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The central government came out with a comprehensive reform programme called the Ujwal Discom Assurance Yojana (UDAY) in November 2015, for the financial and operational turnaround of electricity distribution companies (discoms). The scheme is beneficial because it provides for affordable power to all, financial turnaround of discoms and also increases renewable energy penetration.
Until the end of FY16, as many as 10 states have signed MoUs, which constitute about 45% of total debt. The scheme makes a clear distinction in its responsibilities between state governments, discoms and the Centre. State governments have committed to take over future losses from 5% to 50% progressively from FY18 to FY21. The Centre has committed additional benefits such as priority funding through Deen Dayal Upadhyaya Gram Jyoti Yojana, Integrated Power Development Scheme, Power System Development Fund and cheap power from NTPC/other CPSUs, higher coal allocation/linkages, etc.
Of the 10 states that have signed MoUs, eight states have taken over 50% of the debt amounting to R1 lakh crore, of which a major portion (90%) is from the northern states of Uttar Pradesh, Rajasthan, Haryana and Punjab. Therefore, the success of UDAY for the first phase shall rest with the success of the northern states. The real challenge for the scheme lies in making it sustainable through operational turnaround. Now, there are seven principles of operational turnaround.
Aggregate technical and commercial (AT&C) losses have two components.
w Technical losses are generally transformation losses and losses occurring on flow of current through conductors/cables.
w Commercial losses are basically the difference between the total input energy and the total energy billed after taking out technical losses.
AT&C loss reduction, as claimed by various states, varies from 11% to 71%, with a national average of 22% for FY14. The determination of AT&C losses is not currently determined through measurement as all feeders, distribution transformers (DTs) and consumers do not have metering facilities. Thus, most of the time AT&C loss is worked out with an estimated number. In order to ensure that these numbers are correct and authentic, meters are to be in place as envisaged in UDAY, i.e. all feeders by June 30 and DTs by June 30 of next year, respectively. So, all losses will be determined through measurement. Further, each DT will be monitored by energy sent out and sum of all energy bills of consumers on that DT.
Development of distribution network characteristics differs from state to state. Distribution voltage levels are distinguished as LV (400V), MV (up to 33kV) and HV (up to or above 66kV). HV network is generally meshed and not planned with redundancies, such as transmission. Monitoring and automation are unsatisfactory, making it difficult to supervise and control the HV network from a control centre. On the other hand, MV distribution networks significantly differ in characteristics in case of urban and rural.
Mostly meshed but many states operate radial. The MV network with remote monitoring, control and automation with protection/fault sectionalisation is currently very low. LV networks are usually radially operated. Monitoring and control is non-existent. Measurement usually relies on aggregated information from substation and is only available with a significant time lag. More and more HV distribution systems, cables and automation needs to be installed to arrest losses.
Optimised power procurement
Power purchase costs are 80-85% of the cost of power supply. So, economical procurement is a key factor to reduce the cost of power. Earlier, the practice was to buy total power—even if it was required for a few hours—and pay a fixed cost for 25 years. Now, various power products are available in addition to long-term measures, such as medium-term, short-term, day-ahead, intra-day, etc. Power exchanges are functioning well and an e-bidding platform has been introduced by the central government. Each discom has to procure its power requirement scientifically, depending upon the load curve, season and cost.
This shall be more complex with penetration of renewable energy including distributed generation in the absence of real-time distribution system operations and will need accurate load forecasting, renewable energy forecasting and real-time distribution supply management like the transmission system operation. UDAY has started yielding results by reducing NTPC generation cost by around 15%.
Smart metering, billing and collection
This is the most crucial area of distribution system. UDAY envisages installation of smart meters for consumers of 500 units and 200 units per month by 2017 and 2019, respectively. The most important issues that need to be addressed are (1) cheaper communication from smart meters to a control centre and cyber-security for automatic reading; (2) complete automation from metering to collection and acknowledgement by customers; and (3) open protocol for communication to integrate meters of various manufacturers.
Reliable distribution service
The reliability of distribution service has been poor due to power outages and interruptions in the distribution system. This is primarily due to low investment in capex, operational expenditure and low level of technology penetration, including monitoring and control. In fact, a study has highlighted that the distribution charges per consumer of private discoms are about twice that of state-owned discoms, whereas state discoms’ opex per consumer should be more in order to provide reliable services, considering large geography and dispersed load.
The management being deployed needs to be professional/specialised, as one needs more turnaround specialists than business-as-usual managers. They have to be kept for a longer period, say 4 years, so that they are accountable for the decision taken. Further, introduction of new technology and renewable energy penetration in distribution would need new skillsets to trigger new business models and regulatory framework.
This programme needs to be monitored intensively and bottlenecks have to be addressed then and there. This has to be done by an independent agency, to get feedback from grassroots level.
It is said that “well begun is half done.” Financial engineering has taken off well and we have to take up operational turnaround aggressively on a Mission Mode. If UDAY is left to business-as-usual, this shall negatively affect state finances and all stakeholders badly. Stakes are much higher this time around.
The author is former chairman and MD of Power Grid Corporation of India Ltd
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