Presentation by

1
Evaluating Power Sector Reforms 10th INDIA POWER
FORUM 11th September, 07, New Delhi
Presentation by Sh. V.S. Ailawadi-IAS(Retd.) F
r. Chairman, ERC Member, IIPA- Expert Group
2
The Electricity Act, 2003, and Govt. Policy
Objectives

• The Electricity Act, 2003 underlines framework
  timeline for undertaking reforms of the SEBs
  choice of model for restructuring.
• Promoting competition and Open Access leading to
  electricity market.
• Policy guidelines in the NEP and NTP to promote
  objectives of the EA,03.
• Access to all unconnected households in next
  five years (2010) and demand to be fully met by
  2012.
• To increase the per capita consumption from about
  631 units at present to 1000 units by 2012.

3
STATES COVERED IN THE STUDY

• The Ministry of Power constituted IIPA- A Group
  of Experts comprising of experts. To evaluate
  progress of Reforms in 12 identified States. The
  identified States were group as under
• Group1 (7 States) -SEBs, which got reorganised on
  the basis of the respective State Reforms
  Acts prior to the enactment of Electricity Act,
  2003
• Group 2 (3 States)- SEBs which were reorganised
  the post Electricity Act, 2003
• Group 3 (2 States)- SEBs which are in the process
  of restructuring

4
Focus of Study and Analysis.

• The analysis and discussions in the main focused
  on
• The performance of power utilities prior and post
  restructuring period.
• Commitment to Power Sector Reforms and
  Restructuring Plans for the SEBs.
• Financial and Functional Autonomy of the
  restructured utilities.
• Functioning and effectiveness of Regulatory
  Bodies.
• Key variables and analyzed by deploying
  Statistical and Operation Research Tools.
• Comparison of the utilities based on criterion
  and key indicators for- Generation/Transmission/D
  istribution.

5
Contd.

• Key criterion selected
• (A) GENERATION
• Planned growth strategy to meet demand
• Technical efficiency levels Achieved.
• Financial turnaround.
• (B) TRANSMISSION
• Achievement in transmission capacity
  strengthening / addition.
• Reduction in inter-state and intra-state
  transmission losses.
• Operational efficiency standards / norms and
  comparative achievement.

6
Contd.

• (C ) DISTRIBUTION
• Reduction of ATC losses, Billing and Collection
  efficiency.
• Tariff rationalisation and gap between ACS ARR
• Commercial Performance of Utilities.
• Level of subsidies and cross subsidies, extent of
  Govt. funding of subsidies.
• Quality of power supply (QoS) Customer Relation
  Management (CRM).
• Advantage of APDRP in upgrading sub distribution
  systems and improved I.T Applications (IT
  Applications e.g. GIS Mapping, Customer Indexing,
  Energy Audit etc.)
• Planning for meeting the future growth and
  demand for power.

7
OUTCOME OF RESTRUCTURING

• In majority of the States, improvements are
  noticeable in varying degree, after
  restructuring
• Overall improvements were noticed in billing
  efficiencies, overall billing collection
  efficiencies
• Limited success in reducing ATC losses
• Generation capacity addition as priority focus
  by the new power utilities
• Marked improvement in Transmission System
  availability
• Improvement in PLF, Heat Rate, Auxiliary
  consumption
• ARDP assistance utilised more on hardware and
  impact in operational improvements found
  localised rather than at circle/utility level
• Improved Awareness for consumer interface and
  satisfaction.
• In all States good progress in metering and theft
  reduction programs.

8
Contd.

• (D) REGULATORY BODIES
• Status of Regulations in the State.
• Tariff Rationalisation.
• Promotion of competition and Open Access.
• Autonomy, effectiveness and compliance of
  Regulation.
• Coordination and closer consultation between ERCs
  and concerned
• Govt. Agencies.
• Capacity Building, constraints in Capacity
  Building, if any.

