Private Sector Participation in Distribution

Report
Private Sector Participation in Distribution
Puneet Munjal, Sr. GM
TATA POWER DELHI DISTRIBUTION LIMITED
(formerly North Delhi Power Limited)
Dec 23, 2011
Contents
Setting the Context
• Key Issues in the Distribution Sector
•Need for Private Sector Participation
Tata Power Delhi Distribution Limited (A PPP Model)
•Pre Reforms Situation in Delhi
•Reforms Objectives
•Delhi PPP Model
•About Tata Power Delhi Distribution Limited
• Our Turnaround Story
•Initiatives
•AT&C Loss Reduction
•Reliability
•Consumer Service Excellence
•Change Management
•Corporate Sustainability
Key Issues in the Distribution Sector (1/3)
• High Aggregate Technical and Commercial
Losses
• National Average at 26-28%
• Absence of Cost Reflective Tariffs
Source: PFC Report on Performance of Power Utilities
2009-10
• Huge Revenue Gaps for discoms on account of
Deferred Tariffs: creation of Regulatory Assets
not in favor of anyone except bankers !
• Incorrect economic signals to consumers on
consumption vis-à-vis price
• As per Plng. Commission’s HLP Report, losses of
SEBs at end of 2010 at Rs. 1,07,000 Cr; to
increase to app. 2,90,000 Cr. by end of XII Plan
(2017) at existing tariffs
Source: PFC Report on Performance of Power Utilities
2009-10
Deteriorating Financial Health of DISCOMS; Banks limiting/ restricting exposure to Power Distribution 3Sector
Key Issues in the Distribution Sector (2/3)
• Huge Cross subsidies built into
existing tariff structures
• Major inhibitor to introduction of
Competition under Open Access
Framework
• Insignificant progress towards Tariff
Rationalization in line with NTP
• Spiraling Generation Tariffs
• No control on Input (Coal/ Gas cost for
Power Generation) but output cost (Retail
Tariff) is controlled
• Dissonance between Generation and
Distribution Regulations – while in Distt.,
efficiency is expected to be brought
annually in O&M Costs (RPI- X), no such
requirement in Generation.
Source: PFC Report on Performance of Power Utilities
2009-10
• Competition
Open Access yet to take off
4
Need for Private Sector Participation
• Professional and Accountable Management
Pvt
•
Introduction of Best Practices
•
Agility in decision making
•
Attract talent in the Distribution Sector
•
Responsiveness to consumer expectations
•
Ability to inculcate Performance Orientation in
Employees
State Owned
PPP
DF
Current Scenario (More than
85% state owned)
What can
private
participation
offer ?
• Equity contribution by private players can free
scarce state resources for public use
Private participation – insulates Utility from Political Interference ; runs utility on Commercial principles
5
Need for Private Sector Participation
• Observation of High Level Panel studying various distribution
models in India
• Govt. owned utilities have to perform within a rigid framework coupled with low
levels of accountability
While,
Private Utilities enjoy greater flexibility in operations, are more focused on their
actual businesses and have greater individual accountability at all levels
• To raise high density areas to optimum levels of efficiency and performance, these
should be carved out into separate entities and privatized
6
Some Pre Requisites for Private Sector Participation
• Sustainable Business Model
• Reasonable Return after recovery of costs
• Clean Balance Sheets
•
•
•
•
Reasonably Accurate Baseline
Stable Regulatory Regime: MYT Policy
Cost Reflective Tariffs
Govt. Support for
• Transition
• Loss Reduction : Police Force, Special Courts
• Freedom to select employees (maybe restricted)
7
Models for Private Participation
Sale of 51% Equity to Pvt. Player PPP
Model
Delhi / Orissa Discoms
• Distribution Companies privatized
by Govt. through sale of majority
stake
• License-based Regulated business –
license for 25 years
• AT&C loss targets as bid variable;
Guaranteed 16% RoE on meeting
AT&C Loss Reduction Targets.
• Tariff set by regulator on cost plus
RoE.
• Overachievement gains shared with
consumer
• Transition Support by Govt.
