//! $ Distribution ,harge,ost#Aeighted average cost of power

 purchase of the top 53 of poweras per the merit order generation! e0cludingthe li(uid fuel based generation and renewable generation' Distribution

,harge#Aheeling charge set for the distribution utility' L#System losses till

the voltage level at which power is withdrawn!

Distribution +eforms

• >ifurcation of Feeders: Due to fast e0pansion of towns the length of the

feeders has gone far beyond the standard limit which has been creating

 problem of low voltage and high technical loss" This warrants bifurcation"

>ifurcation also enables the utility to segregate various types of load' which

helps utilities in restricting supply to particular types of consumers for certain

time period"

• Segregation of +ural Feeders from ?rban Feeders* agricultural feeders from

non agricultural feeders: This will help the utilities in effective energy

accounting and auditing and will help in fi0ing accountability"

• +evamping old' wea9 and overloaded networ9s along with feeder bifurcation

uality e(uipment matching load re(uirements and of much longer guarantee

 periods are re(uired to be installed" The re(uired shunt capacitors need to be

installed to improve power factor and voltage"Due to inade(uate networ9

e0pansion commensurate with load growth' many power transformers'

distribution transformers' 229v lines and ..9v feeders are overloaded" ost of the distribution networ9s in India are (uite old which results in reduced

reliability' increased +& e0penses and poor (uality of supply"

• aintenance of substation and distribution networ9"

• 1doption of igh @oltage Distribution System@DS! to increase igh

Tensionlow tension ratio"

• Governance or administrative easures include constitution of SE+, and

timely filing of tariff petitions' preparation of long term plans for

strengthening and improvement of distribution systems along with associated

transmission system' training of employees' proper networ9 planning for

future e0pansion' provide sufficient budget annually for strengthening and

upgradation of electricity networ9"

• Theft ,ontrolElectricity 1mendment >ill' 4//5 aims to ma9e all offences

under the Electricity 1ct' 4//2 noncogniHable offence" 1 Scheme of

incentives and disincentives will help to motivate the employees of the utilities

in reducing the losses and also in controlling theft of electricity" Some State

Governments have also constituted special courts and special police stations to

deal with cases related to electricity theft" igh voltage distribution system has

 been suggested in the %ational Electricity -olicy as an effective method for

 prevention of theft as well as reduction of technical loss' improved voltage

 profile and better consumer service" )ther measures include incentive for

informers and wor9shops and awareness programmes for officers of thedistrict administration' power utilities and general public"

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• etering: It was resolved in 4//. for the States to provide .//3 metering on

..9v feeders and to start energy accounting and auditing within ne0t si0

months at ..9v feeder level for fi0ing accountability at local level" 1ndhra

-radesh' 1ssam' Delhi' Goa' GuBarat' imachal -radesh' erala' iHoram'

?taranchal and Aest >engal have achieved consumer metering above =53"

1runachal -radesh' >ihar' 8har9hand' anipur and %galand still have lowfeeder metering" ost of the States have not yet ta9en up metering of

agricultural consumers" Following steps need to be ta9en : i! .//3 feeder

metering ii! .//3 metering of Distribution Transformers iii! .//3

consumer metering iv! -repaid metering for small consumers* single point

consumers*remote areas iv! GIS mapping of assets and consumer inde0ing v!

Energy accounting and auditing coupled with proper billing"

• Franchising: It is necessary that the system of franchisee is implemented in a

 phased manner by the state government*utilities in order to bring down

commercial losses' improve collection efficiency and provide doorstep

services to the consumers" The assets will be owned by the state utilities and

the franchisee will be allowed to recover the investment through regulatory

mechanism" Franchisee will be re(uired to pay the electricity charges to the

utility at bul9 supply tariff after allowing for reasonable T&D loss in the

networ9" The franchisee would be responsible for distribution of electricity

within an identified contiguous area for a prescribed duration' carry out

minor*maBor repairs' issue of new connections etc" and for collecting revenue

directly from the consumers at a tariff decided by the regulator" Franchisees

need to be selected following a transparent process on the basis of clearly laid

down criteria" Aherever feasible' franchisees should be selected on the basis

of competitive bidding for the most favourable bul9 supply tariff for the

distribution licensee" Franchisees could be %G)s' ?sers 1ssociation',ooperatives' individual entrepreneurs or the -anchayat institutions"

