Electricity Act 2003, Amendments and way forward

1. EA 2003 : Amendments & Way Forward
Presented by – R R Mehta

2. Flow Of Presentation
Reliance Energy- Overview
Last 10 Years performance
Improvement Areas
EA 2003 Amendments
Confidential Slide
2
EA 2003 Agenda

3. Overview – Mumbai Distribution
Distribution Area 400 Sq. km
No. of Customers ~2.9 Million
Max. System Demand 1,697 MVA
HT Cable Length 4,137 Kms
LT Cable Length 5,892 Kms
Power Transformers 3,042 MVA
Distribution Transformers 4,613 MVA
Distribution Loss ~9.4%
Data As on 31-Mar-14
Reliability Index 99.97 %
Serving Mumbai Since 85 Years !!!
Confidential As on 31st Mar 2014 Slide
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4. Our National Footprint
IT Implementation Agency
Chattisgarh & Bihar
-
IT Consultancy
Karnataka
SCADA / DMS Consultancy
- Haryana, Maharashtra
- Chattisgarh. Bihar
- Chandigarh
SCADA / DMS
Consultancy
Distribution
ITIA
Distribution Assets in 3 States I Engaged with 7 States
Distribution
SCADA / DMS
Consultancy
Distribution
AMR Installation
ITC
Confidential Slide

5. Network : SCADA & DMS
 Country’s only Integrated (G-T-D) SCADA
 State-of-the-Art Upgraded SCADA
(SCADA security - ISO 27001)
 Distribution Management System (11kV)
(1st Utility in India - DMS S/S in 4 Digits - >1000)
 Fully integrated with GIS-OMS
Leading to a System Reliability of 99.97%
OMS : Outage Management System; GIS : Geographical Info System 5
Confidential Slide

6. Customer : Engagement
Website
- Personalized response
- ‘My-Account’ service
- E-bills to customers
- Online Chat
SMS services on :
- Scheduled outages
- Meter Reading
- All transactions
Information on Bill: -
Customized messages
- Conservation / Safety tips
- Regulatory Updates
Social Media
- FB : 1,00,000+ Fans
- Twitter : 19,000+ Followers
- You Tube :150+ Subscribers
Proactive & Personalised communication for customer engagement
Confidential Slide
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7. Patented
Theft Proof Pillar
Innovations
Unique home grown solutions being patented
Confidential Slide
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 For prevention of theft in notorious theft-prone slum areas
 Pilot implementation has led to loss reduction by 10%

8. Patent
applied
Innovations
Accu-check Easy-check
 Compact and sturdy
 Dust proof and water proof
 Phantom load redesigned to reduce the weight (2 kg)
Portable solution for accuracy checking of Energy meters
Confidential Slide
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9. Meter Data Management
Meter Data Acquisition & Management System- PrimeRead
MDA & MDM
AMI
AMR
Energy
Input
Utility
Confidential Slide
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Stepping stone for Smart Grid Applications

10. Dashboard
SAP Business Objects-Dashboard Features & Functionalities
•Operation Control
•Trend Analysis
•Triggers and Alerts
•System Data Integration
• Display & Formatting
• Adhoc Analysis
Visual Analytics & Interactive Dashboards :- Need of an Hour!!!
Confidential Slide 10

11. Flow Of Presentation
Reliance Energy- Overview
Last 10 Years performance
Improvement Areas
EA 2003 Amendments
Confidential Slide
11
EA 2003 Agenda

12. EA 2003 : Agenda
• Open Access & Franchisee
• Competitive bidding
• Power Trading
Competition
• Establishing SERC / APTEL
• Unbundling
Accountability &
Transparency
• Tariff Setting
• State Govt Subsidy
Commercial
Viability
• USO
• Rural electrification Access
• Consumer Grievance
• Reduction in T&D losses
Quality &
affordability
• Mandatory RPOs
• REC mechanism Renewable Energy
Confidential Slide
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13. Flow Of Presentation
Reliance Energy- Overview
Last 10 Years performance
Improvement Areas
EA 2003 Amendments
Confidential Slide
13
EA 2003 Agenda

14. Slow Pace of Reforms
Avg implementation
score across all states
is 0.54
Maharashtra,
Delhi & Orissa are
forefront in
implementing
reforms
Confidential Slide
Source : Deloitte 2013 14

15. Deterioration of Distribution finances
Source : Khurana & Banerjee 2013, Referred in WB Report 2014
• Accumulated losses to the tune of Rs 2000 Bn
• Sector losses = ~1.5% of GDP
• Distribution sector contributes 80% of the above losses
Confidential Slide
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16. Increasing Gap
• Cost – Revenue gap has doubled since 2003
• Avg Cost rose about 7% a yr over 2003-11
• Cost – Revenue gap grew about 6% a yr over 2003-11
Confidential Slide
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Source : Khurana & Banerjee 2013, Referred in WB Report 2014

17. Flow Of Presentation
Reliance Energy- Overview
Last 10 Years performance
Improvement Areas
EA 2003 Amendments
Confidential Slide
17
EA 2003 Agenda