• Performance Assurance Standards
vested with licensee
Franchisee Model
Concession Based PPP Model
Bhiwandi
(under consideration)
• Licensee appoints franchisee for a
tenor of 15-20 yrs
• Input Rate for Bulk Power as bid
variable
• Assets transferred to Franchisee on
license to use basis
• Franchisee Tariff similar to that of
remaining licensee area
• Performance Standards of licensee
to be maintained by Franchisee
• Franchisee insulated from direct
Regulatory Oversight; Licensee
adopts the Regulatory Role
• Long Term Concession – BOOT basis
• Assets transferred to Concessionaire
on License to Use Basis; to be
returned to Concession Granting
Agency on termination of
Concession Agreement
• Bid Evaluation Criteria – positive /
negative Viability Gap Funding
Requirement based on a predetermined wheeling tariff
• Regulator to only fix the Retail
Supply Tariff based on actual cost of
input
• Penalties/ Incentives for
over/underachieving Performance
Assurance Standards – to be
specified in the RFP/ Concession
Agreement
8
Tata Power Delhi Distribution Limited
(A PPP Model)
Joint Venture between Tata Power (51%) and Govt. of Delhi (49%)
Distributing Electricity in North and North West of Delhi
Pre Reforms Situation in Delhi
Pre 2002 Delhi Electricity Board – A Vertically Integrated Utility
Burgeoning Aggregate Technical & Commercial (AT&C) Losses - 50% - 60%
Condition of Network Pathetic – supply system on the verge of collapse
Govt. Subsidies of ~ Rs. 1200-1400 Cr. p.a.
Billing Receivables Close to 1 year Outstanding
Harassed Consumers- Large no. of Complaints and Requests Backlog
Lack of accountability, initiative & service orientation in ageing and semi skilled
workforce
Ill maintained administrative infrastructure and no IT Enablement
Sector becoming increasingly unviable leading to decision to reform through unbundling
and privatization
Reforms Objectives
Improvement in
Quality of
supply
Attract investment
Make Sector Self
Sustaining
Focus on Consumer
Service
Reduction in AT&C
Losses
Delhi PPP Model: 2002
Integrated SEB unbundled: Generation, Transmission and three Discoms
Discoms privatized (51%) through sale of majority stake at par value
AT&C Loss Reduction Commitment: Sole Bid Evaluation Criteria
Clean Balance Sheets with only serviceable liabilities
Guaranteed 16% RoE on meeting AT&C Loss Reduction Targets
Overachievement gains shared equally between Utility & Consumers
Power Purchase cost to Discoms subsidized through Govt. owned Bulk Buyer Transco
to prevent tariff shocks
Transition Support by Govt. to Transco – (Rs. 3,450 Cr. over first five years) to cover
Transco’s deficit which was to be paid by Discoms for Power on Capacity to Pay basis
Delhi PPP Model:2002
Government Oversight through Board
 Shareholders Agreement between Govt. of Delhi (49%) and Tata Power (51%)
Salient Features of Shareholder Agreement are as follows:







Private Entity entitled to appoint MD/ CEO and all other Executive Directors of the Company.
Govt. Nominees on Discoms’ Board of Directors – One less than Majority Shareholder.
Quorums for Board Meetings – at least one Govt. Nominee Director to be present
Approval of Govt. Directors essential in critical matters till the Govt. Entity holds 10% or more of
Discom Equity
Govt. Partner Entity entitled to examine books and accounts kept by the Discoms and to be supplied
with all relevant information including quarterly management account and operating statistics.
Prior intimation to Govt. Partner Entity for transfer of shares in excess of 26% of total equity share
capital
First Right of Refusal on Sale of Shares with both Shareholders
Fully protects the interest of the Government and citizens at large
13
Delhi PPP Model:2002
Regulatory Oversight
•
License issued by the DERC w.e.f. March 12, 2004 for distribution and retail supply of power in
North and North West Areas of Delhi.
•
The same is valid for a period of 25 years from this date.
•
The Licence may be renewed by the DERC for such further period or periods and on such
terms and conditions, as it may consider appropriate
•
•
The Licence lays down the Terms and Conditions for operation of the License together with
the conditions under which the Licence can be suspended / revoked.