9
Performance of Key Indicators

• Utilities having achieved reduction in ATC
  losses
• In AP ATC losses reduced to 23 by 2005-06
• In NCT Delhi, NDPL reduced AT C losses from 53
  to 28.11
• In Karnataka (Bescom) reduced ATC losses to
  24.83 and Messcom
• to 26.63
• In Gujarat ATC losses reduced to 30.32
• The Reforming States where ATC losses remain
  above the National
• Average of 33 are
• Haryana,
• Orissa,
• Rajasthan,
• U.P and
• M.P.

10
Contd.

• Performance Of Generating Companies
• PLF()

11
Common Shortcomings and Areas of Concern

• Problem areas continue in terms of electricity
  thefts, pilferages, unmetered supplies to the
  agricultural sector
• Management challenges to achieve efficiencies
  and improve revenue stream by the Utilities
• Concern regarding states where progress was
  unsteady are partial
• Inadequate autonomy for the restructured
  utilities
• Insufficient efforts to inculcate ownership for
  reforms amongst the staff.

12
Impact of Regulation

• The State Electricity Regulatory Commissions
  (SERCs) have played a positive role in the power
  sector reform process.
• There is a need to play a more effective role to
  introduce greater transparency and public
  participation.
• SERCs should become more proactive, and promote
  competition, non-discriminatory Open Access.
• Fix reasonable surcharge levy which acts as
  incentive for OA.
• Enforcement of the codes and standards of
  performance, enhance efficiency of the
  Utilities.

13
Broad Findings And Recommendations

• Need for sustained political commitment and
  managing the reform process in the state
• Need to issue Detailed Policy Statements (DPS) to
  spell out the future policy and programs
• Strategies for change management and commitment
  through innovative and and transparent HRD
  policies
• Make the regulatory mechanism autonomous and
  more effective
• Need for the Central Government for increased
  support to Power Sector Reforms to states that
  are on track with increased funding under
  restructured APDRP and RGGVP .
• Autonomy for the boards of directors and
  professional management cadres in the
  restructured Utilities
• Greater use of media for creating informed
  public awareness on key issues effecting
  the reforms and overall gains for pushing
  reforms..

14
Contd.
BROAD FINDINGS AND RECOMMENDATIONS

• The State Governments should establish medium
  term financial restructuring plans (FRPS). Over a
  defined period
• FRPs should identify milestones against the
  components of financial assistance
• Further, FRS should be given wide publicity and
  should be subjected to regular monitoring and
  review at the highest level every year.
• The State Governments should be requested to
  include the FRS in their performance budgets
• The Planning Commission should review the
  implementation status of FRS during the Annual
  Plan discussions of the respective States.

15
Making Tough Choices For Way Ahead

• Public perception that the state govts. are
  dithering to comprehensive reforms.
• Despite the fact that EA.03 has laid down the
  time frame for restructuring of the SEBs some
  important states like Tamil Nadu, Punjab, Kerala
  have not undertaken Reforms.
• What are the Reasons ?
• Some have reservation on the model. Not sure as
  to the right model.  
• Afraid of commitments to credible and robust
  reforms as it may inflict since significant
  political damage to their constituencies.
• How do deal with the issues of free power and how
  to fund losses during transition?

16
ROLE OF THE ELECTRICITY REGULATORY COMMISSIONS

• The Regulatory Commissions to play a more
  proactive role in implementing Open Access, MYTs
  and standards of performance (SOP)
• Develop harmonious approach to common issues such
  as competition, Open Access, etc., in the larger
  interest of the sector growth
• FOIR and FOR should find ways for interacting
  with the user groups and representatives of the
  Utilities for the sector reforms
• Reduce uncertainty about regulatory approach
  through predictable and uniform policies between
  the commissions.

17
Conclusion -

• To sustain Indias GDP growth rate of 8 percent
  and above, electricity
• sector requires faster pace of reforms
• Restructuring is a necessary but not a
  sufficient condition for
• turnaround of the power sector
• Restructuring is only the beginning and not
  the end of the process
• Strong and sustained political support during
  all phases of
• restructuring is the key
• Taking the employees into confidence and
  enlisting their willing
• support
• Strengthening the institution of Electricity
  Regulators is critical for
• success and sustainability of power sector
  reforms Contd-

18
If Power sector wins, everybody wins.
To accomplish such a win-win situation, the
time to act is here and now.
19
Thank you