Franchisees have to be developed and will need hand holding by the utility for

some time"+E, has launched a national programme for franchisees under

which a tas9 force on capacity building has been formed" The performance of

a franchisee will have to be closely monitored on various benchmar9

 parameters li9e 1T&, losses' revenue collection' reliability of supply and

consumer services etc"

• Determination of ,ross Subsidy Surcharge and Aheeling ,harge: The forum

of regulators could e0pedite determination of cross subsidy surcharge and

wheeling charge in a rational manner as provided in the tariff policy The

States need to e0tend cooperation to SE+,s in bringing about reduction incross subsidies" The Tariff -olicy provides that the cross subsidies are to be

reduced to the range of $ 4/3 of the average cost of supply by year 4./..

and the SE+,s were re(uired to notify roadmap within si0 months for

achieving this" The policy also provides that wheeling charges should be

determined on the basis of same principles as laid down for transmission

charges so that open access consumers are not discriminated against in respect

of wheeling charges"

• Early implementation of intra state 1>T as envisaged in the Tariff -oicy

• +estructuring of -ower Distribution System through introduction of )pen

1ccess: -rivatisation of distribution system has shown mi0ed success"owever this only transfers State monopoly to private monopoly" )pen access

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in distribution has not materialised due to the inability of the consumers to

aggregate and approach the generator directly' due to high charges including

cross subsidy surcharge and wheeling charges and due to the highly

entrenched interests of the incumbent distribution entities etc" The electricity

1ct can be interpreted to mean a supplier of electricity who has no asset and

does not need any licence' but can buy electricity for resale" owever' whenread with the ,E+, regulations on trading' this interpretation no longer holds"

Section .4 of the Electricity 1ct provides that licence will be re(uired for

trading in electricity" >ut as per Section .2' the provisions of section .4 may

not be applicable to certain noncommercial organiHations li9e local authority'

 panchayat institutions' usersJ association' cooperative societies' %G)s or

franchisees" owever' under ,E+, regulations JlicenceJ means licence granted

under section .7 of the Electricity 1ct to underta9e inter state trading in

electricity as an electricity trader" So some confusion e0ists" In order to foster

competition in distribution' we would need to create the category of licensed

Electricity Suppliers under the Electricity 1ct to come under the present

definition of JtraderJ by appropriate regulations under the 1ct" These supplierswould have no assets of their own but use the transmission and distribution

system of the present transmission service providers and distribution service

 providers" The e0isting distribution licensees could be the default suppliers for 

consumers who fail to register with any of the suppliers" In course of time this

function can also be phased out" +ates could be regulated through tariff caps

and fi0ed transmission and distribution charges" +ate caps will ensure that

retailers do not ma9e money out of the supply till such time as the prices are

ade(uately balanced through the forces of demand and supply" There could be

re(uirements that a minimum percentage of consumers are residential

consumers" Such electricity providers could be regulated through licensing

with the regulator' perhaps as a subclass of JtraderJ provided suitable

regulations are made" The entities who wish to register must be financially

capable of carrying out the business of electricity supply" owever' open

access would not assume any significant proportion unless sufficient (uantity

of electricity is available in the mar9et outside the long term --1s"

• Encouraging development of various products for different consumer groups:

Efforts should be made to develop different products with retailers coming up

with different pac9ages to cater to different populations"

• ,hange in the role of the regulatory authority: Tariff fi0ation should

increasingly be left to the mar9et and the regulatory authority should rather

monitor more closely the performance standards in the power sector"• ,reation of a vibrant -ower E0change: 1 vibrant power e0change could

ensure that the resultant price is an outcome of both supply and demand as it

would match the prices at which various suppliers are willing to supply" This

system would score over the system of competitive bidding where buyers

enter the mar9et separately and compare the prices bid by the electricity

suppliers"

• Improving the financial health of state utilities: ?tilities should put in place a

Financial Turnaround -lan duly approved by the regulator and the State

Government' which should include timely filing of 1nnual +evenue

+e(uirement1++! and Tariff -etition' adoption of ultiKear Tariff as

 provided for in the %ational Tariff -olicy 4//6' and a scheme for timely

 payment of electricity dues by Government Departments' local bodies and

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advance payment of subsidies from the State Government' in addition to

restructuring of their balance sheets as a onetime measure"

• ,reation of a central repository of data in electronic form: 1bsence of this

leads to delay in filing tariff petitions and responding to (ueries from

regulators"

1ccelerated -ower Development and +eform -rogramme1-D+-!