18. Shunglu Committee
In Dec 2011, a High Level Panel headed by V.K Shunglu recommended
following key corrective actions:
• No write-offs, repayment period can be elongated
• State Govt not to be let-off the hook
• Suo-Motu tariff determination
• Cost reflective tariffs
• Increase in Power Purchase cost to be passed immediately
• SERC to act independently
• SERCs to be evaluated for their performance
• No mis-use of Sec 108 by State Govt
• Support to Discoms for T&D reduction
Confidential Slide
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19. Chaturvedi Committee
In Nov 2010, task force under B K Chaturvedi was formed to develop a
framework for private participation in Distribution by way of PPP:
 Forward Path
 Franchisee or Privatisation Model would not deliver desired outcomes
 Well formulated PPP model in DISCOM is the way forward
 Wire & Supply Segregation is highly desirable
 Concession
 Concessionaire required to obtain a license to comply with EA 2003
 Concession period - 25 Yrs
 Ownership of Assets with Govt, Concessionaire exclusive rights to use
 No Govt shareholding except “Golden Share” for public policy matters
 Principles for determination of termination payment (after expiry of concession
period) to be specified upfront
 Tariff
 Govt can provide existing subsidy to prevent tariff shock for initial years
 Supply tariff will include cost of electricity and a predetermined margin
 Pre-determined system of incentives / penalties based on the KPIs
 Trajectory of AT&C loss reduction to be part of bid, Over or Under performance to
be borne by Concessionaire
Confidential Slide
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20. ATE Directives
In Nov’11 ATE suo-motu issued the following directions :
• SERCs to ensure APR, true-up of past expenses, ARR & tariff
determination to be conducted year on year as per regulations
• SERC’s to decided the Tariffs before 1st Apr of the tariff year
• In case of delay, SERC can suo-motu proceed for tariff determination
• Regulatory Assets should not be created as a matter of course
• Recovery of RA should be time bound and within a period not
exceeding three years and preferably within control period
• Carrying cost of RA to be allowed to the utilities in ARR
• Fuel & Power Purchase cost adjustment should be done preferably
monthly but in no case exceeding a Quarter
Confidential Slide
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21. Lavasa Committee
In Oct 2012, Ashok Lavasa committee prepared the following FRP for
all loss making Discoms:
Financial Restructuring Plan:
• 50% of the outstanding short term liabilities upto 31/03/12 to be serviced by
State Govt by issuance of bonds to participating lenders.
• Balance 50% short term loans & payables for power purchase to be
rescheduled & serviced by the Discoms with a moratorium of 3 yrs & to be
repaid in 5 yrs thereafter duly backed by a State Govt guarantee
•The State Govt will eliminate the gap between ACS & ARR within the period
of moratorium of the bonds issued by the State Govt
Strategy for Discom turanround:
•Regular Tariff Hike
•Increase in Quantum of Power Sold
•Rescheduling/ restructuring of existing loans
•Continued short term lending by banks/financial institutions
•Availability of surplus tradable power after a few years
FRP package would cost Rs 1.9 Trillion
Confidential Slide
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22. Flow Of Presentation
Reliance Energy- Overview
Last 10 Years performance
Improvement Areas
EA 2003 Amendments
Confidential Slide
22
EA 2003 Agenda

23. Need s for EA 2003 Amendments
• Creation of Regulatory Assets should not be allowed
• Tariffs to be revised every yr, suo-moto determination by SERC
• Open Access encouraged
• Wire & Retail Separation
Confidential Slide
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Sustainability
Accountability
Competition
Access
• SERCs to be more accountable
• State Government to use sec 108 powers only in exceptional
situations
• 24 X 7 supply in rural areas for all domestic purposes
• Build proper infrastructure, financed by REC, considering
1 KW / house in rural

24. Needs of Administrative Changes:
• Existing expectations of EA2003 and Policies should be
implemented/enforced by Regulators
•EA 2003 should lay down framework for SERCs for uniformity in
implementation
•All SERCs should be aligned to such Framework through Model
documents prepared by FOR (Forum of Regulators)
Confidential Slide

25. Thank You

26. Increasing State Subsidy
• Cumulative subsidies booked between 2003-11 : Rs 1.75 Tr
• Cumulative subsidies recd between 2003-11 : Rs 1.30 Tr
• Avg State support to power sector in 2011 : 1.3% of State GDP
Confidential Slide
Source : Khurana & Banerjee 2013, WB Report 2014 26

27. Impact of Power Purchase Cost
56%
74%
• Share of Power Purchase Cost increased from 56% to 74%
• Share of fuel cost on total Generation cost is ~80%
• Increase mainly due to – extreme shortfall in coal, leading to use of
imported coal and higher short term power purchases
Confidential Slide
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Source : Khurana & Banerjee 2013, Referred in WB Report 2014

28. Cross Subsidy in tariffs
• Industrial Tariff is highest in 18 States
• Commercial Tariff is highest in 11 States
• Domestic Tariff is the lowest in all States - State Subsidy & Cross Subsidy
Confidential Slide
Source : WB Report 2014 28