14
Our Turnaround Story
About Tata Power Delhi Distribution Limited
• The Tata Power Company Ltd. and
Govt. of Delhi JV (51:49)
• License Area : N. Delhi- 510 sq. km
• Consumer Base : 1.1 Mln ; serving
population of 5 Mln
• Peak Load Served : ~ 1300 MW
• Employee Base : 3998
Tata Power : Largest Integrated Power Co. in Private Sector
Tata Power Delhi Distribution : ISO 9001, 14001, 27001 ; SA 8000 Certified
Our inheritance
Bleeding with 53.1 % Technical & Commercial losses
Un-reliable Power Situation
Transformers’ failure rate 11%
Absence of key management functions like HR, Finance,
Governance etc.
1,00,000 Billing Complaints
20,000 New Connections
Erroneous consumer database
17
A workforce of 5600
employees with
little skill set
Our Sustainability Philosophy
Success Parameters
Areas of Focus
ATC Levels
AT&C Loss
Reduction
Operational
Excellence
Consumer Service
Excellence
Shareholder Value
Reliability Indices
Care for
Environment
Customer Skilled & Motivated
Excellence
Workforce
Improving CSI Score
Consumer Centric Inclusive Approach
TCCI Score
AA Score
Care for
Community
Care for
Environment
Drivers
Safety
Becoming Carbon
Neutral
Innovative Technology
Adaptation
Care for
Community
Passion for excellence
Tata Power Delhi Distribution Limited: Snapshot of Turnaround
Parameter
2010-11
% change
%
%
%
Ckt. Km
MVA
July 2002 (on
takeover)
53.10
70
11
6750
1730
13.2
99.9
1.10
10034
3209
75.1
42.7
90
48.6
85.5
Distribution Transformation Capacity
MVA
1926
4160
116
New Connection Energization Time
Days
51.8
7.3
85.9
Peak Load
MW
930
1313
41.1
Number of Consumers
Nos. ‘000
700
1184
69.1
Number of employees
Nos.
5600
3981
28.9
%
40
99.1
147.7
Rs. Cr.
920
3663
298.1
%
%
-
88
72
-
AT&C Losses
System Reliability – ASAI
Transformer Failure Rate
Length of Network
Power Transformation Capacity
Street Light Functionality
Capex Incurred (Cumulative)
Consumer Satisfaction Index
Employee Satisfaction Index
UoM
19
AT&C Loss Reduction
•
•
•
•
Consistently overachieved AT&C Loss Reduction Targets
Saved over Rs. 6500 Crs. for Exchequer over last 9 years
Pre-paid to Govt. its 552 Cr. Opening Balance Sheet Loan in the fourth year against 13 years tenor
Started paying dividends from the 4th year of operation
20
Initiatives Undertaken
I.
•
•
•
•
•
AT&C Loss Reduction Initiatives (1/2)
Energy Audit up to the DT level – prioritizing focus
HVDS & LT ABC Implementation – Technology interventions for theft prevention
Replacement of Electromechanical meters with Electronic meters
AMR for all High Revenue consumers – 70% of Total Revenue
Aggressive Enforcement activities with scientific inputs & analysis
Energy Audit at 4 levels
HVDS
LT ABC
AMR
AT&C Loss Reduction Initiatives (2/2)
• Collaboration with NGOs – awareness creation across LA especially slums
• Public participation in controlling Theft through Community pressure
• Separate Segment for consumers at Bottom of Pyramid –Sp. Consumer Group
• Employment Oriented Vocational Trainings - “ Creating Capacity in consumers to
pay before asking them to pay”
Removed Hooks after Raid
Meeting Reforms
Objectives
•
•
Consumers
24x7 Supply of Power
Moderate Tariffs
New Connection
Camps
Red Colored Bills for
Default
Government
Shareholders
Govt. Exp. On Distt.
Sector minimized
Handsome Returns
RoE :CAGR 21%
II.