•  In 4//.' Government introduced the 1ccelerated -ower Development

-rogramme1-D-! with the obBective of initiating a financial turnaround in

the performance of the State owned power sector" The programme was

formulated to finance specific proBects for upgradation of subtransmission and

distribution networ9 and +enovation and oderniHation of power proBects in

Thermal and ydro Sectors"

• In 4//4/2 the programme was rechristened as 1-D+- and the assistance

was lin9ed to reforms"Initially the programme covered 62 distribution circlesout of the 7// distribution circles in the country" Later the focus shifted to

densely electrified Hones i"e" urban and industrial areas" The programme now

aimed at strengthening and upgradation of the subtransmission and

distribution system in the country with the obBective of reducing 1T&, losses'

improving (uality of supply of power' increasing revenue collection and

improving customer satisfaction" The strategy envisaged technical'

commercial' financial and IT intervention' organiHation and restructuring

measures and incentive mechanism for reducing 1T&, and cash loss

reduction"

• ?nder this programme' SE>s are entitled to receive 5/3 of the losses reduced

 by them in a year from the centre in the form of a grant" 1-D+- has both aninvestment component financing investment both via loan and grant in State

-ower Systems and an incentive component lin9ed to loss reduction"

• Status as of 8anuary' 4//;: 5;. proBects were sanctioned under the investment

component with an estimated outlay of +s".;/22"5< cr involving grant

component of +s"6775"<7 cr and loan component of +s"44;7"42 cr" The

Government has so far released +s"7666";= cr grant and the entire loan

component" ?nder the incentive component nine states have achieved cash

loss reduction of+s"5457"6/ cr and has become eligible for incentive of +s"

464;"2/ cr" The Government has so far released +s" .5<;".4 cr out of this

amount" 1T&, Losses have been brought below 4/ percent in 4.4 1-D+-

Towns and below .53 in .6= towns"

-roposal for +evised 1-D+-:

• inistry of -ower constituted a tas9 force under Shri -" 1braham to assess and

analyse the current efforts'suggestions made by various agencies and to

suggest restructuring of the programme to better achieve the obBectives of

1-D+-"

• The tas9 force suggested continuation of the scheme during the ..th -lan under 

a new name J1ccelerated -ower Distribution +eform -rogrammeJ as a

,entrally Sponsored Scheme"

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• Focus of the programme shall be on establishment of base line data and

adoption of IT in areas of energy accounting and auditing and improvement in

consumer services through establishment of IT enabled ,onsumer Service

,entres"

• The programme will cover urban areas only' covering all district head(uarters

and towns with population of more than 5/'///" The funding will be proBectspecific" Important towns of Special ,ategory States having lesser population

will also be covered"

• Funding for strengthening of subtransmission and distribution networ9 will

 be in form of loan through Financial Institutions" ?pto 5/3=/3 for special

category States! of the loan would be converted into grant on reducing 1T&,

losses to at least .53 through specified reform and performance

milestones"The target period will be determined after establishment of

validated baseline data" The baseline data and the reduction in 1T&, loss

will be verified by independent validating agencies appointed by the -ower

inistry"It is proposed to provide incentives to employees in proBect townswhere the agreed targets are achieved"

• ethods to be used for collecting base line dataconsumer inde0ing' GIS

mapping' remote metering of distribution transformers and feeders' automatic

data logging for all distribution transformers and feeders' IT applications'

establishment of consumer care centres etc"

• -art 1:The base line data would be independently verified alongwith the loss

levels for each distribution transformer"

• -art >:+enovation and oderniHation: substations'

transformers*transformer centres'reconducting of lines at ..9v level and

 below' load balancing' S,1D1 etc"

• -art ,:@alidation of the base line data' -roBect advisors and anagement

Information System' proBect evaluation by third parties' capacity building'

consumer attitude survey' +ating e0ercise"

• -art D:Incentive programme for distribution utility employees"

• -art E:./th -lan incomplete proBects shall be completed during the ..th -lan"

The incentives shall be released against admissible claims from ./th -lan

 period"

Eligibility ,riteria:

• 1ll Distribution ,ompanies with valid licence in accordance with Electricity1ct 4//2

• ,onditions to be achieved by States*DIST,)s within stipulated timeframe

which is company specific!

." 1doption of a Financial +estructuring -lan duly approved by the

+egulator and by the State Government

4" +estructuring of SE>*-ower Deptt"

2" Establishment of special courts and special police stations

7" Introduction of measures for better corporate governance

5" Introduction of competition in distribution

6" Introduction of measures for better accountability at town' substation

and transformer level

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;" Establishment of input based franchisees in towns with high 1T&,

loss"