Reliability Improvement (1/2)
• Focused approach to improving Network Reliability & N-1 redundancy
• Capital works of over Rs. 2743 Crs commissioned in 9 years on an acquired asset
base of Rs. 920 Crs
• Innovative Technology Adaptation: Various Work Systems automated and
integrated to improve Reliability and Efficiency
• Many Firsts:
SMS Based Fault Management
System
SCADA
Unmanned Grids
GIS
Packaged Substation
Reliability Improvement(2/2)
Energy Security
• PPAs
• Executed long term PPAs for appr. 1700 MW over
1281 MW allocated
• Own Generation
• Establishing 108 MW Gas Based Power Plant
• Enables supply continuity to critical installations even
during Grid Collapse
• Developing Renewable Portfolio
• Established first operational MW SPV Plant in Delhi
TPDDL Generation Plant at Delhi
1 MW SPV at Delhi
Addressing
Reform Objectives
Consumers
Consumers
Improved Service Quality
Reliable Power Supply
Government
Enhanced Consumer
Satisfaction
III. Consumer Service Excellence (1/3)
• Revamping Consumer Experience
• BPR of Revenue Management Cycle
• Integrated Commercial Software
developed in-house to automate
workflow
• 14 Fully networked consumer care
centers
• Call Centers for No Supply and
Commercial Complaints
• The SUGAM Experience – Billing
database of 100% of consumers on
website
Business Process Reengineering of RCM
Sugam - website
Commercial Call Center
Consumer Service Excellence (2/3)
• Innovative Consumer Offerings in Delhi Distribution Sector
Benchmarked to Banking industry
• Door Step Delivery of New connections
• SMS based pull services
• Instant Connection
• Video conferencing for Consumers
• E-Bills
• Automatic Cash/Cheque Collection machines
Consumer Service Excellence (3/3)
• Inclusive Approach
RWA/IWA Meetings in Progress
• Meetings with RWA /IWA
• Segmented Consumer meets
• Segment wise Relationship Approaches
• Client & Account Managers for
Xpress, KCG & HRB consumers
• Consumer Relationship Officers
(CROs) for HCB Consumers.
• Special Consumer Group
Addressing
Reform Objectives
Consumers
Government
Redefined Service
Delivery
Enhanced Consumer
Satisfaction
IV. Change Management(1/2)
• Organization Performance Alignment through BSC Approach
TPDDL entered “BSC Hall of Fame” in 2008 for its effective use of BSC to attain organizational objectives
Change Management (2/2)
• Capability Development & Knowledge Management
•
•
•
•
Training Center- CENPEID for own and other Utilities employees
Sanchay (Repository) – Knowledge Management Portal linking all employees
SEEKH (Learning) – Platform for Sharing of Best Practices and Knowledge
TPDDL Innoverse and SHINE – Fostering culture of innovation & improvement
• Multiple Communication Forums to encourage employee participation
• SAMVAD (Dialogue Sessions) constituted for two way communication.
• Joint Interaction Forums
• Meet the CEO
• SARTHI (Helpdesk)launched to capture and resolve Employee Grievances
•Only
Multilingual
Newsletters
internal
Utility in the Country
to be SA :for
8000
Certified;communication
also certified for PCMM-II
Addressing
Reform Objectives
Consumers
Employees
Consumer Centric
Employees
Learning & Growth
V.
Corporate Sustainability (1/2)
• 3 pronged Inclusive Approach
• Philanthropic
• Compensatory
• Business Oriented
Village Adoption
Support to MS Patients
• Affirmative Action to support
Underprivileged through
•
•
•
•
Education
Employment
Employability
Entrepreneurship Development
Drug De-Addiction Camps
Free Health Camps
Energy Conservation
Street Plays
Corporate Sustainability (2/2)
• Climate Change Initiatives
• Carbon footprint reduced by 75% from 0.41 to 0.10 TCO2/Mwh (2002-03
to 2010-11) on account of loss reduction
• Aspire to be Carbon Neutral and Water Neutral by 2014-15
• Renewable Projects – Roof Tops (5-10 MW)
• Water Harvesting projects being initiated at Grids in Phases
• Demand Side Management
• Green Village Project
• Delhi Water Utility Peak Shifting Project
• LED Hoardings & Streetlights
Thank You

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